-----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, lTG2H2WvuK9doqNZbmdxWbW7UuRamKZbIL0RF/vmTGkoQJasXLNhYyophZpn43gG UDaFlo1l5Lhun0THjIKcSw== 0000069659-95-000005.txt : 19950512 0000069659-95-000005.hdr.sgml : 19950512 ACCESSION NUMBER: 0000069659-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950511 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NARRAGANSETT ELECTRIC CO CENTRAL INDEX KEY: 0000069659 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 050187805 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07471 FILM NUMBER: 95536413 BUSINESS ADDRESS: STREET 1: 280 MELROSE ST CITY: PROVIDENCE STATE: RI ZIP: 02901 BUSINESS PHONE: 4019411400 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, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-898 (LOGO) THE NARRAGANSETT ELECTRIC COMPANY (Exact name of registrant as specified in charter) Rhode Island 05-0187805 (State or other (I.R.S. Employer jurisdiction of Identification No.) incorporation or organization) 280 Melrose Street, Providence, R.I. 02901 (Address of principal executive offices) Registrant's telephone number, including area code (401-784-7000) 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 $50 per share, authorized and outstanding: 1,132,487 shares at March 31, 1995. PART I FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- THE NARRAGANSETT ELECTRIC COMPANY Statements of Income Periods Ended March 31 (Unaudited)
Three Months Twelve Months ------------ ------------- 1995 1994 1995 1994 ---- ---- ---- ---- (In Thousands) Operating revenue $125,020 $125,461 $481,228 $484,343 -------- -------- -------- -------- Operating expenses: Purchased electric energy, principally from New England Power Company, an affiliate 72,802 78,313 295,167 313,108 Other operation 16,269 15,867 73,484 69,067 Maintenance 2,669 3,399 11,551 11,952 Depreciation 7,507 4,675 27,645 17,896 Taxes, other than federal income taxes 9,667 9,909 35,576 36,068 Federal income taxes 3,461 2,891 5,453 5,500 -------- -------- -------- -------- Total operating expenses 112,375 115,054 448,876 453,591 -------- -------- -------- -------- Operating income 12,645 10,407 32,352 30,752 Other income: Allowance for equity funds used during construction 209 278 958 755 Other income (expense) - net, including related taxes (321) (787) (390) (517) -------- -------- -------- -------- Operating and other income 12,533 9,898 32,920 30,990 -------- -------- -------- -------- Interest: Interest on long-term debt 3,982 3,325 14,991 12,934 Other interest 1,101 554 3,443 2,066 Allowance for borrowed funds used during construction - credit (316) (295) (1,554) (798) -------- -------- -------- -------- Total interest 4,767 3,584 16,880 14,202 -------- -------- -------- -------- Net income $ 7,766 $ 6,314 $ 16,040 $ 16,788 ======== ======== ======== ======== Statements of Retained Earnings Retained earnings at beginning of period $ 91,556 $ 81,659 $ 86,871 $ 75,354 Net income 7,766 6,314 16,040 16,788 Dividends declared on cumulative preferred stock (536) (536) (2,143) (2,079) Dividends declared on common stock (566) (566) (2,548) (2,831) Premium on redemption of preferred stock (361) -------- -------- -------- -------- Retained earnings at end of period $ 98,220 $ 86,871 $ 98,220 $ 86,871 ======== ======== ======== ======== 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.
