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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<S> <C> <C>
For the quarterly period ended June 30,1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period _________________ to ___________________
Commission File Number 0-8480
EASTERN EDISON COMPANY
(Exact name of registrant as specified in its charter)
<S> <C> <C>
Massachusetts 04-1123095
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Mulberry Street, Brockton, Massachusetts
(Address of principal executive offices)
02402
(Zip Code)
(508)580-1213
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes...X......No..........
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
<S> <C> <C>
Class Outstanding at July 31, 1994
Common Shares, $25 par value 2,891,357 shares
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
EASTERN EDISON COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
<CAPTION>
ASSETS June 30, December 31,
1994 1993
<S> <C> <C> <C>
Utility Plant in Service $ 788,739 $ 784,664
Less: Accumulated Provision for Depreciation
and Amortization 239,178 226,391
Net Utility Plant in Service 549,561 558,273
Construction Work in Progress 11,545 6,779
Net Utility Plant 561,106 565,052
Current Assets:
Cash and Temporary Cash Investments 7,055 697
Accounts Receivable - Associated Companies 15,727 11,220
- Other 36,252 37,153
Materials and Supplies 7,765 9,838
Other Current Assets 11,110 10,848
Total Current Assets 77,909 69,756
Deferred Debits and Other Non-Current Assets 104,540 107,465
Total Assets $ 743,555 $ 742,273
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Stock, $25 Par Value $ 72,284 $ 72,284
Other Paid-In Capital 47,249 47,249
Common Stock Expense (43) (43)
Retained Earnings 107,612 103,515
Total Common Equity 227,102 223,005
Redeemable Preferred Stock - Net 29,665 29,670
Preferred Stock Redemption Cost (4,706) (4,846)
Long-Term Debt - Net 264,178 264,134
Total Capitalization 516,239 511,963
Current Liabilities:
Accounts Payable - Associated Companies 4,872 4,221
- Other 22,016 22,611
Taxes Accrued 616 4,225
Interest Accrued 7,039 6,136
Other Current Liabilities 9,847 10,150
Total Current Liabilities 44,390 47,343
Deferred Credits & Other Non-Current Liabilities 64,600 65,361
Accumulated Deferred Taxes 118,326 117,606
Total Liabilities and Capital $ 743,555 $ 742,273
<FN>
See accompanying notes to consolidated condensed financial statements.
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EASTERN EDISON COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
<S><C> <C> <C> <C> <C>
1994 1993 1994 1993
Operating Revenues $ 102,002 $ 100,776 $ 212,390 $ 206,357
Operating Expenses:
Fuel 23,244 20,389 46,381 40,809
Purchased Power 27,795 29,369 57,724 60,603
Other Operation and Maintenance 25,388 26,904 49,787 51,411
Depreciation and Amortization 6,457 6,644 12,872 13,288
Taxes - Other Than Income 2,645 1,864 5,600 4,317
- Current Income 2,498 1,031 7,761 5,913
- Deferred Income 970 2,150 2,439 2,595
Total 88,997 88,351 182,564 178,936
Operating Income 13,005 12,425 29,826 27,421
Allowance for Other Funds
Used During Construction 62 75 111 138
Other Income - Net 433 264 820 617
Income Before Interest Charges 13,500 12,764 30,757 28,176
Interest Charges:
Interest on Long-Term Debt 4,636 6,283 9,216 12,613
Other Interest Expense 1,875 487 2,772 884
Allowance for Borrowed Funds Used
During Construction(Credit) (83) (82) (151) (152)
Net Interest Charges 6,428 6,688 11,837 13,345
Net Income 7,072 6,076 18,920 14,831
Preferred Dividend Requirements 497 790 994 1,696
Consolidated Net Earnings $ 6,575 $ 5,286 $ 17,926 $ 13,135
<FN>
See accompanying notes to consolidated condensed financial statements.
