-----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, qXXOMp3db+T0n6Myctu/dM3AvIFziZdcaRGRiXp2o0OHvG+MUbZ5mYHnBHcu+aNc bM+g2rsXEsJYWHRpllWe6A== 0000031224-95-000043.txt : 19950814 0000031224-95-000043.hdr.sgml : 19950814 ACCESSION NUMBER: 0000031224-95-000043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EASTERN UTILITIES ASSOCIATES CENTRAL INDEX KEY: 0000031224 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 041271872 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05366 FILM NUMBER: 95561766 BUSINESS ADDRESS: STREET 1: ONE LIBERTY SQ STREET 2: P O BOX 2333 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6173579590 10-Q 1 EUA 2ND QUARTER 1995 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _________________ to ___________________ Commission File Number 1-5366 EASTERN UTILITIES ASSOCIATES (Exact name of registrant as specified in its charter) Massachusetts 04-1271872 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Liberty Square, Boston, Massachusetts (Address of principal executive offices) 02109 (Zip Code) (617)357-9590 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes...X.......No.......... Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Class Outstanding at July 31, 1995 Common Shares, $5 par value 20,309,714 shares PART I - FINANCIAL INFORMATION
Item 1. Financial Statements EASTERN UTILITIES ASSOCIATES CONSOLIDATED CONDENSED BALANCE SHEETS (In Thousands) June 30, December 31, ASSETS 1995 1994 Utility Plant and Other Investments: Utility Plant in Service $ 1,025,258 $ 1,020,859 Less: Accumulated Provision for Depreciation and Amortization 321,096 304,034 Net Utility Plant in Service 704,162 716,825 Construction Work in Progress 20,756 8,389 Net Utility Plant 724,918 725,214 Investments in Jointly Owned Companies 69,621 70,675 Non-Utility Plant - Net 109,106 107,803 Total Plant and Other Investments 903,645 903,692 Current Assets: Cash and Temporary Cash Investments 11,441 20,109 Accounts Receivable, Net 87,631 89,348 Notes Receivable 19,494 13,906 Materials and Supplies 13,438 15,168 Other Current Assets 12,069 8,517 Total Current Assets 144,073 147,048 Deferred Debits and Other Non-Current Assets 182,716 183,309 Total Assets $ 1,230,434 $ 1,234,049 LIABILITIES AND CAPITALIZATION Capitalization: Common Shares, $5 Par Value $ 101,513 $ 99,685 Other Paid-In Capital 218,256 212,990 Common Share Expense (3,899) (3,849) Retained Earnings 59,493 56,617 Total Common Equity 375,363 365,443 Non-Redeemable Preferred Stock - Net 6,900 6,900 Redeemable Preferred Stock - Net 25,870 25,390 Long-Term Debt - Net 449,728 455,412 Total Capitalization 857,861 853,145 Current Liabilities: Long-Term Debt Due Within One Year 43,203 41,601 Notes Payable 43,075 31,678 Preferred Stock Sinking Fund 50 50 Accounts Payable 30,587 33,442 Taxes Accrued 4,688 6,465 Interest Accrued 9,080 10,889 Other Current Liabilities 10,285 29,566 Total Current Liabilities 140,968 153,691 Deferred Credits and Other Non-Current Liabilities 89,586 89,313 Accumulated Deferred Taxes 142,019 137,900 Total Liabilities and Capitalization $ 1,230,434 $ 1,234,049 See accompanying notes to consolidated condensed financial statements.