THE NARRAGANSETT ELECTRIC COMPANY Balance Sheets (Unaudited)
March 31, December 31, ASSETS 1995 1994 ------ ---- ---- (In Thousands) Utility plant, at original cost $630,335 $617,498 Less accumulated provisions for depreciation 165,611 161,557 -------- -------- 464,724 455,941 Construction work in progress 38,010 35,974 -------- -------- Net utility plant 502,734 491,915 -------- -------- Current assets: Cash 1,703 713 Accounts receivable: From sales of electric energy 52,504 51,278 Other (including $7,106,000 and $9,306,000 from affiliates) 17,504 17,953 Less reserves for doubtful accounts 5,017 4,472 -------- -------- 64,991 64,759 Unbilled revenues 10,800 13,100 Fuel, materials, and supplies, at average cost 6,234 5,170 Prepaid and other current assets 14,881 13,993 -------- -------- Total current assets 98,609 97,735 -------- -------- Deferred charges and other assets 57,857 57,727 -------- -------- $659,200 $647,377 ======== ======== CAPITALIZATION AND LIABILITIES ------------------------------ Capitalization: Common stock, par value $50 per share, authorized and outstanding 1,132,487 shares $ 56,624 $ 56,624 Premiums on preferred stocks 170 170 Other paid-in capital 60,000 60,000 Retained earnings 98,220 91,556 -------- -------- Total common equity 215,014 208,350 Cumulative preferred stock 36,500 36,500 Long-term debt 193,873 188,862 -------- -------- Total capitalization 445,387 433,712 -------- -------- Current liabilities: Short-term debt (including $8,075,000 to affiliates in 1995) 26,950 29,800 Accounts payable (including $43,657,000 and $47,900,000 to affiliates) 49,479 56,139 Accrued liabilities: Taxes 5,545 143 Interest 3,172 5,615 Other accrued expenses 24,687 25,346 Customer deposits 5,246 5,261 Dividends payable 1,102 819 -------- -------- Total current liabilities 116,181 123,123 -------- -------- Deferred federal income taxes 71,903 70,253 Unamortized investment tax credits 8,392 8,518 Other reserves and deferred credits 17,337 11,771 -------- -------- $659,200 $647,377 ======== ======== The accompanying notes are an integral part of these financial statements.
THE NARRAGANSETT ELECTRIC COMPANY Statements of Cash Flows Quarters Ended March 31 (Unaudited)
1995 1994 ---- ---- (In Thousands) Operating activities: Net income $ 7,766 $ 6,314 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 7,507 4,675 Deferred federal income taxes and investment tax credit - net 921 232 Allowance for funds used during construction (525) (573) Amortization of unbilled revenue (2,052) Decrease (increase) in accounts receivable, net and unbilled revenue 2,068 418 Decrease (increase) in fuel, materials, and supplies (1,064) (1,428) Decrease (increase) in prepaid and other current assets (888) 846 Increase (decrease) in accounts payable (6,660) (7,391) Increase (decrease) in other current liabilities 4,337 3,923 Other, net 6,050 787 -------- -------- Net cash provided by operating activities $ 17,460 $ 7,803 -------- -------- Investing activities: Plant expenditures, excluding allowance for funds used during construction $(17,801) $(17,636) -------- -------- Net cash used in investing activities $(17,801) $(17,636) -------- -------- Financing activities: Dividends paid on common stock $ (283) $ (566) Dividends paid on preferred stock (536) (536) Long-term debt - issues 5,000 5,000 Changes in short-term debt (2,850) 6,300 -------- -------- Net cash provided by financing activities $ 1,331 $ 10,198 -------- -------- Net increase in cash and cash equivalents $ 990 $ 365 Cash and cash equivalents at beginning of period 713 838 -------- -------- Cash and cash equivalents at end of period $ 1,703 $ 1,203 ======== ======== Supplementary information: Interest paid less amounts capitalized $ 6,941 $ 5,284 -------- -------- Federal income taxes paid $ (3,230) $ (949) -------- -------- The accompanying notes are an integral part of these financial statements.
