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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000
Commission File Number 1-8858
Unitil Corporation
(Exact name of registrant as specified in its charter)
New Hampshire 02-0381573
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 Liberty Lane West, Hampton, New Hampshire 03842
(Address of principal executive office) (Zip Code)
(603) 772-0775
(Registrant's telephone number, including area code)
NONE
(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
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 May 1, 2000
Common Stock, No par value 4,717,022 Shares
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
INDEX
Part I. Financial Information Page No.
Consolidated Statements of Earnings - Three
Months Ended March 31, 2000 and 1999 3
Consolidated Balance Sheets, March 31, 2000,
March 31, 1999 and December 31, 1999 4-5
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7-9
Management's Discussion and Analysis of Results of
Operations and Financial Condition 10-14
Exhibit 11 - Computation of Earnings per Average
Common Share Outstanding 15
Exhibit 99 - Selected Quarterly Financial Data 16
Part II. Other Information 17
PART 1. FINANCIAL INFORMATION
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
(000's except common shares and per share data)
(UNAUDITED)
Three Months Ended
March 31,
2000 1999
Operating Revenues:
Electric $38,958 $36,184
Gas 7,320 6,156
Other 39 7
Total Operating Revenues 46,317 42,347
Operating Expenses:
Fuel and Purchased Power 25,853 22,906
Gas Purchased for Resale 4,052 3,178
Operation and Maintenance 6,169 5,937
Depreciation and Amortization 3,040 2,935
Provisions for Taxes:
Local Property and Other 1,377 1,465
Federal and State Income 1,368 1,375
Total Operating Expenses 41,859 37,796
Operating Income 4,458 4,551
Non-Operating Expense, Net 49 12
Income Before Interest Expense 4,409 4,539
Interest Expense, Net 1,745 1,795
Net Income 2,664 2,744
Less Dividends on Preferred Stock 67 68
Net Income Applicable to Common Stock $2,597 $2,676
Average Common Shares Outstanding 4,714,540 4,621,042
Basic Earnings Per Share $0.55 $0.58
Diluted Earnings Per Share $0.55 $0.58
Dividends Declared per Share
of Common Stock (Note 1) $0.69 $0.69
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (000's)
(UNAUDITED) (AUDITED)
March 31, December 31,
2000 1999 1999
ASSETS:
Utility Plant:
Electric $165,194 $154,697 $161,767
Gas 34,628 32,234 34,031
Common 21,654 21,034 21,541
Construction Work in Progress 2,046 2,686 2,499
Utility Plant 223,522 210,651 219,838
Less: Accumulated Depreciation 68,107 63,946 66,429
Net Utility Plant 155,415 146,705 153,409
Other Property and Investments 5,276 3,139 5,051
Current Assets:
Cash 2,730 3,344 2,847
Accounts Receivable - Less
Allowance for Doubtful Accounts
of $593, $557 and $598 18,421 18,217 16,630
Materials and Supplies 2,074 2,297 2,503
Prepayments 1,140 613 713
Accrued Revenue (397) (1,397) 2,262
Total Current Assets 23,968 23,074 24,955
Noncurrent Assets:
Regulatory Assets 141,938 165,825 143,470
Prepaid Pension Costs 9,349 8,690 9,119
Debt Issuance Costs 1,336 1,387 1,351
Other Noncurrent Assets 24,629 26,939 24,753
Total Noncurrent Assets 177,252 202,841 178,693
TOTAL $361,911 $375,759 $362,108
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (Cont.) (000's)
(UNAUDITED) (AUDITED)
March 31, December 31,
2000 1999 1999
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common Stock Equity $78,223 $75,867 $78,675
Preferred Stock, Non-Redeemable,
Non-Cumulative 225 225 225
Preferred Stock, Redeemable,
Cumulative 3,532 3,598 3,532
Long-Term Debt,
Less Current Portion 81,915 85,061 84,966
Total Capitalization 163,895 164,751 167,398
Current Liabilities:
Long-Term Debt,
Current Portion 3,195 1,180 1,191