EASTERN UTILITIES ASSOCIATES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In Thousands Except Number of Shares and Per Share Amounts)
Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 Operating Revenues $ 146,119 $ 137,269 $ 284,086 $ 287,466 Operating Expenses: Fuel 23,643 23,246 45,927 46,429 Purchased Power 31,481 29,907 63,455 64,809 Other Operation and Maintenance 53,445 44,392 94,745 88,705 Voluntary Retirement Incentive 4,505 0 4,505 0 Depreciation and Amortization 11,724 12,076 23,480 23,471 Taxes - Other Than Income 4,497 6,113 11,054 12,962 - Current Income 1,297 2,558 5,248 8,380 - Deferred Income 1,056 730 3,117 2,893 Total 131,648 119,022 251,531 247,649 Operating Income 14,471 18,247 32,555 39,817 Other Income (Deductions) - Net 4,234 4,470 8,387 9,780 Income Before Interest Charges 18,705 22,717 40,942 49,597 Interest Charges: Interest on Long-Term Debt 9,658 9,746 19,318 19,519 Other Interest Expense 1,480 2,405 2,728 3,684 Allowance for Borrowed Funds Used During Construction (Credit) (838) (204) (1,396) (549) Net Interest Charges 10,300 11,947 20,650 22,654 Net Income 8,405 10,770 20,292 26,943 Preferred Dividends of Subsidiaries 580 584 1,161 1,167 Consolidated Net Earnings $ 7,825 $ 10,186 $ 19,131 $ 25,776 Weighted Average Number of Common Shares Outstanding 20,210,861 19,652,160 20,105,183 19,521,353 Consolidated Earnings Per Average Common Share $ 0.38 $ 0.52 $ 0.95 $ 1.32 Dividends Paid $ 0.40 $ 0.385 $ 0.785 $ 0.745 See accompanying notes to consolidated condensed financial statements.
EASTERN UTILITIES ASSOCIATES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In Thousands)
Six Months Ended June 30, 1995 1994 CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 20,292 $ 26,943 Adjustments to Reconcile Net Income to Net Cash Provided from Operating Activities: Depreciation and Amortization 29,307 27,498 Deferred Taxes 3,410 3,505 Non-cash (Gains)/Expenses on Sales of Investments in Energy Savings Projects (3,946) 823 Investment Tax Credit, Net (606) (590) Allowance for Funds Used During Construction (299) (129) Collections and sales of project notes and leases rec. 10,064 3,895 Other - Net 5,245 1,207 Change in Operating Assets and Liabilities (22,837) (9,744) Net Cash Provided From Operating Activities 40,630 53,408 CASH FLOW FROM INVESTING ACTIVITIES: Construction Expenditures (43,572) (22,823 Collections on Notes and Lease Receivables of EUA Cogenex 939 621 Acquisition of Northeast Energy Management, Inc. (8,567) Increase in Other Investments (327) Net Cash (Used in) Investment Activities (42,633) (31,096 CASH FLOW FROM FINANCING ACTIVITIES: Issuances: Common Stock 3,050 4,584 Long-Term Debt 7,927 Redemptions: Long-Term Debt (4,125) (10,954 Premium on Reacquisition and Financing Expenses (50) (607) EUA Common Share Dividends Paid (15,775) (14,572 Subsidiary Preferred Dividends Paid (1,162) (1,167) Net Increase (Decrease) in Short-Term Debt 11,397 (1,637) Net Cash (Used in) Financing Activities (6,665) (16,426 Net (Decrease) Increase in Cash and Temp. Cash Investments (8,668) 5,886 Cash and Temporary Cash Investments at Beginning of Period 20,109 4,180 Cash and Temporary Cash Investments at End of Period $ 11,441 $ 10,066 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (Net of Capitalized Interest) $ 20,794 $ 20,356 Income Taxes $ 4,622 $ 5,159 Supplemental schedule of non-cash investing activities: Conversion of Investments in Energy Savings Projects to Notes and Leases Receivable $ 9,248 $ 3,536 See accompanying notes to consolidated condensed financial statements.
