-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XKbkSW5MtjsCuk+U6P1mp8qYuBpUP8ci4fXjHBhP8MUwMgenHDwIvHp/N/lA+aJ3 1wgS4zyBuRYmKZ3fnqQ7uA== 0000950156-94-000006.txt : 19940315 0000950156-94-000006.hdr.sgml : 19940315 ACCESSION NUMBER: 0000950156-94-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EASTERN ENTERPRISES CENTRAL INDEX KEY: 0000311259 STANDARD INDUSTRIAL CLASSIFICATION: 4924 IRS NUMBER: 041270730 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-02297 FILM NUMBER: 94515791 BUSINESS ADDRESS: STREET 1: 9 RIVERSIDE RD CITY: WESTON STATE: MA ZIP: 02193 BUSINESS PHONE: 6176472300 FORMER COMPANY: FORMER CONFORMED NAME: EASTERN GAS & FUEL ASSOCIATES DATE OF NAME CHANGE: 19890511 10-K 1 EASTERN ENTERPRISES FORM 10-K - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ------ to --------------Commission File Number 1-2297 ------ EASTERN ENTERPRISES ------------------- (Exact Name of Registrant As Specified In Its Charter) MASSACHUSETTS 04-1270730 (State or Other Jurisdiction of Incorporation or (I.R.S. Employer Organization) Identification No.) 9 RIVERSIDE ROAD WESTON, MASSACHUSETTS 02193 (617) 647-2300 (Address of Principal Executive Offices) (Registrant's Telephone Number) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Name of Each Exchange Title of Each Class on Which Registered --------- -------------------- Common Stock, par value $1.00 per share New York Stock Exchange Common Stock Purchase Rights, no par value Boston Stock Exchange Pacific Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by non- affiliates of the registrant as of March 10, 1994. COMMON STOCK, PAR VALUE $1.00 PER SHARE -- $550,397,558 Indicate the number of shares outstanding of the registrant's class of common stock as of March 10, 1994. COMMON STOCK, PAR VALUE $1.00 PER SHARE -- 20,967,526 SHARES DOCUMENTS INCORPORATED BY REFERENCE Portions of the annual report to shareholders for the year ended December 31, 1993 are incorporated by reference into Parts I and II. Portions of the 1994 definitive Proxy Statement are incorporated by reference into Part III. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ PART I ITEM 1. BUSINESS 1(A) GENERAL DEVELOPMENT OF BUSINESS Eastern Enterprises ("Eastern") is an unincorporated voluntary association (commonly referred to as a "Massachusetts business trust") established and existing under a Declaration of Trust dated July 18, 1929, as from time to time amended. Eastern's principal subsidiaries are Boston Gas Company ("Boston Gas"), Midland Enterprises Inc. ("Midland") and WaterPro Supplies Corporation ("WaterPro"). Another subsidiary, Ionpure Technologies Corporation ("Ionpure"), was sold on December 1, 1993 for an equity interest in United States Filter Corporation, as described in Note 10 of Notes to Financial Statements. Boston Gas distributes natural gas in Boston and 73 other Massachusetts communities. Midland is engaged in barge transportation, principally on the Ohio and Mississippi river systems. WaterPro is a wholesale distributor of water and wastewater system components to contractors and municipal customers in 23 states. Eastern provides management and staff services to its operating subsidiaries. Boston Gas and Midland are financed primarily through their own funded debt, which is not guaranteed by Eastern. Many of the debt instruments relating to these borrowings contain restrictive covenants applicable to Boston Gas and Midland, including restrictions on the payment of dividends to Eastern. In the opinion of management, none of these restrictions has any material impact upon the operations of Eastern and its subsidiaries. 1(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Information with respect to this item may be found in Note 2 of Notes to Financial Statements for the year ended December 31, 1993, appearing on pages 36 and 37 of the annual report to shareholders for such year. Such information is incorporated herein by reference. 1(C) NARRATIVE DESCRIPTION OF BUSINESS BOSTON GAS COMPANY Boston Gas is engaged in the distribution, sale and transportation of natural gas to residential, commercial and industrial customers in the city of Boston, Massachusetts and 73 other Massachusetts communities. Gas is sold and transported to "firm" and "non-firm" customers for a variety of applications. In most cases, firm sales and transportation services are provided under rate schedules or contracts with customers that do not contemplate service interruption at any time during the year. Firm sales of natural gas used for space heating are directly related to weather conditions. Consequently, variations in weather patterns can have a significant impact on Boston Gas' revenues and earnings. Boston Gas also provides seasonal firm sales and transportation services for terms less than 365 days. Non-firm services include sales and transportation to customers who typically can use oil or gas interchangeably and special sales for resale to other gas companies for distribution to their customers. Non-firm sales depend on gas supply availability, weather conditions and the price of gas in relation to the price of alternate fuels. Availability of gas supply and price competition from residual oil are important factors in retaining non- firm gas sales. Gross margins from non-firm sales and transportation services are passed back to firm customers through the cost of gas adjustment clause. This practice enhances Boston Gas' competitive position by reducing gas costs to firm customers. As an additional incentive to Boston Gas, beginning November 1, 1993, a portion of gross margins from non-firm sales and transportation services will be retained if certain levels are attained. Because the volume of gas sold to firm customers varies greatly between winter and summer months, Boston Gas customarily incurs seasonal borrowings. Boston Gas purchases approximately 70% of its pipeline gas supplies directly from producers and marketers pursuant to long term contracts which are subject to review and approval by the Massachusetts Department of Public Utilities ("DPU"). The balance of its pipeline supplies is purchased under short-term, firm winter service agreements and on a spot basis. These pipeline supplies are transported on interstate pipeline systems to Boston Gas' service territory on terms and conditions of service approved by the Federal Energy Regulatory Commission ("FERC"). Boston Gas has also contracted with pipeline companies and others for the storage of natural gas and related transportation from underground storage fields in New York and Pennsylvania. Supplemental supplies of liquefied natural gas and propane are purchased and produced from foreign and domestic sources, primarily on a spot basis. All interstate pipelines serving Boston Gas have implemented service restructuring plans on terms and conditions approved by FERC pursuant to Order 636, issued in April 1992, which required interstate pipeline companies to unbundle existing gas service contracts into separate gas sales, transportation and storage services. Accordingly, Boston Gas' firm bundled service contract with Tennessee Gas Pipeline Company ("Tennessee") has been converted to an annual transportation and storage entitlement of 77,800 million cubic feet ("MMCF"). Similarly, its firm bundled service contracts with Algonquin Gas Transmission Company ("Algonquin") and Texas Eastern Transmission Corporation ("Texas Eastern") have been converted to annual firm transportation entitlements of 65,600 MMCF and 100,100 MMCF, respectively. This transportation capacity is used to transport natural gas from both producing regions and underground storage facilities. As a result of the restructuring, Boston Gas holds entitlements to 16,500 MMCF of storage capacity with Tennessee, Texas Eastern and others. These new transportation and storage agreements with Algonquin, Tennessee and Texas Eastern have terms generally expiring no earlier than 1996, 2000 and 2012. In addition, as a result of industry restructuring, Boston Gas has firm entitlements on interstate pipelines upstream of these three pipelines with direct access to supply areas. In addition to its domestic supply arrangements, Boston Gas has long term contracts with Canadian gas suppliers for the annual purchase of up to 22,862 MMCF. These contracts expire between 2003 and 2007. Boston Gas has contracted with Iroquois Gas Transmission System, Tennessee and Algonquin for the transportation of these supplies to its service territory. Boston Gas considers the service reliability of its natural gas portfolio after industry restructuring to be comparable to that existing prior to Order 636. As a result of these changes in federal energy regulation, Boston Gas has assumed more direct operational responsibility for procuring and arranging transportation of natural gas supplies. Boston Gas expects that this new operational responsibility will provide additional opportunities to benefit from low cost gas and competitive transportation options. The following table provides statistical information with respect to Boston Gas' sources of supply and sales during 1991-1993.
YEAR ENDED DECEMBER 31, ------------------------------ 1993 1992 1991 ---- ---- ---- Gas supply (Millions of cubic feet @ 1,000 B.T.U.) Natural gas purchased .................................. 86,276 94,086 77,283 Propane and manufactured gas ........................... 18 50 77 LNG purchased .......................................... 13,375 12,344 11,412 ------ ------- ------ Total manufactured and purchased ................... 99,669 106,480 88,772 Deduct: Net increase (decrease) in storage gas ............. 4,021 5,195 1,034 Company use, unbilled and other .................... 2,552 3,665 3,190 ------ ------- ------ Total gas billed ........................................... 93,096 97,620 84,548 ------ ------- ------ ------ ------- ------ YEAR ENDED DECEMBER 31, ------------------------------- 1993 1992 1991 ---- ---- ---- Gas sales and transportation (Millions of cubic feet @ 1,000 B.T.U.) Residential Heating (A) .................................... 38,126 37,923 32,731 Non-heating ........................................ 3,793 3,906 3,847 Commercial (B) ..................................... 26,011 25,796 23,614 Industrial -- firm ..................................... 4,955 4,914 4,150 Seasonal firm contracts ................................ 10,022 6,379 -- ------- ------- ------- Total firm sales ................................... 82,907 78,918 64,342 Interruptible sales .................................... 8,106 14,456 20,206 Special sales for resale ............................... 2,083 4,246 -- ------- ------- ------- Total gas sales ............................................ 93,096 97,620 84,548 Firm transportation .................................... 12,351 7,369 -- Interruptible transportation ........................... 39,304 27,270 31,424 ------- ------- ------- Total throughput ........................................... 144,751 132,259 115,972 ------- ------- ------- ------- ------- ------- Percent of normal billing degree days ...................... 99% 104% 87% - --------- (A) The heating classification includes all gas sold to customers having central or space heating. (B) The commercial classification includes central-metered apartment houses and condominiums with five or more units.
Boston Gas relies on supplemental supplies to meet firm sendout requirements which are greater than its firm pipeline capacity entitlements. The number of days that peak sendout can be maintained is limited by the capacity of Boston Gas' storage facilities for supplemental gas supplies and the rate at which these supplies can be sent out and subsequently replenished. Boston Gas considers its peak sendout capability fully adequate to meet the requirements of its firm customers. During 1993, Boston Gas continued to increase its firm sales and customer base through marketing programs that emphasize natural gas' competitive price, efficiency and environmental advantages. Despite the 17-week work stoppage, in 1993 Boston Gas added approximately 1,812 MMCF in firm annual sales to the commercial and industrial sectors. Clean-burning properties and the absence of on-site storage problems make natural gas attractive in these sectors, where Boston Gas' market share is only 22% as compared to a national average of 39%. Approximately 4,400 residential customers converted to gas for central heating last year. Approximately 46% of Boston Gas' existing residential customers do not use gas for central heating. Boston Gas faces competition with fuel oil and electricity for residential, commercial and industrial applications. Regulatory changes affecting pipeline transportation have created the potential for increased competition among existing and new suppliers of natural gas within Boston Gas' service area. Boston Gas is well positioned to provide transportation services to customers who engage in direct purchases of natural gas from others. Rate design changes approved by the DPU in 1993 provide for margin neutrality regardless of the customer's decision to purchase gas directly from Boston Gas or to purchase third-party gas for transportation by Boston Gas. Boston Gas' operations are subject to Massachusetts statutes applicable to gas utilities. Rates, the territorial limits of Boston Gas' service area, the issuance of securities, affiliated party transactions, the purchase of gas and pipeline safety are regulated by the DPU. Construction of certain facilities is regulated by the Massachusetts Energy Facilities Siting Board of the DPU. Municipal, state and federal authorities have jurisdiction over the use of public ways, land and waters for gas mains and other distribution facilities. The DPU allowed Boston Gas an annual revenue increase of $37.7 million, effective November 1, 1993, and also approved several rate design changes that will reduce the volatility of margins attributable to weather. The DPU has approved conservation and load management programs for Boston Gas' residential, commercial and industrial customers. These programs encourage more efficient gas consumption by subsidizing various conservation measures. Recovery of costs related to these programs and financial incentives were authorized by the DPU. Boston Gas is subject to local, state and federal environmental regulation of its operations and properties. As described in Note 13 of Notes to Financial Statements, there are 37 identified former manufactured gas plant ("MGP") sites located within Boston Gas' service territory. Massachusetts Electric Company, a wholly-owned subsidiary of New England Electric System ("NEES"), has assumed responsibility for remediating one such MGP site in Lynn, Massachusetts, pursuant to the decision of the First Circuit Court of Appeals in John S. Boyd, Inc. et. al. v. Boston Gas Company, et al., which affirmed that NEES and/or its subsidiaries are responsible for remediating the site as prior owners and operators and that Boston Gas did not assume any liability for such remediation when it acquired the property from NEES in 1973. Thirteen other former MGP sites within Boston Gas' service territory are currently owned by Boston Gas, and 10 of such 13 sites were also acquired from NEES and its subsidiaries. Boston Gas is currently working with the Massachusetts Department of Environmental Protection to determine the extent of remediation which may be required at such 13 sites. A 1990 settlement agreement with the DPU provides for recovery through the cost of gas adjustment clause of all environmental response costs associated with former MGP sites over separate, seven-year amortization periods without a return on the unamortized balance. Boston Gas and Eastern were granted an intrastate exemption from the provisions of the Public Utility Holding Company Act of 1935 ("Act") under Section 3(a)(1) thereof pursuant to an order of the Securities and Exchange Commission ("SEC") dated February 28, 1955, as amended by orders dated November 3, 1967 and August 28, 1975. On February 7, 1989, the SEC issued a proposed rule under the Act which would provide limits for non-utility related diversification by intrastate public utility holding companies, such as Eastern, that are exempt under the Act. Since its proposal in 1989, the SEC has taken no further public action with respect to this proposed rule. Eastern and Boston Gas cannot predict whether this proposed rule will be adopted or, if adopted, whether it will affect their exemption under the Act. Boston Gas has approximately 1,720 employees, of whom 71% are represented by six local labor unions. In 1993, after a 17-week work stoppage, Boston Gas entered into a new six-year labor contract with the bargaining units which, among other things, provides for annual general wage increases of approximately 4%, updates work rules and changes health care coverage to a managed program with cost sharing. Boston Gas' property consists almost entirely of utility property and franchises, a portion of which is pledged as security for Boston Gas' first mortgage bonds. Capital expenditures for 1993 totaled $47.1 million, principally for replacements of and additions to mains, services and meters and for computer systems. MIDLAND ENTERPRISES INC. Midland is primarily engaged through wholly owned subsidiaries in the operation of a fleet of barges and towboats, principally on the Ohio and Mississippi rivers and other parts of the inland waterway system, the Gulf Intracoastal Waterway and the Gulf of Mexico. Midland transports bulk commodities, a major portion of which is coal. In December 1993 Midland disposed of its liquid cargo business through the sale of its tank barges, its liquid transportation contract and the Chotin trade name. Through other wholly-owned subsidiaries, Midland also performs repair work on marine equipment and operates two coal terminals, a phosphate terminal and a marine fuel supply facility. It suspended operations at its barge construction facility in late 1993. The following table indicates tonnages and ton miles transported by Midland for the years 1991-1993:
1993 1992 1991 ---- ---- ---- Tonnages (in millions) ........................... 62.5 62.4 60.6 Ton miles (in billions) .......................... 32.2 32.4 32.2
The record tonnage in 1993 increased slightly over 1992 with reduced tonnage in coal, grain and phosphate more than offset by increased tonnage in all other commodities. The 3% tonnage increase in 1992 reflected increased spot coal, iron, scrap and steel and grain volumes. Approximately 2.6% of the tonnage and 4.7% of the ton miles in 1993 were attributable to the liquid cargo business sold in December 1993. Ton miles are the product of tons and distance transported. The small decrease in ton miles in 1993 reflected lower ton miles from coal, grain and phosphate, mostly offset by higher ton miles in all other commodities. The record ton miles in 1992 reflected increased ton miles from grain, aggregates and ores, partially offset by lower coal ton miles. In addition to changes in ton miles transported, Midland's revenues and net earnings are affected by competitive conditions and weather. Due to the freezing of some northern rivers and waterways during the winter months and increased coal consumption by electric utilities during the summer months, average winter month revenues tend to be lower than revenues for the remainder of the year. The only significant raw material required to operate towboats is diesel fuel. Diesel fuel is purchased from a variety of sources, and Midland regards the availability of diesel fuel as adequate for presently planned operations. Due to the capital-intensive, high-fixed-cost nature of Midland's business, the negotiation of long-term contracts which facilitate steady and efficient utilization of equipment is important to profitable operations. Midland has long-term transportation and terminaling contracts which expire at various dates from January 1995 through December 2007. During 1993 approximately 41% of Midland's revenues resulted from these contracts. No customer accounted for 10% or more of Midland's 1993 revenues. A substantial portion of the contracts provide for rate adjustments based on changes in various costs, including diesel fuel costs, and contain "force majeure" clauses which excuse performance by the parties to the contracts when performance is prevented by circumstances beyond their reasonable control. Many of these contracts have provisions for termination for specified causes such as material breach of the contract, environmental restrictions on the burning of coal, or loss by the customer of an underlying commodity supply contract. Penalties for termination for such causes are not generally specified. However, some contracts provide that in the event of an uncured material breach by Midland which results in the termination of the contract, Midland would be responsible for reimbursing its customer for the differential between the contract price and the substituted performance. The backlog of transportation and terminaling business under long-term contract is summarized in the next table:
DECEMBER 31, ------------ 1993 1992 ---- ---- Tons (in millions) ....................................... 165.5 184.5 Revenues (in millions) ................................... $585.5 $773.2 Portions of revenue backlog not expected to be filled within the current fiscal year ......................... 80% 81%
The 1993 revenue backlog (which is based on contracts that extend beyond December 31, 1994) is shown at prices current as of December 31, 1993 which are subject to escalation/de-escalation provisions. Since services under many of the long-term contracts are based on customer requirements, Midland has estimated its backlog based on its forecast of the requirements of these long- term contract customers. About 50% of the decrease in the tonnage backlog is due to the sale of the liquid barge business and its contract. About 40% of the revenue backlog at December 31, 1993 is associated with a disputed contract with Gulf Power Company, for which shipments have been curtailed. The Interstate Commerce Act, as amended, exempts from regulation water transportation of dry commodities which were transported in bulk as of June 1, 1939 (including coal, grain, phosphate rock, stone, sand and gravel and ores). In addition, the Interstate Commerce Act exempts from regulation water transportation of liquid cargoes in bulk. Approximately 96% of Midland's 1993 tonnage was exempt from regulation by the Interstate Commerce Commission ("ICC"). Regulated commodities include iron and steel products, other manufactured products, packaged goods and scrap. Improvements in operating efficiencies have permitted barge operators to maintain competitive rate structures. Consequently, the barge industry has been able to retain its competitive position relative to alternate methods of transportation for bulk commodities when the origin and destination of such movements are near or contiguous to navigable waterways. Primary competitors of Midland's barge line subsidiaries include other barge lines and railroads, including one integrated rail-barge carrier. There are a number of companies offering transportation services on the waterways served by Midland, including carriers licensed by the ICC and carriers not so regulated. Railroads operating in areas served by the inland waterways compete for cargoes carried by river barges. In many cases, these railroads offer unit train service (an entire train committed to one customer) and dedicated equipment service (equipment set aside for the exclusive use of a particular customer) for coal, grain and other bulk commodities. In addition, rates charged by both railroads and river barge operators are sometimes designed to reflect special circumstances and requirements of the individual shippers. As a result, it is difficult to compare rates charged for movements of the various commodities between specific points. Modern diesel-powered towboats such as those which comprise Midland's towboat fleet are capable of moving approximately 22,500 tons in one tow (equivalent to 225 one-hundred-ton-capacity railroad cars) on the Ohio River and the Upper Mississippi River and approximately 60,000 tons (equivalent to 600 one-hundred-ton-capacity railroad cars) on the Lower Mississippi River, where there are no locks, at average rates per ton mile which are generally below those charged by Class 1 railroads. Midland is subject to the provisions of the Federal Water Pollution Control Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendment and Reauthorization Act, the Resource Conservation and Recovery Act of 1976 and the Oil Pollution Act of 1990, which permit the Coast Guard and the Environmental Protection Agency to assess penalties for oil, hazardous substance, and hazardous waste discharges. Compliance with these acts has had no material effect on Midland's capital expenditures, earnings, or competitive position, and no such effect is anticipated. Midland and its subsidiaries have approximately 1,500 employees, of whom 28% are represented by labor unions. As of December 31, 1993, Midland's floating equipment consisted of 2,461 barges and 91 boats. A substantial portion of this equipment is either mortgaged to secure Midland's equipment financing obligations or chartered under long term leases from third parties. Capital expenditures for Midland in 1993 totaled $14.2 million. These expenditures were made principally for renewal and replacement of the barge fleet. WATER PRODUCTS GROUP Eastern's Water Products Group consisted of WaterPro Supplies Corporation and Ionpure Technologies Corporation until December 1, 1993, when Ionpure was sold to United States Filter Corporation ("U.S. Filter"). Ionpure designs, manufactures and services ultrapure water purification systems for commercial and industrial customers worldwide. Since Ionpure was operated for the account of U.S. Filter after October 1, 1993, its subsequent operating results have been excluded from Eastern's consolidated results. Eastern's interest in U.S. Filter is accounted for as a Headquarters investment. WATERPRO is a wholesale distributor of components for the repair, improvement and expansion of municipal water supply and wastewater collection systems. Effective late March, 1994 WaterPro is headquartered in Edina, Minnesota. It operates 26 branches serving 23 states and has approximately 320 employees. Pipe, fire hydrants, valves, fittings, meters and other components are purchased from a variety of sources, including nationally branded products made by prominent manufacturers. WaterPro regards these sources as adequate for presently planned operations. Components are warehoused by WaterPro and then sold to contractors, as well as cities, towns and private water utilities for new systems, rehabilitation and improvement to existing lines and system expansion. WaterPro's business is affected by housing starts and related construction activity, municipal infrastructure spending levels and seasonal weather conditions. Competition in WaterPro's business is intense and is based principally on price, service and product offering. GENERAL Certain information with respect to Eastern's compliance with Federal and state environmental statutes may be found in Item 1(c) under "Boston Gas Company" and "Midland Enterprises Inc." and Note 13 of the Notes to Financial Statements of Eastern appearing on pages 42 and 43 of the annual report to shareholders for the year ended December 31, 1993. Such information is incorporated herein by reference. Eastern and its wholly owned subsidiaries employed approximately 3,600 employees at December 31, 1993. ITEM 2. PROPERTIES Information with respect to this item may be found in Item 1(c) under "Boston Gas Company," "Midland Enterprises Inc." and "Water Products Group". Such information is incorporated herein by reference. ITEM 3. LEGAL PROCEEDINGS Information with respect to certain legal proceedings may be found in Notes 13 and 14 of the Notes to Financial Statements of Eastern appearing on pages 42 through 43 of the annual report to shareholders for the year ended December 31, 1993 and in Item 1(c) hereof under "Boston Gas Company" and "Midland Enterprises, Inc." Such information is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders in the fourth quarter of 1993. EXECUTIVE OFFICERS OF THE REGISTRANT GENERAL The table below identifies the executive officers of Eastern, who are appointed annually and serve at the pleasure of the company's trustees.