Capitalized Leases,
Current Portion 874 917 902
Accounts Payable 14,222 12,354 16,515
Short-Term Debt 12,225 3,375 10,500
Dividends Declared and Payable 1,835 1,855 220
Refundable Customer Deposits 1,307 1,334 1,302
Taxes Payable (Refundable) 962 1,510 (1,419)
Interest Payable 1,392 1,344 1,245
Other Current Liabilities 3,577 2,868 3,042
Total Current Liabilities 39,589 26,737 33,498
Deferred Income Taxes 42,352 42,477 42,634
Noncurrent Liabilities:
Power Supply Contract
Obligations 103,973 129,688 106,184
Capitalized Lease,
Less Current Portion 3,654 4,217 3,860
Other Noncurrent Liabilities 8,448 7,889 8,534
Total Noncurrent Liabilities 116,075 141,794 118,578
TOTAL $361,911 $375,759 $362,108
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (000's)
(UNAUDITED)
Three Months Ended March 31,
2000 1999
Cash Flows from Operating Activities:
Net Income $2,664 $2,744
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Depreciation and Amortization 3,040 2,935
Deferred Taxes Provision (99) (443)
Amortization of Investment Tax Credit (64) (94)
Amortization of Debt Issuance Costs 15 14
Changes in Working Capital:
Accounts Receivable (1,791) (2,218)
Materials and Supplies 429 665
Prepayments (657) 534
Accrued Revenue 2,659 3,383
Accounts Payable (2,293) 972
Refundable Customer Deposits 5 41
Taxes and Interest Payable 2,528 3,069
Other, Net (919) (1,894)
Net Cash Provided by
Operating Activities 5,517 9,708
Cash Flows Used In Investing Activities:
Acquisition of Property,
Plant and Equipment (4,308) (2,752)
Other Property and Investments (226) (3,097)
Cash Used in
Investing Activities (4,534) (5,849)
Cash Flows from Financing Activities:
Net Increase (Decrease) in Short-Term Debt 1,725 (16,625)
Proceeds from Issuance of Long-Term Debt --- 12,000
Repayment of Long-Term Debt (1,047) (980)
Dividends Paid (1,704) (1,642)
Issuance of Common Stock 160 2,729
Retirement of Preferred Stock --- (20)
Repayment of Capital Lease Obligations (234) (60)
Cash Used in Financing Activities (1,100) (4,598)
Net Decrease in Cash (117) (739)
Cash at Beginning of Year 2,847 4,083
Cash at March 31 $2,730 $3,344
Supplemental Cash Flow Information:
Interest Paid $1,853 $1,398
Federal Income Taxes Paid --- ---
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1.
Dividends Declared Per Share:
Two regular quarterly common stock dividends were declared during the
first quarter of 2000 and 1999.
Common Stock Dividend:
On March 16, 2000, the Company's Board of Directors declared its regular
quarterly dividend on the Company's Common Stock of $0.345 per share which
is payable on May 15, 2000 to shareholders of record as of May 1, 2000.
On January 19, 2000, the Company's Board of Directors declared its regular
quarterly dividend on the Company's Common Stock of $0.345 per share which
was payable on February 15, 2000 to shareholders of record as of
February 1, 2000.
Note 2.
Common Stock:
During the first quarter of 2000, the Company sold 5,021 shares of Common
Stock, at an average price of $31.88 per share, in connection with its
Dividend Reinvestment and Stock Purchase Plan. Net proceeds of $160,068
were used to reduce short-term borrowings.
Note 3.
Preferred Stock:
Details on preferred stock at March 31, 2000, March 31, 1999 and
December 31, 1999 are shown below (000's):
March 31, December 31,
2000 1999 1999
Preferred Stock:
Non-Redeemable, Non-Cumulative,
6%, $100 Par Value $225 $225 $225
Redeemable, Cumulative,
$100 Par Value:
8.70% Series 215 215 215
5% Dividend Series 91 91 91
6% Dividend Series 168 168 168
8.75% Dividend Series 333 333 333
8.25% Dividend Series 385 385 385
5.125% Dividend Series 987 999 987
8% Dividend Series 1,353 1,407 1,353
Total Redeemable Preferred Stock 3,532 3,598 3,532
Total Preferred Stock $3,757 $3,823 $3,757
Note 4.
