-----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, L/ShBqMqgBIzMh+N8VLznsUfqB4sSh4My9rZ1jfM23UnPTPBtqzs9mQwD/8w6Hm+ 6dH0YHf34frCQROlSIO66A== 0000063073-97-000008.txt : 19971113 0000063073-97-000008.hdr.sgml : 19971113 ACCESSION NUMBER: 0000063073-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 000-05464 FILM NUMBER: 97715227 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 September 30, 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 September 30, 1997. PART I FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- MASSACHUSETTS ELECTRIC COMPANY Statements of Income Periods Ended September 30 (Unaudited)
Quarter Nine Months ------- ----------- 1997 1996 1997 1996 ---- ---- ---- ---- (In Thousands) Operating revenue $404,990 $398,542 $1,180,050 $1,147,840 -------- -------- ---------- ---------- Operating expenses: Purchased electric energy, principally from New England Power Company, an affiliate 302,596 301,664 862,288 851,057 Other operation 51,398 53,253 149,478 152,855 Maintenance 8,185 7,790 24,489 23,087 Depreciation 12,638 12,037 37,714 36,112 Taxes, other than income taxes 7,620 7,372 24,534 23,855 Income taxes 4,932 2,888 19,988 12,866 -------- -------- ---------- ---------- Total operating expenses 387,369 385,004 1,118,491 1,099,832 -------- -------- ---------- ---------- Operating income 17,621 13,538 61,559 48,008 Other income (expense), net (198) (439) (2,305) (2,516) -------- -------- ---------- ---------- Operating and other income 17,423 13,099 59,254 45,492 -------- -------- ---------- ---------- Interest: Interest on long-term debt 6,688 6,735 20,775 20,196 Other interest 2,790 1,783 6,761 4,989 Allowance for borrowed funds used during construction - credit (96) (193) (312) (657) -------- -------- ---------- ---------- Total interest 9,382 8,325 27,224 24,528 -------- -------- ---------- ---------- Net income $ 8,041 $ 4,774 $ 32,030 $ 20,964 ======== ======== ========== ========== Statements of Retained Earnings Retained earnings at beginning of period $171,581 $154,150 $ 165,936$ 150,308 Net income 8,041 4,774 32,030 20,964 Dividends declared on cumulative preferred stock (779) (778) (2,336) (2,335) Dividends declared on common stock (2,398) (1,199) (19,185) (11,990) -------- -------- ---------- ---------- Retained earnings at end of period $176,445 $156,947 $ 176,445 $ 156,947 ======== ======== ========== ========== 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 Statements of Income Twelve Months Ended September 30 (Unaudited)
1997 1996 ---- ---- (In Thousands) Operating revenue $1,570,747 $1,532,418 ---------- ---------- Operating expenses: Purchased electric energy, principally from New England Power Company, an affiliate 1,131,940 1,113,387 Other operation 208,286 211,985 Maintenance 32,504 30,299 Depreciation 48,959 46,547 Taxes, other than income taxes 31,238 31,344 Income taxes 32,308 25,499 ---------- ---------- Total operating expenses 1,485,235 1,459,061 ---------- ---------- Operating income 85,512 73,357 Other income (expense), net (1,002) (2,298) ---------- ---------- Operating and other income 84,510 71,059 ---------- ---------- Interest: Interest on long-term debt 27,668 26,865 Other interest 8,245 6,377 Allowance for borrowed funds used during construction - credit (395) (902) ---------- ---------- Total interest 35,518 32,340 ---------- ---------- Net income $ 48,992 $ 38,719 ========== ========== Statements of Retained Earnings Retained earnings at beginning of period $ 156,947 $ 134,531 Net income 48,992 38,719 Dividends declared on cumulative preferred stock (3,115) (3,114) Dividends declared on common stock (26,379) (13,189) ---------- ---------- Retained earnings at end of period $ 176,445 $ 156,947 ========== ========== 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)
September 30, December 31, ASSETS 1997 1996 ------ ---- ---- (In Thousands) Utility plant, at original cost $1,554,942 $1,509,896 Less accumulated provisions for depreciation 455,510 430,585 ---------- ---------- 1,099,432 1,079,311 Construction work in progress 16,219 9,119 ---------- ---------- Net utility plant 1,115,651 1,088,430 ---------- ---------- Current assets: Cash 2,131 2,356 Accounts receivable: From sales of electric energy 132,040 165,866 Other (including $2,587,000 and $1,605,000 from affiliates) 4,128 2,600 Less reserves for doubtful accounts 14,487 13,146 ---------- ---------- 121,681 155,320 Unbilled revenues 45,348 43,390 Materials and supplies, at average cost 8,947 8,820 Prepaid and other current assets 24,652 25,923 ---------- ---------- Total current assets 202,759 235,809 ---------- ---------- Deferred charges and other assets 50,530 66,019 ---------- ---------- $1,368,940 $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 176,445 165,936 Unrealized gain on securities, net 109 ---------- ---------- Total common equity 437,679 427,061 Cumulative preferred stock 50,000 50,000 Long-term debt 333,457 343,321 ---------- ---------- Total capitalization 821,136 820,382 ---------- ---------- Current liabilities: Long-term debt due within one year 10,000 30,000 Short-term debt (including $4,725,000 and $5,275,000 to affiliates) 21,275 43,775 Accounts payable (including $172,896,000 and $157,603,000 to affiliates) 192,133 178,263 Accrued liabilities: Taxes 4,326 961 Interest 6,899 9,635 Other accrued expenses 75,494 54,833 Customer deposits 4,303 4,308 Dividends payable 3,177 7,973 ---------- ---------- Total current liabilities 317,607 329,748 ---------- ---------- Deferred federal and state income taxes 171,802 177,778 Unamortized investment tax credits 15,739 16,566 Other reserves and deferred credits 42,656 45,784 ---------- ---------- $1,368,940 $1,390,258 ========== ========== The accompanying notes are an integral part of these financial statements.
MASSACHUSETTS ELECTRIC COMPANY Statements of Cash Flows Nine Months Ended September 30 (Unaudited)
1997 1996 ---- ---- (In Thousands) Operating Activities: Net income $ 32,030 $ 20,964 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 37,714 36,112 Deferred income taxes and investment tax credit, net (6,915) (11,458) Allowance for borrowed funds used during construction (312) (657) Decrease (increase) in accounts receivable, net and unbilled revenues 31,681 17,633 Decrease (increase) in materials and supplies (127) 1,673 Decrease (increase) in prepaid and other current assets 1,271 (454) Increase (decrease) in accounts payable 13,870 15,703 Increase (decrease) in other current liabilities 21,285 35,631 Other, net 14,157 4,516 -------- -------- Net cash provided by operating activities $144,654 $119,663 -------- -------- Investing Activities: Plant expenditures, excluding allowance for funds used during construction $(64,712) $(74,091) Other investing activities (1,350) (211) -------- -------- Net cash used in investing activities $(66,062) $(74,302) -------- -------- Financing Activities: Dividends paid on common stock $(23,981) $(11,991) Dividends paid on preferred stock (2,336) (2,335) Long-term debt-retirements (30,000) Changes in short-term debt (22,500) (31,350) -------- -------- Net cash used in financing activities $(78,817) $(45,676) -------- -------- Net increase (decrease) in cash and cash equivalents $ (225) $ (315) Cash and cash equivalents at beginning of period 2,356 1,840 -------- -------- Cash and cash equivalents at end of period $ 2,131 $ 1,525 ======== ======== 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. Massachusetts Electric Company (the Company) is a wholly-owned distribution subsidiary of New England Electric System (NEES). NEES subsidiaries have an internal environmental audit program and an external waste disposal vendor audit and qualification program intended to enhance compliance with 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 September 30, 1997, the fund had a balance of $29 million. If a Massachusetts restructuring and rate settlement is approved by the Federal Energy Regulatory Commission, an additional $15 million Note A - Hazardous Waste - Continued - ------------------------ will be transferred to the fund in 1997 out of existing reserves for refunds. 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. The NEES companies have recovered amounts from certain insurers, and, where appropriate, the Company is seeking or intends to seek recovery from other insurers and from other PRPs, but it is uncertain whether, and to what extent, such efforts will be successful. At September 30, 1997, the Company had total reserves for environmental response costs of $36 million and a related regulatory liability of less than $1 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 became 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 (the Company) (a wholly-owned distribution subsidiary of New England Electric System (NEES)) 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 third quarter and first nine months of 1997 increased $3 million and $11 million, respectively, compared with the corresponding periods in 1996. These increases are due to an increase in kilowatt-hour (kWh) deliveries to ultimate customers and a reduction in the level of the Company's purchased power cost adjustment (PPCA) mechanism (see discussion in the "Operating Revenues" section). KWh deliveries to ultimate customers increased 3.1 percent and 1.8 percent in the third quarter and first nine months of 1997, respectively. The improving regional economy contributed to the increase. Industry Restructuring - ---------------------- For a full discussion of industry restructuring activities in Massachusetts, Rhode Island and New Hampshire, see "Industry Restructuring" in the Company's Form 10-K for 1996. Industry Restructuring Update As previously reported, the Massachusetts settlement covering customer choice and electric utility industry restructuring provides for full recovery of the costs of generating assets and oil and gas related assets (including regulatory assets) not recoverable through the divestiture of New England Power Company's (NEP) (a