-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D7s2iunC81EOiZaCjb00swIg0X+Ibr8ffWSmCfixmF1aWi1zXtFnFZVy43ipM1jJ JSyG2Sv5vfjE0siImhtYQQ== 0000063073-97-000001.txt : 19970514 0000063073-97-000001.hdr.sgml : 19970514 ACCESSION NUMBER: 0000063073-97-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MASSACHUSETTS ELECTRIC CO CENTRAL INDEX KEY: 0000063073 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 041988940 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05464 FILM NUMBER: 97602745 BUSINESS ADDRESS: STREET 1: 25 RESEARCH DR CITY: WESTBOROUGH STATE: MA ZIP: 01582 BUSINESS PHONE: 5083892000 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-5464 (LOGO) MASSACHUSETTS ELECTRIC COMPANY (Exact name of registrant as specified in charter) MASSACHUSETTS 04-1988940 (State or other (I.R.S. Employer jurisdiction of Identification No.) incorporation or organization) 25 Research Drive, Westborough, Massachusetts 01582 (Address of principal executive offices) Registrant's telephone number, including area code (508-389-2000) 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 ( ) Common stock, par value $25 per share, authorized and outstanding: 2,398,111 shares at March 31, 1997. PART I FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- MASSACHUSETTS ELECTRIC COMPANY Statements of Income Periods Ended March 31 (Unaudited)
Three Months Twelve Months ------------ ------------- 1997 1996 1997 1996 ---- ---- ---- ---- (In Thousands) Operating revenue $405,518 $390,819$1,553,236 $1,523,403 -------- ------------------ ---------- Operating expenses: Purchased electric energy, principally from New England Power Company, an affiliate 295,200 287,385 1,128,523 1,116,520 Other operation 48,546 47,198 213,011 208,947 Maintenance 7,424 8,056 30,470 30,149 Depreciation 12,638 12,037 47,959 45,401 Taxes, other than income taxes 8,873 8,745 30,687 30,413 Income taxes 8,596 6,711 27,071 22,965 -------- ------------------ ---------- Total operating expenses 381,277 370,132 1,477,721 1,454,395 -------- ------------------ ---------- Operating income 24,241 20,687 75,515 69,008 Other income (expense) - net, including related taxes (1,896) (2,037) (1,071) (2,904) -------- ------------------ ---------- Operating and other income 22,345 18,650 74,444 66,104 -------- ------------------ ---------- Interest: Interest on long-term debt 7,083 6,725 27,447 26,521 Other interest 1,742 1,387 6,828 5,530 Allowance for borrowed funds used during construction - credit (116) (196) (660) (656) -------- ------------------ ---------- Total interest 8,709 7,916 33,615 31,395 -------- ------------------ ---------- Net income $ 13,636 $ 10,734$ 40,829 $ 34,709 ======== ================== ========== Statements of Retained Earnings Retained earnings at beginning of period $165,936 $150,308$ 150,671 $ 135,264 Net income 13,636 10,734 40,829 34,709 Dividends declared on cumulative preferred stock (778) (779) (3,114) (3,115) Dividends declared on common stock (11,991) (9,592) (21,583) (16,187) -------- ------------------ ---------- Retained earnings at end of period $166,803 $150,671$ 166,803 $ 150,671 ======== ================== ========== The accompanying notes are an integral part of these financial statements. Per share data is not relevant because the Company's common stock is wholly- owned by New England Electric System.
MASSACHUSETTS ELECTRIC COMPANY Balance Sheets (Unaudited)
March 31, December 31, ASSETS 1997 1996 ------ ---- ---- (In Thousands) Utility plant, at original cost $1,526,477 $1,509,896 Less accumulated provisions for depreciation 438,176 430,585 ---------- ---------- 1,088,301 1,079,311 Construction work in progress 10,152 9,119 ---------- ---------- Net utility plant 1,098,453 1,088,430 ---------- ---------- Current assets: Cash 2,408 2,356 Accounts receivable: From sales of electric energy 171,223 165,866 Other (including $2,292,000 and $1,605,000 from affiliates) 2,951 2,600 Less reserves for doubtful accounts 13,967 13,146 ---------- ---------- 160,207 155,320 Unbilled revenues 35,845 43,390 Materials and supplies, at average cost 8,953 8,820 Prepaid and other current assets 23,710 25,923 ---------- ---------- Total current assets 231,123 235,809 ---------- ---------- Deferred charges and other assets 63,101 66,019 ---------- ---------- $1,392,677 $1,390,258 ========== ========== CAPITALIZATION AND LIABILITIES ------------------------------ Capitalization: Common stock, par value $25 per share, authorized and outstanding 2,398,111 shares $ 59,953 $ 59,953 Premiums on capital stocks 45,862 45,862 Other paid-in capital 155,310 155,310 Retained earnings 166,803 165,936 ---------- ---------- Total common equity 427,928 427,061 Cumulative preferred stock 50,000 50,000 Long-term debt 333,369 343,321 ---------- ---------- Total capitalization 811,297 820,382 ---------- ---------- Current liabilities: Long-term debt due in one year 40,000 30,000 Short-term debt (including $4,400,000 and $5,275,000 to affiliates) 21,875 43,775 Accounts payable (including $173,702,000 and $157,603,000 to affiliates) 179,360 178,263 Accrued liabilities: Taxes 11,690 961 Interest 7,342 9,635 Other accrued expenses 69,955 54,833 Customer deposits 4,335 4,308 Dividends payable 12,769 7,973 ---------- ---------- Total current liabilities 347,326 329,748 ---------- ---------- Deferred federal and state income taxes 172,703 177,778 Unamortized investment tax credits 16,290 16,566 Other reserves and deferred credits 45,061 45,784 ---------- ---------- $1,392,677 $1,390,258 ========== ========== The accompanying notes are an integral part of these financial statements.
