-----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, TdcHyUmosnsVsvtFVPkKN7RAhG8g6JVf8NqnkiqZktJUDxajWmzkXGFFOTaV3GdH 1I2iFYe9bJH6uLVgm8LGTA== 0000069659-97-000001.txt : 19970514 0000069659-97-000001.hdr.sgml : 19970514 ACCESSION NUMBER: 0000069659-97-000001 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: 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: 97603088 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, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-7471 (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, 1997. PART I FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- THE NARRAGANSETT ELECTRIC COMPANY Statements of Income Periods Ended March 31 (Unaudited)
Three Months Twelve Months ------------ ------------- 1997 1996 1997 1996 ---- ---- ---- ---- (In Thousands) Operating revenue $131,466 $127,285 $507,766 $501,378 -------- -------- -------- -------- Operating expenses: Fuel for generation and purchased electric energy (principally from New England Power Company, an affiliate) 77,173 73,689 300,544 295,539 Other operation 17,826 17,103 72,348 72,648 Maintenance 2,715 3,987 11,737 12,492 Depreciation 6,104 7,137 26,866 31,163 Taxes, other than federal income taxes 10,268 10,081 38,717 37,041 Federal income taxes 3,977 3,002 12,926 10,429 -------- -------- -------- -------- Total operating expenses 118,063 114,999 463,138 459,312 -------- -------- -------- -------- Operating income 13,403 12,286 44,628 42,066 Other income: Allowance for equity funds used during construction (103) Other income (expense) - net, including related taxes (1,056) (1,109) (679) (980) -------- -------- -------- -------- Operating and other income 12,347 11,177 43,949 40,983 -------- -------- -------- -------- Interest: Interest on long-term debt 4,305 4,292 17,218 16,937 Other interest 393 684 2,592 3,246 Allowance for borrowed funds used during construction - credit (44) (89) (218) (1,634) -------- -------- -------- -------- Total interest 4,654 4,887 19,592 18,549 -------- -------- -------- -------- Net income $ 7,693 $ 6,290 $ 24,357 $ 22,434 ======== ======== ======== ======== Statements of Retained Earnings Retained earnings at beginning of period $119,978 $108,227 $111,716 $ 98,220 Net income 7,693 6,290 24,357 22,434 Dividends declared on cumulative preferred stock (536) (536) (2,143) (2,143) Dividends declared on common stock (3,397) (2,265) (10,192) (6,795) -------- -------- -------- -------- Retained earnings at end of period $123,738 $111,716 $123,738 $111,716 ======== ======== ======== ======== 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 1997 1996 ------ ---- ---- (In Thousands) Utility plant, at original cost $737,989 $742,481 Less accumulated provisions for depreciation 191,243 187,690 -------- -------- 546,746 554,791 Construction work in progress 14,363 5,392 -------- -------- Net utility plant 561,109 560,183 -------- -------- Current assets: Cash 1,258 1,727 Accounts receivable: From sales of electric energy 57,123 54,426 Other (including $1,406,000 and $1,253,000 from affiliates) 2,676 3,415 Less reserves for doubtful accounts 6,104 5,149 -------- -------- 53,695 52,692 Unbilled revenues 12,100 15,300 Fuel, materials, and supplies, at average cost 4,423 4,300 Prepaid and other current assets 16,064 15,919 -------- -------- Total current assets 87,540 89,938 -------- -------- Deferred charges and other assets 57,051 56,881 -------- -------- $705,700 $707,002 ======== ======== 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 80,000 80,000 Retained earnings 123,738 119,978 -------- -------- Total common equity 260,532 256,772 Cumulative preferred stock 36,500 36,500 Long-term debt 173,546 178,517 -------- -------- Total capitalization 470,578 471,789 -------- -------- Current liabilities: Long-term debt due in one year 37,500 32,500 Short-term debt (including $2,650,000 and $5,300,000 to affiliates) 6,775 19,025 Accounts payable (including $44,477,000 and $40,425,000 to affiliates) 45,791 45,221 Accrued liabilities: Taxes 9,620 3,877 Interest 3,281 5,677 Other accrued expenses 17,286 11,949 Customer deposits 5,724 5,638 Dividends payable 3,933 2,801 -------- -------- Total current liabilities 129,910 126,688 -------- -------- Deferred federal income taxes 81,121 81,880 Unamortized investment tax credits 7,393 7,517 Other reserves and deferred credits 16,698 19,128 -------- -------- $705,700 $707,002 ======== ======== The accompanying notes are an integral part of these financial statements.