OFFICE HELD NAME TITLE AGE SINCE ---- ----- --- ----------- J. Atwood Ives ............ Chairman and Chief Executive Officer 57 1991 Richard R. Clayton ........ President and Chief Operating Officer 55 1991 Walter J. Flaherty ........ Senior Vice President and Chief Financial Officer 45 1992 Richard J. Klau ........... Senior Vice President - President of WaterPro Supplies Corporation 45 1991 Chester R. Messer ......... Senior Vice President - President of Boston Gas Company 52 1988 Fred C. Raskin ............ Senior Vice President - President of Midland Enterprises Inc. 45 1991 L. William Law, Jr. ....... General Counsel and Secretary 49 1987
BUSINESS EXPERIENCE Prior to joining Eastern in 1991, J. Atwood Ives was Vice Chairman, Chief Financial Officer and a member of the Office of the Chairman of General Cinema Corporation (now Harcourt General, Inc.) and The Neiman Marcus Group, Inc. Prior to joining Eastern in 1987 as Executive Vice President and Chief Administrative Officer, Richard R. Clayton was Chairman, President and Chief Executive Officer of Vermont Castings, Inc. He was Executive Vice President and Chief Operating Officer of Eastern from 1990 to 1991. Walter J. Flaherty was Vice President-Marketing, Public Relations and Rates of Boston Gas from 1986 to 1988 and Senior Vice President-Administration of Boston Gas from 1988 until joining Eastern in 1991 as its Senior Vice President and Chief Administrative Officer. He has been an employee of Eastern or its subsidiaries since 1971. Richard J. Klau was President of Ionpure from 1989 to 1991. Prior to joining Ionpure in 1989, he was Vice President and General Manager of the Process Water Division of Millipore Corporation. Chester R. Messer was Senior Vice President-Administration of Boston Gas from 1986 to 1988 and Executive Vice President of Boston Gas in 1988. He was elected a Senior Vice President of Eastern in 1988, when he became President of Boston Gas. He has been an employee of Boston Gas since 1963. Fred C. Raskin was Senior Vice President-Administration of Midland from 1987 to 1988 and Executive Vice President of Midland from 1988 to 1991. He was elected a Senior Vice President of Eastern in 1991, when he became President of Midland. He has been an employee of Eastern or its subsidiaries since 1978. Prior to joining Eastern in 1987 as General Counsel and Secretary, L. William Law, Jr. was General Counsel and Secretary of Boston Gas. He has been an employee of Eastern or its subsidiaries since 1975. PART II. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on the New York, Boston and Pacific Stock Exchanges (ticker symbol EFU). The approximate number of shareholders at December 31, 1993 was 6,600. Information with respect to this item may be found in the sections captioned "Cash Dividends Per Share" and "Stock Price Range" appearing on page 50 of the annual report to shareholders for the year ended December 31, 1993. Such information is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Information with respect to this item may be found in the section captioned "Summary of Operations" appearing on page 48 of the annual report to shareholders for the year ended December 31, 1993. Such information is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information with respect to this item may be found under the captions, "1993 Compared to 1992", "1992 Compared to 1991", "Liquidity and Capital Resources" and "Other Matters" on pages 26 through 30 of the annual report to shareholders for the year ended December 31, 1993. Such information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information with respect to this item appears on page F-1 of this report. Such information is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to this item may be found in the section captioned "Information With Respect to Nominees and Trustees" appearing on pages 4 through 6 of the 1994 definitive Proxy Statement. Such information is incorporated herein by reference. See also the item captioned "Executive Officers of the Registrant" at the end of Part I hereof. ITEM 11. EXECUTIVE COMPENSATION Information with respect to this item may be found in the section captioned "Compensation of Executive Officers" appearing on pages 8 through 12 of the 1994 definitive Proxy Statement. Such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to this item may be found in the sections captioned "Information With Respect to Certain Shareholders" appearing on pages 2 and 3 and "Stock Ownership of Trustees and Executive Officers" appearing on page 7 of the 1994 definitive Proxy Statement. Such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to this item may be found in the last paragraph in the section captioned "Compensation of Trustees" appearing on page 11 of the 1994 definitive Proxy Statement. Such information is incorporated herein by reference. PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) (1) AND (2) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Information with respect to these items appears on page F-1 of this report. Such information is incorporated herein by reference. (3) LIST OF EXHIBITS 3.1 --Declaration of Trust of Eastern Enterprises, as amended through April 27, 1989 (filed as Exhibit 3.1 to Quarterly Report of Eastern Enterprises on Form 10-Q for the quarter ended June 30, 1989).* 3.2 --By-Laws of Eastern Enterprises, as amended through July 23, 1992 (filed as Exhibit 3.1 to Quarterly Report of Eastern on Form 10-Q for the quarter ended June 30, 1992).* (NOTE: Eastern agrees to furnish to the Securities and Exchange Commission upon request a copy of any instrument with respect to long-term debt of Eastern or any of its subsidiaries. Such instruments are not filed herewith since no such instrument authorizes securities in an amount greater than 10% of the total assets of Eastern and its subsidiaries on a consolidated basis.) 4.1 --Common Stock Rights Agreement between Eastern and The Bank of New York, dated as of February 22, 1990, and Exhibits attached thereto (filed as Exhibits to Form 8-K dated March 1, 1990).* 10.1 --Gas Transportation Contract between Boston Gas Company and Tennessee Gas Pipeline Company dated as of September 1, 1993 (filed as Exhibit 10.1 to Annual Report of Boston Gas Company on Form 10-K for the year ended December 31, 1993 (File no. 2-23416)).* 10.2 --Gas Transportation Contracts between Boston Gas Company and Texas Eastern Transmission Corporation dated December 30, 1993 (filed as Exhibits 10.2 and 10.3 to Annual Report of Boston Gas Company on Form 10-K for the year ended December 31, 1993 (File no. 2-23416)).* 10.3 --Gas Transportation Contracts between Boston Gas Company and Algonquin Gas Transmission Company dated December 30, 1993 (filed as Exhibits 10.4 and 10.5 to Annual Report of Boston Gas Company on Form 10-K for the year ended December 31, 1993 (File no. 2-23416)).* 10.4 --Gas Sales Contract between Boston Gas Company and Esso Resources Canada, Limited, dated as of May 1, 1989, as amended, (filed as Exhibits 10.12 and 10.12.1 to the Annual Report of Boston Gas Company on Form 10-K for the year ended December 31, 1989 (File no. 2-23416)).* 10.5 --Gas Sales Agreement between Boston Gas Company and Alberta Northeast Gas Limited, dated as of February 7, 1991 (filed as Exhibit 10.16 to the Annual Report of Boston Gas Company on Form 10-K for the year ended December 31, 1990 (File no. 2-23416)).* 10.6 --Firm Gas Transportation Agreement between Boston Gas Company and Iroquois Gas Transmission System, L.P., dated as of February 7, 1991 (filed as Exhibit 10.17 to the Annual Report of Boston Gas Company on Form 10-K for the year ended December 31, 1990 (File no. 2-23416)).* 10.7 --Eastern's Deferred Compensation Plan for Trustees, as amended .(a) 10.8 --Eastern's 1982 Stock Option Plan, as amended (filed as Exhibit 10.2 to Quarterly Report of Eastern on Form 10-Q for the quarter ended March 31, 1992).*(a) 10.9 --Eastern's Supplemental Executive Retirement Plan, as amended.(a) 10.10 --Trust Agreement between Eastern and Shawmut Bank of Boston, N.A., as amended (filed as Exhibit 10.12 to the Annual Report of Eastern on Form 10-K for the year ended December 31, 1990).*(a) 10.11 --Eastern's Executive Incentive Compensation Plan, as amended (filed as Exhibit 10.3 to Quarterly Report of Eastern on Form 10-Q for the quarter ended March 31, 1992).*(a) 10.12 --Salary Continuation Agreements between Eastern and certain officers, as amended (filed as Exhibit 10.13 to the Annual Report of Eastern on Form 10-K for the year ended December 31, 1991).*(a) 10.13 --Agreement dated November 27, 1991 between Eastern and J. Atwood Ives (filed as Exhibit 10.14 to the Annual Report of Eastern on Form 10-K for the year ended December 31, 1991).*(a) 10.14 --Agreement dated October 25, 1991 between Eastern and Richard R. Clayton (filed as Exhibit 10.15 to the Annual Report of Eastern on Form 10-K for the year ended December 31, 1991).*(a) 10.15 --Eastern's Headquarters Retirement Plan, as amended and restated (filed as Exhibit 10.1 to Quarterly Report of Eastern on Form 10-Q for the quarter ended September 30, 1991).*(a) 10.16 --Midland Enterprises Inc. Salaried Retirement Plan, as amended and restated (filed as Exhibit 10.2 to Quarterly Report of Eastern on Form 10-Q for the quarter ended September 30, 1991).*(a) 10.17 --Boston Gas Company Retirement Plan, as amended and restated (filed as Exhibit 10.3 to Quarterly Report of Eastern on Form 10-Q for the quarter ended September 30, 1991).*(a) 10.18 --Trust Agreement made as of October 2, 1987 between Eastern and The Bank of New York, as amended (filed as Exhibit 10.19 to the Annual Report of Eastern on Form 10-K for the year ended December 31, 1990).*(a) 10.19 --Eastern's Retirement Plan for Non-Employee Trustees, as amended (filed as Exhibit 10.22 to Annual Report of Eastern on Form 10-K for the year ended December 31, 1992).*(a) 10.20 --Eastern's 1992 Restricted Stock Plan (filed as Exhibit 10.1 to Quarterly Report of Eastern on Form 10-Q for the quarter ended March 31, 1992).*(a) 10.21 --Eastern's Restricted Stock Plan for Non-Employee Trustees (filed as Exhibit 10.24 to Annual Report of Eastern on Form 10-K for the year ended December 31, 1992).*(a) 10.22 --Eastern's 1994 Deferred Compensation Plan.(a) 13.1 --Portions incorporated herein of annual report to shareholders for the year ended December 31, 1993. With the exception of the information incorporated by reference in Items 1, 3, 5, 6, 7 and 8 of this Form 10-K, the annual report to shareholders for the year ended December 31, 1993 is not deemed filed as a part of this report. 21.1 --Subsidiaries of the registrant. Eastern will furnish a copy of any exhibit not included herewith to any holder of Eastern's common stock upon payment of the cost of reproduction and mailing. (B) REPORTS ON FORM 8-K There were no reports on Form 8-K filed in the fourth quarter of 1993. - ------------- *Not filed herewith. In accordance with Rule 12b-32 of the General Rules and Regulations under the Securities and Exchange Act of 1934, reference is made to the document previously filed with the Commission. (a) Indicates a Management Contract or Compensatory Plan or Arrangement.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. EASTERN ENTERPRISES Registrant By JAMES J. HARPER ------------------------------------- JAMES J. HARPER Vice President and Controller (Chief Accounting Officer) Date: March 14, 1994. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 14th day of March, 1994.
SIGNATURE TITLE --------- ----- J. ATWOOD IVES Chairman and Chief Executive Officer - ---------------------------------------------------- and Trustee J. ATWOOD IVES RICHARD R. CLAYTON President and Chief Operating Officer - ---------------------------------------------------- and Trustee RICHARD R. CLAYTON WALTER J. FLAHERTY Senior Vice President and - ---------------------------------------------------- Chief Financial Officer WALTER J. FLAHERTY NELSON J. DARLING, JR. Trustee - ---------------------------------------------------- NELSON J. DARLING, JR. SAMUEL FRANKENHEIM Trustee - ---------------------------------------------------- SAMUEL FRANKENHEIM DEAN W. FREED Trustee - ---------------------------------------------------- DEAN W. FREED ROBERT P. HENDERSON Trustee - ---------------------------------------------------- ROBERT P. HENDERSON LEONARD R. JASKOL Trustee - ---------------------------------------------------- LEONARD R. JASKOL THOMAS W. JONES Trustee - ---------------------------------------------------- THOMAS W. JONES HAROLD T. MILLER Trustee - ---------------------------------------------------- HAROLD T. MILLER WILLIAM J. PRUYN Trustee - ---------------------------------------------------- WILLIAM J. PRUYN WILLIAM G. SALATICH Trustee - ---------------------------------------------------- WILLIAM G. SALATICH RINA K. SPENCE Trustee - ---------------------------------------------------- RINA K. SPENCE LAWRENCE E. THOMPSON Trustee - ---------------------------------------------------- LAWRENCE E. THOMPSON
(Page F-1) EASTERN ENTERPRISES AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND SCHEDULES DECEMBER 31, 1993 (SUBMITTED IN ANSWER TO ITEMS 8 AND 14(A)(1) AND (2) OF FORM 10-K, SECURITIES AND EXCHANGE COMMISSION) FINANCIAL STATEMENTS
PAGE ---- EASTERN ENTERPRISES AND SUBSIDIARIES: Report of independent public accountants ............................................ 47* Report of independent public accountants on schedules ............................... F-2 Consent of independent public accountants ........................................... F-2 Consolidated: Statements of operations for each of the three years ended December 31, 1993 ...... 31* Balance sheets as of December 31, 1993 and 1992 ................................... 32* Statements of cash flows for each of the three years ended December 31, 1993 ...... 34* Statements of shareholders' equity for each of the three years ended December 31, 1993 ............................................................... 35* Notes to financial statements ..................................................... 36* Unaudited interim financial information for the two years ended December 31, 1993 . 46* SCHEDULES (PAGES F-3 THROUGH F-13) V Property and equipment VI Accumulated depreciation and amortization of property and equipment VIII Valuation and qualifying accounts and reserves IX Short-term borrowings X Supplementary earnings statement information Schedules not listed above are omitted as not applicable or not required under the rules of Regulation S-X. - --------- *Incorporated herein by reference to Eastern's annual report to shareholders for the year ended Decem- ber 31, 1993, incorporated portions of which are attached to this Form 10-K as Exhibit 13.1. Page references are to such annual report.
(Page F-2) REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES TO EASTERN ENTERPRISES: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Eastern Enterprises Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 4, 1994. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index on page F-1 are the responsibility of Eastern's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. Boston, Massachusetts February 4, 1994 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports, dated February 4, 1994, included in, and incorporated by reference into, Eastern Enterprises Annual Report on this Form 10-K for the year ended December 31, 1993, into Eastern's previously filed Post-Effective Amendment No. 1 to Form S-16 Registration Statement No. 2-71614 on Form S-3 and Form S-8 Registration Statements No. 2-77146, No. 33-19990, No. 33-40862 and No. 33-56424. ARTHUR ANDERSEN & CO. Boston, Massachusetts March 14, 1994 (Page F-3) SCHEDULE V EASTERN ENTERPRISES AND SUBSIDIARIES PROPERTY AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1993 (THOUSANDS)
BALANCE SALES BALANCE DECEMBER 31, ADDITIONS AND DECEMBER 31, CLASSIFICATION 1992 AT COST RETIREMENTS OTHER(1) 1993 -------------- ------------ --------- ----------- -------- ------------ Gas utility -- Land and rights-of-way ....... $ 4,223 $ (161) $ -- $ -- $ 4,062 Structures ................... 29,284 2,462 (516) -- 31,230 Street mains ................. 253,110 13,104 (565) -- 265,649 Transportation equipment ..... 4,761 126 (152) -- 4,735 Other equipment .............. 293,834 21,499 (10,952) -- 304,381 Improvements and replacements in progress ................ 186 7,945 -- -- 8,131 Miscellaneous property ....... 38,513 2,082 (1,072) -- 39,523 --------- ------ -------- -------- --------- $ 623,911 $47,057 $(13,257) $ -- $ 657,711 --------- ------ -------- -------- --------- Marine fleet and facilities -- Land ......................... $ 5,188 $ -- $ (52) $ 23 $ 5,159 Towboats and barges .......... 556,753 13,861 (22,687) 5,278) 542,649 Terminals and other facilities 59,698 330 (2,005) (684) 57,339 --------- ------ -------- -------- --------- $ 621,639 $14,191 $(24,744) $ (5,939) $ 605,147 --------- ------ -------- -------- --------- Water products distribution and manufacturing -- Land ......................... $ 140 $ 172 $ -- $ -- $ 312 Buildings, machinery and equipment .................. 20,643 891 (24) (16,283) 5,227 Furniture and fixtures ....... 2,231 130 (4) (1,646) 711 Autos and trucks ............. 1,530 118 (114) (595) 939 Improvements and replacements in progress .................. 460 1,630 -- (2,090) -- --------- ------ -------- -------- --------- $ 25,004 $ 2,941 $ (142) $(20,614) $ 7,189 --------- ------ -------- -------- --------- Headquarters -- Land and land improvements ... $ 2,000 $ -- $ -- $ -- $ 2,000 Buildings, machinery and equipment .................. 2,176 48 (6) 19 2,237 Furniture and fixtures ....... 663 31 (23) (4) 667 Autos and trucks ............. 180 123 (93) -- 210 --------- ------ -------- -------- --------- $ 5,019 $ 202 $ (122) $ 15 $ 5,114 --------- ------ -------- -------- --------- Total consolidated ....... $1,275,573 $64,391 $(38,265) $(26,538) $1,275,161 --------- ------ -------- -------- --------- --------- ------ -------- -------- --------- - --------- (1)Water products decreases reflect sale of Ionpure.