MASSACHUSETTS ELECTRIC COMPANY Statements of Cash Flows Quarters Ended March 31 (Unaudited)
1997 1996 ---- ---- (In Thousands) Operating activities: Net income $ 13,636 $ 10,734 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 12,639 12,037 Deferred income taxes and investment tax credits, net (5,365) (7,279) Allowance for funds used during construction (116) (196) Decrease (increase) in accounts receivable, net and unbilled revenues 2,658 (2,412) Decrease (increase) in materials and supplies (133) (739) Decrease (increase) in prepaid and other current assets 2,214 (920) Increase (decrease) in accounts payable 1,097 (10,466) Increase (decrease) in other current liabilities 23,585 29,526 Other, net 2,562 2,993 -------- -------- Net cash provided by operating activities $ 52,777 $ 33,278 -------- -------- Investing activities: Plant expenditures, excluding allowance for funds used during construction $(22,546) $(22,779) Other investing activities (306) (178) -------- -------- Net cash used in investing activities $(22,852) (22,957) -------- -------- Financing activities: Dividends paid on common stock $ (7,194) $ (1,198) Dividends paid on preferred stock (779) (779) Changes in short-term debt (21,900) (8,975) -------- -------- Net cash provided by (used in) financing activities $(29,873) $(10,952) -------- -------- Net decrease in cash and cash equivalents $ 52 $ (631) Cash and cash equivalents at beginning of period 2,356 1,840 -------- -------- Cash and cash equivalents at end of period $ 2,408 $ 1,209 ======== ======== The accompanying notes are an integral part of these financial statements.
Note A - Hazardous Waste - ------------------------ The Federal Comprehensive Environmental Response, Compensation and Liability Act, more commonly known as the "Superfund" law, imposes strict, joint and several liability, regardless of fault, for remediation of property contaminated with hazardous substances. A number of states, including Massachusetts, have enacted similar laws. The electric utility industry typically utilizes and/or generates in its operations a range of potentially hazardous products and by-products. New England Electric System (NEES) subsidiaries currently have in place an internal environmental audit program and an external waste disposal vendor audit and qualification program intended to enhance compliance with existing federal, state, and local requirements regarding the handling of potentially hazardous products and by-products. The Company has been named as a potentially responsible party (PRP) by either the United States Environmental Protection Agency or the Massachusetts Department of Environmental Protection for 19 sites at which hazardous waste is alleged to have been disposed. Private parties have also contacted or initiated legal proceedings against the Company regarding hazardous waste cleanup. The most prevalent types of hazardous waste sites with which the Company has been associated are manufactured gas locations. The Company is aware of approximately 35 such manufactured gas locations in Massachusetts (including eight of the 19 locations for which the Company is a PRP). The Company is currently aware of other possible hazardous waste sites, and may in the future become aware of additional sites, that it may be held responsible for remediating. In 1993, the Massachusetts Department of Public Utilities approved a settlement agreement regarding the rate recovery of remediation costs of former manufactured gas sites and certain other hazardous waste sites located in Massachusetts. Under that agreement, qualified costs related to these sites are paid out of a special fund established on the Company's books. The Company made an initial $30 million contribution to the fund. Rate- recoverable contributions of $3 million, adjusted since 1993 for inflation, are added annually to the fund along with interest and any recoveries from insurance carriers and other third parties. At March 31, 1997, the fund had a balance of $17 million. Under a 1996 Massachusetts restructuring and rate settlement, an additional $15 million will be transferred to the fund in 1997 out of existing reserves for refunds. This settlement is pending approval with the Federal Energy Regulatory Commission. Note A - Hazardous Waste - Continued - ------------------------ Predicting the potential costs to investigate and remediate hazardous waste sites continues to be difficult. There are also significant uncertainties as to the portion, if any, of the investigation and remediation costs of any particular hazardous waste site that may ultimately be borne by the Company. Where appropriate, the Company intends to seek recovery from its insurers and from other PRPs, but it is uncertain whether, and to what extent, such efforts will be successful. At March 31, 1997, the Company had total reserves for environmental response costs of $37 million and a related regulatory asset of $14 million. The Company believes that hazardous waste liabilities for all sites of which it is aware, and which are not covered by a rate agreement, are not material to its