Long-term Debt:
Details on long-term debt at March 31, 2000, March 31, 1999 and
December 31, 1999 are shown below (000's):
March 31, December 31,
2000 1999 1999
Concord Electric Company:
First Mortgage Bonds:
Series I, 8.49%, due
October 14, 2024 6,000 6,000 6,000
Series J, 6.96%, due
September 1, 1998 10,000 10,000 10,000
Exeter & Hampton Electric Company:
First Mortgage Bonds:
Series K, 8.49%, due
October 14, 2024 9,000 9,000 9,000
Series L, 6.96%, due
September 1, 2028 10,000 10,000 10,000
Fitchburg Gas and Electric
Light Company:
Promissory Notes:
8.55% Notes due March 31, 2004 12,000 13,000 13,000
6.75% Notes due November 30, 2023 19,000 19,000 19,000
7.37% Notes due January 15, 2029 12,000 12,000 12,000
Unitil Realty Corp.:
Senior Secured Notes:
8.00% Notes due August 1, 2017 7,110 7,241 7,157
Total 85,110 86,241 86,157
Less: Installments due within
one year 3,195 1,180 1,191
Total Long-term Debt $81,915 $85,061 $84,966
Note 5.
Contingencies:
The Company is currently undergoing an audit of its 1992 and 1993 Federal
income tax returns by the Internal Revenue Service (IRS). Although the IRS
has not completed its examination of these returns, it has proposed
adjustments relating to the timing of tax deductions taken by Unitil in
those years. The Company strongly disagrees with the IRS' position and will
vigorously contest it. If the IRS prevails with its position, the Company
may be required to pay additional taxes and interest. However, those taxes
will be recovered in future years. Although the outcome cannot be predicted
with certainty, the Company's management does not expect it to have a
material adverse impact on the Company's results of operations.
Note 6.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the consolidated financial
position as of March 31, 2000 and 1999; and results of operations for the
three months ended March 31, 2000 and 1999; and consolidated statements of
cash flows for the three months ended March 31, 2000 and 1999.
Reclassifications are made periodically to amounts previously reported to
conform with current year presentation.
The results of operations for the three months ended March 31, 2000 and 1999
are not necessarily indicative of the results to be expected for the full
year.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
EARNINGS
Diluted earnings per average common share were $0.55 for the first quarter
of 2000, a decrease of $0.03 from the first quarter of 1999. This decrease
reflects higher operation and maintenance and depreciation expenses,
including start-up costs of the Usource E-commerce business. These costs
were offset by stronger electric and gas sales. Also contributing to the
lower earnings per share was the impact of an increase in the number of
average common shares outstanding in the current period compared to the
prior period.
Total Operating Revenues were $46.3 million in the first quarter of 2000
compared to $42.3 million in the prior year, the result of higher unit
energy sales and increased energy supply costs in the current period. First
quarter electric sales were stronger in 2000, reflecting customer growth
and increased usage primarily a result of the ongoing strength of the local
and regional economies. As shown in the Sales and Revenue table on this
page, total electric kWh sales were up 1.3%.
Electric kWh sales to residential customers increased by 5.9% in the first
quarter of 2000. Electric kWh sales to commercial and industrial customers
were 1.5% lower, because a major industrial customer suspended operations.
Exclusive of this customer, electric commercial and industrial sales were
4.0% higher than the first quarter of 1999.