(Page F-4) SCHEDULE V EASTERN ENTERPRISES AND SUBSIDIARIES PROPERTY AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1992 (THOUSANDS)
BALANCE SALES BALANCE DECEMBER 31, ADDITIONS AND DECEMBER 31, CLASSIFICATION 1991 AT COST RETIREMENTS OTHER 1992 -------------- ------------ --------- ----------- ----- ------------ Gas utility -- Land and rights-of-way ........ $ 3,920 $ 303 $ -- $ -- $ 4,223 Structures .................... 23,412 6,065 (193) -- 29,284 Street mains .................. 228,599 25,619 (1,108) -- 253,110 Transportation equipment ...... 6,126 48 (1,413) -- 4,761 Other equipment ............... 271,081 27,639 (4,886) -- 293,834 Improvements and replacements in progress ................. 35,839 (35,653) -- -- 186 Miscellaneous property ........ 11,398 27,115 -- -- 38,513 --------- ------ ------- ------ --------- $ 580,375 $51,136 $ (7,600) $ -- $ 623,911 --------- ------ ------- ------ --------- Marine fleet and facilities -- Land .......................... $ 5,188 $ -- $ -- $ -- $ 5,188 Towboats and barges ........... 538,271 27,634 (2,799) (6,353) 556,753 Terminals and other facilities 59,350 1,693 (403) (942) 59,698 --------- ------ ------- ------ --------- $ 602,809 $29,327 $ (3,202) $ (7,295) $ 621,639 --------- ------ ------- ------ --------- Water products distribution and manufacturing -- Land .......................... $ 140 $ -- $ -- $ -- $ 140 Buildings, machinery and equipment ................... 14,366 167 (23) 6,133 20,643 Furniture and fixtures ........ 1,858 107 (2) 268 2,231 Autos and trucks .............. 1,522 161 (66) (87) 1,530 Improvements and replacements in progress ................. 4,695 1,918 -- (6,153) 460 --------- ------ ------- ------ --------- $ 22,581 $ 2,353 $ (91) $ 161 $ 25,004 --------- ------ ------- ------ --------- Headquarters -- Land and land improvements .... $ 2,000 $ -- $ -- $ -- $ 2,000 Buildings, machinery and equipment ................... 2,149 75 (48) -- 2,176 Furniture and fixtures ........ 665 -- (2) -- 663 Autos and trucks .............. 231 -- (51) -- 180 --------- ------ ------- ------ --------- $ 5,045 $ 75 $ (101) $ -- $ 5,019 --------- ------ ------- ------ --------- Total consolidated ........ $1,210,810 $82,891 $ (10,994) $(7,134) $1,275,573 --------- ------ ------- ------ --------- --------- ------ ------- ------ ---------
(Page F-5) SCHEDULE V EASTERN ENTERPRISES AND SUBSIDIARIES PROPERTY AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1991 (THOUSANDS)
BALANCE SALES BALANCE DECEMBER 31, ADDITIONS AND DECEMBER 31, CLASSIFICATION 1990 AT COST RETIREMENTS OTHER 1991 -------------- ------------ --------- ----------- ----- ------------ Gas utility -- Land and rights-of-way ....... $ 3,920 $ -- $ -- $ -- $ 3,920 Structures ................... 21,828 1,624 (40) -- 23,412 Street mains ................. 210,690 18,890 (981) -- 228,599 Transportation equipment ..... 8,285 155 (2,314) -- 6,126 Other equipment .............. 251,345 26,435 (6,699) -- 271,081 Improvements and replacements in progress ................ 25,993 9,846 -- -- 35,839 Miscellaneous property ....... 10,977 450 (29) -- 11,398 ---------- -------- -------- ------- ---------- $ 533,038 $ 57,400 $(10,063) $ -- $ 580,375 ---------- -------- -------- ------- ---------- Marine fleet and facilities -- Land ......................... $ 5,225 $ -- $ (37) $ -- $ 5,188 Towboats and barges .......... 498,892 47,184 (3,804) (4,001) 538,271 Terminals and other facilities 58,211 1,347 (208) -- 59,350 ---------- -------- -------- ------- ---------- $ 562,328 $ 48,531 $ (4,049) $(4,001) $ 602,809 ---------- -------- -------- ------- ---------- Water products distribution and manufacturing -- Land ......................... $ 140 $ -- $ -- $ -- $ 140 Buildings, machinery and equipment .................. 6,669 1,735 13 5,949 14,366 Furniture and fixtures ....... 903 59 (33) 929 1,858 Autos and trucks ............. 926 142 (76) 530 1,522 Improvements and replacements in progress ................ 7,133 4,015 -- (6,453) 4,695 ---------- -------- -------- ------- ---------- $ 15,771 $ 5,951 $ (96) $ 955 $ 22,581 ---------- -------- -------- ------- ---------- Headquarters -- Land and land improvements ... $ 2,400 $ -- $ -- $ (400) $ 2,000 Buildings, machinery and equipment .................. 2,053 96 -- -- 2,149 Furniture and fixtures ....... 616 49 -- -- 665 Autos and trucks ............. 256 58 (83) -- 231 ---------- -------- -------- ------- ---------- $ 5,325 $ 203 $ (83) $ (400) $ 5,045 ---------- -------- -------- ------- ---------- Total consolidated ....... $1,116,462 $112,085 $(14,291) $(3,446) $1,210,810 ---------- -------- -------- ------- ---------- ---------- -------- -------- ------- ----------
(Page F-6) SCHEDULE VI EASTERN ENTERPRISES AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1993 (THOUSANDS)
ADDITIONS ------------------------ CHARGED BALANCE TO COSTS CHARGED BALANCE DECEMBER 31, AND TO OTHER SALES AND DECEMBER 31, CLASSIFICATION 1992 EXPENSES ACCOUNTS RETIREMENTS OTHER\1/ 1993 -------------- ------------ -------- -------- ----------- -------- ------------ Gas utility ................... $182,550 $27,566 $1,921 $(12,426) $ (4,327) $195,284 ------- ------ ----- -------- -------- ------- Marine fleet and facilities -- Towboats and barges ......... $248,087 $22,850 $ 693 $(21,533) $ -- $250,097 Terminals and other facilities................. 36,407 2,439 96 (538) -- 38,404 ------- ------ ----- -------- -------- ------- $284,494 $25,289 $ 789 $(22,071) $ -- $288,501 ------- ------ ----- -------- -------- ------- Water products distribution and manufacturing -- Buildings, machinery and equipment .................. $ 5,363 $ 2,444 $ -- $ (18) $ (5,395) $ 2,394 Furniture and fixtures ...... 822 389 -- (2) (801) 408 Autos and trucks ............ 762 275 -- (80) (390) 567 ------- ------ ----- -------- -------- ------- $ 6,947 $ 3,108 $ -- $ (100) $ (6,586) $ 3,369 ------- ------ ----- -------- -------- ------- Headquarters -- Buildings, machinery and equipment .................. $ 1,195 $ 232 $ -- $ -- $ -- $ 1,427 Furniture and fixtures ...... 476 61 (12) -- -- 525 Autos and trucks ............ 132 50 -- (92) -- 90 ------- ------ ----- -------- -------- ------- $ 1,803 $ 343 $ (12) $ (92) $ -- $ 2,042 ------- ------ ----- -------- -------- ------- Total consolidated ...... $475,794 $56,306 $2,698 $(34,689) $(10,913) $489,196 ------- ------ ----- -------- -------- ------- ------- ------ ----- -------- -------- ------- - ------------ \1/ Water products decreases reflect sale of Ionpure.
(Page F-7) SCHEDULE VI EASTERN ENTERPRISES AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1992 (THOUSANDS)
ADDITIONS ----------------------------- CHARGED BALANCE TO COSTS CHARGED BALANCE DECEMBER 31, AND TO OTHER SALES AND DECEMBER 31, CLASSIFICATION 1991 EXPENSES ACCOUNTS RETIREMENTS OTHER 1992 -------------- ------------ -------- -------- ----------- ----- ------------ Gas utility ............... $173,927 $22,493 $2,018 $ (7,600) $ (8,288) $182,550 -------- ------- ------ --------- --------- -------- Marine fleet and facilities -- Towboats and barges ..... $234,411 $22,143 $ 645 $ (2,759) $ (6,353) $248,087 Terminals and other facilities ............ 34,250 2,464 104 (411) -- 36,407 -------- ------- ------ --------- -------- -------- $268,661 $24,607 $ 749 $ (3,170) $ (6,353) $284,494 -------- ------- ------ --------- -------- -------- Water products distribution and manufacturing -- Buildings, machinery and equipment ............. $ 2,791 $ 2,569 $ 9 $ (6) $ -- $ 5,363 Furniture and fixtures .. 433 380 9 -- -- 822 Autos and trucks ........ 522 287 (15) (32) -- 762 -------- ------- ------ --------- -------- -------- $ 3,746 $ 3,236 $ 3 $ (38) $ -- $ 6,947 -------- ------- ------ --------- -------- -------- Headquarters -- Buildings, machinery and equipment ............. $ 950 $ 284 $ -- $ (39) $ -- $ 1,195 Furniture and fixtures .. 366 111 -- (1) -- 476 Autos and trucks ........ 116 50 8 (42) -- 132 -------- ------- ------ --------- -------- -------- $ 1,432 $ 445 $ 8 $ (82) $ -- $ 1,803 -------- ------- ------ --------- -------- -------- Total consolidated .... $447,766 $50,781 $2,778 $ (10,890) $(14,641) $475,794 -------- ------- ------ --------- -------- -------- -------- ------- ------ --------- -------- --------
(Page F-8) SCHEDULE VI EASTERN ENTERPRISES AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1991 (THOUSANDS)
ADDITIONS ----------------------- CHARGED BALANCE TO COSTS CHARGED BALANCE DECEMBER 31, AND TO OTHER SALES AND DECEMBER 31, CLASSIFICATION 1990 EXPENSES ACCOUNTS RETIREMENTS OTHER 1991 -------------- ------------ -------- -------- ----------- ----- ------------ Gas utility ..................... $167,012 $18,685 $1,866 $(10,063) $(3,573) $173,927 ------- ------ ----- ------- ------ ------- Marine fleet and facilities -- Towboats and barges ........... $221,025 $19,868 $ 665 $ (3,146) $(4,001) $234,411 Terminals and other facilities 31,946 2,372 113 (181) -- 34,250 ------- ------ ----- ------- ------ ------- $252,971 $22,240 $ 778 $ (3,327) $(4,001) $268,661 ------- ------ ----- ------- ------ ------- Water products distribution and manufacturing -- Buildings, machinery and equipment .................... $ 1,155 $ 1,795 $ -- $ (163) $ 4 $ 2,791 Furniture and fixtures ........ 115 327 -- (5) (4) 433 Autos and trucks .............. 201 338 -- (17) -- 522 ------- ------ ----- ------- ------ ------- $ 1,471 $ 2,460 $ -- $ (185) $ -- $ 3,746 ------- ------ ----- ------- ------ ------- Headquarters -- Buildings, machinery and equipment ................... $ 678 $ 272 $ -- $ -- $ -- $ 950 Furniture and fixtures ........ 260 106 -- -- -- 366 Autos and trucks .............. 162 43 5 (94) -- 116 ------- ------ ----- ------- ------ ------- $ 1,100 $ 421 $ 5 $ (94) $ -- $ 1,432 ------- ------ ----- ------- ------ ------- Total consolidated ........ $422,554 $43,806 $2,649 $(13,669) $(7,574) $447,766 ------- ------ ----- ------- ------ ------- ------- ------ ----- ------- ------ -------
(Page F-9) SCHEDULE VIII EASTERN ENTERPRISES AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (THOUSANDS)
ADDITIONS DEDUCTIONS --------------------------- ------------ CHARGES CHARGED FOR WHICH BALANCE TO COSTS CHARGED RESERVES BALANCE DECEMBER 31, AND TO OTHER WERE DECEMBER 31, DESCRIPTION 1992 EXPENSES ACCOUNTS CREATED 1993 ----------- ------------ -------- -------- ------- ------------ Reserves deducted from assets -- Reserves for doubtful accounts . $ 12,630 $ 13,893 $ (402) $(11,655) $ 14,466 -------- -------- ------- -------- -------- -------- -------- ------- -------- -------- Reserves for inventory ......... $ 3,214 $ 1,169 $(2,843) $ (897) $ 643 -------- -------- ------- -------- -------- -------- -------- ------- -------- -------- Reserves for loss on investments $ 19 $ -- $ -- $ -- $ 19 -------- -------- ------- -------- -------- -------- -------- ------- -------- -------- Reserves included in liabilities -- Reserve for post-retirement health care .................. $103,760 $ 1,364 $ 5,233 $ (5,627) $104,730 Reserve for coal miners retiree health care .................. -- 70,000 -- -- 70,000 Reserves for employee benefits . 12,425 8,969 (1,978) (8,755) 10,661 Reserves for environmental expenses ..................... 6,746 5,639 (159) (1,360) 10,866 Reserves for insurance claims .. 9,202 6,369 1,098 (7,502) 9,167 Other .......................... 25,367 8,027 (6,887) (5,253) 21,254 -------- -------- ------- -------- -------- Total liability reserves ... $157,500 $100,368 $(2,693) $(28,497) $226,678 -------- -------- ------- -------- -------- -------- -------- ------- -------- --------
(Page F-10) SCHEDULE VIII EASTERN ENTERPRISES AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (THOUSANDS)
ADDITIONS DEDUCTIONS -------------------------------- --------------- CHARGES CHARGED FOR WHICH BALANCE TO COSTS CHARGED RESERVES BALANCE DECEMBER 31, AND TO OTHER WERE DECEMBER 31, DESCRIPTION 1991 EXPENSES ACCOUNTS CREATED 1992 ----------- ------------ -------- -------- ------- ------------ Reserves deducted from assets -- Reserves for doubtful accounts ... $ 11,274 $12,739 $ 150 $(11,533) $ 12,630 -------- ------- ------- -------- ------- -------- ------- ------- -------- ------- Reserves for inventory ........... $ 2,712 $ 554 $ -- $ (52) $ 3,214 -------- ------- ------- -------- ------- -------- ------- ------- -------- ------- Reserve for loss on investments .. $ 19 $ -- $ -- $ -- $ 19 -------- ------- ------- -------- ------- -------- ------- ------- -------- ------- Reserves included in liabilities -- Reserves for post-retirement health care .................... $103,502 $10,258 $ 432 $(10,432) $103,760 Reserves for employee benefits ... 11,608 9,723 (144) (8,762) 12,425 Reserves for environmental expenses ....................... 7,367 2,500 282 (3,403) 6,746 Reserves for insurance claims .... 10,235 7,032 232 (8,297) 9,202 Other ............................ 14,778 4,783 15,844\1/ (10,038) 25,367 -------- ------- ------- -------- ------- Total liability reserves ..... $147,490 $34,296 $16,646 $(40,932) $157,500 -------- ------- ------- -------- ------- -------- ------- ------- -------- ------- - --------- \1/SFAS 109 gross up for deferred taxes on regulatory liabilities of Boston Gas Company.
(Page F-11) SCHEDULE VIII EASTERN ENTERPRISES AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1991 (THOUSANDS)
DEDUCTIONS ADDITIONS -------------- ------------------------------ CHARGES CHARGED FOR WHICH BALANCE TO COSTS CHARGED RESERVES BALANCE DECEMBER 31, AND TO OTHER WERE DECEMBER 31, DESCRIPTION 1990 EXPENSES ACCOUNTS CREATED 1991 ----------- ------------ -------- -------- ------- ------------ Reserves deducted from assets -- Reserves for doubtful accounts ..... $ 7,155 $14,152 $ 880 $(10,913) $ 11,274 ------- ------- -------- -------- ------- ------- ------- -------- -------- ------- Reserves for inventory $ 1,027 $ 1,600 $ 293 $ (208) $ 2,712 ------- ------- -------- -------- ------- ------- ------- -------- -------- ------- Reserve for loss on investments .... $ 19 $ -- $ -- $ -- $ 19 ------- ------- -------- -------- ------- ------- ------- -------- -------- ------- Reserves included in liabilities -- Reserves for post-retirement health care ...................... $ 1,515 $13,266 $ 94,250\1/ $ (5,529) $103,502 Reserves for employee benefits ..... 24,662 9,120 (11,286)\2/ (10,888) 11,608 Reserves for environmental expenses. 4,601 5,410 140 (2,784) 7,367 Reserves for insurance claims ...... 11,141 6,149 1,339 (8,394) 10,235 Other .............................. 15,610 7,493 4,382 (12,707) 14,778 ------- ------- -------- -------- ------- Total liability reserves ....... $57,529 $41,438 $ 88,825 $(40,302) $147,490 ------- ------- -------- -------- ------- ------- ------- -------- -------- ------- - --------- \1/Health care costs deferred by Boston Gas Company. \2/Decrease in pension minimum funding liability.
(Page F-12) SCHEDULE IX EASTERN ENTERPRISES AND SUBSIDIARIES SHORT-TERM BORROWINGS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (THOUSANDS)
MAXIMUM AVERAGE WEIGHTED BALANCE WEIGHTED AMOUNT AMOUNT AVERAGE AT END AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE OF INTEREST DURING THE DURING THE DURING THE YEAR DESCRIPTION PERIOD RATE PERIOD PERIOD(1) PERIOD(2) - ---- ----------- ------ -------- ----------- --------- ------------- 1993 ....... Notes payable ................... $106,300 3.5% $110,869 $56,746 3.7% -------- ---- -------- ------- ---- -------- ---- -------- ------- ---- 1992 ....... Notes payable ................... $ 54,944 4.3% $ 73,612 $35,785 5.0% -------- ---- -------- ------- ---- -------- ---- -------- ------- ---- 1991 ....... Notes payable ................... $ 56,418 5.7% $ 56,418 $27,825 7.3% -------- ---- -------- ------- ---- - --------- (1) Average daily balances. (2) Actual interest incurred divided by average principal amount outstanding during the period.
(Page F-13) SCHEDULE X EASTERN ENTERPRISES AND SUBSIDIARIES SUPPLEMENTARY EARNINGS STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (THOUSANDS)
1993 1992 1991 ---- ---- ---- Maintenance and repairs ............................. $49,903 $44,917 $43,536 Taxes, other than payroll and income taxes: Real estate and personal property ............... $11,016 $ 7,001 $ 6,151 Other ........................................... $ 8,425 $ 6,969 $ 6,695
EXHIBIT INDEX See Item 14(a)(3), "List of Exhibits," for statement of the location of exhibits incorporated by reference.
EXHIBIT ------- 3.1 --Declaration of Trust of Eastern Enterprises, as amended through April 27, 1989 (incorporated by reference). 3.2 --By-Laws of Eastern Enterprises, as amended through July 23, 1992 (incorporated by reference). 4.1 --Common Stock Rights Agreement between Eastern and The Bank of New York, dated as of February 22, 1990, and Exhibits attached thereto (incorporated by reference). 10.1 --Gas Transportation Contract between Boston Gas Company and Tennessee Gas Pipeline Company dated as of September 1, 1993 (incorporated by reference). 10.2 --Gas Transportation Contracts between Boston Gas Company and Texas Eastern Transmission Corporation dated December 30, 1993 (incorporated by reference). 10.3 --Gas Transportation Contracts between Boston Gas Company and Algonquin Gas Transmission Company dated December 30, 1993 (incorporated by reference). 10.4 --Gas Sales Contract between Boston Gas Company and Esso Resources Canada, Limited, dated as of May 1, 1989, as amended (incorporated by reference). 10.5 --Gas Sales Agreement between Boston Gas Company and Alberta Northeast Gas Limited, dated as of February 7, 1991 (incorporated by reference). 10.6 --Firm Gas Transportation Agreement between Boston Gas Company and Iroquois Gas Transmission System, L.P., dated as of February 7, 1991 (incorporated by reference). 10.7 --Eastern's Deferred Compensation Plan for Trustees, as amended. 10.8 --Eastern's 1982 Stock Option Plan, as amended (incorporated by reference). 10.9 --Eastern's Supplemental Executive Retirement Plan, as amended. 10.10 --Trust Agreement between Eastern and Shawmut Bank of Boston, N.A., as amended (incorporated by reference). 10.11 --Eastern's Executive Incentive Compensation Plan, as amended (incorporated by reference). 10.12 --Salary Continuation Agreements between Eastern and certain officers, as amended (incorporated by reference). 10.13 --Agreement dated November 27, 1991 between Eastern and J. Atwood Ives (incorporated by reference). 10.14 --Agreement dated October 25, 1991 between Eastern and Richard R. Clayton (incorporated by reference). 10.15 --Eastern's Headquarters Retirement Plan, as amended and restated (incorporated by reference). 10.16 --Midland Enterprises Inc. Salaried Retirement Plan, as amended and restated (incorporated by reference). 10.17 --Boston Gas Company Retirement Plan, as amended and restated (incorporated by reference). 10.18 --Trust Agreement made as of October 2, 1987 between Eastern and The Bank of New York, as amended (incorporated by reference). 10.19 --Eastern's Retirement Plan for Non-Employee Trustees, as amended (incorporated by reference). 10.20 --Eastern's 1992 Restricted Stock Plan (incorporated by reference). 10.21 --Eastern's Restricted Stock Plan for Non-Employee Trustees (incorporated by reference). 10.22 --Eastern's 1994 Deferred Compensation Plan. 13.1 --Portions incorporated herein of annual report to shareholders for the year ended December 31, 1993. 21.1 --Subsidiaries of the registrant.