Note A - ------ A 1986 Rhode Island Supreme Court decision held that the Rhode Island Public Utilities Commission's (RIPUC) rate-making powers include the authority to order refunds of amounts earned in excess of an allowed return. As a result, the RIPUC monitors the Company's earnings on a regular basis. Note B - 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. 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 environmental audit 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 U.S. Environmental Protection Agency or the Massachusetts Department of Environmental Protection for two sites (one of which is located in Massachusetts) at which hazardous waste is alleged to have been disposed. The Company is currently aware of other sites, and may in the future become aware of additional sites, that it may be held responsible for remediating. Gas was manufactured from coal in Rhode Island in the past. The Company is aware of five sites on which gas was manufactured or manufactured gas was stored that were owned either by the Company or by its predecessor companies. It is not known to what extent the Company would be held liable for hazardous wastes, if any, left at these manufactured gas locations. 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. A preliminary review by a consultant hired by the NEES companies of the potential cost of investigating and, if necessary, remediating Note B - Hazardous Waste - Continued - ------------------------ Rhode Island manufactured gas sites resulted in costs per site ranging from less than $1 million to $8 million. An informal survey of other utilities conducted on behalf of NEES and its subsidiaries indicated costs in a similar range. 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 would be successful. The Company believes that hazardous waste liabilities for all sites of which it is aware will not be material to its financial position. Note C - New Accounting Standard - -------------------------------- In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (FAS 121), effective for fiscal year 1996. This standard clarifies when and how to recognize an impairment of long- lived assets. In addition, FAS 121 requires that all regulatory assets be written off unless they continue to meet the criteria for initially recording such regulatory assets. In order to be initially recorded, a regulatory asset must have a high probability of future recovery. However, once written off, a regulatory asset can be restored if it again becomes probable of recovery. The impact of this standard will be driven by the facts and circumstances that exist when the standard is adopted and thereafter. Note D - ------ 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 1994 Annual Report. Item 2. Management's Discussion and Analysis of Financial --------------------------------------------------------- Condition and Results of Operations ----------------------------------- This section contains management's assessment of The Narragansett 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 1994 Annual Report on Form 10-K. Earnings - -------- Net income for the first three months of 1995 increased $1.5 million compared with the same period last year. The increase in first quarter income reflects the rate recovery commencing in 1995 of the Company's investment in new transmission facilities that went into service in September 1994. This increase in income was partially offset by decreased sales caused by unusually mild weather conditions in the first quarter of 1995 and the loss of a large customer in May 1994. Rate Activity - ------------- On March 1, 1995, the Company filed a request with the Rhode Island Public Utilities Commission (RIPUC) to increase its base rates by $30.5 million to be effective December 1995. As part of its filing, the Company proposed a special rate discount of 8 percent of base rates, for manufacturing customers that agree to give the Company three to five years notice before they purchase power from another supplier or generate any additional power themselves. These discounts, which the Company proposed to be recovered from all customers, are in addition to the 5 percent base rate service extension discounts (SEDs) that became available to large commercial and industrial customers in May 1994. Commencing in 1995, pursuant to a rate settlement, the cost of the SED programs are being passed on to New England Power Company (NEP), the Company's affiliated wholesale power supplier. As an alternative to the December 1995 effective date, the Company had proposed to phase its requested rate increase in two steps -- the first step in June 1995 ($13 million) and the second step in June 1996. In an open meeting on March 28, 1995, the RIPUC rejected the alternative phased proposal. Operating Revenue - ----------------- The following table summarizes the changes in operating revenue: Increase (Decrease) in Operating Revenue First Quarter ------------- 1995 vs 1994 ------------- (In Millions) Sales decrease $(4) Unbilled revenues recognized under