Sales and Revenue (000's)
Three Months Ended
kWh Sales 3/31/2000 3/31/1999 Change
Residential 163,836 154,673 5.9%
Commercial/Industrial 255,635 259,533 (1.5)%
Total kWh Sales 419,471 414,206 1.3%
Electric Revenue
Residential 16,082 14,664 9.7%
Commercial/Industrial 22,876 21,520 6.3%
Total Electric Revenue 38,958 36,184 7.7%
Firm Therm Sales
Residential 5,526 5,394 2.4%
Commercial/Industrial 5,211 4,846 7.5%
Total Firm Therm Sales 10,737 10,240 4.9%
Gas Revenue
Residential 3,912 3,250 20.4%
Commercial/Industrial 2,583 2,580 0.1%
Total Firm Gas Sales 6,495 5,830 11.4%
Interruptible Gas Sales 825 326 153.1%
Total Gas Revenue 7,320 6,156 18.9%
Customer growth also led to increased gas sales in the first quarter of 2000.
Total Firm Therm gas sales were up 4.9% compared to the prior year. Firm
Therm sales to residential customers were 2.4% higher in 2000 compared to
the first quarter of 1999, and Firm Therm sales to commercial and industrial
customers increased 7.5% over the prior year.
During the first quarter, electric and gas energy supply costs increased,
because of higher sales volume and higher costs. Those higher costs are
reflected in higher Fuel and Purchased Power and higher Gas Purchased for
Resale expenses. Both electric and gas energy supply costs are collected
from customers through periodic cost recovery mechanisms. Therefore, changes
in energy supply prices do not affect the Company's net income, as they
mirror changes in energy supply costs.
Operation and Maintenance expenses increased over the prior year, primarily
because of the costs associated with the development of Usource. The
increase in Depreciation and Amortization expenses was a result of the
accelerated write-off of electric generating assets, in accordance with
Fitchburg Gas and Electric Light Company's ("FG&E") electric utility
industry restructuring plan, as well as additional amortization related to
Usource. FG&E is the Company's electric and gas utility subsidiary in
Massachusetts. Interest expense, net, was lower in the first quarter of 2000
as compared to 1999, reflecting higher interest income on deferred
collection of costs related to industry restructuring.
Brokering electricity and natural gas through the Usource on-line energy bid
system, which began in mid-1999, has gained wider acceptance during the
first quarter for 2000. Usource initiated a pilot program partnership with
the New York City Housing Authority, in which the Authority will utilize the
Usource on-line energy bid system for acquisition of its current gas
requirements. Also during the first quarter, Usource reached agreement with
an association of large energy users with facilities located throughout New
York. In addition, Usource was approved to conduct business in Maine and
Pennsylvania.
Diluted earnings per average common share for the twelve months ended March
31, 2000 and 1999, were $1.71 and $1.78, respectively. Contributing to the
lower earnings per share was the impact of an increase in the number of
average common shares outstanding.
REGULATORY MATTERS
Electric and gas industry restructuring and the process for separating the
"competitive" retail sale of the electric and gas energy from the "regulated"
delivery of that energy over a utility's transmission and distribution
system has been the predominant focus of the Company's regulatory
initiatives and activities in both Massachusetts and New Hampshire.
Since March 1, 1998 all electric consumers in Massachusetts served by
investor-owned utilities have had the ability to choose their electric
energy supplier. FG&E, the Company's Massachusetts utility operating
subsidiary, began implementation of its comprehensive electric restructuring
plan that includes the divestiture of its entire regulated power supply
business.
In New Hampshire, CECo and E&H, our electric utility operating subsidiaries,
and Unitil Power Corp., our wholesale power company, continue to prepare for
the transition that will move them into this new market structure pending
resolution of key restructuring policies and issues that have slowed the
restructuring process in the state.
Massachusetts gas industry restructuring plans continue to be a major focus
of our regulatory activities as well. Since 1997, FG&E has worked in
collaboration with the other Massachusetts Local Distribution Companies
(LDCs) and various other stakeholders to develop and implement the
infrastructure to offer gas customers choice of their competitive gas energy
supplier and to complete the restructuring of gas service provided by LDCs.
