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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, 1997
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, 1997
Common Stock, No par value 4,397,147 Shares
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
INDEX
Part I. Financial Information Page No.
Consolidated Statements of Earnings - Three
Months Ended March 31, 1997 and 1996 3
Consolidated Balance Sheets, March 31, 1997,
March 31, 1996 and December 31, 1996 4-5
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1997 and 1996 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,
1997 1996
Operating Revenues:
Electric $38,058,307 $36,696,596
Gas 7,266,381 7,448,729
Other 7,500 23,285
Total Operating Revenues 45,332,188 44,168,610
Operating Expenses:
Fuel and Purchased Power 25,472,247 24,237,784
Gas Purchased for Resale 4,366,396 4,323,966
Operating and Maintenance 5,647,256 5,824,291
Depreciation 1,902,259 1,633,558
Amort. of Cost of Abandoned Properties 400,935 488,500
Provisions for Taxes:
Local Property and Other 1,370,796 1,313,376
Federal and State Income 1,557,425 1,751,787
Total Operating Expenses 40,717,314 39,573,262
Operating Income 4,614,874 4,595,348
Non-Operating Expense (Income) 5,485 (12,501)
Income Before Interest Expense 4,609,389 4,607,849
Interest Expense, Net 1,694,905 1,411,936
Net Income 2,914,484 3,195,913
Less Dividends on Preferred Stock 69,008 70,726
Net Income Applicable to Common Stock $2,845,476 $3,125,187
Average Common Shares Outstanding 4,389,566 4,334,283
Earnings Per Share of Common Stock $0.65 $0.72
Dividends Declared per Share
of Common Stock (Note 1) $0.67 $0.66
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1997 1996 1996
ASSETS:
Utility Plant:
Electric $160,108,556 $149,755,755 $157,874,414
Gas 28,887,089 27,378,391 28,729,277
Common 18,641,319 8,347,204 18,779,677
Construction Work in Progress 2,376,329 9,666,536 2,161,114
Utility Plant 210,013,293 195,147,886 207,544,482
Less: Accumulated Depreciation 65,517,975 61,946,195 63,786,756
Net Utility Plant 144,495,318 133,201,691 143,757,726
Other Property & Investments 42,448 42,448 42,448
Current Assets:
Cash 3,269,791 2,151,213 2,902,842
Accounts Receivable - Less Allowance
for Doubtful Accounts of $697,919
$648,186 and $660,114 17,705,259 15,970,323 16,383,323
Materials and Supplies 1,818,763 1,738,516 2,478,932
Prepayments 773,011 679,079 480,453
Accrued Revenue 6,436,125 1,418,653 8,859,188
Total Current Assets 30,002,949 21,957,784 31,104,738
Deferred Assets:
Debt Issuance Costs 814,559 871,107 828,689
Cost of Abandoned Properties 25,031,322 26,766,291 25,432,258
Prepaid Pension Costs 7,525,877 6,914,961 7,347,635
Other Deferred Assets 23,899,625 24,246,950 23,594,289
Total Deferred Assets 57,271,383 58,799,309 57,202,871
TOTAL $231,812,098 $214,001,232 $232,107,783
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1997 1996 1996
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common Stock Equity $69,703,981 $64,502,158 $67,974,260
Preferred Stock, Non-Redeemable,
Non-Cumulative 225,000 225,000 225,000
Preferred Stock, Redeemable, Cumulative 3,665,900 3,766,900 3,665,900
Long-Term Debt, Less Current Portion 57,900,000 62,211,000 60,917,000
Total Capitalization 131,494,881 130,705,058 132,782,160
Capitalized Leases, Less Current Portion 4,448,703 3,644,252 4,629,832
Current Liabilities:
Long-Term Debt, Current Portion 4,272,000 1,255,000 1,294,000
Capitalized Leases, Current Portion 903,356 673,438 1,000,210
Accounts Payable 14,858,337 14,355,500 15,103,925
Short-Term Debt 17,550,000 1,900,000 21,400,000
