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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, 1996
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.)
216 Epping Road, Exeter, New Hampshire 03833
(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 5, 1996
Common Stock, No par value 4,339,818 Shares
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
INDEX
Part I. Financial Information Page No.
Consolidated Statements of Earnings - Three
Months Ended March 31, 1996 and 1995 3
Consolidated Balance Sheets, March 31, 1996,
March 31, 1995 and December 31, 1995 4-5
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7-8
Management's Discussion and Analysis of Results of
Operations and Financial Condition 9-11
Exhibit 11 - Computation of Earnings per Average
Common Share Outstanding 12
Part II. Other Information 13
PART 1. FINANCIAL INFORMATION
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended
March 31,
1996 1995
Operating Revenues:
Electric $36,696,596 $34,630,716
Gas 7,448,729 6,182,175
Other 23,285 219,636
Total Operating Revenues 44,168,610 41,032,527
Operating Expenses:
Fuel and Purchased Power 24,237,784 23,231,030
Gas Purchased for Resale 4,323,966 3,458,550
Operating and Maintenance 5,824,291 5,352,955
Depreciation 1,633,558 1,570,675
Amort. of Cost of Abandoned Properties 488,500 420,719
Provisions for Taxes:
Local Property and Other 1,313,376 1,194,442
Federal and State Income 1,751,787 1,475,449
Total Operating Expenses 39,573,262 36,703,820
Operating Income 4,595,348 4,328,707
Non-Operating (Income) Expense (12,501) 155,810
Income Before Interest Expense 4,607,849 4,172,897
Interest Expense, Net 1,411,936 1,454,030
Net Income 3,195,913 2,718,867
Less Dividends on Preferred Stock 70,726 71,301
Net Income Applicable to Common Stock $3,125,187 $2,647,566
Average Common Shares Outstanding 4,334,283 4,274,626
Earnings Per Share of Common Stock $0.72 $0.62
Dividends Declared per Share
of Common Stock (Note 1) $0.66 $0.64
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December
31,
1996 1995 1995
ASSETS:
Utility Plant:
Electric $149,755,755 $143,467,360 $148,458,414
Gas 27,378,391 25,894,102 27,220,705
Common 8,347,204 6,951,814 8,494,093
Construction Work in Progress 9,666,536 1,452,591 6,003,991
Utility Plant 195,147,886 177,765,867 190,177,203
Less: Accumulated Depreciation 61,946,195 57,509,133 60,682,742
Net Utility Plant 133,201,691 120,256,734 129,494,461
Other Property & Investments 42,448 42,448 42,448
Current Assets:
Cash 2,151,213 6,345,082 3,397,931
Accounts Receivable - Less
Allowance for Doubtful
Accounts of $648,186,
$568,626 and $622,596 15,970,323 14,492,916 14,931,699
Materials and Supplies 1,738,516 1,529,955 2,275,865
Prepayments 679,079 688,645 434,727
Accrued Revenue 1,418,653 655,514 2,577,715
Total Current Assets 21,957,784 23,712,112 23,617,937
Deferred Assets:
Debt Issuance Costs 871,107 926,128 885,258
Cost of Abandoned Properties 26,766,291 28,352,120 27,254,791
Prepaid Pension Costs 6,914,961 5,971,880 6,689,093
Other Deferred Assets 24,246,950 25,511,425 23,718,296
Total Deferred Assets 58,799,309 60,761,553 58,547,438
TOTAL $214,001,232 $204,772,847 $211,702,284
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December
31,
1996 1995 1995
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common Stock Equity $64,502,158 $60,262,024 $63,894,789
Preferred Stock,
Non-Redeemable, Non-Cumulative
Preferred Stock 225,000 225,000 225,000
Redeemable, Cumulative
Preferred Stock 3,766,900 3,809,600 3,773,900
Long-Term Debt,
Less Current Portion 62,211,000 63,466,000 62,211,000
Total Capitalization 130,705,058 127,762,624 130,104,689
Capitalized Leases,
