View:
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 June 30, 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.)
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 August 1, 1996
Common Stock, No par value 4,356,374 Shares
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
INDEX
Part I. Financial Information Page No.
Consolidated Statements of Earnings - Three and Six
Months Ended June 30, 1996 and 1995 3
Consolidated Balance Sheets, June 30, 1996,
June 30, 1995 and December 31, 1995 4-5
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7-8
Management's Discussion and Analysis of Results of
Operations and Financial Condition 9-10
Exhibit 11 - Computation of Earnings per Average
Common Share Outstanding 11
Part II. Other Information 12
-2-
PART 1. FINANCIAL INFORMATION
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Operating Revenues:
Electric $36,350,820 $34,050,063 $73,047,416 $68,680,779
Gas 4,252,892 3,423,175 11,701,621 9,605,350
Other 7,142 207,034 30,427 426,670
Total Operating Revenues 40,610,854 37,680,272 84,779,464 78,712,799
Operating Expenses:
Fuel and Purchased Power 24,739,837 23,050,620 48,977,621 46,249,620
Gas Purchased for Resale 2,831,468 2,126,771 7,155,434 5,585,321
Operating and Maintenance 6,383,692 5,732,168 12,207,983 11,117,153
Depreciation 1,667,157 1,548,067 3,300,715 3,118,742
Amort. of Cost of
Abandoned Properties 416,215 396,869 904,715 817,588
Provisions for Taxes:
Local Property and Other 1,259,582 1,156,449 2,572,958 2,350,891
Federal and State Income 881,432 754,304 2,633,219 2,229,753
Total Operating Expenses 38,179,383 34,765,248 77,752,645 71,469,068
Operating Income 2,431,471 2,915,024 7,026,819 7,243,731
Non-Operating
(Income) Expense (630,220) 16,754 (642,721) 172,564
Income Before
Interest Expense 3,061,691 2,898,270 7,669,540 7,071,167
Interest Expense, Net 1,464,712 1,370,926 2,876,648 2,824,956
Net Income 1,596,979 1,527,344 4,792,892 4,246,211
Less Dividends on
Preferred Stock 66,889 70,835 137,615 142,136
Net Income Applicable to
Common Stock $1,530,090 $1,456,509 $4,655,277 $4,104,075
Average Common Shares
Otstanding 4,344,380 4,290,940 4,339,332 4,282,783
Earnings Per Share
of Common Stock $0.35 $0.34 $1.07 $0.96
Dividends Declared per Share
of Common Stock (Note 1) $0.33 $0.32 $0.99 $0.96
(The accompanying notes are an integral part of these statements.)
-3-
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1996 1995 1995
ASSETS:
Utility Plant:
Electric $152,853,592 $144,392,906 $148,458,414
Gas 27,785,959 26,102,007 27,220,705
Common 7,521,950 7,873,934 8,494,093
Construction Work in Progress 10,588,926 3,058,274 6,003,991
Total Utility Plant 198,750,427 181,427,121 190,177,203
Less: Accumulated Depreciation 62,165,294 58,542,627 60,682,742
Net Utility Plant 136,585,133 122,884,494 129,494,461
Other Property & Investments 42,448 42,448 42,448
Cash 2,537,729 2,199,060 3,397,931
Accounts Receivable - Less
Allowance for Doubtful
Accounts of $678,274
$539,741 and $622,596 14,438,879 13,008,798 14,931,699
Materials and Supplies 2,193,578 2,009,732 2,275,865
Prepayments 743,184 678,516 434,727
Accrued Revenue 3,780,317 2,029,452 2,577,715
Total Current Assets 23,693,687 19,925,558 23,617,937
Deferred Assets:
Debt Issuance Costs 856,956 913,559 885,258
Cost of Abandoned Properties 26,350,076 27,955,250 27,254,791
Prepaid Pension Costs 7,141,212 6,244,710 6,689,093
Other Deferred Assets 23,721,275 24,460,235 23,718,296
Total Deferred Assets 58,069,519 59,573,754 58,547,434
TOTAL $218,390,787 $202,426,254 $211,702,284
(The accompanying notes are an integral part of these statements.)