EX-10 2 MATERIAL CONTRACTS EXHIBIT 10.7 EASTERN ENTERPRISES DEFERRED COMPENSATION PLAN FOR TRUSTEES 1. Purpose The purpose of this plan (the "Plan") is to assist members of the Board of Trustees of Eastern Enterprises ("Eastern") who are not employees of Eastern in making more satisfactory provision for their income following their retirement from the Board. To accomplish this purpose, the Plan establishes arrangements under which certain cash amounts payable by Eastern to such members may be deferred until after the retirement of such members from the Board of Trustees. In addition, the Plan gives such Trustees the option to have all or a portion of their deferred payments credited to Share Units, as hereinafter provided. 2. Administration The Plan will be administered by the Treasurer of Eastern. 3. Deferral of Retainers and of Fees for Attendance at Meetings Each member of the Board of Trustees of Eastern who is not an employee of Eastern will have the right to defer receipt of payments on account of all cash retainers and fees for attendance at meetings ("meeting fees") to which he or she may be entitled for any calendar year as a member of the Board of Trustees, including those to which he or she is entitled as a member of any Committee of the Board of Trustees or as Chairman of any such Committee. In order to exercise his or her right to defer receipt of such cash payments for any calendar year, the member must make an election in accordance with the provisions of paragraph 4 below. Such election must also set forth the method by which the deferred amounts will be paid, subject to the provisions of paragraph 6 below. Any election to defer receipt of payments on account of retainers and meeting fees payable in cash will apply to all such payments for the calendar year to which the election relates. 4. Election to Defer a. Except as provided in 4.b and 4.c below, any member of the Board of Trustees who wishes to defer receipt of payments on account of retainers or meeting fees payable in cash for any calendar year must make an irrevocable election on a form satisfactory to the Treasurer prior to the beginning of the calendar year in which the amounts would be paid if no such election were made. b. In the case of payments on account of retainers or meeting fees for 1980, the election must be made prior to the 1980 annual meeting of shareholders of Eastern and must be on a form satisfactory to the Treasurer. Any such election will apply to all such amounts which would be paid during 1980 after the date of such election if no such election were made. c. In the case of the first calendar year in which an individual becomes a member of the Board of Trustees, or becomes entitled to retainers and meeting fees, the election must be made prior to the date on which such individual becomes a member of the Board of Trustees or becomes so entitled. Such election will apply to all such amounts which would be paid in cash during such year if no such election were made. 5. Cash Accounts; Share Unit Accounts a. Each member who elects to defer under the Plan receipt of payments for a calendar year after 1992 shall, on the form referred to in paragraph 4. hereof, make an irrevocable election to credit each such deferred payment entirely to his or her Cash Account or entirely to his or her Share Unit Account, or to have a fixed percentage of each such deferred payment credited to his or her Share Unit Account and the balance to his or her Cash Account. For members who participated in the Plan for any year prior to 1993, the accounts to which their deferred payments for such year(s) have been credited are their Cash Accounts. Each such member shall have the right to make a one-time irrevocable election, on or prior to December 31, 1992, to transfer from his or her Cash Account to his or her Share Unit Account all or a portion of amounts deferred from years prior to 1993. b. If a member has a balance in his or her Cash Account, then amounts will be credited to such Cash Account as of the end of each calendar year based upon the average balance therein during such year (including any prior interest credits) and upon a rate, as determined by the Treasurer of Eastern, equal to the prime rate* of interest charged by The First National Bank of Boston as of the first day of such year or upon a rate based on such other indices as the Treasurer of Eastern in his or her sole discretion from time to time selects. Such credits will be made as long as there is any amount credited to such Cash Account. [FN] - ---------- * Amended on January 27, 1994 to increase rate to prime rate plus one percent. c. If a member elects to have all or a portion of his or her deferred payments for any year after 1992 credited to his or her Share Unit Account, a number of whole and fractional Share Units shall be credited to such Account, as of the date when each deferred payment or portion thereof would have been payable, equal to the amount of such deferred payment or portion thereof divided by the Fair Market Value of a share of Common Stock, $1.00 par value, of Eastern ("Common Stock") on such date. If a member elects pursuant to paragraph 5.a. to transfer from his or her Cash Account to his or her Share Unit Account an amount deferred from any year(s) prior to 1993, a number of whole and fractional Share Units shall be credited to such Share Unit Account on January 4, 1993, equal to such transferred amount divided by the Fair Market Value of a share of Common Stock on such date. In addition, on the date of payment of each cash dividend declared on the Common Stock, there shall be credited to each Share Unit Account with Share Units therein on such date a number of additional Share Units, such number to be determined by dividing the dollar amount of dividends that would be payable on the number of shares of Common Stock represented by the Share Units in such Account on the record date for such dividend, by the Fair Market Value of a share of Common Stock on the payment date of such dividend. The number of Share Units in each Share Unit Account shall be appropriately adjusted by the Treasurer of Eastern in the event of any stock dividend or split, recapitalization, merger in which Eastern is the surviving entity, combination or exchange of shares or similar corporate change affecting the number or type of shares of Eastern stock outstanding. For purposes of this Plan, the "Fair Market Value" of a share of Common Stock on any day shall be the average of the high and low prices of the Common Stock as published in the New York Stock Exchange Composite Transactions listing for such day (or, if the New York Stock Exchange is not open for trading on such day, the last previous day on which such trading occurred); provided that, in the event that such prices for the Common Stock shall not be so published, the Fair Market Value of the Common Stock shall be reasonably determined by the Treasurer of Eastern. d. Commencing six months and one day following the date on which a member ceases to be a member of the Board of Trustees, such former member may elect to make annual transfers of all or a portion of amounts in his or her Cash Account to his or her Share Unit Account, and vice versa. Each such transfer shall be effected on the first business day of January of the year following the year in which the transfer election is made. In the event of such a transfer to a Share Unit Account, such Account shall be credited with Share Units based on the Fair Market Value of the Common Stock on the date of transfer. In the event of such a transfer from a Share Unit Account, the Share Units in such account shall be converted to cash based on the Fair Market Value of the Common Stock on the date of transfer. On the date of any payment from a Share Unit Account pursuant to paragraph 6.a., 6.b. or 6.c. hereof, the number of whole and fractional Share Units required to make such payment shall be converted to cash based on the Fair Market Value of the Common Stock on such date. Payments from Share Unit Accounts shall be made in cash only, and members, former members and beneficiaries shall in no event have any right to receive Share Units or shares of Common Stock under the Plan. In the event that any installment payment under paragraph 6.a., 6.b. or 6.c. is to be made from both a member's or former member's Share Unit Account and Cash Account, an amount shall be paid from each Account in proportion to the value of such Account on the payment date. 6. Payment of Amounts Deferred a. Amounts in a member's Cash Account and/or Share Unit Account will be paid in cash only, in either of the following ways, as elected by the member prior to the beginning of the first calendar year in which he or she defers receipt of payments under this Plan: (i) in a lump sum, with adjustments as referred to in paragraph 6.b below, on the first business day in January of the year following the year in which the member ceases to be a member of the Board of Trustees; or (ii) in a number of consecutive annual installments as elected by the member, not to exceed 10, beginning in the calendar year following the calendar year in which the member ceases to be a member of the Board of Trustees, the installment in each year to be paid on the first business day of January in such year, and each installment to equal an amount determined by dividing (x) the total amount in the member's Cash Account and Share Unit Account on the payment date (valuing the Share Unit Account based on the Fair Market Value of the Common Stock on such date), by (y) the number of annual installments elected by the member that remain unpaid (including the installment to be paid on such date). Except as provided in paragraph 6.b below, once filed with the Treasurer, a member's election under this paragraph 6 as to the method by which deferred amounts will be paid to him or her will be irrevocable. b. If a member or former member of the Board of Trustees, or any beneficiary of the member after the member's death, incurs a severe financial hardship, the Treasurer, in his or her sole discretion, may revise the schedule for payments from his or her Cash Account (including the making of immediate payments) to the extent reasonably necessary to eliminate the severe financial hardship; provided that no revision shall be made with respect to the schedule for payments from the member's or former member's Share Unit Account. Any such severe financial hardship must have been caused by an accident, illness, or event beyond the control of the member, former member, or beneficiary. c. If at the time of death of a member or former member of the Board of Trustees, there is any balance in his or her individual Cash Account and/or Share Unit Account under the Plan, Eastern will pay such balance (as adjusted under paragraph 6.b above) in cash only to the beneficiary or beneficiaries designated by the member on a form satisfactory to the Treasurer. At the member's election, such payment will be made in a lump sum on the first business day of January of the year following the year of the member's death or in a number of consecutive annual installments as elected by the member, not to exceed 10, beginning in the calendar year following the year of the member's death, each annual installment to be paid on the first business day of January in such year, and the amount of each installment to be calculated in the manner provided in paragraph 6.a above. The member may at any time change his or her designation of beneficiary or beneficiaries and the schedule for payments to such beneficiary or beneficiaries with respect to amounts in his or her Cash Account by filing an additional form with the Treasurer. The member may at any time change his or her designation of beneficiary or beneficiaries with respect to amounts in his or her Share Unit Account by filing an additional form with the Treasurer. However, the member's election as to the schedule for payments to his or her beneficiary or beneficiaries from a Share Unit Account must be made prior to the beginning of the first calendar year in which he or she defers receipt of payments into a Share Unit Account under the Plan, and shall be irrevocable thereafter until six months and one day following the date on which such member ceases to be a member of the Board of Trustees, after which time such former member may at any time change the schedule for payments to such beneficiary or beneficiaries with respect to amounts in his or her Share Unit Account. 7. Payments Under the Plan Eastern will comply with any requirements which may be established by law with respect to payments under the Plan, including the filing of any notices and the withholding of any taxes which may be required. 8. Rights of Members and Other Persons Any rights accruing to any member of the Board of Trustees of Eastern or other person under the Plan will be solely those of an unsecured general creditor of Eastern. Such rights may not be assigned or otherwise transferred by such member or person and will not be subject to be taken by creditors of such member or person by any process whatsoever, and any attempt to cause such interest to be so subjected will not be recognized, except to such extent as may be required by law. 9. Modification and Termination of the Plan The Plan may be amended or terminated by the Board of Trustees of Eastern at any time, in whole or in part, such amendment or termination to become effective on the date specified by the Board of Trustees. 10. Effective Date of the Plan The Plan is effective as of April 1, 1980. ____________________ As Amended by the Board of Trustees January 27, 1994 EX-10 3 MATERIAL CONTRACTS EXHIBIT 10.9 Amended as of February 24, 1994 Eastern Enterprises Supplemental Executive Retirement Plan 1. Purpose. The purpose of this Plan is to provide key management personnel of Eastern Enterprises and its subsidiaries with an appropriate level of retirement income by supplementing the retirement benefits provided under the Eastern Enterprises Headquarters Retirement Plan, the Boston Gas Company Retirement Plan, and the Midland Enterprises Inc. Salaried Retirement Plan, as applicable. 2. Definitions. For purposes of this Plan, the following terms will have the following meanings: (a) The word "Eastern" will mean Eastern Enterprises and any successor to all or a major portion of its assets or business which assumes the obligations of Eastern Enterprises under the Plan. (b) The word "Plan" will mean the Eastern Enterprises Supplemental Executive Retirement Plan set forth herein, together with all amendments hereto. (c) The words "Retirement Plan" will mean the Eastern Enterprises Headquarters Retirement Plan, the Boston Gas Company Retirement Plan, and the Midland Enterprises Inc. Salaried Retirement Plan, as from time to time amended, as applicable. (d) The words "Participating Subsidiary" will mean any Participating Employer (as defined in the Retirement Plan), other than Eastern. (e) The word "Compensation" will mean: (i) except as otherwise provided in Section 2(e)(ii) below, with respect to any Officer for any year, the salary paid by Eastern or by a Participating Subsidiary to such Officer for such year (calculated as of his Earnings Measurement Date, as defined in the Retirement Plan) and fifty percent (50%) of bonuses and incentive awards paid (whether in cash or stock) by Eastern or by a Participating Subsidiary to such Officer in such year; provided, that amounts deferred by such Officer under Eastern's Deferred Compensation Plan for Certain Management Employees shall be treated as paid in the year they would have been payable but for such deferral; further provided, that in determining for the purposes hereof the amount of an incentive award paid (whether in cash or stock) under Eastern's Executive Incentive Compensation Plan (x) there shall be included only the lesser of the amount paid or the target award amount established in creating the incentive opportunity to earn such award and (y) awards based on a fixed number of shares of Eastern stock shall be valued at the price for Eastern stock utilized in creating the incentive opportunity to earn such award; and, further provided, that no amount will be included with respect to stock options or stock appreciation rights; and (ii) with respect to any Officer first receiving benefits hereunder on or after January 1, 1994, for any calendar year, the salary paid by Eastern or by a Participating Subsidiary to such Officer for such calendar year (calculated as of his Earnings Measurement Date, as defined in the Retirement Plan) and fifty percent (50%) of bonuses and incentive awards (whether payable in cash or stock) earned by such Officer with respect to such calendar year under Eastern's Executive Incentive Compensation Plan or any similar executive incentive plan adopted by Eastern after January 1, 1994; provided, that amounts deferred by such Officer under any deferred compensation and/or savings plan maintained by Eastern or any Participating Subsidiary from time to time shall be treated as paid in the calendar year they would have been payable but for such deferral, and such deferrals shall be disregarded for purposes of determining amounts earned; further provided, that in determining for purposes hereof the amount of an incentive award earned (whether payable in cash or stock), (a) a bonus or award that relates to a plan period of more than one calendar year, when earned in accordance with such Plan at the end of such period, shall be deemed to have been earned in equal annual installments during such period, and (b) awards based on a fixed number of shares of Eastern stock shall be valued at the price for Eastern stock utilized in creating the incentive opportunity to earn such award; and, further provided, that no amounts will be included with respect to stock options, stock appreciation rights or restricted stock awards. (f) The word "Officer" will mean any active employee of Eastern or a Participating Subsidiary employed as a Chairman, a President, a Vice President, a General Counsel, an Assistant Vice President, a Treasurer, a Secretary, or a Controller. In addition to the offices named in the preceding sentence, the Compensation Committee may from time to time designate other offices of Eastern or a Participating Subsidiary, the holders of which will be Officers within the meaning of this Section 2(f). (g) The words "Eligible Officer" will mean any Officer who satisfies the eligibility requirements set forth in Section 4 of the Plan. (h) The words "Executive Service" will mean the period of service which an employee serves as an Officer, except that no service after age sixty-five (65) will be counted as Executive Service. (i) The words "Break in Service" will have the same meaning as in the Retirement Plan. (j) The words "Computation Period" will have the same meaning as in the Retirement Plan. (k) The words "Hour of Service" will have the same meaning as in the Retirement Plan. (l) The words "Social Security Benefit" will have the same meaning as in the Retirement Plan. (m) A "Change of Control" will be deemed to have occurred if (i) after January 1, 1987 any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), other than Eastern, becomes a beneficial owner directly or indirectly of securities representing twenty-five percent (25%) or more of the combined voting power of the then outstanding voting securities of Eastern; or (ii) within two years after the commencement of a tender offer or exchange offer for the voting securities of Eastern (other than by Eastern), or as a result of a merger, consolidation, sale of assets or contested election of trustees or directors, or any combination of the foregoing, the individuals who were trustees of Eastern immediately prior thereto shall cease to constitute a majority of the Board of the Trustees of Eastern or of the board of trustees or directors of its successor by merger, consolidation or sale of assets. Wherever used in the Plan, the masculine pronoun will include the feminine. 3. Administration. The Plan will be administered by the Compensation Committee of Eastern, which will have full power and authority to construe, interpret and administer the Plan. Decisions of the Compensation Committee will be final and binding on all persons. The Compensation Committee may, in its discretion, adopt, amend and rescind rules and regulations, not inconsistent with the Plan, relating to the administration thereof. In individual cases, the Compensation Committee may also credit any Officer for either eligibility or benefit-determination purposes, or both, with periods of service in addition to those otherwise taken into account under the Plan, whether or not such Officer has actually performed service for Eastern or its subsidiaries in such periods. 4. Eligibility. All Officers fifty-five (55) years of age or older who (i) are serving in those positions of responsibility that most greatly influence Eastern's performance (such positions to be designated from time to time by the Compensation Committee with reference to this Section 4); (ii) have completed at least twenty-four (24) consecutive months of service in one or more of the positions so designated by the Compensation Committee; and (iii) are Members in the Retirement Plan (as defined therein) will be covered by the Plan and will be eligible to receive benefits hereunder, subject to the provisions of the Plan. The Compensation Committee may extend eligibility under the Plan on an individual basis to other employees of Eastern or of its subsidiaries; provided, however, that no individual (other than a spouse or beneficiary of an Eligible Officer) who is not a Member in the Retirement Plan will be eligible to receive benefits under the Plan. 5. Amount of Benefit. Subject to the offset described in Section 7 below, the actuarial adjustments described in Section 8 below and the off-sets described in Section 9 below, the benefit provided under the Plan with respect to any Eligible Officer will be determined as follows: (a) Termination of Employment At or After Age 62. (i) Except as otherwise provided in Section 5(a)(ii) below, every Eligible Officer whose employment by Eastern and its subsidiaries terminates (other than by death) upon or after his attaining age sixty-two will be eligible to receive an annual amount which is the product of (i) his average annual Compensation for those five (5) years, selected from among the last ten (10) years of his Executive Service, in which his aggregate Compensation was highest, and (ii) a percentage determined according to the following table:
Years of Executive Service Percentage Less than 10 None 10 35 11 36.5 12 38 13 39.5 14 41 15 42.5 16 44 17 45.5 18 47 19 48.5 20 or more 50
For purposes of this Section 5(a)(i), a Computation Period in which an Officer has one thousand (1,000) or more Hours of Service as an Officer will be deemed to be a "year of Executive Service," except that years of Executive Service prior to any Break in Service will be disregarded to the extent that Years of Vesting Service (within the meaning of the Retirement Plan) prior to such Break in Service would be disregarded for purposes of the Retirement Plan. (ii) Every Eligible Officer whose employment by Eastern and its subsidiaries terminates (other than by death) upon or after his attaining age sixty-two (62) and who first receives benefits hereunder on or after January 1, 1994 will be eligible to receive an annual amount which is the product of (i) his average annual Compensation for those five (5) calendar years, selected from among the last ten (10) calendar years of his Executive Service, in which his aggregate Compensation was highest, and (ii) a percentage determined according to the following table:
Non-Calendar Years of Executive Service Percentage Less than 10 None 10 35 11 36.5 12 38 13 39.5 14 41 15 42.5 16 44 17 45.5 18 47 19 48.5 20 or more 50
For purposes of this Section 5(a)(ii), a Computation Period in which an Officer has one thousand (1,000) or more Hours of Service as an Officer will be deemed to be a "non- calendar year of Executive Service," and a calendar year in which an Officer has one thousand (1,000) or more Hours of Service as an Officer will be deemed to be a "calendar year of Executive Service", except that if any Years of Vesting Service (within the meaning of the Retirement Plan) prior to any Break in Service with respect to such Officer would be disregarded for purposes of the Retirement Plan, an equivalent number of non-calendar years of Executive Service and an equivalent number of calendar years of Executive Service will be disregarded hereunder. (b) Termination of Employment Before Age 62. Every Eligible Officer whose employment by Eastern and its subsidiaries terminates (other than by death) upon or after his attaining age fifty-five (55), but before his attaining age sixty-two (62), will be eligible to receive an annual amount equal to the amount calculated under Section 5(a) above multiplied by a percentage determined according to the following table:
Age at Commencement of Benefit Percentage 61 95 60 90 59 85 58 80 57 75 56 70 55 65