EASTERN_UTILITIES_ASSOCIATES NOTES_TO_CONSOLIDATED_CONDENSED_FINANCIAL_STATEMENTS The accompanying Notes should be read in conjunction with the Notes to Consolidated Financial Statements incorporated in the Eastern Utilities Associates (EUA or the Company) 1994 Annual Report on Form 10-K and the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1995. Note A - In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly its financial position as of June 30, 1995 and December 31, 1994, and the results of operations for the three and six months ended June 30, 1995 and 1994 and cash flows for the six months ended June 30, 1995 and 1994. Certain reclassifications have been made to prior period financial statements to conform to current period classifications. Note B - Results shown above for the respective interim periods are not neces- sarily indicative of results to be expected for the fiscal years due to seasonal factors which are inherent in electric utilities in New England. A greater proportionate amount of revenues is earned in the first and fourth quarters (winter season) of most years because more electricity is sold due to weather conditions, fewer day-light hours, etc. Note C - Commitments and Contingencies: Rate Activity On March 21, 1994, Montaup Electric Company (Montaup), the wholesale electric generating and transmission subsidiary of EUA, filed an application with the Federal Energy Regulatory Commission (FERC) for authorization to reduce its wholesale rates by $10.1 million, or three percent. Montaup supplies electricity at wholesale to EUA's retail electric utilities - Eastern Edison Company (Eastern Edison), Blackstone Valley Electric Company (Blackstone) and Newport Electric Corporation (Newport) - and to two non-affiliated municipal utilities. This application was designed to match more closely Montaup's revenues with its decreasing cost of doing business resulting from, among other things, a reduced rate base, lower interest costs and successful cost control efforts. On May 21, 1994, Montaup began billing the reduced rates and on April 14, 1995 FERC approved a settlement agreement between Montaup and the intervenors in the case calling for an annual reduction of approximately $13.9 million (inclusive of the filed $10.1 million reduction). Montaup refunded to its customers the difference collected between the $10.1 million filed reduction and the $13.9 million settled reduction in April 1995. Montaup had previously reserved for this refund. Note C - Commitments and Contingencies (Cont'd): Maine Yankee During the refueling-and-maintenance shutdown of the Maine Yankee Nuclear Generating plant that started in early February of 1995, Maine Yankee Atomic Power Company (Maine Yankee), the owner of the plant, detected an increased rate of degradation of the plant's steam generator tubes in excess of the number expected and started evaluating several courses of action. On April 7, 1995, Maine Yankee announced its intention to further explore sleeving all 17,000 steam generator tubes and on May 22, 1995 the Maine Yankee Board of Directors authorized a sleeving project to go forward. Although testing of all tubes revealed that approximately 40% of the tubes were free of defects, Maine Yankee is in the process of sleeving all of the tubes as a preventative safety measure. Sleeving involves the inserting of a tube of slightly smaller diameter into the defective tube; the sleeve is welded in place and acts as a new tube. Sleeving is a proven technology and must meet rigorous federal standards of safety and licensing. This sleeving project is expected to be completed in December 1995. Montaup owns 4% of the Common Stock of Maine Yankee. Montaup's share of the current estimated cost of the sleeving project is approximately $1.6 million and is recoverable through rates. Other In December 1992, Montaup commenced a declaratory judgment action in which it sought to have the Massachusetts Superior Court determine its rights under the Power Purchase Agreement between it and Aquidneck Power Limited Partnership (Aquidneck). Montaup sought a declaration that the Power Purchase Agreement was binding on the parties according to its terms. Aquidneck asserted that Montaup had either an expressed or implied obligation to negotiate new terms and conditions to the Power Purchase Agreement. In April 1995 Montaup filed a motion for summary judgement and in June 1995 the court granted Montaup's motion. In July, Aquidneck filed for appeal of the court's decision. Montaup, EUA and EUA Service intend to vigorously contest the appeal and continue to believe that Aquidneck's claims have no basis in law. EUA Cogenex, through its EUA WestCoast L.P., has had under development a cogeneration facility of approximately 1.5 MW. As of June 30, 1995, WestCoast's investment in the project was approximately $5.8 million. The cogeneration facility has experienced numerous