rate agreement 2 Fuel recovery 1 Other 1 --- $ - === Kilowatthour (KWH) sales billed to ultimate customers decreased 2.9 percent in the first three months of 1995 compared with the same period last year. This decrease in KWH sales reflects unusually mild weather conditions in the first quarter of 1995 and the loss of sales attributable to the May 1994 plant closing of one of the Company's largest customers. Revenues from this customer, excluding fuel and purchased power costs, were approximately $0.7 million in 1994. Total KWH sales in 1995 are expected to decline by approximately 2 percent compared with 1994. The amount shown for unbilled revenues recognized reflects the amortization of $14 million over a 21 month period that began April 1994 in accordance with the Company's 1994 rate agreement. Operating Expenses - ------------------ The following table summarizes the changes in total operating expenses discussed below: Increase (Decrease) in Operating Expenses First Quarter ------------- 1995 vs 1994 ------------- (In Millions) Purchased electric energy: Fuel costs $ 1 Integrated facilities credits from NEP (6) Other purchased electric energy (1) Depreciation 3 --- $(3) === The Company owns a 10 percent share of the Manchester Street Station and also owns the entire seven mile underground transmission line associated with the facility as well as other transmission facilities in Rhode Island. The Company's share of the electricity generated by this plant is made available to NEP which owns the remaining 90 percent of the station. The Company receives a credit on its purchased power bill from NEP reflecting rate recovery of its investment in the station and the transmission line, and for its fuel costs and other generation and transmission costs. The change in the integrated facilities credit from NEP shown in the table above is primarily due to the recovery of the Company's investment in this new transmission line that was placed in service in September 1994, as well as increased credits for dismantlement costs being incurred on the Company's previously retired South Street generating station. The increase in depreciation expense in the first three months of 1995 is primarily due to increased charges for dismantlement costs for the previously retired South Street generating station. Interest Expense - ---------------- The increase in interest expense is due to increased long-term and short-term debt outstanding in the first quarter of 1995, and increased interest related to a rate adjustment mechanism. Competitive Conditions - ---------------------- The electric utility business is being subjected to increasing competitive pressures, stemming from a combination of trends, including increasing electric rates, improved technologies, and new regulations and legislation intended to foster competition. See the Company's Annual Report on Form 10-K for the year ended December 31, 1994. On March 29, 1995, the Federal Energy Regulatory Commission (FERC) issued a notice of proposed rule-making in which it stated that recovery in rates of legitimate and verifiable stranded costs should be allowed and that direct assignment of stranded costs to departing customers is the appropriate method for recovery of costs stranded as the result of wholesale competition. Under the FERC policy proposal, costs stranded as a result of retail competition would be subject to state commission review if the state commission has the necessary statutory authority, and subject to FERC review if the state commission does not have such authority. A final decision is expected in late 1995 or early 1996. The RIPUC has convened a task force of utilities, commercial and industrial customers, regulators, and other interested parties to prepare a report by May 1995 regarding restructuring the industry, including the recovery of stranded investments. New Accounting Standard - ----------------------- In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (FAS 121), effective for fiscal year 1996. This standard clarifies when and how to recognize an impairment of long- lived assets. In addition, FAS 121 requires that all regulatory assets be written off unless they continue to meet the criteria for initially recording such regulatory assets. In order to be initially recorded, a regulatory asset must have a high probability of future recovery. However, once written off, a regulatory asset can be restored if it again becomes probable of recovery. The impact of this standard will be driven by the facts and circumstances that exist when the standard is adopted and thereafter. Utility Plant Expenditures and Financings - ----------------------------------------- Cash expenditures for utility plant totaled $18 million in the first three months of 1995, including $3 million related to the Company's share of the Manchester Street Station repowering project. The funds necessary for utility plant expenditures were primarily provided by net cash from operating activities, after the payment of dividends, and the proceeds of long-term debt issues. The