(c) Death Benefits. If an Eligible Officer dies while serving (or deemed to be serving under Section 6 below) as an Eligible Officer and leaves a surviving spouse, the spouse will be eligible to receive an annual amount equal to the amount, if any, the Eligible Officer would have been entitled to receive under (a) or (b) above, whichever is applicable, had he retired with the prior written permission of the Compensation Committee on the day before his death. (d) Conditions and Limitations. No officer whose employment terminates upon or after his attaining age fifty-five (55), but before his attaining age sixty-five (65), will be eligible for benefits under the Plan unless: (i) the Compensation Committee has given the Officer its prior written permission (any Officer who dies shall be deemed to have retired with the prior written permission of the Compensation Committee); or (ii) the Officer has given written notification to the Compensation Committee at least six months in advance of the termination; or (iii) the Officer is terminated by Eastern, or a subsidiary of Eastern, and such termination is not determined by the Compensation Committee to be a discharge for cause which casts such discredit on the Officer or Eastern, or a division or subsidiary of Eastern, as to justify forfeiture of any benefits under this Plan. No benefit with respect to any Eligible Officer under the Plan will exceed, after adjustment for the offset described in Section 7 below but before actuarial adjustment under Section 8 below and before adjustment for the offsets described in Section 9 below, an amount equal to three (3) times the greater of (i) $90,000 or (ii) the maximum benefit that could be paid with respect to such Eligible Officer under section 415(b)(1)(A) of the Internal Revenue Code of 1986, as from time to time amended (the "Code"), as adjusted pursuant to section 415(d) of the Code and as in effect on the date of such Eligible Officer's termination of employment. Except as otherwise provided herein, an Officer's employment will terminate for purposes of the Plan as of the date on which such Officer (i) retires, resigns or is dismissed from service as an Officer; (ii) dies while serving as an Officer; or (iii) departs from the service of Eastern and its subsidiaries for any reason; provided, that an Officer will not be deemed to have terminated his employment solely by reason of a duly approved leave of absence. For purposes of this Section 5 only, the age at which an Officer's employment terminates or his benefits commence will be calculated in all cases as of such Officer's nearest birthday. Notwithstanding any other provision of this Plan, an Eligible Officer's surviving spouse shall not be entitled to any benefits hereunder unless such spouse was the person to whom the Eligible Officer was married at the time benefit payments commenced under this Plan (or at the time of the Eligible Officer's death, if earlier). 6. Disability. For purposes of satisfying the length-of-service requirements set forth in Section 4 and Section 5 above, an Officer who is unable to work because of a disability for which he is eligible to receive benefits under a long-term disability program sponsored by Eastern or by a Participating Subsidiary will be deemed to continue to serve as an Officer at the same salary he was receiving when forced to stop working by reason of his disability, until such time as he returns to active employment or his employment terminates. 7. Offset for Social Security payments. The annual benefit calculated with respect to any Eligible Officer under Section 5 above shall be reduced (but not below zero), before the adjustments described in Section 8 and Section 9 below, by a percentage of the Eligible Officer's Social Security Benefit for any year in which such Eligible Officer is eligible to receive a Social Security benefit (or, if the benefit hereunder becomes payable under Section 5(c) by reason of the Eligible Officer's death, by a percentage of the Social Security Benefit to which the Eligible Officer would have been entitled, but only for those years in which such Eligible Officer, had he lived, would have been eligible for Social Security benefits), as follows: for Officers first receiving benefits hereunder prior to January 1, 1994, such percentage shall be one hundred percent (100%); for Officers first receiving benefits hereunder on or after January 1, 1994, such percentage shall be fifty percent (50%). 8. Actuarial adjustment. For purposes of determining the benefit provided under this Plan with respect to any Eligible Officer, the amount calculated under Section 5 above with respect to such Eligible Officer, after adjustment for the offset described in Section 7 above, will be actuarially adjusted as necessary to reflect payment in the form specified in Section 10, in the same manner and using the same actuarial assumptions as would apply in determining how an accrued benefit of like amount payable (with the same commencement date) under the Retirement Plan would be actuarially adjusted (if at all) to reflect payment under the Retirement Plan in such specified form. 9. Offset for other benefits. The annual benefit calculated with respect to any Eligible Officer under Section 5(a) or Section 5(b) above, as adjusted for the offset described in Section 7 above and as further adjusted actuarially under Section 8 above, will be reduced (but not below zero) by the sum of the following amounts: (a) the amount payable annually with respect to such Eligible Officer (1) under the Retirement Plan, assuming commencement on the commencement date hereunder and payment (i) if the Eligible Officer is unmarried on such commencement date, in the form of a single life annuity over the life of the Eligible Officer but with sixty (60) monthly payments guaranteed, or (ii) in every other case, in the form of a joint and survivor annuity under which reduced payments will be made to the Eligible Officer for his lifetime and, following his death, if his spouse survives him, payments equal to one-half the amount payable to the Eligible Officer during his lifetime will be paid to such surviving spouse for the remainder of such spouse's lifetime, or (2) under any other retirement plan to which Eastern or any of its subsidiaries or affiliates has contributed (payments under any such other plan to be determined, for purposes of this Section 9, as though payable in the form described in (1)(i) or (1)(ii) above, whichever is applicable); and (b) the amount, if any, which the Compensation Committee reasonably determines, in its sole discretion, to be the annual retirement income or the equivalent thereof to which the Eligible Officer is entitled by reason of any prior employment (including for this purpose any service as a fiduciary or director), assuming the same form of payment as the applicable benefit form under (a) above. If an Eligible Officer dies while employed (or deemed to be employed under Section 6 above) as an Eligible Officer, and leaves a surviving spouse, the death benefit payable to his spouse each year under Section 5(c) above, as adjusted for the offset described in Section 7 above and as further adjusted actuarially pursuant to Section 8 above, will be reduced (but not below zero) by the sum of the following amounts: (aa) the death benefit provided the spouse each year under the Retirement Plan, assuming commencement on the same commencement date as hereunder, or under any other retirement plan to which Eastern or any of its subsidiaries or affiliates has contributed (payments under any such other plan to be determined, for purposes of this Section 9, as though payable in the same form and commencing at the same time as the death benefit hereunder); and (bb) the amount, if any, which the Compensation Committee reasonably determines, in its sole discretion, to be the annual income to which the spouse of such Eligible Officer is entitled under any plan, agreement or arrangement maintained by a prior employer of such Eligible Officer (or in connection with any service of such Eligible Officer as a fiduciary or director), assuming the same form of payment and benefit commencement date as hereunder. 10. Form and Timing of Benefits for Eligible Officers. Benefits provided to an Eligible Officer under the Plan upon the termination of his employment will be payable (a) if the Eligible Officer is unmarried on the commencement date of benefits hereunder, in the form of a single-life annuity over the life of the Eligible Officer but with sixty (60) monthly payments guaranteed, or (b) in every other case, in the form of a joint and survivor annuity under which reduced payments will be made to the Eligible Officer for his lifetime and, following his death, if his spouse survives him, payments equal to one-half the amount payable to the Eligible Officer during his lifetime will be paid to such surviving spouse for the remainder of such spouse's lifetime. Benefits payable to a surviving spouse under Section 5(c) above will be payable in the form of a single-life annuity over the life of such surviving spouse. Solely for purposes of determining the amount payable to a surviving spouse under Section 5(c), the benefit the deceased Eligible Officer would have been entitled to receive had such Eligible Officer retired with the written permission of the Compensation Committee on the day before his death shall be assumed to have been payable in the form of a joint and survivor annuity under which reduced payments are payable to the Eligible Officer for his lifetime and, following his death, reduced payments in the same amount are payable to the Eligible Officer's surviving spouse for the remainder of such spouse's lifetime. Benefits provided hereunder will commence as of the first day of the month next following the Eligible Officer's termination of employment (or the Eligible Officer's death, in the case of benefits described in Section 5(c)), irrespective of the form and timing of benefit payments under the Retirement Plan. 11. No Vesting; Requirement of Non-Competition. Subject to the provisions of Section 14 below, nothing in this Plan will be construed as vesting in any person rights to any benefits hereunder. If at any time the Compensation Committee determines that a person receiving benefits hereunder is competing, directly or indirectly, with the business of Eastern, it may discontinue the payment of such benefits to such person. For purposes of this paragraph, the phrase "competing, directly or indirectly, with the business of Eastern" will be deemed to include (without limiting the generality of the same) engaging or being interested, directly or indirectly, as owner, director, officer, employee, partner, through stock ownership (other than ownership of less than two (2%) percent of the outstanding stock of any publicly owned company), investment of capital, lending of money or property, rendering of services or otherwise, either alone or in association with others, in the operation of any type of business or enterprise in any way competitive with the business of Eastern or of any of its subsidiaries. Notwithstanding the foregoing, the Compensation Committee may waive or modify its right to discontinue payments to any person by written agreement with such person. 12. Limitation of Rights; Special Provision in the Event of Change in Control. Nothing in this Plan will be construed to create a trust or to obligate Eastern or any other person to segregate a fund, purchase an insurance contract, or in any other way currently to fund the future payment of any benefits hereunder, nor will anything herein be construed to give any employee or any other person rights to any specific assets of Eastern or of any other person. Notwithstanding the foregoing, Eastern in its sole discretion may establish a trust of which it is treated as the owner under Subpart E of Subchapter J, Chapter 1 of the Code to provide for the payment of benefits hereunder, subject to the claims of general creditors in the event of insolvency and subject to such other terms and conditions as Eastern may deem necessary or advisable to ensure that benefits are not includable, by reason of the Trust, in the income of trust beneficiaries prior to actual distribution and that the existence of the trust does not cause the Plan or any other arrangement to be considered funded for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended (a "grantor trust"). In the event Eastern establishes a grantor trust in respect of the Plan and at the time of a Change of Control such trust (i) has not been terminated or revoked and (ii) is not "fully funded" (as hereinafter defined), Eastern shall promptly deposit in such grantor trust cash sufficient to cause the trust to be "fully funded" as of the date of the deposit. For purposes of this paragraph, the aforesaid grantor trust shall be deemed "fully funded" as of any date if, as of that date, the fair market value of the assets held in trust is not less than the aggregate present value as of that date of (1) all benefits then in pay status under the Plan (including benefits not yet commenced but in respect of Eligible Officers who have retired, died or otherwise terminated employment under circumstances entitling them to benefits hereunder) plus (2) all benefits that would be payable under the Plan if all other Eligible Officers were deemed to have retired with the prior written permission of the Compensation Committee on that date plus (3) all benefits payable (as determined under rules similar to the rules described in (1) and (2)) under all other plans and arrangements, to the extent provided for through the grantor trust. In applying the preceding sentence, present value shall be determined by using the interest and mortality assumptions used in determining lump sum present values under the Retirement Plan. 13. Rights Non-Assignable. No employee or beneficiary or any other person will have any right to assign or otherwise to alienate the right to receive payments under the Plan, in whole or in part. 14. Amendment. Eastern reserves the right at any time by action of its Board of Trustees to terminate the Plan or to amend its provisions in any way, except that following a Change of Control no such amendment or termination shall reduce the amount of Eastern's obligations under Section 12 or extend the period within which Eastern may satisfy such obligations. In addition, the Plan will automatically terminate if at any time (and as of the date that) the Retirement Plan is terminated. Notwithstanding the foregoing, no termination or amendment of the Plan (a "Plan amendment") will reduce the benefit payable under the Plan to any person with respect to an Eligible Officer whose employment with Eastern and its subsidiaries was terminated prior to such Plan amendment, nor shall any Plan amendment reduce the benefit to be paid with respect to a person who is an Eligible Officer on the date of such Plan amendment below the amount which such Eligible Officer would have received if his employment had terminated with the prior written permission of the Compensation Committee on the day before such Plan amendment. EX-10 4 MATERIAL CONTRACTS EXHIBIT 10.22 EASTERN ENTERPRISES 1994 DEFERRED COMPENSATION PLAN I. In General. Eastern Enterprises (the "Company") has established the deferred compensation plan hereinafter set forth (as the same may from time to time be amended, the "Plan") in order to provide an incentive for eligible key management employees by enabling them to defer compensation until termination of employment. The Plan provides for deferral of amounts that would otherwise have been received currently by the eligible employee as well as for the crediting of additional deferred amounts. The Plan is intended, in part, to make up for deferrals that cannot be made under the Company's tax-qualified Retirement Savings Plan by reason of the limitations imposed under Section 401(a)(17), Section 401(k)(3), Section 401(g) or Section 415 of the Internal Revenue Code, and shall be construed consistent with that purpose, including without limitation consistency with the anti-conditioning rules of Section 401(k)(4) of the Internal Revenue Code and the regulations thereunder. II. Defined Terms. The following terms shall have the meanings set forth below whenever such terms are used in the Plan, unless a different meaning is clearly indicated by the context: (a) "Account": Either the Elective Account established pursuant to Article IV of the Plan or the Matching Account established pursuant to Article V of the Plan, including any sub-accounts. (b) "Administrator": The Compensation Committee of the Board of Trustees of the Company, or its delegates. (c) "Base Salary": A Participant's basic or regular salary, excluding bonuses and other forms of extraordinary compensation, determined before reduction for deferrals under this Plan or any other employee benefit plan of the Company or its subsidiaries. (d) "Bonus": A cash bonus or the cash portion of any other incentive award payable to a Participant, determined before reduction for deferrals under the Plan or any other employee benefit plan of the Company or its subsidiaries. The term "Bonus" does not include amounts paid upon the exercise or settlement of a stock option or stock appreciation right. (e) "Code": The Internal Revenue Code of 1986, as amended. (f) "Company": Eastern Enterprises, a Massachusetts business trust with its principal place of business at Weston, MA. (g) "Compensation": In the case of any Participant, the sum of his or her Base Salary and Bonuses, if any. (h) "Eligible Employee": An employee of the Company or any of its subsidiaries who is, or who belongs to a classification of employees that is, from time to time designated by the Administrator as eligible to participate in the Plan. The Administrator shall select Eligible Employees from among those employees of the Company and its subsidiaries who are considered "management or highly compensated employees" for purposes of Title I of ERISA. (i) "ERISA": The Employee Retirement Income Security Act of 1974, as amended. (j) "Participant": An Eligible Employee who participates in the Plan. (k) "Plan": The Eastern Enterprises 1994 Deferred Compensation Plan set forth herein, as the same may from time to time be amended and in effect. (l) "Plan Year": The 12-month period designated as the plan year for purposes of the Savings Plan. (m) "Savings Plan": The Company's Retirement Savings Plan as from time to time amended and in effect. III. Elective Deferrals. (a) Each Participant may elect to have the cash portion of his or her Compensation for a Plan Year reduced and an equivalent amount credited to an Account hereunder. Each such election must be made at the time or times specified in (b) below and in the manner specified in (c) below, and shall be irrevocable once made. Separate elections may be made with respect to Base Salary and Bonuses. If only one election (with respect to total Compensation) is made, deferrals will be taken proportionately from Base Salary and Bonuses. The amount, if any, deferred with respect to Base Salary or Bonuses (or with respect to total Compensation if separate elections are not made) shall be the sum of (i) a whole percentage from 0% to 20% of the Participant's Base Salary, plus (ii) a whole percentage from 0% to 100% of the Participant's Bonuses. (b) Elections under this Article III shall be made prior to the beginning of a Plan Year and shall be effective as to Base Salary payable with respect to periods beginning in such Plan Year and to Bonuses earned in such Plan Year. Notwithstanding the foregoing: (i) an individual who becomes an Eligible Employee during a Plan Year may, within 30 days of becoming eligible, elect to defer Base Salary with respect to subsequent pay periods in that year and, if the Administrator so permits, Bonuses to be earned in that year, and (ii) for the 1994 Plan Year, initial elections to defer may be made within 30 days after the Plan is communicated to Eligible Employees, effective as to Base Salary with respect to subsequent pay periods in 1994 and to Bonuses to be earned in 1994. The Administrator may, but need not, provide that deferral elections with respect to a Plan Year shall carry over and be effective with respect to subsequent Plan Years unless affirmatively and timely modified by the Participant. (c) Elections under Article III shall be in writing on a form approved or prescribed by the Administrator and shall be effective when received by the Administrator care of the Company at the Company's principal place of business in Weston, Massachusetts. IV. Crediting of Elective Deferrals. The Administrator shall credit to a Participant's Elective Account the amount, if any, deferred by the Participant under Article III. Amounts shall be credited to a Participant's Elective Account as of the date they would have been paid in cash to the Participant, absent the deferral. V. Matching Credits. Effective as of the last day of each pay period, the Administrator shall credit to each Participant's Matching Account an amount equal to the sum of (a) and (b) below, where: (a) is an amount equal to the excess of (1) 25% of the sum for such period of the Participant's deferrals of Base Salary hereunder plus the Participant's elective deferrals under the Savings Plan, over (2) matching contributions for the benefit of the Participant with respect to such period under the Savings Plan; provided, that the amount described in (1) above shall in no event exceed 1.5% of the Participant's Base Salary for such period; and (b) is an amount equal to 25% of the Participant's elective deferrals of any Bonus under paragraph (a)(ii) of Article III above to the extent such elective deferrals do not exceed 6% of the Bonus. VI. Notional Earnings. At least annually, the Administrator shall credit to each Participant's Elective Account and Matching Account an additional amount representing notional earnings with respect to the balances of such Accounts. Except as may otherwise be determined by the Administrator, notional earnings shall be based on an interest rate equal to the prime rate of interest charged by The First National Bank of Boston as of the first day of the calendar year, plus one (1%) percentage point. In lieu of or in addition to the notional earnings measure described in the preceding sentence, the Administrator may from time to time specify other measure or measures by which notional earnings hereunder shall be determined and may change or eliminate any measure at any time. The Administrator may, but need not, permit Participants to choose the measure or measures (from among those specified as hereinabove provided) that will form the basis for crediting notional earnings to their Accounts under this Article VI. Notional earnings shall continue to be credited with respect to a Participant's Accounts until such Accounts have been fully distributed. VII. Vesting; Rights Unsecured. A Participant's Accounts shall be fully vested and nonforfeitable at all times. Nevertheless, each Participant's rights against the Company and its subsidiaries for benefits, if any, under the Plan shall be solely those of an unsecured general creditor. Nothing herein shall be construed as giving any Participant rights to or in any specific assets of the Company or its subsidiaries, nor shall anything herein be deemed to require the Company or any of its subsidiaries to set aside assets or create a trust or other fiduciary relationship for the purpose of funding benefits hereunder. Notwithstanding the foregoing, the Administrator may (but need not) establish a so-called "rabbi trust", whether or not conforming to the requirement of Revenue Procedure 92-64 but in any event intended to be a "grantor trust" for purposes of the Code and an unfunded arrangement under ERISA, to assist in providing for payment of benefits hereunder. VIII. Distribution of Accounts. (a) Except as provided below, each Participant's Accounts shall be distributed in a single lump sum cash payment as soon as practicable following the Participant's termination of employment with the Company and its subsidiaries. For purposes of the preceding sentence, a Participant employed by a direct or indirect subsidiary of the Company shall be treated as having terminated employment if such subsidiary is (or substantially all its assets are) acquired by another person or persons and the Participant continues to work for the acquiring entity, unless such acquiring entity expressly assumes the obligation to make the deferred payments to which the Participant is entitled hereunder upon termination of the Participant's employment with such acquiring entity. (b) Distribution under (a) above shall be made to the Participant if living. If the Participant's termination of employment occurs by reason of death, distribution shall be made to the Participant's beneficiary or beneficiaries designated in writing for purposes of the Plan on a form prescribed or approved by the Administrator, or in the absence of such a designation to the Participant's estate. If the Participant's termination of employment occurs other than by reason of death but the Participant dies prior to actual payment, distribution shall be made to the Participant's beneficiary or beneficiaries (or to the Participant's estate) as provided in the foregoing sentence. (c) The Administrator may prescribe rules under which total and permanent disability of the Participant, as determined by the Administrator, shall be treated as a termination of employment for purposes of the Plan even if the Participant would not be treated as having terminated employment for other purposes. (d) If a Participant so elects with respect to elective deferrals and/or matching credits for a Plan Year, that portion of the Participant's Accounts attributable to such deferrals and credits and the notional earnings with respect thereto shall be distributed in annual cash installments rather than in a single cash lump sum. The election to receive distribution in installments rather than in a single lump sum shall be made as part of the Participant's deferral election under Article III. The Administrator may specify the number or maximum number of years over which installments will be paid. The amount of each installment shall be determined by dividing that portion of the Participant's Accounts payable in such installments by the number of remaining installments. Where an Account is payable in installments, notional earnings shall continue to be credited to the balance of the Account until the Account is distributed in full. If a Participant who has elected installment distributions dies prior to the commencement or completion of the distributions, remaining payments shall be made to the Participant's beneficiary or beneficiaries (or to the Participant's estate) as provided under (b) above in accordance with the schedule of installment distributions elected by the Participant, except that the Administrator at any time following the Participant's death may commute the remaining installment distributions to a single cash lump sum payment. (e) Notwithstanding