start-up delays and cost overruns. The host of the facility has taken the position that the energy services agreement between WestCoast and itself is terminated due to, among other things, failure to complete the project. WestCoast disagrees with the host's right to terminate, but has decided not to contest the host's purported termination. In June 1993, WestCoast filed a lawsuit against the contractors responsible for the design and construction of the facility, as well as the surety on the contractor's performance bond. Certain defendants in that action have filed cross-complaints against WestCoast and EUA Cogenex, seeking, among other things, approximately $300,000 for payments withheld by WestCoast due to the contractor's deficient performance. A contractor has also filed a cross-complaint against the host. Additionally, the host has also stated that it intends to file a cross-complaint against Cogenex and the other parties in the litigation, seeking at least $7 million in damages arising from lost economic advantage. EUA Cogenex intends to vigorously prosecute its claims against the contractors and surety and defend itself against any cross-complaints. EUA Cogenex cannot predict the ultimate resolution of this matter; it is possible that EUA Cogenex's investment may not be fully recovered. Item_2. Management's_Discussion_and_Analysis_of_Financial_Condition_and_Results of_Operations The following is Management's discussion and analysis of certain significant factors affecting the Company's earnings and financial condition for the interim periods presented in this Form 10-Q. Voluntary Retirement Incentive Offer On March 15, 1995, EUA announced a corporate reorganization which, among other things, consolidated management of Eastern Edison, Blackstone and Newport. As part of the reorganization, a voluntary retirement incentive was offered to sixty-six EUA System employees. Forty-nine of those eligible for the program accepted the incentive and retired effective June 1, 1995. The cost of this incentive program amounted to a one-time $4.5 million pre-tax ($2.7 million after-tax) charge to second quarter 1995 earnings. The estimated payback period is approximately 18 months. Overview Consolidated Net Earnings for the quarter ended June 30, 1995 were $7.8 million compared to $10.2 million in the second quarter of 1994. The second quarter 1995 earnings include a one-time charge of $2.7 million, on an after-tax basis, related to the voluntary retirement incentive offer. Net Earnings contributions by Business Unit for the second quarter of 1995 and 1994 were as follows (000's): Three Months Ended June 30, Increase 1995 1994 (Decrease) Core Electric Business $ 6,456 $ 7,415 $ (959) Energy Related Business 1,337 3,476 (2,139) Corporate 32 (705) 737 Consolidated $ 7,825 $10,186 $(2,361) ======= ======= ======== Net Earnings of the Core Electric Business for the second quarter of 1995 decreased by $1.0 million due primarily to the one-time charge related to the voluntary retirement incentive offer and the impact of Montaup's wholesale rate reduction implemented on May 21, 1994. Offsetting these impacts somewhat were reductions in litigation expenses resulting from recently received favorable court decisions, a decrease in taxes other than income and a slight increase in the second quarter kWh sales. Net Earnings of the Energy Related Business Unit decreased by approximately $2.1 million in the second quarter of 1995 as compared to the same period of a year ago due primarily to increased operating and development expenses of new business ventures of EUA Energy Investment Corporation (EUA Energy) aggregating $900,000. Also second quarter 1994 results included $1.3 million of investment tax credits recorded by EUA Ocean State. The Corporate Business Unit Net Earnings for the second quarter of 1995 compared to the same period in 1994 increased by approximately $0.7 million due primarily to decreased interest and legal expenses. Consolidated Net Earnings for the six months ended June 30, 1995 were $19.1 million compared to $25.8 million for the same period of 1994. Net Earnings contributions by Business Unit for the first six months of 1995 and 1994 were as follows (000's): Six Months Ended June 30, Increase 1995 1994 (Decrease) Core Electric Business $17,092 $20,642 $(3,550) Energy Related Business 1,845 5,725 (3,880) Corporate 194 (591) 785 Consolidated $19,131 $25,776 $(6,645) ======= ======= ======= Net Earnings of the Core Electric Business for the first half of 1995 decreased by $3.6 million. The voluntary retirement incentive offer and Montaup's 1994 rate reduction were the principal reasons for the decrease in year-to-date earnings contributions of the Core Electric Business. Also, a 1.8% decrease in kWh sales in the period had a negative impact on this business unit's earnings. Offsetting these impacts somewhat were reductions in litigation expenses