Less Current Portion 3,644,252 3,381,675 3,732,947
Current Liabilities:
Long-Term Debt, Current Portion 1,255,000 144,000 1,294,000
Short-Term Debt 1,900,000 0 2,700,000
Accounts Payable 14,355,500 11,398,398 14,565,075
Dividends Declared and Payable 1,611,340 1,525,877 170,796
Refundable Customer Deposits 1,823,971 2,917,450 2,237,851
Taxes Accrued 2,040,377 1,193,442 216,596
Interest Accrued 1,471,692 1,428,365 1,425,876
Capitalized Leases,
Current Portion 673,438 525,989 741,832
Accrued and Other
Current Liabilities 2,928,465 2,201,055 2,202,096
Total Current Liabilities 28,059,783 21,334,576 25,554,122
Deferred Liabilities:
Investment Tax Credits 1,754,516 1,955,581 1,803,821
Other Deferred Liabilities 9,139,137 9,258,090 9,763,878
Total Deferred Liabilities 10,893,653 11,213,671 11,567,699
Deferred Income Taxes 40,698,486 41,080,301 40,742,827
TOTAL $214,001,232 $204,772,847 $211,702,284
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
March 31,
1996 1995
Net Cash Flow from Operating Activities:
Net Income $3,195,913 $2,718,867
Adjustments to Reconcile Net Income
to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 2,122,058 1,991,394
Deferred Taxes 156,278 48,205
Amortization of Investment Tax Credit (49,305) (50,587)
Provision of Doubtful Accounts 227,244 185,217
Amortization of Debt Issuance Costs 14,151 29,802
Loss on Taking of Land and Building 0 140,698
Changes in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable (1,265,868) (1,396,447)
Materials and Supplies 537,349 560,024
Prepayments and Prepaid Pension (470,220) (450,110)
Accrued Revenue 1,159,062 1,636,783
Increase (Decrease) in:
Accounts Payable 209,575) (1,092,643)
Refundable Customer Deposits (413,881) 434,671
Taxes and Interest Accrued 1,869,598 1,590,573
Other, Net (493,911) (372,070)
Net Cash Provided by Operating Activities 6,378,893 5,974,377
Net Cash Flows from Investing Activities:
Acquisition of Property, Plant and Equip. (5,359,269) (2,098,879)
Proceeds from Taking of Land & Building 0 2,000,000
Net Cash Used in Investing Activities (5,359,269) (98,879)
Cash Flows from Financing Activities:
Net (Decrease) in Short-Term Debt (800,000) 0
Net (Decrease) in Long-Term Debt (39,000) (1,970,321)
Dividends Paid (1,492,585) (1,435,686)
Issuance of Common Stock 229,333 259,705
Retirement of Preferred Stock (7,000) (59,000)
Repayment of Capital Lease Obligations (157,090) (135,237)
Net Cash Flows from Financing Activities (2,266,342) (3,340,539)
Net Increase (Decrease) in Cash (1,246,718) 2,534,959
Cash at Beginning of Year 3,397,931 3,810,123
Cash at March 31, $2,151,213 $6,345,082
Supplemental Cash Flow Information:
Cash Paid for:
Interest Paid $1,488,976 $1,482,339
Federal Income Taxes Paid $200,000 $0
Non-Cash Financing Activities:
Capital Leases Incurred $0 $205,359
(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 1996 and 1995.
Common Stock Dividend:
On March 7, 1996, the Company's Board of Directors declared its
regular quarterly dividend on the Company's Common Stock of $0.33 per
share which is payable on May 15, 1996 to shareholders of record as
of May 1, 1996.
On January 16, 1996, the Company's Board of Directors approved a
3.1% increase to the dividend rate on its common stock. The new
regular dividend rate is $0.33 per share and was payable February 15,
1996 to shareholders of record as of February 1, 1996.
Note 2.
Common Stock:
During the first quarter of 1996, the Company sold 9,765 shares
of Common Stock, at an average price of $23.48 per share, in
connection with its Dividend Reinvestment and Stock Purchase Plan and
its 401(k) plans. Net proceeds of $229,294 were used to reduce
short-term borrowings.
Note 3.