the preceding provisions of this Article VIII, the Administrator may distribute any Account at any time in full, in satisfaction of all remaining liabilities under the Plan to the affected Participant, if the Administrator in its discretion determines that exclusion of the Participant from the Plan is necessary to preserve the Plan's status as a plan maintained primarily for the benefit of "management or highly compensated employees" (as those words are used in Title I of ERISA). In addition, the Administrator in its discretion may make distributions under the Plan, including lump sum distributions representing the entirety of a Participant's Accounts, upon termination of the Plan even if the Participant is then still employed or had elected an installment distribution. IX. Hardship Distributions. A Participant may apply for a distribution prior to termination of employment if he or she has suffered an unanticipated emergency caused by an event beyond the Participant's control and likely to result in severe financial hardship. The Administrator shall determine if such an emergency exists and its determination shall be final and binding on all persons. If the Administrator determines that such an emergency exists it shall distribute to the Participant such portion of his or her Accounts as the Administrator deems necessary to meet the financial emergency. X. Administration. (a) The Plan shall be administered by the Administrator, which shall have full discretionary authority to interpret the Plan, determine eligibility for participation and benefits, prescribe rules, prescribe forms of election and other forms, and generally do all things necessary to carry out the terms of the Plan. Determinations by the Administrator shall be binding on all persons. (b) The Administrator shall prescribe such procedures as it deems appropriate for claiming benefits under the Plan. If any Participant or beneficiary claims benefits hereunder and the Administrator determines that the claim should be denied, the Administrator will provide to the claimant written notice of the denial, setting forth such information as is required under Section 503 of ERISA. If the claimant within 60 days of receipt of such notice requests in writing that the decision be reviewed, the Administrator shall afford the claimant (and his or her representative) an opportunity for review and within 60 days of receiving the request for review shall render a written decision, including specific reasons for the decision. The Administrator may extend the time for making a decision to the extent consistent with Section 503 of ERISA. Any failure by the Administrator to provide written notice of its decision within the 90-day or 60-day periods hereinabove described (or within such extensions of those periods as may apply in the particular case) shall be deemed a denial by the Administrator. XI. Amendment and Termination. The Board of Trustees of the Company may terminate the Plan at any time. Following Plan termination no further deferrals or other amounts shall be credited to Participant Accounts, except for notional earnings which shall continue to be credited until the Accounts have been distributed. The Board of Trustees of the Company may amend the Plan at any time and in any manner, including with respect to amounts already credited to Participant Accounts; provided, that no such amendment shall reduce the dollar amount credited to a Participant's Accounts as of the effective date of the amendment. XII. Miscellaneous. (a) Nothing in the Plan shall be construed as giving any Eligible Employee or other person the right to continued employment with the Company and its subsidiaries. (b) Rights to benefits under the Plan are nonassignable and shall not be subject to pledge, encumbrance, attachment, garnishment or alienation of any kind whatsoever. However, each Participant may designate a beneficiary or beneficiaries to receive any benefits payable hereunder upon the Participant's death. (c) All distributions under the Plan shall be subject to reduction for applicable tax withholding. (d) The Plan shall be construed in accordance with the laws of the Commonwealth of Massachusetts except to the extent such laws are preempted by ERISA. (e) Reference is hereby made to the trust establishing Eastern Enterprises (formerly Eastern Gas and Fuel Associates) dated July 29, 1929, as amended, a copy of which is on file in the office of the Secretary of the Commonwealth of Massachusetts. The name "Eastern Enterprises" refers to the trustees under said declaration of trust as trustees and not personally, and no trustee, shareholder, officer or agent of Eastern shall be held to any personal liability in connection with the affairs of said Eastern Enterprises, but the trust estate only is liable. Approved by the Board of Trustees: January 27, 1994 EX-13 5 ANNUAL REPORT TO SHAREHOLDERS EXHIBIT 13.1 (Page 26) 1993 COMPARED TO 1992 The reported net loss in 1993 included the effects of three substantial charges of a non-recurring nature totaling $99.8 million, net of tax, or $4.43 per share. In addition, a number of unusual external factors such as floods and strikes negatively impacted each of Eastern's operating businesses during 1993. A management reevaluation of the Water Products Group resulted in the sale of Ionpure Technologies at a loss and a writedown of WaterPro Supplies' goodwill. On December 1, 1993, Eastern completed the sale of Ionpure for a 22% equity interest in U.S. Filter Corporation, as described in Note 10 of Notes to Financial Statements ("Notes"). This sale resulted in a pretax charge of $13.0 million ($9.3 million net of tax, or $.41 per share). In addition, in consideration of the continuing pressures on operating margins, diminished expectations for growth and other factors, Eastern revalued WaterPro and in the fourth quarter of 1993 recorded a pre- and post-tax charge against goodwill of $45.0 million, or $2.00 per share, as described in Note 12 of Notes. Also in the fourth quarter of 1993, Eastern accrued a pretax charge of $70.0 million representing the estimated undiscounted liability for health care and death benefit premiums imposed by the Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act"). As described in Note 14 of Notes, this charge has been reported as an extraordinary item of $45.5 million net of tax, or $2.02 per share. On November 1, 1993 Eastern filed a lawsuit in the Federal District Court for Massachusetts challenging the constitutionality of the Coal Act, as applied to it, and asserting a claim against Peabody Holding Company, Inc., to which Eastern sold its coal subsidiaries in 1987, that any liability under the Coal Act should be borne by Peabody and such subsidiaries. Eastern has posted security to delay payment of premiums pending the outcome of its constitutional challenge. Eastern's ultimate obligation under the Coal Act could range from zero to more than $100 million depending on a number of factors, including the outcome of such challenge, its claim against Peabody, Medicare reimbursements, administrative review of assigned individuals, medical inflation rates and changes in government health care programs. (Page 27) REVENUES:
(In millions) -------------------------------------------------------------------------- 1993 1992 Change Boston Gas $ 614.3 $ 594.3 3 % Midland 254.9 263.6 (3)% Water Products Group 230.6 233.5 (1)% ---------------------- Total $1,099.8 $1,091.4 1 % ---------------------------------- ----------------------------------
Consolidated revenues increased slightly in 1993. Although a variety of market and economic factors affected the change, in general, continued growth to the Boston Gas firm customer base offset decreases in coal and grain transportation at Midland. OPERATING EARNINGS:
(In millions) -------------------------------------------------------------------------- 1993 1992 Change Boston Gas $49.1 $63.1 (22)% Midland 33.0 38.3 (14)% Water Products Group (0.4) (0.3) nm Headquarters (4.7) (5.1) 8% -------------- Operating earnings before writedown 77.0 96.0 (20)% Writedown of WaterPro goodwill (45.0) -- nm -------------- Total $32.0 $96.0 nm -------------- --------------
Consolidated operating earnings decreased from 1992, due primarily to the writedown of WaterPro goodwill and the absence of a one-time benefit in 1992 that resulted from a modification to the gas cost recovery mechanism at Boston Gas that increased operating earnings by $11.6 million. In addition, record flooding in the Midwest and strikes by the United Mine Workers ("UMW") and Boston Gas union employees decreased revenues and increased operating expenses. Earnings before income taxes decreased from $63.0 million in 1992 to a loss of $16.6 million in 1993, primarily reflecting the decrease in operating earnings described above, the $13.0 million loss on the sale of Ionpure, lower interest income and higher interest expense. Interest income decreased due to lower investment balances and rates. The increase in interest expense primarily reflected additional dividends paid on subsidiary preferred stock. The high income tax rate in 1993 resulted from the absence of any tax benefit recognized on the writedown of WaterPro goodwill and, to a much lesser extent, the 1% increase in the federal statutory rate and unbenefited capital losses on the sale of Ionpure, as described in Note 9. Net earnings of $46.1 million in 1992 decreased to a loss of $77.7 million in 1993, reflecting the above-described 1993 extraordinary charge for the reserve for coal miners retiree health care and the absence of the $8.2 million benefit recorded in 1992 on the adoption of SFAS 109, as described in Note 9. BOSTON GAS Increased sales to Boston Gas firm customers, primarily to an electric utility on a seasonal-firm basis, increased revenue by $21.8 million and operating earnings by $4.9 million. Relatively low residual oil prices throughout 1993 limited sales to non-firm customers and reduced comparative revenues by nearly $15.0 million. However, a $37.7 million rate increase which took effect November 1, 1993 and the pass through of higher gas costs were somewhat offsetting. The weather in 1993, which was 4.5% warmer than 1992, was 1.3% warmer than normal, decreasing revenues by $9.8 million and operating earnings by $1.7 million. Excluding the $11.6 million benefit in 1992 of the modification to the gas cost recovery mechanism, operating earnings decreased by $2.4 million as the partial impact of the rate increase in combination with the benefit of ongoing load growth offset much of the increased expenses attributable primarily to the work stoppage. (Page 28) MIDLAND Midland's transportation revenues decreased in 1993 primarily as a result of: reduced coal and grain shipments caused by the severe flooding on the Mississippi and Illinois Rivers and reduced exports of both commodities; the curtailment of coal shipments under a major long-term contract; and lower deliveries to electric utilities caused by the UMW strike. Midland's tonnage and ton miles were unchanged from 1992 despite several significant events that negatively affected the barge industry in general and Midland specifically. A decline in coal tonnage from 1992 primarily reflected reduced shipments to electric utilities due to the UMW strike (resolved in December), disruption in river traffic caused by flooding, and the cessation of coal shipments under a long-term contract. An increase in non-coal tonnage, despite a significant reduction in grain tonnage, served to replace the lower coal volume, although at lower margins. Benefits of cost savings programs helped to offset much of the lost margins. Higher coal terminal throughput was offset by lower phosphate terminalling. In addition to restricting tonnage and altering traffic patterns, flooding increased operating costs and shifted business to less profitable markets. In December 1993 Midland sold its liquid barge business at a pretax gain of $8.0 million. In addition, Midland closed its barge construction facility in Port Allen, Louisiana and set up a $3.5 million reserve to reflect shutdown costs and carrying charges until final disposition of the facility is determined. These transactions were included in "Other income." WATER PRODUCTS GROUP Water Products Group's revenue declined slightly as increases at WaterPro offset most of the Ionpure reduction resulting from its sale as of October 1, 1993. Operating profits declined due to intense competition and slow moving inventory charges at WaterPro. WaterPro's 1993 operating profits also included charges related to upgrading its information system, a training and logistics initiative and higher corporate overhead. These charges offset the absence of the $1.0 million restructuring charge recorded in 1992. 1992 COMPARED TO 1991 REVENUES:
(In millions) -------------------------------------------------------- 1992 1991 Change Boston Gas $ 594.3 $527.9 13 % Midland 263.6 267.1 (1)% Water Products Group 233.5 198.1 18 % -------------------- Total $1,091.4 $993.1 10 % -------------------------------- --------------------------------
The increase in consolidated revenues from 1991 to 1992 primarily reflected colder weather and continued growth in the Boston Gas firm customer base. Higher revenues for WaterPro and Ionpure also contributed to the increase. OPERATING EARNINGS:
(In millions) --------------------------------------------------------- 1992 1991 Change Boston Gas $63.1 $39.3 61 % Midland 38.3 40.5 (5)% Water Products Group (0.3) (1.3) nm Headquarters (5.1) (5.7) nm ----------------- Total $96.0 $72.8 32 % --------------------------- ---------------------------
Results for all segments of Eastern's operations for 1992 and 1991 were depressed by the recession, as reflected by weak demand experienced by Midland and high bad debt expense for Boston Gas. For both WaterPro and Ionpure, competitive pressures decreased margins which offset the benefit of higher revenues. (Page 29) Net earnings before accounting changes increased 29% from 1991, as the growth in operating earnings was partially offset by increased interest expense, lower interest income and an increase in the reported tax rate due to the 1992 adoption of SFAS 109, as described in Note 9 of Notes. Net earnings for 1992 also increased from the $8.2 million benefit recorded on the adoption of SFAS 109 and the absence of the $8.7 million charge, net of tax, recorded in 1991 on the adoption of SFAS 106, as described in Notes 9 and 15 of Notes. The SFAS charge in 1991 was partially offset by a one-time gain related to a 1987 pension termination. BOSTON GAS The weather in 1992 was 19.3% colder than 1991 and 3.6% colder than normal, increasing revenues by $47.0 million and operating earnings by $14.7 million. The 1992 modification to the gas cost recovery mechanism resulted in a one-time benefit to operating earnings of $11.6 million. Growth in the firm customer base, which was evenly divided between traditional residential markets and the commercial/industrial market, increased operating earnings in 1992 by $7.1 million. These gains were partially offset by higher operating expenses in 1992 related primarily to increased system maintenance costs and depreciation. MIDLAND Midland's ton miles during 1992 increased 1% from 1991, reflecting increased volume from grain and other commodities, mostly offset by reduced demand for coal transportation due to moderate temperatures and a weak economy. Industry overcapacity reduced rates and margins. Revenues and earnings from support operations were generally lower than 1991. Lower fuel costs and improved operating conditions, partially offset by increased administrative costs and depreciation expense related to fleet renewal, resulted in lower operating costs as compared to 1991. WATER PRODUCTS GROUP In 1992 the Water Products Group incurred an operating loss of $0.3 million, compared to a loss in 1991 of $1.3 million. WaterPro's results reflected increased sales, partially offset by decreased margins. Ionpure benefited from increased sales of capital goods, especially in Europe. The 1992 operating loss reflects a number of unusual charges, including nearly $1.0 million in restructuring charges at WaterPro. LIQUIDITY AND CAPITAL RESOURCES Management believes that projected cash flow from operations, in combination with currently available resources, is more than sufficient to meet Eastern's 1994 capital expenditure and working capital requirements, normal debt repayments and anticipated dividends to shareholders. In addition to cash and short-term investments in excess of $50 million, Eastern maintains a $60 million credit agreement plus other lines, all of which are available for general corporate purposes. At December 31, 1993 there were no borrowings outstanding under any of these facilities. Through a combination of increased equity and newly issued debt, Eastern expects to continue its policy of capitalizing Boston Gas and Midland with approximately equal amounts of equity and long-term debt. Both subsidiaries maintain "A" ratings with the major rating agencies. (Page 30) In May 1993 Eastern contributed $20.0 million to Boston Gas which was used to redeem $20.0 million of 9% debentures due 2001. During the last quarter of 1993, Eastern repurchased 1,739,900 shares of its common stock for $46.0 million. To meet working capital requirements which reflect the seasonal nature of the gas distribution business, Boston Gas had $106.3 million of notes outstanding at December 31, 1993. In January 1994 Boston Gas issued $36.0 million of Medium-Term Notes, the proceeds of which were used to reduce short-term indebtedness. An additional $14.0 million is available for issuance under a shelf registration through December 31, 1994 for the funding of capital expenditures and other corporate purposes. Boston Gas also maintains a credit agreement which backs the issuance of up to $90 million of commercial paper to fund its inventory of gas supplies. At December 31, 1993, Boston Gas had outstanding $59.3 million of commercial paper for this purpose. Anticipated increases in deferred gas costs and pipeline transition costs resulting from the restructuring of the natural gas industry are expected to be funded through additional short term borrowings. Consolidated capital expenditures, principally at Boston Gas, are budgeted at approximately $60 million for 1994. OTHER MATTERS Boston Gas may have or share responsibility for environmental remediation of certain former manufactured gas plant sites, as described in Note 13 of Notes. A 1990 regulatory settlement agreement provides for recovery by Boston Gas of environmental costs associated with such sites over separate, seven-year amortization periods without a return on the unamortized balance. Although Eastern does not possess at this time sufficient information to reasonably determine the ultimate cost to Boston Gas of such remediation, it believes that it is not probable that such costs will materially affect Eastern's financial condition or results of operations. Eastern may share responsibility for environmental remediation in the vicinity of a former coal tar processing facility in Everett, Massachusetts, as described in Note 13. Eastern does not possess at this time sufficient information to reasonably determine or estimate the ultimate cost to it of such remediation. (Page 31) Consolidated Statements of Operations (In thousands, except per share amounts) - ---------------------------------------------------------------------------
Years ended December 31, 1993 1992 1991 REVENUES $1,099,847 $1,091,434 $993,070 OPERATING COSTS AND EXPENSES: Operating costs 830,692 805,154 742,535 Selling, general and administrative expenses 132,907 136,545 130,937 Depreciation and amortization 59,261 53,728 46,793 ---------------------------------- OPERATING EARNINGS BEFORE WRITEDOWN 76,987 96,007 72,805 Writedown of WaterPro goodwill 45,000 -- -- ---------------------------------- OPERATING EARNINGS AFTER WRITEDOWN 31,987 96,007 72,805 OTHER INCOME (EXPENSE): Interest income 2,875 4,217 6,628 Interest expense (35,305) (33,924) (29,720) Loss on sale of Ionpure (13,000) -- -- Other, net (3,179) (3,269) (2,620) ---------------------------------- EARNINGS (LOSS) BEFORE INCOME TAXES (16,622) 63,031 47,093 PROVISION FOR INCOME TAXES 15,538 25,125 17,726 ---------------------------------- EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (32,160) 37,906 29,367 EXTRAORDINARY ITEM: Reserve for coal miners retiree health care, net of tax benefit of $24,500 (45,500) -- -- CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR: Income taxes -- 8,209 -- Post-retirement health care costs, net of tax benefit of $4,463 -- -- (8,662) ---------------------------------- NET EARNINGS (LOSS) $ (77,660) $ 46,115 $ 20,705 ---------------------------------- ---------------------------------- EARNINGS (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE $(1.43) $1.67 $1.30 EXTRAORDINARY ITEM: Reserve for coal miners retiree health care, net of tax (2.02) -- -- CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR: Income taxes -- .37 -- Post-retirement health care costs, net of tax -- -- (.38) ---------------------------------- EARNINGS (LOSS) PER SHARE $(3.45) $2.04 $ .92 ---------------------------------- ---------------------------------- The accompanying notes are an integral part of these financial statements.
(Page 32) Consolidated Balance Sheets
(In thousands) - --------------------------------------------------------------------------- December 31, 1993 1992 ASSETS CURRENT ASSETS: Cash and short-term investments $ 52,240 $ 105,440 Receivables, less reserves of $14,466 in 1993 and $12,630 in 1992 145,523 137,958 Inventories 87,568 93,078 Deferred gas costs 65,802 40,868 Other current assets 11,995 9,378 ----------------------- TOTAL CURRENT ASSETS 363,128 386,722 INVESTMENTS: Equity in U.S. Filter 44,292 -- Other investments 8,279 7,443 ----------------------- TOTAL INVESTMENTS 52,571 7,443 PROPERTY AND EQUIPMENT, AT COST 1,275,161 1,275,573 Less -- accumulated depreciation 489,196 475,794 ----------------------- NET PROPERTY AND EQUIPMENT 785,965 799,779 OTHER ASSETS: Deferred post-retirement health care costs 101,182 99,126 Deferred charges and other costs, less amortization 63,600 41,097 Goodwill, less amortization 13,231 90,899 ----------------------- ----------------------- TOTAL ASSETS $1,379,677 $1,425,066 ----------------------- ----------------------- The accompanying notes are an integral part of these financial statements.
(Page 33)
(In thousands) - --------------------------------------------------------------------------- December 31, 1993 1992 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current debt $ 114,335 $ 62,247 Accounts payable 76,161 78,889 Accrued expenses 31,280 22,188 Other current liabilities 63,703 42,802 ----------------------- TOTAL CURRENT LIABILITIES 285,479 206,126 GAS INVENTORY FINANCING 59,297 48,631 LONG-TERM DEBT 328,939 357,109 RESERVES AND OTHER LIABILITIES: Deferred income taxes 90,793 105,544 Post-retirement health care 104,730 103,760 Coal miners retiree health care 63,060 -- Preferred stock of subsidiary 29,197 29,436 Other reserves 54,444 56,554 ----------------------- TOTAL RESERVES AND OTHER LIABILITIES 342,224 295,294 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock $1.00 par value -- Authorized shares -- 50,000,000 Issued shares -- 21,644,378 in 1993 and 23,634,543 in 1992 21,644 23,635 Capital in excess of par value 61,778 112,050 Retained earnings 299,131 408,739 Treasury stock at cost -- 714,786 shares in 1993 and 1,013,320 shares in 1992 (18,815) (26,518) ----------------------- TOTAL SHAREHOLDERS' EQUITY 363,738 517,906 ----------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,379,677 $1,425,066 ----------------------- ----------------------- The accompanying notes are an integral part of these financial statements.
(Page 34) Consolidated Statements of Cash Flows
(In thousands) - --------------------------------------------------------------------------- Years ended December 31, 1993 1992 1991 CASH FLOWS FROM OPERATING ACTIVITIES: NET EARNINGS (LOSS) $(77,660) $ 46,115 $ 20,705 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 59,261 53,728 46,793 Income taxes and tax credits (16,061) 1,355 4,487 Coal miners retiree health care 70,000 -- -- Writedown of WaterPro goodwill 45,000 -- -- Loss on sale of Ionpure 13,000 -- -- Other changes in assets and liabilities: Receivables (17,003) (14,138) 2,049 Inventories (3,813) (17,355) 6,363 Deferred gas costs (24,934) (26,994) 2,793 Accounts payable 717 3,331 3,915 Other (9,970) 532 5,720 ------------------------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 38,537 46,574 92,825 ------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (64,391) (82,891) (112,085) Acquisitions, net of cash acquired -- -- (37,117) Short-term investments (14,411) 20,769 (34,696) Proceeds on sale of liquid barge business 14,950 -- -- Other (3,096) (6,816) (1,201) ------------------------------ NET CASH USED BY INVESTING ACTIVITIES (66,948) (68,938) (185,099) ------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (31,697) (31,634) (31,560) Issuance of preferred stock by subsidiary -- 29,436 -- Changes in notes payable 53,286 (1,474) 14,553 Proceeds from issuance of long-term debt -- 53,000 42,000 Repayment of long-term debt (26,273) (26,324) (9,519) Changes in gas inventory financing 10,666 17,461 (4,021) Purchase of treasury shares (46,039) -- (692) Other 857 756 (4,095) ------------------------------ NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (39,200) 41,221 6,666 ------------------------------ Net increase (decrease) in cash and cash equivalents (67,611) 18,857 (85,608) Cash and cash equivalents at beginning of year 91,377 72,520 158,128 ------------------------------ Cash and cash equivalents at end of year 23,766 91,377 72,520 Short-term investments 28,474 14,063 34,696 ------------------------------ CASH AND SHORT-TERM INVESTMENTS $ 52,240 $105,440 $107,216 ------------------------------ ------------------------------ The accompanying notes are an integral part of these financial statements.