FG&E has filed with the Massachusetts Department of Telecommunications and
Energy (MDTE) new gas tariffs to implement natural gas unbundling in
accordance with Model Terms and Conditions resulting from these
collaborative efforts. The target date for implementation of approved
tariffs and final rules that was initially set for April 1, 2000 has been
adjusted to June 1, 2000 to allow sufficient time for regulatory review and
approval.
Massachusetts (Electric)- On January 15, 1999, the MDTE approved FG&E's
restructuring plan with certain modifications. The Plan provides customers
with: a) the ability to choose an energy supplier; b) an option to purchase
Standard Offer Service provided by FG&E at regulated rates for up to seven
years; and c) a cumulative 15% rate reduction. The Order also approved
FG&E's power supply divestiture plan for its interest in three generating
units and four long-term power supply contracts. The Company has been
afforded full recovery of any transition costs through a non-bypassable
retail Transition Charge.
Pursuant to the Plan, on October 30, 1998, FG&E filed a proposed contract
with Constellation Power Services Inc. for provision of Standard Offer
Service. Service under the FG&E/Constellation contract commenced on March
1, 1999, and is scheduled to continue through February 28, 2005. This
contract is the result of the first successful Standard Offer auction
conducted in Massachusetts.
A contract for the sale of FG&E's interest in the New Haven Harbor plant was
approved by the MDTE on March 31, 1999 and the sale of the unit closed on
April 14, 1999. A contract for the sale of the entire output from FG&E's
remaining generating assets and purchased power contracts was approved by
the MDTE on December 28, 1999, and went into effect February 1, 2000.
FG&E filed an electric rate decrease effective September 1, 1999, as
provided for by the 1997 Massachusetts Electric Restructuring Act (the Act).
The Act mandated a 10% rate reduction in March 1998, to be followed by an
additional, inflation-adjusted 5% rate reduction by September 1, 1999. The
net rate decrease of 1.3% reflects FG&E's divestiture of its generation
assets and purchased power portfolio.
On December 22, 1999, FG&E filed with the MDTE new rates for effect January
1, 2000. The revised rates maintain the required inflation-adjusted 15%
rate discount. The MDTE approved the rates on January 5, 2000, subject to
reconciliation pursuant to an investigation, resulting in an upward
inflation adjustment of 2.5% relative to September 1999 rates. The MDTE has
issued a notice of public hearing and procedural conference to examine
electric restructuring issues including, but not limited to, consistency of
the proposed charges and adjustments with the methods approved in FG&E's
restructuring plan.
As a result of restructuring and divestiture of FG&E's generation and
purchased power portfolio, FG&E has accelerated the write-off of its
electric generation assets and on FG&E's abandoned investment in Seabrook
Station. An MDTE Order established the return to be earned on the
unamortized balance of FG&E's generation plant. The new return reduces
FG&E's earnings on its generation assets. As this portfolio is amortized
over the next 10 years, earnings from this segment of FG&E's utility
business will continue to decline and ultimately cease. Currently, Unitil's
earnings from this business segment represent approximately 10% of total
consolidated earnings.
Massachusetts (Gas)- In mid-1997, the MDTE directed all Massachusetts
natural gas LDCs to form a collaborative with other stakeholders to develop
common principles and appropriate regulations for the unbundling of gas
service, and directed FG&E and four other LDCs to file unbundled gas rates
for its review. FG&E's unbundled gas rates were filed with, and approved by,
the MDTE and implemented in November 1998.
On February 1, 1999, the MDTE issued an order in which it determined that
the LDCs would continue to have an obligation to provide gas supply and
delivery services for another five years, with a review after three years.
This order also set forth the MDTE's decision regarding release by LDCs of
their pipeline capacity contracts to competitive marketers. In March 1999,
the LDCs and other stakeholders filed a settlement with the MDTE which set
forth rules for implementing an interim firm transportation service through
October 31, 2000. The interim service will ultimately be superseded by the
permanent transportation service, expected to begin June 1, 2000. The MDTE
approved the settlement on April 2, 1999. FG&E has made separate compliance
filings that were approved by the MDTE to implement its interim firm gas
transportation service for its largest general service customers effective
June 1, 1999 and to complement this service with a firm gas peaking service.