Preferred Stock:
Details on preferred stock at March 31, 1996, March 31, 1995 and
December 31, 1995 are shown below:
March 31, December
31,
1996 1995 1995
Preferred Stock:
Non-Redeemable,
Non-Cumulative,
6%, $100 Par Value $225,000 $225,000 $225,000
Redeemable, Cumulative,
$100 Par Value:
8.70% Series 215,000 215,000 215,000
5% Dividend Series 91,000 98,000 98,000
6% Dividend Series 168,000 168,000 168,000
8.75% Dividend Series 344,300 344,300 344,300
8.25% Dividend Series 406,000 406,000 406,000
5.125% Dividend Series 1,076,600 1,108,100 1,076,600
8% Dividend Series 1,466,000 1,470,200 1,466,000
Total Redeemable Preferred 3,766,900 3,809,600 3,773,900
Total Preferred Stock $3,991,900 $4,034,600 $3,998,900
Note 4.
Long-term Debt:
Details on long-term debt at March 31, 1995, March 31, 1995 and
December 31, 1995 are shown below:
March 31, December
31,
1996 1995 1995
Concord Electric Company:
First Mortgage Bonds:
Series C, 6 3/4%,
due January 15, 1998 $1,552,000 $1,584,000 $1,584,000
Series H, 9.43%,
due September 1, 2003 6,500,000 6,500,000 6,500,000
Series I, 8.49%,
dueOcotber 14, 2024 6,000,000 6,000,000 6,000,000
Exeter & Hampton
Electric Company:
First Mortgage Bonds:
Series E, 6 3/4%,
due January 15, 1998 504,000 511,000 511,000
Series H, 8.50%,
due December 15, 2002 910,000 1,015,000 910,000
Series J, 9.43%,
due September 1, 2003 5,000,000 5,000,000 5,000,000
Series K, 8.49%,
due October 14, 2024 9,000,000 9,000,000 9,000,000
Fitchburg Gas and Electric
Light Company:
Promissory Notes:
8.55% Notes due March 31, 2004 15,000,000 15,000,000 15,000,000
6.75% Notes due November 30,2023 19,000,000 19,000,000 19,000,000
Total 63,466,000 63,610,000 63,505,000
Less: Installments
due within one year 1,255,000 144,000 1,294,000
Total Long-term Debt $62,211,000 $63,466,000 $62,211,000
Note 5.
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, 1996 and 1995; and
results of operations for the three months ended March 31, 1996 and
1995; and consolidated statements of cash flows for the three months
ended March 31, 1996 and 1995. Reclassifications of amounts are
made periodically to previously issued financial statements to
conform with the current year presentation.
The results of operations for the three months ended March 31,
1996 and 1995 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
Earnings per average common share outstanding were $0.72 for the
three-months ended March 31, 1996, as compared to $0.62 per average
common share outstanding for the three-months ended March 31, 1995.
This increase of $0.10 per share, or 16%, was primarily due to higher
electric and gas base revenue during the first quarter of 1996.
Higher operating costs and lower energy consulting revenue partially
offset this increase.
Total base revenue increased 10.7% in the first quarter of 1996.
This increase was mainly attributable to two factors: 1) continued
growth in electric sales to the System's largest commercial and
industrial customers: and 2) the positive impact of a normal heating
season on electric and gas sales to residential customers. The Unitil
System's kilowatt-hour (KWH) sales increased 11.7% during the first
quarter of 1996. Regulatory approvals for Unitil's Energy Bank(TM) have
now been secured and already this initiative has meant substantial
new electric sales under market pricing arrangements with the
System's customers at prices which are up to 40% less than the
current New England average industrial rate. The addition of these
substantial new sales, combined with overall higher energy usage by
existing customers, resulted in an increase of over 24% in KWH sales
to the System's largest commercial and industrial customer group, to
145,584,255 KWH up from 117,294,800 KWH in the year earlier period.
A return to normal winter weather also had a positive impact on
sales. The weather in the first quarter of 1996, as measured by
heating degree days, was 12.5% colder than the same period in 1995.