(Page 35) Consolidated Statements of Shareholders' Equity
(In thousands) - ------------------------------------------------------------------------------------------------------------ Common Capital in Stock Excess of Retained Treasury $1 Par Value Par Value Earnings Stock Total BALANCE AT DECEMBER 31, 1990 $23,598 $112,279 $405,898 $(28,615) $513,160 ADD (DEDUCT): Net earnings -- -- 20,705 -- 20,705 Dividends declared -- $1.40 per share -- -- (31,560) -- (31,560) Purchase of stock -- -- -- (692) (692) Foreign currency translation adjustment -- -- (392) -- (392) Issuance of stock 15 343 -- 1,307 1,665 ------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1991 23,613 112,622 394,651 (28,000) 502,886 ADD (DEDUCT): Net earnings -- -- 46,115 -- 46,115 Dividends declared -- $1.40 per share -- -- (31,660) -- (31,660) Foreign currency translation adjustment -- -- (367) -- (367) Unearned compensation related to the issuance of restricted stock, net -- (1,079) -- 1,371 292 Issuance of stock 22 507 -- 111 640 ------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1992 23,635 112,050 408,739 (26,518) 517,906 ADD (DEDUCT): Net loss -- -- (77,660) -- (77,660) Dividends declared -- $1.40 per share -- -- (31,711) -- (31,711) Purchase of stock -- -- -- (46,039) (46,039) Retirement of stock (2,000) (50,732) -- 52,732 -- Foreign currency translation adjustment -- -- (237) -- (237) Unearned compensation related to the issuance of restricted stock, net -- 262 -- 105 367 Issuance of stock 9 198 -- 905 1,112 ------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1993 $21,644 $ 61,778 $299,131 $(18,815) $363,738 ------------------------------------------------------------------- ------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
(Page 36) Notes to Financial Statements 1. ACCOUNTING POLICIES The consolidated financial statements include the accounts of Eastern Enterprises ("Eastern"), Boston Gas Company ("Boston Gas"), Midland Enterprises Inc. ("Midland") and Water Products Group, consisting of WaterPro Supplies Corporation ("WaterPro") and Ionpure Technologies Corporation ("Ionpure"). See Note 10 concerning the exchange in 1993 of Ionpure for an equity interest in United States Filter Corporation ("U.S. Filter") in a non-cash transaction. Certain prior year financial statement information has been reclassified to be consistent with the current presentation. All material intercompany balances and transactions have been eliminated in consolidation. Certain accounting policies followed by Eastern and its subsidiaries are described below: Cash: Highly liquid instruments with original maturities of three months or less are considered cash equivalents. Inventories: Inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) or average cost method. The components of inventories were as follows:
(In thousands) ---------------------------------------------------------------------- December 31, 1993 1992 Supplemental gas supplies $53,152 $42,140 Other materials, supplies and marine fuel 17,984 23,886 Finished products 16,432 27,052 -------------------- $87,568 $93,078 -------------------- --------------------
Goodwill: Goodwill is amortized on a straight-line basis over a period of 40 years. Accumulated amortization as of December 31, 1992 amounted to $7,016,000. During 1993, management determined that WaterPro's goodwill was impaired and it was written down to its realizable value as described in Note 12. Accumulated amortization was eliminated to reflect the new cost basis which will be amortized over its remaining life of 35 years. Other current liabilities: Included in other current liabilities were:
(In thousands) ---------------------------------------------------------------------- December 31, 1993 1992 Pipeline transition costs regulatory liability $24,174 $ -- Pipeline refunds due utility customers 8,029 13,061 Reserves for insurance claims 8,285 8,480 Dividends payable 7,930 7,916 --------------------
Revenue recognition: Boston Gas' revenues are recorded when billed. Boston Gas defers the cost of any firm gas that has been distributed, but is unbilled at the end of a period, to the period in which the gas is billed to customers. Midland recognizes revenue on tows in progress on the percentage of completion method based on miles traveled. WaterPro recognizes revenues on shipment. Depreciation and amortization: Depreciation and amortization are provided using the straight-line method at rates designed to allocate the cost of property and equipment over their estimated useful lives. Because the rates of depreciation on commercial equipment vary with each property unit, it is impractical to state each rate individually. Excluding the amortization of goodwill, depreciation and amortization as a percentage of average depreciable assets was as follows: --------------------------------------------------------------------
Years ended December 31, 1993 1992 Boston Gas 4.0% 3.8% Midland 4.2% 4.1% Water Products Group 13.7% 15.5% Headquarters 11.2% 14.7% ----------------
Earnings per share: Earnings per share are based on the weighted average number of common and common equivalent shares outstanding. Such shares amounted to 22,530,000 in 1993, 22,654,000 in 1992 and 22,580,000 in 1991. Fully diluted earnings per share were not materially different from primary earnings per share. 2. BUSINESS SEGMENT INFORMATION Operating results and other financial data are presented for Eastern's three business segments: Boston Gas, a local gas distribution company serving eastern and central Massachusetts; Midland, a barge transportation (Page 37) company operating on the inland waterways; and Water Products Group, consisting of WaterPro, a distributor of components for municipal water and wastewater systems and Ionpure, a provider of water purification systems sold effective October 1, 1993.
(In thousands) ---------------------------------------------------------------------- 1993 1992 1991 REVENUES: Boston Gas $ 614,294 $ 594,330 $527,928 Midland 254,921 263,617 267,044 Water Products Group 230,632 233,487 198,098 ----------------------------------- $1,099,847 $1,091,434 $993,070 ----------------------------------- ----------------------------------- OPERATING EARNINGS: Boston Gas $49,063 $63,120 $39,291 Midland 33,001 38,277 40,471 Water Products Group\1/ (402) (249) (1,237) Headquarters (4,675) (5,141) (5,720) ----------------------------------- $76,987 $96,007 $72,805 ----------------------------------- ----------------------------------- IDENTIFIABLE ASSETS, NET OF DEPRECIATION AND RESERVES: Boston Gas $ 834,440 $ 738,604 $ 644,273 Midland 373,144 395,097 391,714 Water Products Group 64,230 179,751 178,813 Headquarters 107,863 111,614 118,651 ----------------------------------- $1,379,677 $1,425,066 $1,333,451 ----------------------------------- ----------------------------------- CAPITAL EXPENDITURES: Boston Gas $47,057 $51,136 $ 57,400 Midland 14,191 29,327 48,531 Water Products Group\2/ 2,941 2,353 5,951 Headquarters 202 75 203 ----------------------------------- $64,391 $82,891 $112,085 ----------------------------------- ----------------------------------- DEPRECIATION AND AMORTIZATION: Boston Gas $27,566 $22,493 $18,685 Midland 25,288 24,607 22,240 Water Products Group 6,062 6,183 5,447 Headquarters 345 445 421 ------------------------------------ $59,261 $53,728 $46,793 ------------------------------------ ------------------------------------ - ----------- \1/Excludes $45,000 charge to write down WaterPro goodwill in 1993. \2/Excludes $37,117 for acquisitions in 1991. Operating loss under "Headquarters" reflects unallocated corporate general and administrative expenses. Identifiable assets under "Headquarters" include cash and short-term investments and in 1993 Eastern's investment in U.S. Filter.
3. LONG-TERM OBLIGATIONS AND CURRENT DEBT Credit agreement and lines of credit: Eastern maintains a credit agreement with a group of banks which provides for the borrowing by Eastern and certain subsidiaries of up to $60,000,000 at any time through December 31, 1994. In addition Eastern and certain subsidiaries maintain lines of credit totaling $50,000,000. At December 31, 1993 and 1992 no borrowings were outstanding under these agreements. The interest rate for borrowings is the agent bank's prime rate or, at Eastern's option, various alternatives. The agreement and lines require facility or commitment fees, which average 3/16 of 1% of the unused portion. Boston Gas utilizes the credit agreement and the lines of credit to back commercial paper borrowings. Included in current debt were $106,300,000 and $54,944,000 of commercial paper and notes payable at December 31, 1993 and 1992, respectively. Gas inventory financing: Boston Gas funds its inventory of gas supplies through external sources. All costs related to this funding are recoverable from customers. Boston Gas maintains a credit agreement with a group of banks which provides for the borrowing of up to $90,000,000 for the exclusive purpose of funding its inventory of gas supplies or for backing commercial paper issued for the same purpose. Boston Gas had $59,297,000 and $48,631,000 of commercial paper outstanding to fund its inventory of gas supplies at December 31, 1993 and 1992, respectively. Since the commercial paper is supported by the credit agreement, these borrowings have been classified as non-current in the accompanying consolidated balance sheets. The credit agreement includes a one-year revolving credit which may be converted to a two-year term loan at the option of Boston Gas if the one-year revolving credit is not renewed (Page 38) by the banks. Boston Gas may select interest rate alternatives based on prime or Eurodollar rates and requires a commitment fee of 1/8 of 1% on the unused portion. No borrowings were outstanding under this agreement during 1993 and 1992. LONG-TERM DEBT:
(In thousands) ----------------------------------------------------------------------------- December 31, 1993 1992 BOSTON GAS: 7.95%-9% Sinking Fund Debentures, due 1997-2001 $ 63,142 $ 83,142 8.33%-9.75% Medium-Term Notes, Series A, due 2005-2022 100,000 100,000 First Mortgage Bonds -- 8.375% Series, due 1996 3,360 3,840 Capital leases 7,008 8,240 Less -- current portion (2,165) (1,712) -------------------- 171,345 193,510 -------------------- MIDLAND: First Preferred Ship Mortgage Bonds -- 9.9% Series, due 2008 48,692 48,827 8.1%-9.85% Medium-Term Notes, Series A, due 2002-2012 75,000 75,000 Promissory Note, due 1995 3,031 5,456 8.8% Ship Financing Bond, due 1996 938 1,314 Capital leases 35,804 38,593 Less -- current portion (5,871) (5,591) -------------------- 157,594 163,599 -------------------- $328,939 $357,109 -------------------- --------------------
Description of debt: In 1992 Boston Gas filed a shelf registration covering the issuance of up to $50,000,000 of Medium-Term Notes through December 31, 1994. In January 1994 Boston Gas issued $36,000,000 of Medium-Term Notes, Series B, with a weighted average maturity of 24 years and coupon of 6.94%. Proceeds from the issuance reduced current debt. Boston Gas' First Mortgage Bonds are secured by a first mortgage lien on a portion of Boston Gas' utility properties and franchises. Midland's First Preferred Ship Mortgage Bonds are secured by certain transportation equipment. The Ship Financing Bond was assumed pursuant to an acquisition of certain marine companies. This obligation is guaranteed by the U.S. Government and is secured by certain transportation equipment. Midland's promissory note bears interest at variable rates based upon the prime rate or, at its option, Eurodollar or certificate of deposit quotes. Capital leases consist of property and equipment lease obligations with an average interest rate of 9.6%. Minimum lease payments under these agreements are due in installments through 2003. Five-year sinking funds and operating lease commitments: In addition to the property and equipment financed under capital leases, Eastern and its subsidiaries lease certain facilities, vessels and equipment under long- term operating leases which expire on various dates through the year 2006. Total rentals charged to expense were $13,169,000 in 1993, $12,563,000 in 1992 and $10,923,000 in 1991. Sinking fund requirements and maturities, net of amounts acquired in advance are $8,036,000, $6,675,000, $8,239,000, $15,049,000 and $13,016,000 for 1994 through 1998, respectively. Future minimum lease commitments under operating leases are as follows:
Operating lease (In thousands) commitments ---------------------------------------------------------------------------- 1994 $10,374 1995 9,327 1996 7,661 1997 4,501 1998 1,613 Thereafter 4,979 ------- $38,455 ------- -------
(Page 39) 4. PREFERRED STOCK OF SUBSIDIARY On July 23, 1992 Boston Gas sold 1,200,000 shares of variable-term cumulative preferred stock, which is non-voting and has a liquidation value of $25 per share. On July 13, 1993, Boston Gas selected a Final Term of September 1, 2018 and fixed the dividend rate at 6.421%. Dividends are paid quarterly, commencing September 1, 1993. The Final Term requires 5% annual sinking fund payments beginning on September 1, 1999 and is non-callable for 10 years. 5. STOCK PLANS Eastern has a stock option plan which provides for the issuance of non-qualified stock options, incentive stock options and stock appreciation rights ("SARs") to its officers and key employees. Options and SARs may be granted at prices not less than fair market value on the date of grant for periods not extending beyond ten years from the date of grant. Exercise of an option requires surrender of the related SAR, if any. Exercise of an SAR requires surrender of the related option. Shares available for future grants under the stock option plans were 199,334 at December 31, 1993, 188,806 at December 31, 1992, and 162,939 at December 31, 1991. Stock options exercisable at December 31, 1993 and 1992 were 389,188 and 330,325, respectively. SARs exercisable at December 31, 1993 and 1992 were 121,100 and 116,228, respectively. Option activity during the past three years was as follows:
Average Stock option price options SARs --------------------------------------------------------- Outstanding at December 31, 1990 $24.14 375,811 166,406 Granted 27.34 313,500 31,750 Exercised 24.29 (16,357) (26,711) Surrendered 23.54 (26,711) (50) Canceled 25.45 (14,962) (1,800) -------------------------------- Outstanding at December 31, 1991 $25.72 631,281 169,595 Granted 27.06 2,000 -- Exercised 21.79 (20,569) (22,647) Surrendered 21.49 (22,647) (1,850) Canceled 28.47 (5,220) (2,410) --------------------------------- Outstanding at December 31, 1992 $26.00 584,845 142,688 Exercised 21.93 (10,109) (8,588) Surrendered 21.97 (8,588) (120) Canceled 29.16 (1,940) (970) --------------------------------- Outstanding at December 31, 1993 $26.12 564,208 133,010 --------------------------------- ---------------------------------
Under Restricted Stock Plans for key employees and non-employee trustees, Eastern awarded 4,000 and 52,500 shares in 1993 and 1992. Eastern recognized compensation expense of $367,000 in 1993 and $292,000 in 1992 in accordance with the vesting terms of these awards. Shares available for future awards under these plans were 48,500 shares at December 31, 1993 and 22,500 at December 31, 1992. 6. COMMON STOCK PURCHASE RIGHTS On February 22, 1990, Eastern declared a distribution to shareholders of record on March 5, 1990, pursuant to the terms of a Common Stock Rights Agreement between Eastern and The Bank of New York, of one common stock purchase right for each outstanding share of common stock. Each right would initially entitle the holder to purchase one share of common stock at an exercise price of $100.00, subject to adjustment to prevent dilution. The rights become exercisable on the 10th business day after a person (Page 40) acquires 20% or more of Eastern's stock or commences a tender offer for 20% or more of Eastern's stock, or on the 10th business day after Eastern's Board of Trustees determines that a shareholder owning at least 10% of Eastern's stock is an "adverse person," based on criteria specified in the rights agreement. The rights may be redeemed by Eastern at a price of $.01 at any time prior to the 10th day after a 20% position has been acquired. The rights will expire March 5, 2000. If Eastern is acquired in a merger or other business combination, each right will entitle its holder to purchase common shares of the acquiring company having a market value of twice the exercise price of each right (i.e., at a 50% discount). If an acquiror purchases 20% of Eastern's common stock or has been determined to be an "adverse person," each right will entitle its holder to purchase a number of Eastern's common shares having a market value of twice the right's exercise price. 7. INTEREST EXPENSE
(In thousands) ---------------------------------------------------------------------------------------------------------- Years ended December 31, 1993 1992 1991 Interest on long-term debt $31,326 $31,781 $29,427 Other, including amortization of debt expense 3,754 3,375 3,838 Less -- capitalized interest (1,164) (1,637) (3,545) Subsidiary preferred stock dividends 1,389 405 -- ------------------------------- Interest expense $35,305 $33,924 $29,720 ------------------------------- ------------------------------- Interest payments $34,307 $33,390 $28,554 ------------------------------- -------------------------------
8. OTHER INCOME (EXPENSE)
(In thousands) ---------------------------------------------------------------------------------------------------------- Years ended December 31, 1993 1992 1991 Provision for environmental expenses $ (5,715) $ (2,500) $ (5,400) Gain on termination of pension plan in 1987 -- -- 3,500 Gain on sale of liquid barge business 7,988 -- -- Closing of barge construction facility (3,500) -- -- Other (1,952) (769) (720) ------------------------------------ $ (3,179) $ (3,269) $ (2,620) ------------------------------------ ------------------------------------
9. INCOME TAXES The table below reconciles the statutory U.S. Federal income tax provision
(In thousands) -------------------------------------------------------------------------------------------------------- Years ended December 31, 1993 1992 1991 Statutory rate 35% 34% 34% Computed provision for income taxes at statutory Federal rate $(5,818) $21,431 $16,012 Increase (decrease) from statutory rate resulting principally from: Writedown of goodwill 15,750 -- -- State taxes, net of Federal benefit 1,833 2,468 1,649 Effect of change in Federal income tax rate 1,414 -- (1,500) Unbenefited capital losses 1,068 84 -- Amortization of goodwill 839 907 863 Unbenefited foreign losses 373 470 1,181 Other, net 79 (235) (479) -------------------------------- Provision for income taxes $15,538 $25,125 $17,726 -------------------------------- --------------------------------
Following is a summary of the provision for income taxes:
(In thousands) --------------------------------------------------------------------------------------------------------- Years ended December 31, 1993 1992 1991 Current: Federal $ 6,083 $14,662 $10,783 State 1,500 3,139 1,852 Foreign -- (25) 219 ------------------------------- Total current provision 7,583 17,776 12,854 Deferred: Federal 6,635 6,749 4,226 State 1,320 600 646 ------------------------------- Total deferred provision 7,955 7,349 4,872 ------------------------------- Provision for income taxes $15,538 $25,125 $17,726 ------------------------------- ------------------------------- Tax payments $10,809 $ 6,656 $ 8,817 -------------------------------
(Page 41) Effective January 1, 1992, Eastern adopted Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." Eastern recorded a credit to income of approximately $8,209,000 or $.37 per share, which represents the net decrease to the deferred tax liabilities as of that date. This amount has been reflected in the consolidated statement of earnings as the cumulative effect of the accounting change for non-utility operations. The cumulative effect for Boston Gas and the impact of the 1993 tax increase have been recorded as a regulatory asset and are being recovered in accordance with Boston Gas' 1993 rate order. The 1991 tax provision was reduced by $1,755,000 of credits no longer applicable under SFAS 109. The Revenue Reconciliation Act of 1993 increased the statutory Federal income tax rate from 34% to 35%, effective January 1, 1993. The provision for income tax in 1993 includes approximately $468,000 for the impact of the rate change on the current earnings, and approximately $1,414,000 to reflect the additional deferred tax requirements for non-utility operations as of January 1, 1993, in accordance with SFAS 109. Significant items making up deferred tax liabilities and deferred tax assets are as follows:
(In thousands) ------------------------------------------------------------------------------------------ December 31, 1993 1992 Assets: Unbilled revenue $ 30,924 $ 21,878 Coal retiree health care 24,500 -- Regulatory liabilities 5,494 6,797 Deferred investment tax credits 5,437 5,567 Bad debt reserve 5,366 4,390 Other 13,038 12,795 ------------------------ Total deferred tax assets 84,759 51,427 Liabilities: Accelerated depreciation (130,379) (118,617) Deferred gas costs (23,861) (15,526) Other (18,098) (18,913) ------------------------ Total deferred tax liabilities (172,338) (153,056) ------------------------ Total deferred taxes $ (87,579) $ (101,629) -------------------------- --------------------------