THE NARRAGANSETT ELECTRIC COMPANY Statements of Cash Flows Quarters Ended March 31 (Unaudited)
1996 1995 ---- ---- (In Thousands) Operating activities: Net income $ 7,693 $ 6,290 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 6,104 7,137 Deferred federal income taxes and investment tax credit, net (996) (510) Allowance for funds used during construction (44) (89) Decrease (increase) in accounts receivable, net and unbilled revenue 2,197 5,291 Decrease (increase) in fuel, materials, and supplies (123) (44) Decrease (increase) in prepaid and other current assets (145) (610) Increase (decrease) in accounts payable 570 (1,722) Increase (decrease) in other current liabilities 8,770 2,700 Other, net (2,327) (122) -------- -------- Net cash provided by operating activities $ 21,699 $ 18,321 -------- -------- Investing activities: Plant expenditures, excluding allowance for funds used during construction $ (6,990) $(15,346) Other investing activities (127) (69) -------- -------- Net cash used in investing activities $ (7,117) $(15,415) -------- -------- Financing activities: Dividends paid on common stock $ (2,265) $ (566) Dividends paid on preferred stock (536) (536) Long-term debt - issues 2,000 Long-term debt - retirements (2,000) Changes in short-term debt (12,250) (3,000) -------- -------- Net cash provided by (used in) financing activities $(15,051) $ (4,102) -------- -------- Net increase (decrease) in cash and cash equivalents $ (469) $ (1,196) Cash and cash equivalents at beginning of period 1,727 1,999 -------- -------- Cash and cash equivalents at end of period $ 1,258 $ 803 ======== ======== 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 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 three sites (two of which are 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 Note B - Hazardous Waste - Continued - ------------------------ preliminary review by a consultant hired by the NEES companies of the potential cost of investigating and, if necessary, remediating Rhode Island manufactured gas sites resulted in costs per site ranging from less than $1 million to $11 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 will be successful. The Company believes that hazardous waste liabilities for all sites of which it is aware 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 C - ------ 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 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 1996 Annual Report on Form 10-K. Earnings - -------- Net income for the first quarter of 1997 increased $1.4 million from the corresponding period in 1996. This increase reflects an $11 million increase in base distribution rates that became effective on January 1, 1997 and decreased distribution system- related operation and maintenance expense. Partially offsetting these increases to income is a 2.1 percent decrease in kilowatt- hour (kWh) deliveries to ultimate customers due to milder weather conditions in the first quarter of 1997 as compared to the first quarter of 1996. 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 divesture of its generation business. The NEES companies anticipate that industry restructuring and divestiture will lead to workforce reductions. Rhode Island The Rhode Island legislature is considering a number of proposed bills relating to industry restructuring. Possible legislation dealing with securitization of stranded costs has been discussed; however, to date no such legislation has been introduced. 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 $44 million in net regulatory assets in compliance with FAS 71. The Company believes that the continuing rate-making policies and practices of the RIPUC and the terms of the Rhode Island statute 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 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) Sales to ultimate customers $(3) Rate changes 3 Fuel Recovery 4 --- $ 4 === For a discussion of sales to ultimate customers, see the "Earnings" section. The increase in revenues due to rate changes reflects an $11 million increase in base rates, approved by the RIPUC and distribution rates, effective January 1, 1997 in accordance with the utility Restructuring Act of 1996. 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) Fuel for generation and purchased electric energy: Fuel $ 4 Integrated Facilities credit from NEP 1 Purchases and Demand Charges and Other (1) Other operation and maintenance (1) Depreciation (1) Income Taxes 1 --- $ 3 === For a discussion of fuel costs, see the "Operating Revenue" section. The decrease in other operation and maintenance expense in the first quarter reflects a decrease in distribution system-related expenses. The decrease in depreciation and the decrease in the integrated facilities credits from NEP both reflect reduced dismantlement costs associated with the retired South Street generation plant. This decrease in depreciation expense was partially offset by new plant expenditures. Utility Plant Expenditures and Financings - ----------------------------------------- Cash expenditures for utility plant totaled $7 million in the first three months of 1997. The funds necessary for utility plant expenditures were primarily provided by net cash from operating activities, after the payment of dividends. The Company plans to issue $40 million of long-term debt in 1997. At March 31, 1997, the Company had $7 million of short-term debt outstanding of which $4 million represents 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, 1997. For the twelve-month period ending March 31, 1997, the ratio of earnings to fixed charges was 2.84. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders - ------------------------------------------------------------ On March 18, 1997, 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 was fixed at nine. The following were elected as directors: Joan T. Bok Stephen A. Cardi Richard W. Frost Frances H. Gammell Joseph J. Kirby Robert L. McCabe John W. Rowe Richard P. Sergel William E. Trueheart Coopers & Lybrand L.L.P. was appointed as auditor for 1997. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- The Company filed no report on Form 8-K during the quarter. The Company is filing the following revised exhibit for incorporation by reference into its registration statements on Form S-3, Commission File No. 33-61131: 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. THE NARRAGANSETT ELECTRIC COMPANY s/Howard W. McDowell Howard W. McDowell Controller, Authorized Officer, and Principal Accounting 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 THE NARRAGANSETT 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 $24,357 $22,954 $23,910 $14,589 $14,274 $21,052 - ---------- Add income taxes and fixed charges - ---------------------------------- Current federal income taxes 8,348 6,918 7,212 1,020 2,183 4,608 Deferred federal income taxes 4,223 4,675 3,512 3,930 2,199 4,560 Investment tax credits - net (497) (498) (503) (508) (508) (507) Interest on long-term debt 17,218 17,205 16,627 14,334 12,715 13,290 Interest on short-term debt and other2,592 2,883 3,663 2,897 2,074 1,277 ------- ------- ------- ------- ------- ------- Net earnings available for fixed charges $56,241 $54,137 $54,421 $36,262 $32,937 $44,280 ------- ------- ------- ------- ------- ------- Fixed charges: Interest on long-term debt $17,218 $17,205 $16,627 $14,334 $12,715 $13,290 Interest on short-term debt and other2,592 2,883 3,663 2,897 2,074 1,277 ------- ------- ------- ------- ------- ------- Total fixed charges $19,810 $20,088 $20,290 $17,231 $14,789 $14,567 ======= ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 2.84 2.69 2.68 2.10 2.23 3.04 - ----------------------------------
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-31-1997 MAR-31-1997 3-MOS PER-BOOK 561,109 0 87,540 57,051 0 705,700 56,624 80,170 123,738 260,532 0 36,500 173,546 2,650 0 4,125 37,500 0 0 0 190,847 705,700 131,466 3,977 114,086 118,063 13,403 (1,056) 12,347 4,654 7,693 536 7,157 3,397 4,305 21,699 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-----