On November 3, 1999 the Massachusetts LDCs filed Model Terms and Conditions
for Gas Service, including provisions for capacity assignment, peaking
service and default service. In accordance with the MDTE's approval of these
Model Terms and Conditions in January 2000, FG&E filed Company-specific
tariffs that implement natural gas unbundling. The MDTE has also opened a
rulemaking proceeding on proposed regulations that would govern the
unbundling of services related to the provision of natural gas. The target
date for implementation of approved tariffs and final rules has been
adjusted to June 1, 2000.
New Hampshire - On February 28, 1997, the New Hampshire Public Utilities
Commission (NHPUC) issued its Final Plan for New Hampshire electric
utilities to transition to a competitive electric market in the state
("Final Plan"). The Final Plan linked the interim recovery of stranded cost
by the State's utilities to a comparison of their existing rates with the
regional average utility rates. CECo's and E&H's rates are below the
regional average; thus, the NHPUC found that CECo and E&H were entitled to
full interim stranded cost recovery, as defined by the NHPUC. However, the
NHPUC also made certain legal rulings, which could affect CECo's and E&H's
long-term ability to recover all of their stranded costs.
Northeast Utilities' affiliate, Public Service Company of New Hampshire
(PSNH), filed suit in U.S. District Court for protection from the Final Plan
and related orders and was granted an indefinite stay. In June 1997, Unitil,
and other utilities in New Hampshire, were granted intervention as
plaintiffs in the federal court proceeding. In June 1998, the Federal
District Court affirmed the continuing injunction against the NHPUC's
efforts to implement restructuring. This amended injunction was appealed by
the NHPUC, but affirmed by the First Circuit Court of Appeals in December
1998. On October 20, 1999, the District Court heard Motions for Summary
Disposition previously filed by Unitil and other parties. On March 6, 2000,
the District Court issued a ruling in a related matter in the case, not
directly involving the Unitil companies, in which the Court again affirmed
the Injunctions, but indicated that no ruling on Summary Disposition would
be made until negotiations between the state and PSNH are either abandoned
or result in a resolution. In June 1999, PSNH announced a Settlement with a
number of parties including the Governor of New Hampshire. On April 19,
2000, after an extensive proceeding, the NHPUC issued a ruling on the
Settlement approving it with certain conditions and modifications.
Implementation of a final Settlement is still contingent upon final
acceptance of all terms by PSNH, legislative action to authorize the
required securitization of certain stranded costs, and final PUC approval
of all compliance filings.
During 1998, Unitil took steps to settle all of the outstanding issues
related to the Final Plan and the federal court litigation over electric
industry restructuring. In September 1998, Unitil reached a settlement with
key parties and filed this unopposed agreement with the NHPUC for approval.
However, the NHPUC imposed unacceptable conditions to approval of the
settlement, and CECo and E&H withdrew the proposed settlement from further
NHPUC review. Unitil has continued to work actively to explore additional
settlement opportunities and to seek a fair and reasonable resolution of
key restructuring policies and issues in New Hampshire.
Rate Proceedings -The last formal regulatory filings to increase base
electric rates for Unitil's three retail operating subsidiaries occurred in
1985 for CECo, 1984 for FG&E, and 1981 for E&H. A majority of the Company's
operating revenues are collected under various periodic rate adjustment
mechanisms including fuel, purchased power, cost of gas, energy efficiency,
and restructuring-related cost recovery mechanisms. Industry restructuring
will continue to change the methods of how certain costs are recovered
through the Company's regulated rates and tariffs.