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EASTERN EDISON COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
<CAPTION>
Six Months Ended
June 30,
1994 1993
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 18,920 $ 14,831
Adjustments to Reconcile Net Income to Net
Cash Provided from Operating Activities:
Depreciation and Amortization 13,741 14,932
Amortization of Nuclear Fuel 1,471 2,860
Deferred Taxes 2,406 2,562
Investment Tax Credit, Net (460) (536)
Allowance for Other Funds Used During Construction (111) (138)
Other - Net (591) 168
Change in Operating Assets and Liabilities (4,748) (13,850)
Net Cash Provided From Operating Activities 30,628 20,829
CASH FLOW FROM INVESTING ACTIVITIES:
Construction Expenditures (9,683) (10,925)
Net Cash (Used in) Investing Activities (9,683) (10,925)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuances:
Long-Term Debt 100,000
Redemptions:
Long-Term Debt (105,000
Preferred Stock (15,600)
Increase in Short-Term Debt 5,337
Premium on Reacquisition & Financing Expenses (61) (7,077)
Common Stock Dividends Paid to EUA (13,532) (11,103)
Preferred Dividends Paid (994) (1,811)
Net Cash (Used in) Financing Activities (14,587) (35,254)
Net Increase (Decrease) in Cash and Temporary
Cash Investments 6,358 (25,350)
Cash and Temporary Cash Investments at
Beginning of Period 697 25,519
Cash and Temporary Cash Investments at
End of Period $ 7,055 $ 169
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (Net of Capitalized Interest) $ 9,202 $ 15,654
Income Taxes $ 11,229 $ 5,162
<FN>
See accompanying notes to consolidated condensed financial statements.
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EASTERN EDISON COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying Notes should be read in conjunction with the Notes to
Consolidated Financial Statements appearing in Eastern Edison Company's
(Eastern Edison or the Company) 1993 Annual Report on Form 10-K and the
Company's Quarterly Report on Form 10-Q for the period ended March 31, 1994.
Note A - In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the
financial position as of June 30, 1994 and December 31, 1993, and the
results of operations for the three and six months ended June 30, 1994
and 1993 and cash flows for the six months ended June 30, 1994 and
1993. Certain reclassifications have been made to prior period
financial statements to conform with current classifications.
In November 1992, the Financial Accounting Standards Board issued
Statement No. 112, "Employers' Accounting for Post-employment
Benefits." The Company was required to adopt this standard no later
than January 1, 1994. The estimated impact of this standard on the
Company is immaterial and therefore no liability has been recorded.
Note B - Results shown above for the respective interim periods are not neces-
sarily indicative of results to be expected for the fiscal years due
to seasonal factors which are inherent in electric utilities in New
England. A greater proportionate amount of revenues is earned in the
first and fourth quarters (winter season) of most years because more
electricity is sold due to weather conditions, fewer day-light hours,
etc.
Note C- Commitments and Contingencies:
Rate Activity
On March 21, 1994, Montaup Electric Company (Montaup), the wholesale
electric generating and transmission subsidiary of Eastern Edison,
filed an application with the Federal Energy Regulatory Commission
(FERC) for authorization to reduce its wholesale rates by $10.1
million, or three percent. Montaup supplies electricity at wholesale
rates to Eastern Edison and its affiliated retail electric utilities -
Blackstone Valley Electric Company and Newport Electric Corporation
(Newport) - and to two non-affiliated municipal utilities. This
application is designed to match more closely Montaup's revenues with
its decreasing cost of doing business resulting from, among other
things, a reduced rate base, lower capital costs and successful cost
control efforts.
As part of the rate filing, Montaup is seeking authorization to become
an "all-requirements" supplier for Newport. Previously, Montaup
provided only a portion of Newport's electricity requirements.
FERC allowed Montaup to implement the rate reduction on May 21, 1994,
and Montaup began billing Newport as an all-requirements customer on
that date, pending final adjudication and approval.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following is Management's discussion and analysis of certain
significant factors affecting the Company's earnings and financial condition
for the interim periods presented in this Form 10-Q.