-4-
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1996 1995 1995
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common Stock Equity $64,951,176 $60,718,674 $63,894,789
Preferred Stock,
Non-Redeemable, Non-Cumulative 225,000 225,000 225,000
Preferred Stock,
Redeemable, Cumulative 3,665,900 3,773,900 3,773,900
Long-Term Debt, Less
Current Portion 62,204,000 63,466,000 62,211,000
Total Capitalization 131,046,076 128,183,574 130,104,689
Capitalized Leases, Less
Current Portion 3,584,502 3,260,128 3,732,947
Current Liabilities:
Long-Term Debt, Current Portion 1,262,000 144,000 1,294,000
Short-Term Debt 6,100,000 -- 2,700,000
Accounts Payable 15,288,086 10,656,094 14,565,075
Dividends Declared and Payable 1,614,531 1,534,903 170,796
Refundable Customer Deposits 1,813,729 2,721,807 2,237,851
Taxes Accrued (56,414) 39,958 216,596
Interest Accrued 1,453,462 1,408,871 1,425,876
Capitalized Leases, Current Portion 792,100 498,770 741,832
Accrued and Other
Current Liabilities 4,168,896 1,832,404 2,202,096
Total Current Liabilities 32,436,390 18,836,807 25,554,122
Deferred Liabilities:
Investment Tax Credits 1,705,211 1,904,994 1,803,821
Other Deferred Liabilities 8,786,046 9,268,130 9,763,878
Total Deferred Liabilities 10,491,257 11,173,124 11,567,699
Deferred Income Taxes 40,832,562 40,972,621 40,742,827
TOTAL $218,390,787 $202,426,254 $211,702,284
(The accompanying notes are an integral part of these statements.)
-5-
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
1996 1995
Net Cash Flow from Operating Activities:
Net Income $4,792,892 $4,246,211
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 4,205,430 3,936,330
Deferred Taxes 392,022 (29,899)
Amortization of Investment Tax Credit (98,610) (101,174)
Provision of Doubtful Accounts 476,252 369,264
Amortization of Debt Issuance Costs 28,302 43,950
Loss on Taking of Land and Building -- 140,698
Changes in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable 16,568 (96,377)
Materials and Supplies 82,287 80,247
Prepayments and Prepaid Pension (760,576) (712,811)
Accrued Revenue (1,202,602) 262,845
Increase (Decrease) in:
Accounts Payable 723,011 (1,834,947)
Refundable Customer Deposits (424,122) 239,028
Taxes and Interest Accrued (245,424) 417,595
Other, Net 841,446 304,467
Net Cash Provided by Operating Activities 8,826,876 7,265,427
Net Cash Flows from Investing Activities:
Acquisition of Property, Plant and Equip. (10,119,112) (5,963,887)
Proceeds from Taking of Land & Building -- 2,000,000
Net Cash Used in Investing Activities (10,119,112) (3,963,887)
Cash Flows from Financing Activities:
Net (Decrease) in Short-Term Debt 3,400,000 -
Net (Decrease) in Long-Term Debt (39,000) (1,970,321)
Dividends Paid (2,991,258) (2,873,120)
Issuance of Common Stock 524,318 541,634
Retirement of Preferred Stock (108,000) (94,700)
Repayment of Capital Lease Obligations (354,026) (516,096)
Net Cash Flows from Financing Activities 432,034 (4,912,603)
Net Increase (Decrease) in Cash (860,202) (1,611,063)
Cash at Beginning of Year 3,397,931 3,810,123
Cash at June 30, $2,537,729 $2,199,060
Supplemental Cash Flow Information:
Cash Paid for:
Interest Paid $2,893,132 $2,994,398
Federal Income Taxes Paid $2,232,000 $955,000
Non-Cash Financing Activities:
Capital Leases Incurred $255,849 $437,453
(The accompanying notes are an integral part of these statements.)
-6-
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1.
Dividends Declared Per Share:
Three regular quarterly common stock dividends were declared during
the six month periods ended June 30, 1996 and 1995.
Common Stock Dividend:
On June 20, 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 August 15, 1996 to shareholders of record as of August 1, 1996.
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 second quarter of 1996, the Company sold 13,701 shares of
Common Stock, at an average price of $21.53 per share, in connection with its
Dividend Reinvestment and Stock Purchase Plan and its 401(k) plans. Net
proceeds of $295,024 were used to reduce short-term borrowings.
Note 3.