On May 15, 1998, FG&E filed a gas base rate case with the MDTE. The last
base rate case had been in 1984. After evidentiary hearings, the MDTE issued
an Order allowing FG&E to establish new rates, effective November 30, 1998,
that would produce an annual increase of approximately $1.0 million in gas
revenues. As part of the proceeding, the Massachusetts Attorney General
alleged that FG&E had double-collected fuel inventory finance charges, and
requested that the MDTE require FG&E to refund approximately $1.6 million in
double collections since 1987. The Company believes that the Attorney
General's claim is without merit and that a refund was not justified or
warranted. The MDTE rejected the Attorney General's request and stated its
intent to open a separate proceeding to investigate the Attorney General's
claim. On November 1, 1999, the MDTE issued an Order of Notice initiating an
investigation of this matter. This proceeding is underway and is expected to
be concluded in the second quarter of 2000.
On October 29, 1999, the MDTE initiated a proceeding designed to result in
the eventual implementation of Performance Based Rate making (PBR) for all
electric and gas distribution utilities in Massachusetts. PBR is a method of
setting regulated distribution rates that provide incentives for utilities
to control costs while maintaining a high level of service quality. Under
PBR, a company's earnings are tied to performance targets, and penalties can
be imposed for deterioration of service quality. On December 29, 1999, FG&E
filed a petition with the MDTE for authority to defer for later recovery
costs associated with its preparation of a PBR filing for its gas division
and its participation in the MDTE-initiated generic gas and electric PBR
proceedings. This petition is pending. The Company is currently evaluating
the impact, if any, that PBR would have on the Company's ability to continue
applying the standards of Statement of Financial Accounting Standards No.71
"Accounting for the Effects of Certain Types of Regulation."
On December 31, 1999, the Massachusetts Attorney General initiated a
Complaint against FG&E. The Attorney General requested that the MDTE launch
an investigation of the distribution rates, rate of return, and depreciation
accrual rates for FG&E's electric operations in calendar year 1999.
To date, the MDTE has taken no action on the Attorney General's complaint.
Millstone Unit No. 3 - FG&E has a 0.217% nonoperating ownership in the
Millstone Unit No. 3 (Millstone 3) nuclear generating unit which supplies it
with 2.49 megawatts (MW) of electric capacity. In January 1996, the Nuclear
Regulatory Commission (NRC) placed Millstone 3 on its Watch List, which
calls for increased NRC inspection attention. In March 1996, as a result of
engineering evaluations, Millstone 3 was taken out of service. The NRC
authorized the restart of Millstone 3 in June 1998.
During the period that Millstone 3 was out of service, FG&E continued to
incur its proportionate share of the unit's ongoing Operations and
Maintenance (O&M) costs, and may incur additional O&M costs and capital
expenditures to meet NRC requirements. FG&E also incurred costs to replace
the power that was expected to be generated by the unit. During the outage,
FG&E incurred approximately $1.2 million in replacement power costs, and
recovered those costs through its electric fuel charge, which is subject to
review and reconciliation by the MDTE. Under existing MDTE precedent, FG&E's
replacement power costs of $1.2 million could be subject to disallowance
in rates.
In August 1997, FG&E, in concert with other nonoperating joint owners, filed
a demand for arbitration in Connecticut and a lawsuit in Massachusetts, in
an effort to recover costs associated with the extended unplanned shutdown.
Several preliminary rulings have been issued in the arbitration and legal
cases, and both cases are continuing. On March 22, 2000, FG&E entered into a
settlement agreement with the defendants under which FG&E will dismiss its
lawsuit and arbitration claims. The settlement is generally similar to
earlier settlements with the defendants and three joint owners that own, in
the aggregate, approximately 19 percent of the unit. The settlement provides
for FG&E to receive an initial payment of $600,000 and other amounts
contingent upon future events and would result in FG&E's entire interest in
the unit being included in the auction of the majority interest, and certain
of the minority interests, in Millstone 3 expected to be completed by 2001.
Upon completion of the sale of Millstone 3, FG&E will be relieved of all
residual liabilities, including decommissioning liabilities, associated with
Millstone 3. FG&E expects to flow the net proceeds of the settlement to its
customers.