As a result, KWH sales to residential customers increased 7.4% to
154,572,282 KWH, compared to 143,987,634 KWH during the first quarter
of 1995. Total gas firm therm sales, most impacted by the weather,
increased 16.6% during the current quarter of 1996 to 11,331,370
therms from 9,719,744 therms in the year earlier period.
Higher operating costs in the first quarter of 1996 partially
offset the increase in base revenue. This increase in costs primarily
reflects expanded business development and marketing initiatives. The
Company is investing some of the earnings from new growth in the
development and marketing of additional new products designed to secure
and expand market share as new competitive opportunities arise from
industry restructuring efforts currently underway. Other offsetting
factors included a reduction in energy consulting revenues during the
current quarter and an increase in property taxes of more than 10%.
Millstone Unit No. 3
Unitil's Massachusetts operating subsidiary, Fitchburg Gas and
Electric Light Company (FG&E), has a 0.217% ownership in the
Millstone Unit No. 3 nuclear generating unit which supplies it with
2.50 MW of electric capacity. In January 1996 the Nuclear Regulatory
Commission (NRC) placed Millstone No. 3 on its watch list, which
calls for increased NRC inspection attention. In March 1996 the NRC
requested additional information about the operation of the unit. As
a result of an engineering evaluation completed by Northeast
Utilities, the unit's managing owner, Millstone Unit No. 3 was taken
out of service on March 30, 1996. It is expected that completion of
the work necessary to answer the NRC's questions will last until
early July 1996. Neither the plant's management nor the Company can
predict how long the NRC will take to review this data, or what
further actions the NRC might require before the restarting of this
unit.
During the period that Millstone No. 3 is out of service FG&E
will continue 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 the NRC guidelines. FG&E
will also incur costs to replace the power that was expected to be
generated by the unit. It is estimated that the additional cost of
replacement power will approximate $35,000 per month during the
outage.
Competition and Industry Restructuring
At the state level in both New Hampshire and Massachusetts,
progress towards a more competitive retail electric marketplace has
continued. Unitil remains an active participant in industry,
regulatory, and legislative proceedings on the issues of competition
and industry restructuring, favoring a reasonable and orderly
transition to competition and more choice for all customers.
In New Hampshire, the Retail Competition Pilot Program initiated
by the New Hampshire Public Utilities Commission (NHPUC) is currently
in the implementation stage. On May 1, 1996, all regulated electric
utilities in the State released lists of customers who have been
selected as participants in the program. The guidelines provide that
up to 3% of each utility's retail customer's will be allowed to
select from among competing electric supply providers and have this
supply delivered across the local utility system.More than twenty
electric suppliers, including Unitil Resources, Inc., are authorized
to begin marketing the sale of unbundled electricity to these
participants.
Unitil is currently appealing a decision by the NHPUC regarding
the recovery of power costs on mandated sales discounts to Pilot
Program participants. The NHPUC has ordered CECo and E&H to file
tariff rates which include a non-participant protection mechanism, to
prevent the allocation of unrecovered power costs to
non-participating customers. The Commission's decision would deny
CECo and E&H the opportunity to fully recover their purchased power
costs, in violation of both federal and state law, or to mitigate any
of the losses associated with the mandated power sales discounts.
Unless and until reversed by the Commission or the Supreme Court it
is estimated that under these tariffs CECo and E&H may potentially
incur $275,000 annually of trapped wholesale power supply costs.
Early in 1995, the NHPUC issued an order ruling that utilities
in New Hampshire do not have exclusive territories as a matter of
law. This order was issued in response to a petition by a power
marketer seeking to sell electricity to certain industrial customers
of an investor-owned New Hampshire utility. The NHPUC's decision was
appealed to the New Hampshire Supreme Court by the affected New
Hampshire utility, and on May 13, 1996 the Court confirmed the NHPUC
decision by ruling that New Hampshire utilities do not as a matter of
law have exclusive territories.
In the New Hampshire Legislature, HB 1392 passed both the House
and the Senate during the first quarter of 1996 and execution by the
governor is pending. This bill establishes principles, standards and
a timetable for the NHPUC to implement full, open retail electric
energy competition by January 1, 1998. The Bill also calls for the
NHPUC to set Interim Access Charges (equitable, appropriate and
balanced with due consideration of regional competitive rate levels),
with final orders on stranded cost recovery within two years of the
implementation of full competition.