wholly-owned generation and transmission subsidiary of NEES) generating business. The Massachusetts settlement was approved by the Massachusetts Department of Public Utilities (MDPU) and a companion wholesale settlement is now pending final approval before the Federal Energy Regulatory Commission (FERC). Final FERC action is expected later in 1997. On November 10, 1997, the Massachusetts House of Representatives passed a bill which would provide Massachusetts customers with the ability to choose their electric supplier on March 1, 1998. The bill provides for the recovery of stranded costs but contains provisions that could require Massachusetts regulators to reexamine and recompute stranded costs. The bill further requires electric companies to provide customers who do not choose a supplier with a standard offer transition rate which is 10 percent below 1997 rates, with the discount growing to 15 percent upon completion of divestiture of generating assets or so-called "securitization" (or refinancing) of stranded costs. The Massachusetts settlement, as approved by the MDPU this year, along with the anticipated sale of our generating business described below, is expected to allow the Company to meet the rate reduction targets contained in the House bill. The Senate is expected to act on the proposed legislation before the current session ends on November 19, 1997. On August 5, 1997, NEP and The Narragansett Electric Company (Narragansett Electric) (a wholly-owned distribution subsidiary of NEES) (collectively, the "Sellers") reached an agreement to sell their nonnuclear generating business to USGen New England, Inc. (USGen), an indirect wholly-owned subsidiary of PG&E Corporation. The Sellers' nonnuclear generating business includes three fossil- fuel generating stations and 15 hydroelectric generating stations, totaling approximately 4,000 megawatt (MW) of capacity, with a book value $1.1 billion. USGen will pay the Sellers $1.59 billion in cash, of which $225 million will be contingent upon retail customers being able to choose their electric supplier. Specifically, if customers representing 89 percent of kWh sales of investor owned utilities in Massachusetts, or 50 percent of kWh sales in New England, have the ability to choose their electric supplier by January 1, 1999, the Sellers will be entitled to the full contingent amount. If such retail choice milestone is met after January 1, 1999, the contingent portion of the purchase price declines ratably by $75 million over the year 1999, and $50 million per year thereafter until the milestone is met. Payment of the contingent portion can be deferred for up to two years, if retail choice is not the result of legislation. USGen will also reimburse the NEES companies for $85 million of costs associated with early retirement and special severance programs for employees affected by industry restructuring. USGen will purchase NEP's entitlement in approximately 1,100 MW of power procured under long-term contracts. NEP will make a monthly fixed contribution toward the above-market cost of the purchased power of between $12.5 million and $14.2 million per month from closing through January 2008. These amounts are recoverable under the terms of the Massachusetts settlement. USGen will be responsible for the balance of the costs under the purchased power contracts. USGen will assume responsibility for environmental conditions at the Sellers' generating stations. USGen will also assume NEP's obligations under long-term fuel and fuel transportation contracts and certain existing collective bargaining agreements. The sale is subject to approval by various state and federal regulatory agencies. The timing of such approval is uncertain; however, approval is unlikely before the spring of 1998. Closing is contingent upon all regulatory approvals being obtained by February 1999. Under the Massachusetts settlement, the proceeds from the sale will be used to offset the stranded costs which the Company recovers from customers. The Company estimates that, upon completion of the sale, prices for its customers would decrease on average by approximately 15 percent below today's prices. Workforce Reduction The NEES companies expect to implement substantial workforce reductions during 1998 as a result of industry restructuring and the sale of the generating business. The NEES companies have reached an agreement with all three of their unions regarding benefits and other assistance including early retirement and severance programs, to union employees that are affected by these events. The NEES companies have also announced similar early retirement and severance programs for management employees. The costs of such programs are expected to be substantially recovered from the proceeds of the sale of the generating business. Risk Factors This Form 10-Q contains statements that may be considered forward looking statements as defined under the securities laws. Actual results may differ materially. As disclosed in the Company's