CAPITAL REQUIREMENTS
Capital expenditures for the three months ended March 31, 2000 were
approximately $4.3 million. This compares to $2.8 million during the same
period last year. Capital expenditures for the year 2000 are estimated to be
approximately $19.0 million as compared to $15.4 million for 1999. This
projection reflects normal capital expenditures for utility system
expansions, replacements and other improvements.
LEGAL PROCEEDINGS
The Company is involved in legal and administrative proceedings and claims
of various types which arise in the ordinary course of business. In the
opinion of the Company's management, based upon information furnished by
counsel and others, the ultimate resolution of these claims should not have
a material impact on the Company's financial position.
FORWARD-LOOKING INFORMATION
This report contains forward-looking statements which are subject to the
inherent uncertainties in predicting future results and conditions. Certain
factors that could cause the actual results to differ materially from those
projected in these forward-looking statements include, but are not limited
to; variations in weather, changes in the regulatory environment, customers'
preferences on energy sources, general economic conditions, increased
competition and other uncertainties, all of which are difficult to predict,
and many of which are beyond the control of the Company.
PART I. EXHIBIT 11.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING
(000's except for per share data)
(UNAUDITED)
BASIC Three Months Ended
EARNINGS PER SHARE March 31,
2000 1999
Net Income $2,664 $2,744
Less: Dividend Requirement
on Preferred Stock 67 68
Net Income Applicable
to Common Stock $2,597 $2,676
Average Number of Common
Shares Outstanding 4,715 4,621
Basic Earnings Per Common Share $0.55 $0.58
DILUTED Three Months Ended
EARNINGS PER SHARE March 31,
2000 1999
Net Income $2,664 $2,744
Less: Dividend Requirement
on Preferred Stock 67 68
Net Income Applicable
to Common Stock $2,597 $2,676
Average Number of Common
Shares Outstanding 4,744 4,629
Diluted Earnings Per Common Share $0.55 $0.58
PART I. EXHIBIT 99.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
SELECTED QUARTERLY FINANCIAL DATA
(000's except for per share data)
(UNAUDITED)
Three Months Ended
June 30,
1999 1998
Total Operating Revenues $42,761 $41,542
Operating Income $3,402 $3,209
Net Income $1,598 $1,478
Basic Earnings per Share $0.32 $0.31
Diluted Earnings per Share $0.32 $0.30
Dividends Paid per
Common Share $0.345 0.34
Three Months Ended
September 30,
1999 1998
Total Operating Revenues $42,738 $40,315
Operating Income $3,392 $3,397
Net Income $1,709 $1,717
Basic Earnings per Share $0.35 $0.37
Diluted Earnings per Share $0.35 $0.36
Dividends Paid per
Common Share $0.345 0.34
Three Months Ended
December 31,
1999 1998
Total Operating Revenues $44,527 $40,828
Operating Income $4,063 $4,181
Net Income $2,387 $2,432
Basic Earnings per Share $0.49 $0.52
Diluted Earnings per Share $0.49 $0.50
Dividends Paid per
Common Share $0.345 $0.34
Three Months Ended
March 31,
2000 1999
Total Operating Revenues $46,317 $42,347
Operating Income $4,458 $4,551
Net Income $2,664 $2,744
Basic Earnings per Share $0.55 $0.58
Diluted Earnings per Share $0.55 $0.58
Dividends Paid per
Common Share $0.345 $0.345
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Description of Exhibit Reference
11 Computation in Support of
Earnings Per Average Common Share Filed herewith
99 Selected Quarterly Financial Data Filed herewith
(b) Reports on Form 8-K
During the quarter ended March 31, 2000, the Company did
not file any reports on Form 8-K.
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.
UNITIL CORPORATION
(Registrant)
Date: May 10, 2000 /s/ Anthony J. Baratta, Jr.
Anthony J. Baratta, Jr.
Chief Financial Officer
Date: May 10, 2000 /s/ Mark H. Collin
Mark H. Collin
Treasurer