financial position. In October 1996, the American Institute of Certified Public Accountants issued new accounting rules for Environmental Remediation Liabilities which become effective in 1997. These new rules do not have a material effect on the Company's financial position or results of operations. Note B - ------ In the opinion of the Company, these statements reflect all adjustments (which include normal recurring adjustments) necessary for a fair statement of the results of its operations for the periods presented and should be considered in conjunction with the notes to the financial statements in the Company's 1996 Annual Report. Item 2. Management's Discussion and Analysis of Financial --------------------------------------------------------- Condition and Results of Operations ----------------------------------- This section contains management's assessment of Massachusetts Electric Company's financial condition and the principal factors having an impact on the results of operations. This discussion should be read in conjunction with the Company's financial statements and footnotes and the 1996 Annual Report on Form 10-K. Earnings -------- Net income for the first quarter of 1997 increased $ 3 million over the same period last year. This increase was primarily due to decreased demand charges from the Company's wholesale generating affiliate, New England Power Company (NEP). Industry Restructuring ---------------------- For a discussion of industry restructuring activities in Massachusetts, Rhode Island and New Hampshire, see "Industry Restructuring" in the Company's Form 10-K for 1996. The NEES companies have reached an agreement with all three of its unions - the Brotherhood of Utility Workers, the International Brotherhood of Electrical Workers, and the Utility Workers Union of America - regarding benefits and other assistance to union employees that are affected by the restructuring of the electric utility industry and the NEES companies divestiture of its generation business. The NEES companies anticipates that industry restructuring and divestiture will lead to workforce reductions. Accounting Implications Historically, electric utility rates have been based on a utility's costs. As a result, electric utilities are subject to certain accounting standards that are not applicable to other business enterprises in general. Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation (FAS 71), requires regulated entities, in appropriate circumstances, to establish regulatory assets, and thereby defer the income statement impact of certain costs expected to be recovered in future rates. At December 31, 1996 the Company had approximately $16 million in net regulatory assets (regulatory assets of $56 million offset by regulatory liabilities of $40 million) in compliance with FAS 71. The Company believes that the continuing rate-making policies and practices of the Massachusetts Department of Public Utilities and the terms of the Massachusetts settlement will enable the Company to recover both its specific costs of providing ongoing distribution services and stranded costs billed to it by NEP. The Company believes that these factors will allow it to continue to apply FAS 71. However, the Company understands that members of the Securities and Exchange Commission (SEC) staff have raised questions concerning the continued applicability of FAS 71 to certain other electric utilities facing restructuring. In connection therewith, the Emerging Issues Task Force of the Financial Accounting Standards Board has decided to take under consideration how FAS 71 should be applied in light of recent changes within the regulated utility industry. In the event that future circumstances should cause the application of FAS 71 to be discontinued, a noncash write-off of previously established regulatory assets would be required. Operating Revenue ----------------- The following table summarizes the changes in operating revenue: Increase (Decrease) in Operating Revenue First Quarter ------------- 1997 vs 1996 ------------- (In Millions) Deliveries to ultimate customers $(2) Purchased Power cost adjustment mechanism 2 Fuel recovery 13 Demand-side management (DSM) 1 Other 1 --- $15 === Kilowatt-hour deliveries to ultimate customers decreased 0.3 percent in the first quarter of 1997. The purchased power cost adjustment mechanism is designed to allow the Company to pass on to its customers changes in purchased energy costs resulting from rate increases or decreases by NEP. The mechanism is also designed to pass on to customers the effects of NEP's seasonal rates. The increase in fuel recovery revenues is due to increased replacement power fuel purchases by NEP due to the reduced generation of partially owned nuclear units. These costs are passed on to the Company through NEP's fuel clause. The Company, in turn, passes these costs on to its customers. Operating Expenses ------------------ The following table summarizes the changes in operating expenses which are discussed below: Increase (Decrease) in Operating Expenses First Quarter ------------- 1997 vs 1996 ------------- (In Millions) Purchased electric energy: Fuel costs $ 13 Other (5) Other operation and maintenance: DSM 1 Other 0 Taxes 2 --- $11 === For a discussion of increased fuel costs, refer to the "Operating Revenues" section. The decrease in other purchased electricity is principally due to a reduction in peak demand charges, reflecting milder weather in the first quarter of 1997. The increase in taxes is primarily due to increased income. Utility Plant Expenditures and Financing ---------------------------------------- Cash expenditures for utility plant totaled $23 million in the first three months of 1997. The funds necessary for utility plant expenditures during the period were provided by net cash from operating activities, after the payment of dividends. The Company plans to issue a net $20 million of long-term debt in 1997 to fund capital expenditures. At March 31, 1997, the Company had $22 million of short-term debt outstanding including $17 million of commercial paper borrowings. The Company currently has lines of credit with banks totaling $90 million. These lines of credit are available to provide liquidity support for commercial paper borrowings and other corporate purposes. There were no borrowings under these lines of credit at March 31, 1997. For the twelve-month period ending March 31, 1997, the ratio of earnings to fixed charges was 2.92. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders - ------------------------------------------------------------ On March 19, 1997, the Annual Meeting of Stockholders was held. The following actions were taken by the unanimous vote of the 2,398,111 shares having general voting rights represented at the meeting: The number of directors was fixed at eleven. The following were elected as directors of the Company: Urville J. Beaumont Joan T. Bok Sally L. Collins Kalyan K. Ghosh Charles B. Housen Patricia A. McGovern John F. Reilly Lawrence J. Reilly John W. Rowe Richard P. Sergel Roslyn M. Watson Michael E. Jesanis was elected Treasurer and Robert King Wulff was elected Clerk. Coopers & Lybrand L.L.P. was selected as auditor for 1997. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- The Company filed no reports on Form 8-K during the quarter. The Company is filing the following revised exhibit for incorporation by reference into its registration statement on Form S-3, Commission File No. 33-59145: 12 Statement re Computation of ratios The Company is filing Financial Data Schedules. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q for the quarter ended March 31, 1997 to be signed on its behalf by the undersigned thereunto duly authorized. MASSACHUSETTS ELECTRIC COMPANY s/Michael E. Jesanis Michael E. Jesanis, Treasurer, Authorized Officer, and Principal Financial Officer Date: May 13, 1997 EX-99 2 Exhibit Index Exhibit Index ------------- Exhibit Description Page - ------- ----------- ---- 12 Statement re computation of Filed herewith ratios 27 Financial Data Schedule Filed herewith EX-12 3 Exhibit 12 MASSACHUSETTS ELECTRIC COMPANY Computation of Ratio of Earnings to Fixed Charges (SEC Coverage) (Unaudited)
12 Months Ended March 31, 1997 Years Ended December 31, Actual ------------------------------------------------------------- (Unaudited) 1996 1995 1994 1993 1992 -------------- ---- ---- ---- ---- ---- (In Thousands) Net Income $ 40,829 $37,926 $29,101 $34,726 $23,779 $34,905 - ---------- Add income taxes and fixed charges - ---------------------------------- Current federal income taxes 25,840 25,867 9,437 (6,762) 5,606 3,977 Deferred federal income taxes (4,464) (6,052) 6,156 24,932 3,430 13,451 Investment tax credits - net (1,115) (1,118) (1,132) (1,228) (1,228) (1,228) Massachusetts franchise tax 4,794 4,479 3,935 4,681 3,348 3,858 Interest on long-term debt 27,447 27,089 25,901 20,967 23,403 21,910 Interest on short-term debt and other6,828 6,473 6,784 6,366 3,638 3,657 -------- ------- ------- ------- ------- ------- Net earnings available for fixed charges $100,159 $94,664 $80,182 $83,682 $61,976 $80,530 -------- ------- ------- ------- ------- ------- Fixed charges: Interest on long-term debt $ 27,447 $27,089 $25,901 $20,967 $23,403 $21,910 Interest on short-term debt and other6,828 6,473 6,784 6,366 3,638 3,657 -------- ------- ------- ------- ------- ------- Total fixed charges $ 34,275 $33,562 $32,685 $27,333 $27,041 $25,567 ======== ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 2.92 2.82 2.45 3.06 2.29 3.15 - ----------------------------------
EX-27 4
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF MASSACHUSETTS ELECTRIC COMPANY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 DEC-31-1997 MAR-31-1997 3-MOS PER-BOOK 1,098,453 0 231,123 63,101 0 1,392,677 59,953 201,172 166,803 427,928 0 50,000 333,369 4,400 0 17,475 40,000 0 0 0 519,505 1,392,677 405,518 8,596 372,681 381,277 24,241 (1,896) 22,345 8,709 13,636 778 12,858 11,991 7,083 52,777 0 0 Total deferred charges includes other assets. Per share data is not relevant because the Company's common stock is wholly-owned by New England Electric System. -----END PRIVACY-ENHANCED MESSAGE-----