During 1991, deferred income taxes were provided for significant timing differences in the recognition of revenue and expenses for tax and financial statement purposes. Principal components of the 1991 deferred provision were $2,807,000 for employee benefit reserves and $2,794,000 for accelerated depreciation, partially offset by a credit of $1,021,000 for deferred gas costs. 10. IONPURE DISPOSITION On December 1, 1993 Eastern exchanged the stock of its wholly owned subsidiary, Ionpure, for 2,027,395 shares or 22% of the voting stock of U.S. Filter plus $100,000. In connection with the exchange, in the third quarter of 1993 Eastern recorded a pre-tax charge of $13,000,000 ($9,300,000 after-tax or $.41 per share) to write down Ionpure assets to their estimated realizable value, net of related transaction expenses. The tax credit of $3,700,000 reflects the benefit of ordinary deductions from the transaction and partial utilization of capital losses against current capital gains. Since Ionpure was operated for the account of U.S. Filter after October 1, 1993, its subsequent operating results have been excluded from Eastern's consolidated results. Eastern accounts for its investment in U.S. Filter using the equity method, with a lag of one fiscal quarter. The difference of approximately $19,700,000 between the carrying value of Eastern's investment and its share of the underlying net assets of U.S. Filter as of December 1, 1993 is being amortized over a period of 40 years. 11. ACQUISITIONS On January 10, 1991 Eastern acquired certain assets and operations of A & P Water and Sewer Supplies, Inc., a distributor of components for municipal water systems in the mid-Atlantic region, for approximately $35,500,000 in cash. Eastern also acquired (Page 42) another operation in 1991 for $1,600,000. These acquisitions have been accounted for as purchases. Accordingly, the acquired assets and liabilities were recorded at their estimated fair values at the date of acquisition. Results of operations for these acquisitions have been included in Eastern's consolidated results since the dates of acquisition. Results of operations from the beginning of the year to the dates of acquisition would not have been material to Eastern. 12. WRITEDOWN OF WATERPRO GOODWILL During the fourth quarter of 1993, Eastern determined that a significant impairment of the fair value of WaterPro had occurred due to a permanent erosion in margins and lack of industry growth. The impairment was determined by discounting at 10% WaterPro's cash flows, as projected in management's five year forecast. The discount rate reflects WaterPro's projected weighted average cost of capital. Accordingly, Eastern wrote down the book value of WaterPro by taking a $45,000,000 charge against the goodwill associated with the purchase of WaterPro's operations. No tax benefit has been recognized against this charge. 13. ENVIRONMENTAL MATTERS There are 37 identified former manufactured gas plant ("MGP") sites located within Boston Gas' service territory. Massachusetts Electric Company, a wholly- owned subsidiary of New England Electric System ("NEES"), has assumed responsibility for remediating one such MGP site in Lynn, Massachusetts, pursuant to the decision of the First Circuit Court of Appeals in John S. Boyd, Inc. et al. v. Boston Gas --------------------------------------- Company, et al., which affirmed that NEES and its ---------------- subsidiaries are responsible for remediating the site as prior owners and operators, and that Boston Gas did not assume any liability for such remediation when it acquired the property from NEES in 1973. Thirteen other former MGP sites within Boston Gas' service territory are currently owned by Boston Gas, and 10 of such 13 sites were also acquired from NEES and its subsidiaries. Boston Gas is currently working with the Massachusetts Department of Environmental Protection (the "DEP") to determine the extent of remediation which may be required at such 13 sites. A 1990 settlement agreement with the Massachusetts Department of Public Utilities provides for recovery by Boston Gas through the cost of gas adjustment clause of any environmental response costs associated with MGP sites over separate, seven-year amortization periods without a return on the unamortized balance. Due to uncertainties as to the extent and sources of releases of compounds, the nature and extent of any required remediation and the extent of contribution or assumption of responsibility by NEES for the sites acquired from it, Eastern does not possess at this time sufficient information to reasonably determine the ultimate cost to Boston Gas of remediation at such sites, but believes that it is not probable that such costs will materially affect Eastern's financial condition or results of operations. Eastern is aware of certain non-utility sites, associated with operations in which it is no longer involved, for which it may have or share environmental remediation responsibility. While Eastern has provided reserves that cover some anticipated costs of remediation of the site of a former coal tar processing facility in Everett, Massachusetts (the "Facility"), and believes that it has provided reserves that are adequate to cover the estimated costs of remediation of the other such sites, the extent of Eastern's potential liability at such sites is not yet determinable. The Facility, which was located on a 10-acre parcel of land formerly owned by Eastern, was operated by predecessors of Allied-Signal, Inc. from the early 1900s until 1937 and by Koppers Company, predecessor of Beazer East, Inc. (and Eastern's controlling stockholder until 1951) from 1937 until 1960 when the Facility was shut down. The Facility processed coal tar purchased from Eastern's adjacent by-product coke plant, also shut down in (Page 43) 1960. Eastern, Beazer and Allied-Signal entered into an Administrative Consent Order with the DEP in 1989 which requires that they jointly investigate and develop a remedial response plan for the Facility site, including any area where a release from that site may have come to be located. The companies have entered into a cost-sharing agreement under which each company has agreed to bear one-third of the costs of compliance with the Consent Order, while preserving any claims it may have against the other companies. In 1993 the companies completed preliminary remedial measures, including abatement of seepage of materials into the adjacent Island End River, a 29-acre tidal river which is part of Boston harbor. Studies have identified compounds that may be associated with coal tar and/or oil in soil and ground water at the site and adjacent areas and in the Island End River sediments. The National Oceanic and Atmospheric Administration and the Coast Guard have recently begun working with the DEP in connection with further investigation and possible remediation of river sediment conditions. In addition, the U.S. Environmental Protection Agency is currently evaluating the Facility site and the Island End River for possible designation as a federal priority Superfund site. In light of uncertainties as to the extent and sources of releases of compounds, the nature of any required remediation, the area and volume of soil, ground water and/or sediments that may be included, the possibility of participation by additional potentially responsible parties and the apportionment of liability, Eastern does not possess at this time sufficient information to reasonably determine or estimate the ultimate cost to it of such remedial measures. Eastern may be entitled to recovery against certain insurers with respect to this matter. 14. COAL MINERS RETIREE HEALTH CARE In September 1993 Eastern received notice from the Social Security Administration claiming that Eastern is responsible for health care and death benefit premiums for certain retired coal miners and their beneficiaries under the newly-effective federal Coal Industry Retiree Health Benefit Act of 1992 (the "Coal Act"). The amount of premiums requested aggregates in excess of $5,000,000 to cover an initial 20-month period ending September 30, 1994, and relates to retired miners who are said to have worked for Eastern's Coal Division prior to the transfer of those operations to a subsidiary in 1965. Eastern has filed a lawsuit in the Federal District Court for Massachusetts challenging the constitutionality of the new statute, as applied to it, and asserting a claim against Peabody Holding Company, Inc. ("Peabody"), to which Eastern sold its coal subsidiaries in 1987, that any liabilities under the Coal Act should be borne by Peabody and such subsidiaries. Eastern has posted security to delay payment of premiums pending the outcome of its constitutional challenge. Eastern is aware of several other lawsuits challenging the constitutionality of the Coal Act. Eastern has recorded a reserve of $70,000,000 to provide for its undiscounted obligations under the Coal Act. This amount has been reflected as an extraordinary item of $45,500,000 net of tax or $2.02 per share, in accordance with the conclusions of the Financial Accounting Standard Board's Emerging Issues Task Force, which has determined that an entity such as Eastern which no longer has operations in the coal industry should account for its entire obligation under the Coal Act as an extraordinary item. If Eastern prevails in its constitutional challenge or its claim against Peabody, its obligation under the Coal Act would be eliminated. Eastern's obligation could be more than $100 million depending on other factors including administrative review of assigned individuals, medical inflation rates, Medicare reimbursements and other changes in government health care programs. (Page 44) 15. RETIREE BENEFITS Eastern and its subsidiaries, through various company-administered plans and other union retirement and welfare plans under collective bargaining agreements, provide retirement benefits for the majority of their employees, including pensions and certain health care and life insurance benefits. Normal retirement age is 65 but provision is made for earlier retirement. Pension benefits for salaried plans are based on salary and years of service, while union retirement and welfare plans are based on negotiated benefits and years of service. Employees who are participants in the pension plans become eligible for health care benefits if they reach retirement age while working for Eastern. The funding of retirement and employee benefit plans is in accordance with the requirements of the plans and collective bargaining agreements and, where applicable, in sufficient amounts to satisfy the "Minimum Funding Standards" of the Employee Retirement Income Security Act ("ERISA"). Effective January 1, 1991, Eastern adopted Statement of Financial Accounting Standards No. 106 ("SFAS 106"), "Employers" Accounting for Post- retirement Benefits Other Than Pensions,'' by immediately recognizing the cumulative effect of the accounting change. SFAS 106 requires that the expected cost of post-retirement benefits other than pensions be charged to expense during the period that the employee renders service. At the date of adoption, the cumulative effect of the accounting change ("transition obligation") was $102,245,000, of which $89,120,000 was attributable to Boston Gas. With regulatory approval, Boston Gas has deferred the cost of the transition obligation and the amount by which expense under SFAS 106 exceeds expense under the current benefit payments. The impact of immediate recognition of the balance of the transition obligation was $13,125,000 pre-tax or $8,662,000 net of tax, equal to $.38 per share. Boston Gas' 1993 rate order provides a four year transition to full recovery of tax deductible amounts, which approximate SFAS 106 expense including amortization of the transition charges. The net cost for these plans and agreements charged to expense was as follows: PENSIONS
(In thousands) ------------------------------------------------------------------------------------------------- Years ended December 31, 1993 1992 1991 Service cost $ 4,556 $ 4,176 $ 3,894 Interest cost on projected benefit obligation 9,869 9,033 8,353 Actual return on plan assets (21,763) (12,961) (25,796) Net amortization and deferral 10,729 2,590 17,378 ----------------------------------- Total net pension cost of company-administered plans 3,391 2,838 3,829 Multi-employer union retirement and welfare plans 377 321 298 ----------------------------------- Total net pension cost $ 3,768 $ 3,159 $ 4,127 ----------------------------------- -----------------------------------
HEALTH CARE
(In thousands) ------------------------------------------------------------------------------------------------- Years ended December 31, 1993 1992 1991 Service cost $ 1,590 $ 1,569 $ 1,511 Interest cost on accumulated benefit obligation 8,065 8,955 8,644 Actual return on plan assets (282) (173) -- Net amortization and deferral (1,241) (247) -- Boston Gas deferral (2,368) (4,447) (5,130) --------------------------------------- Total retiree health care cost $ 5,764 $ 5,657 $ 5,025 --------------------------------------- ---------------------------------------
(Page 45) The following table sets forth the funded status of company-administered plans and amounts recorded in Eastern's consolidated balance sheet as of December 31, 1993 and 1992 using actuarial measurement dates as of October 1, 1993 and 1992:
(In thousands) Pensions Health Care ----------------------------------------------------------------------------------------------------- 1993 1992 1993 1992 Accumulated benefit obligation: Vested benefits $104,355 $101,276 $ 67,492 $ 84,696 Non-vested benefits 13,275 11,773 15,741 29,441 ------------------------------------------------------- 117,630 113,049 83,233 114,137 Effect of future salary increases 18,820 18,477 -- -- ------------------------------------------------------- Projected benefit obligation ("PBO") $136,450 $131,526 $ 83,233 $ 114,137 ------------------------------------------------------- ------------------------------------------------------- Plan assets at fair value $152,925 $147,175 $ 10,856 $ 5,573 Less PBO 136,450 131,526 83,233 114,137 ------------------------------------------------------- Plan assets in excess of (less than) PBO 16,475 15,649 (72,377) (108,564) Unrecognized net obligation at December 31, 1985 being amortized over 15 years 2,951 3,324 -- -- Unrecognized net (gain) loss (19,638) (12,370) (15,171) 8,145 Unrecognized prior service cost (benefit) 15,837 8,315 (17,182) (8,341) Amounts contributed to plans during fourth quarter 476 375 -- 5,000 Unfunded accumulated benefits (1,291) (918) -- -- ------------------------------------------------------- Net asset (reserve) at December 31 $ 14,810 $ 14,375 $(104,730) $(103,760) ------------------------------------------------------- -------------------------------------------------------
The above vested health care benefits include $58,380,000 and $70,128,000 for retirees in 1993 and 1992, respectively. To fund health care benefits under its collective bargaining agreements, in 1991 Boston Gas established a Voluntary Employee Beneficiary Association ("VEBA"), to which it makes contributions from time to time. Plan assets are invested in equity securities, fixed income investments and money market instruments. Following are the assumptions used in the actuarial measurements:
----------------------------------------------- 1993 1992 Discount rate 7.5% 7.5% Return on plan assets 8.5% 8.5% Increase in future compensation 5.0% 5.0% Health care inflation trend 12.0% 14.0% -----------------
The health care inflation trend is assumed to drop gradually to 5% after 7 years. A one-percentage-point increase in the assumed health care cost trend would have increased the net periodic post-retirement benefit cost charged to expense and the accumulated benefit obligation by $62,000 and $6,440,000, and, $89,000 and $9,993,000, respectively, in 1993 and 1992. (Page 46) 16. FAIR VALUES OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value disclosures for financial instruments: Cash, short-term investments and debt: The carrying amounts approximate fair value because of the short maturity of those instruments. Short-term debt includes notes payable, gas inventory financing, and other miscellaneous short-term liabilities. Long-term debt and preferred stock of subsidiary: The fair values are based on currently quoted market prices. The carrying amounts and estimated fair values of Eastern's financial instruments are as follows:
(In thousands) --------------------------------------------------------------------------------------------------- December 31, 1993 1992 ----------------------- --------------------------- Carrying Fair Carrying Fair Amount Value Amount Value Cash and short-term investments $ 52,240 $ 52,240 $105,440 $105,440 Short-term debt 165,596 165,596 103,575 103,575 Long-term debt 336,975 390,336 364,412 394,290 Preferred stock of subsidiary 29,197 30,600 29,436 29,436 -----------------------------------------------------
17. UNAUDITED QUARTERLY FINANCIAL INFORMATION
(In thousands, except per share amounts) --------------------------------------------------------------------------------------------------- For the three months ended 1993: Mar. 31, June 30, Sept. 30, Dec. 31, Revenues $368,368 $259,745 $195,917 $275,817 Operating earnings (loss) 46,617 13,760 (5,273) (23,117) Pretax earnings (loss) 38,190 5,567 (26,431) (33,948) Earnings (loss) before extraordinary item 23,025 3,264 (20,998) (37,451) Net earnings (loss) 23,025 3,264 (20,998) (82,951) Earnings (loss) per share before extraordinary item $1.02 $.14 $ (.93) $ (1.66) Earnings (loss) per share 1.02 .14 (.93) (3.68) ----------------------------------------------------- 1992: Revenues $356,589 $250,251 $203,264 $281,330 Operating earnings 55,442 19,535 2,033 18,997 Pretax earnings (loss) 48,003 12,290 (5,206) 7,944 Earnings (loss) before accounting change 29,825 7,384 (3,559) 4,256 Net earnings (loss) 38,034 7,384 (3,559) 4,256 Earnings (loss) per share before accounting change $1.32 $.32 $ (.15) $.18 Earnings (loss) per share 1.69 .32 (.15) .18 -----------------------------------------------------
(Page 47) Independent Auditor's Report To the Trustees and Shareholders of Eastern Enterprises: We have audited the accompanying consolidated balance sheets of Eastern Enterprises (a Massachusetts voluntary association) and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Eastern Enterprises and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As explained in Notes 15 and 9 to the consolidated financial statements, effective January 1, 1991 and January 1, 1992, respectively, the company changed its method of accounting for post-retirement benefits other than pensions and income taxes. Arthur Andersen & Co. Boston, Massachusetts, February 4, 1994. Management's Report on Responsibility The management of Eastern Enterprises is responsible for the preparation, integrity and fair presentation of the company's financial statements. These statements have been prepared in accordance with generally accepted accounting principles and, as such, include amounts based on management's informed judgments and estimates. The financial statements have been audited by the independent accounting firm of Arthur Andersen & Co., which was given unrestricted access to all financial records and related data. Eastern maintains a system of internal control over financial reporting which is designed to provide reasonable assurance to the company's management and Board of Trustees regarding the preparation of reliable financial statements and the safeguarding of assets. The system includes a documented organizational structure and division of responsibility, an internal audit staff, the careful selection and development of personnel and established policies and procedures, including policies to foster a strong ethical climate and control environment, which are communicated throughout Eastern. The Audit Committee of the Board of Trustees, consisting solely of outside trustees, meets periodically with management, internal auditors and the independent auditors to review internal accounting controls, financial results and accounting principles and practices. The Audit Committee also annually recommends to the Board of Trustees the selection of independent auditors. J. Atwood Ives Chairman and Chief Executive Officer Walter J. Flaherty Senior Vice President and Chief Financial Officer James J. Harper Vice President and Controller (Page 48) Summary of Operations
(In thousands, except per share amounts) - --------------------------------------------------------------------------------------------------------------------- Years ended December 31, 1993 1992 1991 1990 1989 1988 REVENUES: Boston Gas $ 614,294 $ 594,330 $ 527,928 $ 554,509 $ 559,692 $ 449,437 Midland 254,921 263,617 267,044 269,061 233,958 222,492 Water Products Group 230,632 233,487 198,098 126,452 46,436 -- ------------------------------------------------------------------------------------------------ TOTAL REVENUES 1,099,847 1,091,434 993,070 950,022 840,086 671,929 Operating costs and expenses 1,022,860 995,427 920,265 863,696 764,070 606,251 OPERATING EARNINGS: Boston Gas 49,063 63,120 39,291 40,179 45,900 43,092 Midland 33,001 38,277 40,471 43,950 34,535 27,381 Water Products Group (402) (249) (1,237) 5,680 2,851 -- Headquarters (4,675) (5,141) (5,720) (3,483) (7,270) (4,795) ------------------------------------------------------------------------------------------------ OPERATING EARNINGS BEFORE WRITEDOWN: 76,987 96,007 72,805 86,326 76,016 65,678 Writedown of WaterPro goodwill (45,000) -- -- -- -- -- ----------------------------------------------------------------------------------------------- OPERATING EARNINGS AFTER WRITEDOWN: 31,987 96,007 72,805 86,326 76,016 65,678 OTHER INCOME (EXPENSE): Interest income 2,875 4,217 6,628 11,108 9,612 8,875 Interest expense (35,305) (33,924) (29,720) (27,344) (24,945) (24,241) Loss on sale of Ionpure (13,000) -- -- -- -- -- Peabody- related\1/ -- -- -- 13,887 13,621 14,003 Other, net (3,179) (3,269) (2,620) 4,590 3,335 1,897 ----------------------------------------------------------------------------------------------- PRE-TAX EARNINGS (LOSS) (16,622) 63,031 47,093 88,567 77,639 66,212 Provision for income taxes 15,538 25,125 17,726 24,613 21,086 15,539 ----------------------------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM AND ACCOUNTING CHANGES (32,160) 37,906 29,367 63,954 56,553 50,673 Extraordinary item net of tax\2/ (45,500) -- -- -- -- -- Cumulative effect of accounting change for: SFAS No. 109 -- 8,209 -- -- -- -- SFAS No. 106 -- -- (8,662) -- -- -- ------------------------------------------------------------------------------------------------ NET EARNINGS (LOSS) $ (77,660) $ 46,115 $ 20,705 $ 63,954 $ 56,553 $ 50,673 ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------ FINANCIAL STATISTICS AND RATIOS: Total assets $1,379,677 $1,425,066 $1,333,451 $1,199,214 $1,148,727 $1,087,224 Cash from operating activities 38,537 46,574 92,825 88,042 81,278 68,840 Capital expenditures\3/ 64,391 82,891 112,085 96,779 89,587 63,101 Long-term debt 328,939 357,109 327,361 296,578 260,367 263,587 Shareholders' equity 363,738 517,906 502,886 513,160 498,017 472,750 Debt/equity ratio 47/53 41/59 39/61 37/63 34/66 36/64 Return on total capital 5.0%\4/ 7.7% 4.8% 10.2% 9.5% 9.2% Return on equity 4.5%\4/ 9.0% 4.1% 12.6% 11.7% 11.0% SHARES OUTSTANDING AT DECEMBER 31 20,930 22,621 22,543 22,504 23,213 23,166 PER SHARE DATA: Earnings (loss) before extraordinary item and accounting change $ (1.43) $ 1.67 $ 1.30 $ 2.77 $ 2.43 $ 2.18 Net earnings (loss) (3.45) 2.04 .92 2.77 2.43 2.18 Dividends declared 1.40 1.40 1.40 1.40 1.40 1.30 Shareholders' equity 17.38 22.89 22.31 22.80 21.45 20.41 -------------------------------------------------------------------------------------------- \1/Eastern's 15.01% investment in Peabody Holding Company, Inc. (Peabody), sold in 1990. \2/Charge of $70,000 pretax or $2.02 per share to reserve for coal miners retiree health care. \3/Excludes $37,117 in 1991, $10,931 in 1990 and $93,689 in 1989 for acquisitions by Water Products Group. \4/Excludes non-recurring net charges of $98,800 for the writedown of WaterPro goodwill, loss on sale of Ionpure and a reserve for coal miners retiree health care.
(Page 50) CASH DIVIDENDS PER SHARE - -----------------------------------
Quarter 1993 1992 First $ .35 $ .35 Second .35 .35 Third .35 .35 Fourth .35 .35 ------------------ Total $1.40 $1.40 ------------------ ------------------
STOCK PRICE RANGE - ---------------------------------------------------------
Quarter High Low High Low First $29 3/8 $26 3/8 $28 1/2 $23 1/2 Second 30 26 3/8 27 3/4 25 1/4 Third 29 1/4 26 7/8 28 5/8 24 3/4 Fourth 29 25 1/2 28 1/2 24 1/8 ---------------------------------------- APPENDIX TO EXHIBIT 13.1 NARRATIVE DESCRIPTION OF GRAPHIC AND IMAGE MATERIAL APPEARING IN PAPER FORMAT VERSION OF FORM 10-K Pages 26 through 29 contain bar graphs of revenues, operating earnings, capital structure and capital expenditures for 1989 through 1993. The data points comprising these graphs appear in the table on page 48 under the heading, "Summary of Operations." Capital expenditures by business segment for 1991 through 1993 are shown in Note 2 of Notes to Financial Statements. Capital expenditures, in millions of dollars, for 1989 and 1990 were as follows:
1989 1990 ---- ---- Boston Gas ................................. 40.7 42.3 Water Products Group and Other ............. .8 3.6 Midland .................................... 48.1 50.9 --- --- Total .................................. 89.6 96.8 --- --- --- ---
The figures exclude acquisitions in the Water Products group. EX-21 6 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT The following table shows all direct and indirect subsidiaries of the registrant except (1) subsidiaries which, considered in the aggregate as a single subsidiary, do not constitute a significant subsidiary, and (2) certain consolidated wholly-owned multiple subsidiaries carrying on the same line of business as to which certain summary information appears below. JURISDICTION OF INCORPORATION ----------------------------- Boston Gas Company Massachusetts Midland Enterprises Inc. Delaware 13 subsidiaries engaged in water transportation and related activities Water Products Group Incorporated Massachusetts WaterPro Supplies Corporation Massachusetts -----END PRIVACY-ENHANCED MESSAGE-----