Company issued $5 million of bonds during the first three months of 1995 at an interest rate of 7.81 percent. The Company plans to issue an additional $20 million of long-term debt during 1995. At March 31, 1995, the Company had $27 million of short-term debt outstanding of which $19 million was in the form of commercial paper borrowings. The Company currently has lines of credit with banks totaling $41 million. There were no outstanding borrowings under these lines of credit at March 31, 1995. For the twelve-month period ending March 31, 1995, the ratio of earnings to fixed charges was 2.14. PART II. OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- Information concerning the Company's request to increase rates filed with the Rhode Island Public Utilities 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. The Company's title to properties which may be situated on filled lands (including substations) had been called into question by a 1991 Rhode Island Supreme Court case dealing with title to filled land. The Company's title to the land on which the Manchester Street Station property is located was cleared by legislation in July 1992, by the Rhode Island legislature. The Company challenged the 1991 ruling with respect to another parcel of property. This issue was favorably resolved by an April 24, 1995, decision by the Rhode Island Supreme Court in The Greater Providence Chamber of Commerce et al. v. State of Rhode Island. Item 4. Submission of Matters to a Vote of Security-Holders - ------------------------------------------------------------ On March 21, 1995, the Annual Meeting of Stockholders was held. The following actions were taken by the unanimous vote of the 1,132,487 shares having general voting rights represented at the meeting: The number of directors for the ensuing year was fixed at nine. The following were elected as directors: Joan T. Bok Stephen A. Cardi Frances H. Gammell Joseph J. Kirby Robert L. McCabe John W. Rowe Richard P. Sergel William E. Trueheart John A. Wilson Coopers & Lybrand was appointed as auditor for 1995. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- The Company is filing the following revised exhibit for incorporation by reference into its registration statements on Form S-3, Commission file Nos. 33-49455 and 33-50015. 12 Statement re computation of ratios The Company is filing Financial Data Schedules. The Company filed a report on Form 8-K dated March 1, 1995, 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 March 31, 1995 to be signed on its behalf by the undersigned thereunto duly authorized. THE NARRAGANSETT ELECTRIC COMPANY s/ Howard W. McDowell Howard W. McDowell Controller, Authorized Officer, and Principal Accounting Officer Date: May 11, 1995 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-99 3 Exhibit 12 THE NARRAGANSETT ELECTRIC COMPANY Computation of Ratio of Earnings to Fixed Charges (SEC Coverage) (Unaudited)
12 Months Ended March 31, 1995 Years Ended December 31, Actual ------------------------------------------------------------- (Unaudited) 1994 1993 1992 1991 1990 -------------- ---- ---- ---- ---- ---- (In Thousands) Net Income $16,040 $14,589 $14,274 $21,052 $16,820 $17,599 - ---------- Add income taxes and fixed charges - ---------------------------------- Current federal income taxes 906 1,020 2,183 4,608 1,558 7,624 Deferred federal income taxes 4,619 3,930 2,199 4,560 5,528 351 Investment tax credits - net (507) (508) (508) (507) (500) (504) Interest on long-term debt 14,991 14,334 12,715 13,290 12,581 11,016 Interest on short-term debt and other 3,443 2,897 2,074 1,277 2,500 2,968 ------- ------- ------- ------- ------- ------- Net earnings available for fixed charges $39,492 $36,262 $32,937 $44,280 $38,487 $39,054 ------- ------- ------- ------- ------- ------- Fixed charges: Interest on long-term debt $14,991 $14,334 $12,715 $13,290 $12,581 $11,016 Interest on short-term debt and other 3,443 2,897 2,074 1,277 2,500 2,968 ------- ------- ------- ------- ------- ------- Total fixed charges $18,434 $17,231 $14,789 $14,567 $15,081 $13,984 ======= ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 2.14 2.10 2.23 3.04 2.55 2.79 - ----------------------------------
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 THE NARRAGANSETT ELECTRIC COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 DEC-31-1995 DEC-31-1994 MAR-31-1995 MAR-31-1994 3-MOS 3-MOS PER-BOOK PER-BOOK 502,734 0 0 0 98,609 0 57,857 0 0 0 659,200 0 56,624 0 60,170 0 98,220 0 215,014 0 0 0 36,500 0 193,873 0 26,950 0 0 0 0 0 0 0 0 0 0 0 0 0 186,863 0 659,200 0 125,020 125,461 3,461 2,891 108,914 112,163 112,375 115,054 12,645 10,407 (112) (509) 12,533 9,898 4,767 3,584 7,766 6,314 536 536 7,230 5,778 566 566 3,982 3,325 17,460 7,803 0 0 0 0 Total deferred charges includes other assets. Short-term notes includes commercial paper obligations and notes payable to associated companies. Per share data is not relevant because the Company's common stock is wholly owned by New England Electric System. -----END PRIVACY-ENHANCED MESSAGE-----