Form 10-K for the year ended 1996, there are several risk factors which could affect actual results. While the NEES companies believe that the sale agreement with USGen and other developments constitute substantial progress in resolving the uncertainty regarding the impact from industry restructuring, significant risks remain. These include, but are not limited to: (i) the potential that ultimately the Massachusetts settlement will not be implemented in the manner anticipated by NEES, and (ii) the possibility of state or federal legislation that would increase the risks above those contained in the settlement. The major risk factors affecting the Company relate to the possibility of adverse regulatory or judicial decisions or legislation which limit the level of revenues the Company is allowed to charge for its services or affect the costs the Company incurs. To the extent that neither the divestiture of NEP's nonnuclear generation nor retail choice occurs in 1998, under the Massachusetts settlement pending before the FERC, approximately 73 percent of the amount of NEP's 1998 earnings in excess of 11.75 percent return on equity must be refunded to the Company until its earnings cap is met, and then used to reduce stranded costs. The Company's earnings cap requires it to refund one-half of earnings between 11 percent and 12.5 percent and all earnings in excess of 12.5 percent. In addition, the NEES companies will also incur costs associated with the transition after the sale is completed. 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. Statement of 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. The Company believes that the continuing rate-making policies and practices of the MDPU 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, despite the progress made to date, it is possible that the final restructuring plans ultimately ordered by regulatory bodies would not reflect full recovery of stranded costs, including a fair return on those costs as they are being recovered. In addition, it is possible that future methods of setting performance-based distribution rates may not be considered cost- based as required by FAS 71. 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. Year 2000 Computer Issues - ------------------------- In the next two years, most large companies will face a potentially serious information systems (computer) problem because most software application and operational programs written in the past will not properly recognize calendar dates beginning in the year 2000. This could force computers to either shut down or lead to incorrect calculations. The NEES companies began the process of identifying the changes required to their computer programs and hardware during 1996. The necessary modifications to the NEES companies' centralized financial, customer, and operational information systems are expected to be completed by the end of 1998. The NEES companies believe they will incur approximately $20 million of costs associated with making the necessary modifications identified to date to the centralized systems. Substantially all of these costs are expected to be incurred prior to December 31, 1998. Noncentralized systems are currently being reviewed for Year 2000 problems. The NEES companies are unable to predict the costs to be incurred for correction of such noncentralized systems, but expect the scope and schedule for such work to be less complex than for its centralized information systems. Operating Revenue - ----------------- The following table summarizes the changes in operating revenue: Increase (Decrease) in Operating Revenue Third Quarter Nine Months ------------- ------------ 1997 vs 1996 1997 vs 1996 ------------- ------------ (In Millions) Deliveries to ultimate customers $ 7 $10 PPCA mechanism (1) 7 Fuel recovery 1 15 Demand-Side Management (DSM) (1) (2) Other - 2 --- --- $ 6 $32 === === For a discussion of deliveries to ultimate customers, see the "Earnings" section. The PPCA 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. Due to reduced peak demand levels, primarily in the month of May 1997, refunds recorded under this mechanism were less in 1997 than in 1996. The provisions of the Company's restructuring settlement required the PPCA mechanism to end effective July 31, 1996. However, since the Massachusetts settlement has not yet been approved by the FERC, the Company has continued to accrue refund provisions of $16 million related to the assumed operation of the PPCA mechanism since July 31, 1996 ($9 million in 1996 and $7 million in 1997, to date). In addition, at December 31, 1996 the Company had deferred approximately $8 million of storm damage costs. In accordance with the Massachusetts restructuring settlement signed in 1997, the Company will not be permitted recovery of approximately $2 million of such storm damage costs. The increase in fuel recovery revenues is due to increased replacement power fuel purchases by NEP due to reduced generation by 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 