During February 1996, four Massachusetts utilities filed
restructuring plans with the Massachusetts Department of Public
Utilities (MDPU), as required by that state's industry restructuring
process. Following these filings, the MDPU revised its initial
industry restructuring procedures, moving to a generic rulemaking
proceeding first, to be followed by utility compliance filings by
October 6, 1996. Draft regulations issued May 1, 1996 call for
unbundled rates by January 1, 1997 and implementation of full and
open electric energy competition by around January 1, 1998. Utilities
are to be provided reasonable opportunity to recover prudent,
non-mitigable stranded costs over ten years, phased incentive for
divestiture of generation, and performance based ratemaking of
monopoly transmission and distribution functions.
At the federal level, the Federal Energy Regulatory Commission
(FERC) recently issued its long awaited Mega-NOPR (Notice of Proposed
Rulemaking) ordering jurisdictional utilities to file open access,
non-discriminatory wholesale transmission tariffs within 60 days.
Result should be an increase in wholesale competition in New England
and, over time, a reduction in the Unitil System's purchased power
costs. However, compliance with this ruling will initially involve
additional filing and compliance costs for the Company.
CAPITAL REQUIREMENTS
Capital expenditures for the three months ended March 31, 1996
were approximately $5,400,000. This compares to $2,100,000 during the
same period last year. Capital expenditures for the year 1996 are
estimated to be approximately $18,300,000 as compared to $14,600,000
for 1995. This projection reflects capital expenditures of
approximately $14,200,000 million for normal utility system
expansions, replacements and other improvements and capital
expenditures of approximately $4,100,000 related to the completion of
construction of Unitil's new corporate headquarters.
LEGAL PROCEEDINGS
In June, 1993, E&H was served with a complaint from Zeabrook
Associates, the owner of an
apartment complex. In that complaint filed in the New Hampshire
Superior Court for Rockingham County, the owner asserts that the
Company improperly imposed a cash deposit requirement for new
residential customers in the claimant's apartment complex resulting
in lost rental income and damages to reputation. This matter was
recently settled through mediation and E&H agreed to make a
settlement payment to Zeabrook of $400,000. Approximately $200,000
of the settlement amount and $100,000 of legal fees are recoverable
under E&H's stop-loss insurance policies.
In another matter unrelated to Zeabrook, following a hearing
before the New Hampshire Board of Land and Tax Appeals on April
11,1996, the New Hampshire Department of Transportation ("NHDOT")
agreed to settle its dispute with the Company over the value of the
Company's former corporate headquarters which was taken by NHDOT in
1995 in an eminent domain action. The terms of the settlement include
an additional payment to be made to the Company of $875,000 and is
subject to the approval of the New Hampshire Governor's Council. The
Company intends to use the proceeds of the settlement, when received,
to partially offset construction costs of its new corporate
headquarters in Hampton, NH.
PART I. EXHIBIT 11.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING
(UNAUDITED)
Three Months Ended
PRIMARY March 31,
1996 1995
Net Income $3,195,913 $2,718,867
Less: Dividend Requirement
on Preferred Stock 70,726 71,301
Net Income Applicable
to Common Stock $3,125,187 $2,647,566
Average Number of Common
Shares Outstanding 4,334,283 4,274,626
Earnings Per Common Share $0.72 $0.62
Three Months Ended
FULLY-DILUTED March 31,
1996 1995
Net Income $3,195,913 $2,718,867
Less: Dividend Requirement
on Preferred Stock 70,726 71,301
Net Income Applicable
to Common Stock $3,125,187 $2,647,566
Average Number of Common
Shares Outstanding 4,443,907 4,343,520
Earnings Per Common Share $0.70 $0.61
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
(b) Reports on Form 8-K
During the quarter ended March 31, 1996, 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 14, 1996 /s/ Gail A. Siart
Gail A. Siart, Treasurer and
Chief Financial Officer
(Gail A. Siart is the Principal
Financial Officer and has been duly
authorized to sign on behalf of the
registrant.)