and taxes other than income. Net Earnings of the Energy Related Business Unit decreased by approximately $3.9 million in the first six months of 1995 as compared to the same period of a year ago. The principal reasons for this decrease were additional operating and development expenses of new business ventures of EUA Energy aggregating $2.7 million. Also, 1994 results included $1.3 million of investment tax credits recorded by EUA Ocean State in the second quarter of 1994. EUA Cogenex's year-to-date earnings contribution decreased by approximately $500,000 due primarily to increased costs related to new product development of its EUA Day division and lower earnings from its cogeneration portfolio (see below). The Corporate Business Unit Net Earnings for the first six months of 1995 compared to the same period in 1994 increased by approximately $0.8 million due primarily to decreased interest and legal expenses. EUA Cogenex's Cogeneration Portfolio EUA Cogenex, through its EUA WestCoast L.P., has had under development a cogeneration facility of approximately 1.5 MW. As of June 30, 1995, WestCoast's investment in the project was approximately $5.8 million. The cogeneration facility has experienced numerous start-up delays and cost overruns. The host of the facility has taken the position that the energy services agreement between WestCoast and itself is terminated due to, among other things, failure to complete the project. WestCoast disagrees with the host's right to terminate, but has decided not to contest the host's purported termination. In June 1993, WestCoast filed a lawsuit against the contractors responsible for the design and construction of the facility, as well as the surety on the contractor's performance bond. Certain defendants in that action have filed cross-complaints against WestCoast and EUA Cogenex, seeking, among other things, approximately $300,000 for payments withheld by WestCoast due to the contractor's deficient performance. A contractor has also filed a cross-complaint against the host. Additionally, the host has also stated that it intends to file a cross-complaint against Cogenex and the other parties in the litigation, seeking at least $7 million in damages arising from lost economic advantage. EUA Cogenex intends to vigorously prosecute its claims against the contractors and surety and defend itself against any cross-complaints. EUA Cogenex cannot predict the ultimate resolution of this matter; it is possible that EUA Cogenex's investment may not be fully recovered. In addition to the above mentioned cogeneration project, EUA Cogenex also has approximately 23MW of installed cogeneration capacity, with an aggregate investment of approximately $23 million as of June 30, 1995. The cogeneration portfolio's financial performance has been below expectation, and as a result, EUA Cogenex has ceased investing in new projects. Further, EUA Cogenex is now re-evaluating its continued presence in this line of business, in light of: (i) continued poor financial performance; (ii) increasing environmental regulation; and (iii) competition resulting from electric utility deregulation. As a result, EUA Cogenex is soliciting offers to purchase the cogeneration portfolio and any sale of all or a portion of the portfolio may result in a loss. Operating_Revenues Operating Revenues for the second quarter of 1995 increased by $8.8 million or 6.5% when compared to the same period of 1994. Revenues by Business Unit operations were as follows (000's): Three Months Ended June 30, Increase 1995 1994 (Decrease) Core Electric Business $119,217 $119,255 $ (38) Energy Related Business 26,902 18,014 8,888 Corporate 0 0 0 Consolidated $146,119 $137,269 $8,850 ======== ======== ======= Core Electric Business revenues include the negative impact of Montaup's $13.9 million annual wholesale rate reduction implemented on May 21, 1994 essentially offset by recoveries of increased fuel and purchased power expenses (see Operations Expense below). EUA Cogenex revenues, which account for all of the Energy Related Business Unit revenues, increased by $8.9 million due primarily to increases in partnership project sales and Nova division revenues. (See offsetting impacts in operating expenses below). Operating Revenues for the first six months of 1995 decreased by $3.4 million or 1.2% when compared to the same period of 1994. Operating Revenues by Business Unit for the first six months of 1995 and 1994 were as follows (000's): Six Months Ended June 30, Increase 1995 1994 (Decrease) Core Electric Business $241,955 $251,703 $(9,748) Energy Related Business 42,131 35,763 6,368 Corporate 0 0 0 Consolidated $284,086 $287,466 (3,380) ======== ======== ======= Core Electric Business revenues decreased by $9.7 million due primarily to Montaup's 1994 wholesale rate reduction and recoveries of lower fuel and purchased power expenses. A year-to-date decrease in primary