Dividends Declared and Payable 197,385 1,611,340 191,246
Refundable Customer Deposits 1,643,534 1,823,971 1,585,116
Taxes Payable (Refundable) 1,937,224 2,040,377 (147,938)
Interest Payable 1,427,271 1,471,692 1,484,166
Other Current Liabilities 2,530,987 2,928,465 2,043,846
Total Current Liabilities 45,320,094 28,059,783 43,954,571
Deferred Liabilities:
Investment Tax Credits 1,566,223 1,754,516 1,610,117
Other Deferred Liabilities 8,441,948 9,139,137 8,488,593
Total Deferred Liabilities 10,008,171 10,893,653 10,098,710
Deferred Income Taxes 40,540,249 40,698,486 40,642,510
TOTAL $231,812,098 $214,001,232 $232,107,783
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
1997 1996
Cash Flows from Operating Activities:
Net Income $2,914,484 $3,195,913
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 2,303,194 2,122,058
Deferred Taxes Provided (9,268) 156,278
Amortization of Investment Tax Credit (43,894) (49,305)
Amortization for Debt Issuance Costs 14,130 14,151
Provision of Doubtful Accounts 222,260 227,244
Changes in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable (1,544,196) (1,265,868)
Materials and Supplies 660,169 537,349
Prepayments and Prepaid Pension (470,800) (470,220)
Accrued Revenue 2,423,063 1,159,062
Increase (Decrease) in:
Accounts Payable (245,588) (209,575)
Refundable Customer Deposits 58,418 (413,881)
Taxes and Interest Payable 2,028,267 1,869,598
Other, Net 139,998 (493,911)
Net Cash Provided by Operating Activities 8,450,237 6,378,893
Cash Flows from Investing Activities:
Acquisition of Property, Plant and Equipment (2,570,687) (5,359,269)
Net Cash Used in Investing Activities (2,570,687) (5,359,269)
Cash Flows from Financing Activities:
Repayment of Short-Term Debt (3,850,000) (800,000)
Repayment of Long-Term Debt (39,000) (39,000)
Dividends Paid (1,530,896) (1,492,585)
Issuance of Common Stock 229,003 229,333
Retirement of Preferred Stock 0 (7,000)
Repayment of Capital Lease Obligations (321,708) (157,090)
Net Cash Used in Financing Activities (5,512,601) (2,266,342)
Net Increase (Decrease) in Cash 366,949 (1,246,718)
Cash at Beginning of Year 2,902,842 3,397,931
Cash at March 31, $3,269,791 $2,151,213
Supplemental Cash Flow Information:
Interest Paid $1,848,546 $1,488,976
Federal Income Taxes Paid $0 $200,000
(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 1997 and 1996.
Common Stock Dividend:
On March 6, 1997, the Company's Board of Directors declared its
regular quarterly dividend on the Company's Common Stock of $0.335
per share which is payable on May 15, 1997 to shareholders of record
as of May 1, 1997.
On January 21, 1997, the Company's Board of Directors approved a
1.5% increase to the dividend rate on its common stock. The new
regular dividend rate is $0.335 per share and was payable February
14, 1997 to shareholders of record as of January 31, 1997.
Note 2.
Common Stock:
During the first quarter of 1997, the Company sold 11,935 shares of
Common Stock, at an average price of $19.38 per share, in connection
with its Dividend Reinvestment and Stock Purchase Plan and its 401(k)
plans. Net proceeds of $231,254 were used to reduce short-term
borrowings.
Note 3.
Preferred Stock:
Details on preferred stock at March 31, 1997, March 31, 1996 and
December 31, 1996 are shown below:
March 31, December 31,
1997 1996 1996
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 91,000 91,000
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 1,034,600
8% Dividend Series 1,407,000 1,466,000 1,407,000
Total Redeemable Preferred Stock 3,665,900 3,766,900 3,665,900
Total Preferred Stock $3,890,900 $3,991,900 $3,890,900
Note 4.