Preferred Stock:
Details on preferred stock at June 30, 1996, June 30, 1995 and December 31, 1995
are shown below:
June 30, 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 1,034,600 1,076,600 1,076,600
8% Dividend Series 1,407,000 1,466,000 1,466,000
Total Redeemable Preferred Stock 3,665,900 3,773,900 3,773,900
Total Preferred Stock $3,890,900 $3,998,900 $3,998,900
-7-
Note 4.
Long-term Debt:
Details on long-term debt at June 30, 1996, June 30, 1995 and
December 31, 1995 are shown below:
June 30, 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%, due October 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 1,262,000 144,000 1,294,000
Total Long-term Debt $62,204,000 $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 June 30, 1996 and 1995; and results of operations for the
three and six months ended June 30, 1996 and 1995; and consolidated
statements of cash flows for the six months ended June 30, 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 six months ended June 30, 1996 and
1995 are not necessarily indicative of the results to be expected for the
full year.
-8-
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
EARNINGS
Earnings from ongoing operations for the quarter increased more than 6%,
versus the same period last year. The effect of nonrecurring items reduced
earnings from operations 3%, resulting in a net increase of 3% in earnings per
share to $0.35, compared to earnings of $0.34 per share for the same
three-month period of 1995. For the first six months of 1996, earnings were
$1.07 per share, up $0.11 per share from the same six-month period a year
earlier, an increase of more than 11%.
The earnings improvement for the second quarter primarily reflects
increases derived from growing electric and gas sales. These earnings also
reflect the effect of two nonrecurring and offsetting items recorded in the
second quarter: 1) the positive impact of additional funds received in
settlement of an eminent domain proceeding pertaining to the State of New
Hampshire's taking of the Company's former corporate headquarters; and,
2) a one-time charge to earnings for estimated costs relating to compliance
with the rules and regulations of the New Hampshire Public Utilities
Commission for the New Hampshire Electric Retail Competition Pilot Program.
Total base revenue increased 7.6% in the second quarter of 1996 as a result
of higher electric and gas sales. Electric energy sales to large industrial
and commercial customers were up substantially in the second quarter of 1996,
as KWH usage by this group increased more than 28%, to 158,868,139 KWH up from
123,641,762 KWH in the year earlier period. These sales reflect the addition of
major new load under Unitil's competitive initiatives, including the Energy
Bank program(TM), as well as the overall positive impact that a more normal
heating season had on energy sales. Residential KWH sales increased 2.2% to
117,796,323 KWH in the quarter, compared to 115,209,139 KWH during the
second quarter of 1995. Total gas firm therm sales, most impacted by the
weather, increased 6.5% during the second quarter of 1996 to 4,964,839 therms
from 4,660,553 therms in the year earlier period. These increased energy sales
supported higher operating costs primarily for expanded business development
and marketing initiatives during the period.
During the second quarter of 1996, the Company reached an agreement with
the State of New Hampshire related to the eminent domain taking of its
corporate headquarters. As a result of that agreement, the Company received an
additional payment from the State of New Hampshire of $875,000, which
settled a long standing dispute over the matter. Also in the second quarter,
the Company recorded a one-time charge to earnings for estimated costs relating
to compliance with the rules and regulations of the New Hampshire Public
Utilities Commission for the New Hampshire Electric Retail Competition Pilot
Program (see "NH Retail Competition Pilot Program"). The impact on earnings of
these two nonrecurring items effectively offset each other.
Total base revenue increased by 8.0% in the first six months of 1996. This
increase was driven by an 11.5% increase in total KWH sales during the period.
Sales to the Unitil System's largest commercial and industrial customer group
grew 26.4% during the first six months of 1996, to 304,452,393 KWH from
240,936,562 KWH in the year earlier period. Residential KWH sales increased
5.1% to 272,368,605 KWH, compared to 259,196,773 KWH during the first half of
1995. Total gas firm therm sales, increased 13.3% during the first six months
of 1996 to 16,296,209 therms from 14,380,297 therms in the year earlier period.
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 2.49 MW of electric capacity. In January
1996 the Nuclear Regulatory Commission (NRC) placed Millstone No. 3 on its watch
list as a Category 2 facility, which calls for increased NRC inspection
attention. In March 1996 the NRC requested additional information about the
operation of the unit from Northeast Utilities (NU), the unit's managing owner.