Third Quarter Nine Months ------------- ------------ 1997 vs 1996 1997 vs 1996 ------------- ------------ (In Millions) Purchased electric energy: Fuel costs $ 1 $15 Other - (4) Other operation and maintenance: DSM (1) (2) Other - - Depreciation - 2 Taxes 2 8 --- --- $ 2 $19 === === For a discussion of increased fuel costs, refer to the "Operating Revenues" section. The decrease in other purchased electric energy in the first nine months of 1997 is principally due to a reduction in peak demand charges, reflecting milder weather in the first quarter of 1997. Utility Plant Expenditures and Financing - ---------------------------------------- Cash expenditures for utility plant totaled $65 million in the first nine 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. On October 3, 1997, the Company issued $15 million of long-term debt. The Company plans to issue an additional $35 million of long-term debt by the end of 1997. Bond issuances are to be used to retire maturing bonds and fund capital expenditures. On November 7, 1997, NEES commenced cash tender offers for any and all outstanding shares of the Company's preferred stock, which totals approximately $50 million. Concurrently with the offer, the Company's Board of Directors is soliciting proxies for use at a special meeting of preferred shareholders. The special meeting is being held to consider amendments to the Company's By-Laws and Articles of Incorporation which would remove a limitation on the ability of the Company to issue unsecured debt without approval of preferred shareholders. The offer expires on December 12, 1997. At September 30, 1997, the Company had $21 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 September 30, 1997. For the twelve-month period ending September 30, 1997, the ratio of earnings to fixed charges was 3.21. PART II. OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- Information concerning the restructuring dockets before the Federal Energy Regulatory Commission, discussed in Part I of this report in Management's Discussion and Analysis of Financial Condition and Results of Operations, is incorporated herein by reference and made a part hereof. Item 4.Submission of Matters to a Vote of Security-Holders - ------------------------------------------------------------- On September 21, 1997, a Special Meeting of Stockholders was held. The number of directors of the Company was increased from eleven to twelve by unanimous vote of the 2,398,111 shares having general voting rights represented at the meeting. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- 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. The Company filed a report on Form 8-K dated August 6, 1997, containing Item 5, Other Events. 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 September 30, 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: November 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 STATEMENT RE COMPUTATION OF RATIOS MASSACHUSETTS ELECTRIC COMPANY Computation of Ratio of Earnings to Fixed Charges (SEC Coverage) (Unaudited)
12 Months Ended September 30, 1997 Years Ended December 31, Actual ------------------------------------------------------------- (Unaudited) 1996 1995 1994 1993 1992 -------------- ---- ---- ---- ---- ---- (In Thousands) Net Income $ 48,992 $37,926 $29,101 $34,726 $23,779 $34,905 - ---------- Add income taxes and fixed charges - ---------------------------------- Current federal income taxes 28,059 25,867 9,437 (6,762) 5,606 3,977 Deferred federal income taxes (2,286) (6,052) 6,156 24,932 3,430 13,451 Investment tax credits - net (1,107) (1,118) (1,132) (1,228) (1,228) (1,228) Massachusetts franchise tax 5,621 4,479 3,935 4,681 3,348 3,858 Interest on long-term debt 27,669 27,089 25,901 20,967 23,403 21,910 Interest on short-term debt and other 8,245 6,473 6,784 6,366 3,638 3,657 -------- ------- ------- ------- ------- ------- Net earnings available for fixed charges $115,193 $94,664 $80,182 $83,682 $61,976 $80,530 -------- ------- ------- ------- ------- ------- Fixed charges: Interest on long-term debt $ 27,669 $27,089 $25,901 $20,967 $23,403 $21,910 Interest on short-term debt and other 8,245 6,473 6,784 6,366 3,638 3,657 -------- ------- ------- ------- ------- ------- Total fixed charges $ 35,914 $33,562 $32,685 $27,333 $27,041 $25,567 ======== ======= ======= ======= ======= ======= Ratio of earnings to fixed charges $3.21 2.82 2.45 3.06 2.29 3.15 - ----------------------------------
EX-27 4 FINANCIAL DATA SCHEDULE
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 SEP-30-1997 9-MOS PER-BOOK 1,115,651 0 202,759 50,530 0 1,368,940 59,953 201,172 176,445 437,679 0 50,000 333,457 4,725 0 16,550 10,000 0 0 0 516,529 1,368,940 1,180,050 19,988 1,098,503 1,118,491 61,559 (2,305) 59,254 27,224 32,030 2,336 29,694 19,185 20,775 144,654 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. Total common stockholders equity is reflected net of unrealized gain on securities. -----END PRIVACY-ENHANCED MESSAGE-----