kilowatthour sales of 1.8% also contributed to the decrease in revenues. EUA Cogenex revenues increased by $6.4 million due primarily to increases in partnership project sales and Nova division revenues. KWH Sales Primary kWh sales of electricity by EUA's Core Electric Business Unit increased slightly in the second quarter of 1995 compared to the same period last year only partially offsetting dismal first quarter sales results. Year-to-date June 30, 1995 sales of electricity decreased by 1.8% compared to the same period of 1994 as a result of the unusually mild weather in the first quarter of this year. A 1.8% improvement in year-to-date industrial sales, however, is an indication of slowly improving economic conditions in EUA's service territory. Total energy sales for the three and six months ended June 30, 1995 decreased 23.2% and 20.3% respectively, due mainly to decreased energy sales to the New England Power Pool and decreased short-term unit contract energy sales. Power purchase contracts of Montaup totaling 41mw which expired in October 1994 resulted in lower kilowatthours available to Montaup for interchange and short-term energy sales. These interchange and short-term energy sales essentially recover fuel costs only and have little or no earnings impact. Operations_Expense Fuel expense of the Core Electric Business for the second quarter of 1995 increased from that of the same period in 1994 by approximately $400,000 or 1.7% while for the year-to-date period fuel expense decreased approximately $500,000 or 1.1%. Decreases in total energy generated and purchased of 23.2% and 20.3% for the three and six months ended June 30, 1995, respectively, lowered fuel expense for both periods of 1995. More than offsetting this impact on fuel expense in the second quarter and partially offsetting the year to date impact were increases in the average cost of fuel of 30.5% and 19.6% for the three and six month periods, respectively, and purchased power-energy previously recorded as purchased power expense by Newport now recorded as fuel expense by Montaup as a result of Newport becoming an all-requirements customer of Montaup effective May 21, 1994. This classification adjustment increased fuel expense and decreased purchased power expense by $600,000 and $1.8 million in the second quarter and year-to-date periods of 1995, respectively. Purchased Power demand expense for the second quarter of 1995 increased $1.6 million or 5.3% and decreased $1.4 million or 2.1% for the six months ended June 30, 1995. These changes are due primarily to the net impact of increased billings from the Ocean State Power project and the Yankee nuclear units aggregating $3.9 million and $5.1 million for the second quarter and year-to-date periods, respectively, decreases of $2.1 million and $4.2 million for the respective periods related to 41 mw of power purchase contracts which expired in October 1994 and the classification adjustments discussed above. Other Operation and Maintenance expenses for the quarter and six months ended June 30, 1995 increased approximately $9.1 million or 20.4% and $6.0 million or 6.8%, respectively, from the same periods in 1994. EUA Cogenex expenses increased $10.3 million and $7.6 million for the respective periods and are directly related to increased revenues (see above) and increased personnel and benefits costs. Operating and development expenses of new business ventures of EUA Energy increased $900,000 and $2.7 million in the respective periods. Direct controllable expenses decreased $1.4 million and $3.3 million for the respective periods and indirect expenses decreased $500,000 and $700,000 in the second quarter and year-to-date periods, respectively, due mainly to lower conservation and load management expenses. Taxes Other Than Income Taxes other than income decreased $1.6 million and $1.9 million in the three and six month periods ended June 30, 1995 compared to the same periods of 1994. The June 1995 reversal of previously over-accrued property taxes and lower Rhode Island gross receipts taxes, directly related to lower revenues and a decrease in the gross receipts tax rate, account for most of these changes. Effective Income Tax Rate The EUA System's composite federal and state effective tax rate was approximately 29.6% and 33.7%, respectively, for the quarter and six months ended June 30, 1995 compared to approximately 26.2% and 32.7%, respectively, for the same periods in 1994. The increases are primarily due to $1.3 million of tax credits recorded in the second quarter of 1994 by EUA Ocean State related to its partnership investment in the Ocean State Power Project. Other_Income_(Deductions) -_Net Other Income and (Deductions)-Net decreased $1.4 million or 14.2% in the current year-to-date period as compared to the corresponding period in the prior year due primarily to the absence of $1.3 million of investment tax credits