As a result of an engineering evaluation completed by NU, Millstone Unit No. 3
was taken out of service on March 30, 1996. The NRC later informed NU, in a
letter dated June 28, 1996, that it had reclassified Millstone Station as a
Category 3 facility. The NRC assigns this rating to plants which it deems to
have significant weaknesses that warrant maintaining the plant in shutdown
condition until the operator demonstrates that adequate programs have been
established and implemented to ensure substantial improvement in the operation
of the plant. The NRC's letter also informed NU that this designation would
require the NRC staff to obtain NRC approval by vote prior to a restart of
the unit.
-9-
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 NRC requirements. 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.
NH Retail Competition Pilot Program
In New Hampshire, the Retail Competition Pilot Program (Pilot Program) initiated
by the New Hampshire Public Utilities Commission (NHPUC) has progressed to
the operational stage. On May 1, 1996, all regulated electric utilities in
the State, including Concord Electric Company (CECo) and Exeter
& Hampton Electric Company (E&H), Unitil' New Hampshire based retail operating
utilities, released lists of customers who have been selected as participants
in the Pilot 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 thirty competitive electric suppliers, including Unitil
Resources, Inc., the Company's competitive market subsidiary, are currently
authorized to market the sale of electricity to these participants. Unitil
Resources began marketing electricity to Pilot Program participants in late
May, and actual sale by Unitil Resources and other suppliers began in June is
some areas of the state. Unitil Resource's market price for the month of
August - 2.2 cents/kilowatt hour - is the lowest price offered among the local,
regional and national energy suppliers competing for customers in the program.
Under the Pilot Program, the NHPUC had initially ordered CECo and E&H to
file tariff rates which included discounts to participants and a
non-participant protection mechanism, to prevent the allocation of unrecovered
power costs to nonparticipating customers. The Company filed for reconsideration
of that order based on a determination that the NHPUC'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. The Company entered into
a settlement agreement with the NHPUC staff and the Office of the Consumer
Advocate which was approved by the NHPUC on July 1, 1996 . The settlement
contains provisions which provide the Company with an opportunity to mitigate
the losses resulting from unrecovered power costs and mandated sales discounts.
The Company has recorded in the second quarter a one-time charge to earnings
for estimated costs relating to compliance with the rules and regulations of
the New Hampshire Public Utilities Commission for the New Hampshire Electric
Retail Competition Pilot Program.
CAPITAL REQUIREMENTS
Capital expenditures for the six months ended June 30, 1996 were
approximately $10,100,000. This compares to $6,000,000 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.
CORPORATE HEADQUARTERS RELOCATION
Due to the eminent domain taking of our corporate headquarters in
connection with a highway expansion, we have moved to Hampton, New Hampshire,
just eight miles away from our former site. Our new address is 6 Liberty Lane
West, Hampton, New Hampshire 03842.
-10-
PART I. EXHIBIT 11.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING
(UNAUDITED)
PRIMARY Three Months Ended Six Months Ended
June 30, June 30,
EARNINGS PER SHARE 1996 1995 1996 1995
Net Income $1,596,979 $1,527,344 $4,792,892 $4,246,211
Less: Dividend Requirement
on Preferred Stock 66,889 70,835 137,615 142,136
Net Income Applicable
to Common Stock $1,530,090 $1,456,509 $4,655,277 $4,104,075
Average Number of Common
Shares Outstanding 4,344,380 4,290,940 4,339,332 4,282,783
Earnings Per Common Share $0.35 $0.34 $1.07 $0.96
FULLY-DILUTED Three Months Ended Six Months Ended
June 30, June 30,
EARNINGS PER SHARE 1996 1995 1996 1995
Net Income $1,596,979 $1,527,344 $4,792,892 $4,246,211
Less: Dividend Requirement
on Preferred Stock 66,889 70,835 137,615 142,136
Net Income Applicable
to Common Stock $1,530,090 $1,456,509 $4,655,277 $4,104,075
Average Number of Common
Shares Outstanding 4,454,049 4,365,961 4,453,385 4,357,227
Earnings Per Common Share $0.34 $0.33 $1.05 $0.94
-12-
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 June 30, 1996, the Company did not
file any reports on Form 8-K.
-13-
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: August 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.)
-14-