Long-term Debt:
Details on long-term debt at March 31, 1997, March 31, 1996 and
December 31, 1996 are shown below:
March 31, December 31,
1997 1996 1996
Concord Electric Company:
First Mortgage Bonds:
Series C, 6 3/4%, due January 15, 1998 $1,520,000 $1,552,000 $1,552,000
Series H, 9.43%, due September 1, 2003 5,850,000 6,500,000 5,850,000
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 497,000 504,000 504,000
Series H, 8.50%, due December 15, 2002 805,000 910,000 805,000
Series J, 9.43%, due September 1, 2003 4,500,000 5,000,000 4,500,000
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 62,172,000 63,466,000 62,211,000
Less: Installments due within one year 4,272,000 1,255,000 1,294,000
Total Long-term Debt $57,900,000 $62,211,000 $60,917,000
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, 1997 and
1996; and results of operations for the three months ended March 31,
1997 and 1996; and consolidated statements of cash flows for the
three months ended March 31, 1997 and 1996. 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, 1997
and 1996 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 were $0.65 for the first quarter of
1997, versus $0.72 for the first quarter of 1996. This decrease of $0.07
per share, or 10%, was due to lower electric and gas base revenues during
the winter months, and higher depreciation and interest expense. The weather
in the first quarter of 1997, as measured by heating degree days, was 12%
warmer than the first quarter of 1996.
Total operating revenues for the Unitil System of companies increased
3% to $45.3 million in the first quarter of 1997 from $44.2 million in the
first quarter of 1996 as a result of higher fuel and purchased power
revenues. Fuel and purchased power and cost of gas revenues are collected
from customers as a separate component of their monthly bill, and do not
affect net income as they normally mirror changes in fuel and purchased
power costs.
Operating Revenue ($000s)
Three Months Ended
3/31/97 3/31/96
Base Electric Revenue 12,382 12,437
Fuel & Purchased Power 25,676 24,260
Total Electric Revenues 38,058 36,697
Base Gas Revenue 2,833 3,128
Cost of Gas 3,940 4,086
Interruptible Revenue 493 235
Total Gas Revenue 7,266 7,449
Other Revenue 8 23
Total Operating Revenue 45,332 44,169
Energy Sales
Three Months Ended
KWH Sales (000s) 3/31/97 3/31/96
Residential 149,496 154,572
Commercial 99,053 100,011
Large Commercial / Industrial 132,033 142,963
Other Sales 2,944 2,999
Total KWH Sales 383,526 400,545
Firm Therm Sales (000s)
Residential 5,766 6,568
Commercial 2,498 2,741
Large Commercial / Industrial 1,991 2,022
Total Firm Therm Sales 10,255 11,331
Base revenues are operating revenues which the Company realizes in
addition to fuel, purchased power and cost of gas revenues and which have a
direct impact on net income. Base revenues declined during the quarter by
2% to $15.2 million from $15.6 million in the first quarter of 1996. Total
electric base revenues were slightly lower in the first quarter of 1997
versus 1996. Total gas base revenues declined 9% to $2.8 million from $3.1
million in the first quarter of 1996. The decline in base revenues,
particularly in firm gas sales, reflects the lower consumption of energy
during the warmer heating season of the first quarter of 1997. The Energy
Sales table on this page shows energy consumption by customer class for the
first three months of 1997 and 1996. As previously reported, a major
customer curtailed its operations in the fall of 1996 to make alterations
and improvements to its facility, and has informed the Company that it does
not expect to complete this work until mid-1997. Lower KWH sales to this
customer are reflected in the decrease in the Large Commercial / Industrial
sales category. The impact of lower base revenues during the first quarter of
1997 on earnings was a decline of $0.05 per share versus the first quarter
of 1996.
For the three months ended March 31, 1997, higher depreciation,
interest and property tax expenses were partially offset by lower operation
and maintenance expenses. Interest expense was higher during the first
quarter of 1997 due to increased short term borrowings, primarily reflecting
the interim financing of fuel and purchased power costs and the Company's
ongoing capital expenditure program.
RESTRUCTURING AND COMPETITION - ELECTRIC UTILITY INDUSTRY
Regulatory activity in both New Hampshire and Massachusetts continues
to focus on deregulating the retail sale of electric energy. In both states,
January 1, 1998 has been targeted as the beginning of competition, or
"Choice Date." Under these restructuring proposals, customers would be
allowed to choose their supplier of electricity from the competitive market,
and have their local utility deliver that electricity over its distribution
systems at regulated rates.