recorded in June 1994 by EUA Ocean State. Interest_Charges Net interest charges for the quarter and six months ended June 30, 1995 decreased approximately $1.6 million and $2.0 million respectively, as compared to the same periods of 1994. These decreases were due primarily to increases in capitalized interest of EUA Cogenex of $600,000 and $800,000 for the respective periods related to increased construction activity in 1995 and decreased other interest expense of Eastern Edison and Montaup due to interest expense provisions recorded in June 1994 aggregating approximately $1.0 million related to Internal Revenue Service audits. Electric Utility Industry Restructuring On May 12, 1995, Blackstone and Newport along with other members of the Rhode Island Electric Industry Restructuring Collaborative (the Rhode Island Collaborative), submitted to the Rhode Island Public Utilities Commission a Report and Set of Interdependent Principles addressing industry restructuring. On July 17, 1995, Eastern Edison Company, along with other members of the Electric Industry Restructuring Roundtable (the Massachusetts Roundtable) in Massachusetts filed a similar set of principles with the Massachusetts Department of Public Utilities. The Rhode Island Collaborative and the Massachusetts Roundtable consist of a number of different utilities, industrial users, environmental groups and consumer advocates. These filings are intended to be statements of the consensus position by the signatories of the interdependent principles that should underlie any electric industry restructuring proposal and include but are not limited to principles addressing stranded cost recovery, unbundling of services and demand side management programs. Each filing was submitted on the condition they be approved in full by the respective Commissions. The Commissions of each state are assessing the principles and are expected to make recommendations to implement a competitive environment in the industry. Liquidity_and_Sources_of_Capital The EUA system's need for permanent capital is primarily related to investments in facilities required to meet the needs of its existing and future customers. Traditionally, cash construction requirements not met with internally generated funds are financed through short-term borrowings which are ultimately funded with permanent capital. At June 30, 1995, EUA System companies maintained short-term lines of credit with various banks aggregating approximately $150 million. Outstanding short-term debt at June 30, 1995 and December 31, 1994 by Business Unit was as follows (000's): June 30, 1995 December 31, 1994 Core Electric Business $ 6,087 $ 0 Energy Related Business 25,610 23,476 Corporate 11,378 8,202 Consolidated $43,075 $31,678 ======= ======= For the six months ended June 30, 1995 internally generated funds available after the payment of dividends amounted to approximately $42.3 million while the EUA System's cash construction requirements amounted to approximately $43.6 million for the same period. Various laws, regulations and contract provisions limit the use of EUA's internally generated funds such that the funds generated by one subsidiary are not generally available to fund the operations of another subsidiary. On April 17, 1995, the Trustees of EUA voted to increase the quarterly dividend 1.5 cents per share from 38.5 cents per share to 40 cents per share. The first quarterly dividend at the new rate was payable May 15, 1995 to shareholders of record on May 1, 1995. PART II - OTHER INFORMATION Item 1. Legal Proceedings See Notes to Consolidated Condensed Financial Statements, Note C - Commitments and Contingencies under Other for a discussion of legal proceedings involving Montaup and EUA Cogenex. Item 5. Other Information On May 1, 1995 EUA Cogenex completed the acquisition of Highland Energy Group, Inc. (Highland) of Boulder, Colorado in exchange for $4.2 million of EUA Common Shares (176,258 shares) plus a possible deferred payment of up to $3.8 million in EUA Common Shares contingent upon post-acquisition performance. Highland is an energy services and demand side management company operating as a wholly-owned subsidiary of EUA Cogenex. Item 6. Exhibits_and_Reports_on_Form_8-K (a) Exhibits - None (b) Reports on Form 8-K - none filed in the quarter ended June 30, 1995 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Eastern_Utilities_Associates______ (Registrant) Date: August_11,_1995 /s/ Richard M. Burns Richard M. Burns, Comptroller (on behalf of the Registrant and as Chief Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
OPUR1 1000 6-MOS DEC-31-1995 JUN-30-1995 PER-BOOK 724918 178727 144073 123387 59329 1230434 101513 214357 59493 375363 25737 7033 449728 0 43075 0 43203 50 0 0 286245 1230434 284086 8365 243166 251531 32555 8387 40942 20650 20292 1161 19131 15775 19318 40630 .95 0
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