New Hampshire
On February 28, 1997, the New Hampshire Public Utilities Commission
(NHPUC) issued its Final Plan for transition to a competitive electric
market in New Hampshire. The order allowed Concord Electric Company (CECo)
and Exeter & Hampton Electric Company (E&H), Unitil's New Hampshire based
retail distribution utilities, to recover 100% of costs which will be
"stranded" due to this restructuring. Due to an appeal by Northeast
Utilities, this Plan is under a temporary restraining order in Federal
Court. The NHPUC has also suspended its Plan pending resolution of many
issues which have been identified by various parties. Unitil continues to
participate actively in all proceedings which will define the details of the
transition to competition and customer choice.
Unitil Resources, Inc., the Company's competitive market subsidiary,
continues to participate in the New Hampshire Retail Competition Pilot
Program (Pilot Program), which began in May 1996.
Massachusetts
On February 26, 1997, the Massachusetts Department of Public
Utilities (MDPU) approved a restructuring plan filed by the New England
Electric System, Massachusetts Attorney General (Mass AG), the Massachusetts
Division of Energy Resources and numerous other parties. Under this
settlement, consumers will be allowed to choose an electricity supplier
as early as January 1, 1998, and will receive a 10% reduction on their
electric bills. The settlement requires the utility to divest all its
generation plant, and provides the utility with the opportunity to fully
recover all of its stranded costs. Several other settlement agreements have
been reached in principle with the Mass AG and other Massachusetts electric
utilities. The Company is currently developing a transition plan for its
Massachusetts utility subsidiary and exploring the use of the settlement
process to expedite its restructuring process.
Each of the settlements reached are subject to restructuring
legislation that may be enacted by the Massachusetts Legislature. On March
20, 1997, the Special Joint Committee on Electric Industry Restructuring of
the Massachusetts Legislature issued a lengthy report and proposed
legislation recommending retail competition and the recovery of prudently
incurred generation cost for a period of ten years. The Committee also
recommended that in order to be allowed to recover stranded cost that
companies had to provide for a ten percent (10%) reduction in customer
bills.
On March 3, 1997, the Company filed unbundled rates as required by
MDPU Order 96-100 dated December 30, 1996. The Order required that the
unbundled rates be revenue neutral by rate class and customer, since their
primary purpose is to provide customers with unbundled bills for
informational purposes prior to choice date.
MILLSTONE UNIT NO. 3
Unitil's Massachusetts operating subsidiary, Fitchburg Gas and
Electric Light Company, 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 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 companies (NU), which operate the unit. As a result
of an engineering evaluation completed by NU, Millstone 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 3 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.
The other Millstone nuclear units are also out of service and listed as
Category 3 facilities.
In March 1997, NU announced that Millstone 3 has been designated as
the lead unit in the recovery process for the Millstone units, and plans to
have one unit ready for restart in the third quarter of 1997, and back on
line by the end of 1997. During the period that Millstone 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. During the outage, FG&E has been incurring approximately $35,000 per
month in replacement power costs, and has been recovering these costs
through its fuel adjustment clause, which will be subject to review and
approval by the MDPU.
CAPITAL REQUIREMENTS
Capital expenditures for the three months ended March 31, 1997 were
approximately $2,600,000. This compares to $5,400,000 during the same period
last year. Capital expenditures for the year 1997 are estimated to be
approximately $13,300,000 as compared to $18,500,000 for 1996. 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 will not have a
material impact on the Company's financial position.
PART I. EXHIBIT 11.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING
(UNAUDITED)
PRIMARY Three Months Ended March 31,
EARNINGS PER SHARE 1997 1996
Net Income $2,914,484 $3,195,913
Less: Dividend Requirement
on Preferred Stock 69,008 70,726
Net Income Applicable
to Common Stock $2,845,476 $3,125,187
Average Number of Common
Shares Outstanding 4,389,566 4,334,283
Earnings Per Common Share $0.65 $0.72
FULLY-DILUTED Three Months Ended March 31,
EARNINGS PER SHARE 1997 1996
Net Income $2,914,484 $3,195,913
Less: Dividend Requirement
on Preferred Stock 69,008 70,726
Net Income Applicable
to Common Stock $2,845,476 $3,125,187
Average Number of Common
Shares Outstanding 4,497,607 4,443,907
Earnings Per Common Share $0.63 $0.70
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, 1997, 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, 1997 /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.)