Overview
Second quarter and six months ended June 30, 1994 Consolidated Net
Earnings increased $1.3 million or 24.4% and $4.8 million or 36.5%,
respectively, as compared to the same periods of a year ago. Decreases in
interest expense and preferred dividend requirements resulting from Eastern
Edison's 1993 financing activity, growth in kilowatthour (kWh) sales of
electricity and lower operations and maintenance expenses as discussed below
were the major contributors toward these increases. Total retail kWh sales
posted gains of 1.7% and 2.5% in the second quarter and year-to-date periods,
respectively. Increases in kWh sales to industrial customers of 7.0% and 6.1%
in the respective periods highlighted the overall kWh sales increase and is an
indication of economic recovery in the Company's service territory. Despite
this strong sales performance, the Company anticipates a slow economic recovery
for the foreseeable future.
Operating Revenues
Operating Revenues increased for the second quarter and six months ended
June 30, 1994 by $1.2 million and $6.0 million, respectively, as compared to
the same periods in 1993. Eastern Edison's kWh sales growth, as discussed
above, accounted for growth in base revenues in the second quarter of
approximately $1.7 million. Additionally, second quarter revenues were
impacted by recoveries of increased fuel expenses of approximately $2.6 million
and increased transmission wheeling revenues of $0.5 million. These second
quarter increases were partially offset by a decrease in recoveries of
purchased power expense of approximately $1.9 million along with the impacts of
Montaup's rate reduction effective May 21, 1994. Likewise, in the year-to-date
period Eastern Edison's base revenues grew by $1.5 million, the Company
recovered an additional $5.2 million and $1.9 million of increased fuel and
conservation and load management expenses, respectively, and wheeling revenues
grew by $1.0 million. These year-to-date increases were partially offset by a
decrease of approximately $2.2 million in recoveries of purchased power expense
along with the impact of Montaup's rate reduction.
Operations Expense
Fuel expense for the second quarter and six months ended June 30, 1994 as
compared to the same periods in 1993 increased $2.9 million or 14.0% and $5.6
million or 13.7%, respectively. These increases were due primarily to
increased generation by Company owned units in 1994 as a result of outages
experienced during 1993. Canal Unit 2, which is 50% owned by Montaup, began a
scheduled outage on February 13, 1993 and returned to service on April 5, 1993
while Somerset Unit 6, a wholly owned unit of Montaup had been out of service
for essentially all of 1993 due to waterwall restoration. Offsetting these
impacts on fuel expense somewhat were decreases in the average cost of fuel of
9.6% and 4.3% for the respective periods.
Purchased Power demand expense for the second quarter and for the six
months ended June 30, 1994 decreased approximately $1.6 million or 5.4% and
$2.9 million or 4.8%, respectively, as compared to the same periods in 1993.
These decreases are due primarily to a decrease in costs billed by Montaup's
suppliers of approximately $1.4 million and $2.5 million, respectively.
Other Operation and Maintenance expenses for the second quarter and six
months ended June 30, 1994 decreased by approximately $1.5 million or 5.6% and
$1.6 million or 3.2%, respectively, from the same periods in 1993. These
changes were primarily due to decreases in Canal Unit 2 maintenance expense of
$1.4 million and $2.4 million (see discussion above) and decreases in EUA
Service Corporation (EUA Service) allocated charges recorded as operation and
maintenance expense of $0.7 million and $1.4 million in the second quarter and
six month periods, respectively. Offsetting the six month period decreases was
an increase in conservation and load management expense of $2.2 million.
Taxes Other Than Income
Taxes other than income for the three and six month periods ended June
30, 1994 increased $0.8 million and $1.3 million, respectively, when compared
to the same periods of 1993. Contributing to these increases were EUA Service
allocated payroll taxes and property taxes previously recorded as operation and
maintenance expenses aggregating approximately $0.3 million and $0.7 million
for the respective periods. The remaining increase in both periods relates to
a $0.5 million New Hampshire Nuclear Property Tax Abatement recorded by the
Company in the second quarter of 1993.
Interest Charges
Interest on long-term debt decreased by $1.6 million or 26.2% and $3.4
million or 26.9%, respectively, in the second quarter and six months ended June
30, 1994 as compared to the same periods in 1993. These decreases are due to
Eastern Edison's refinancings of $195 million of long-term debt in 1993 at
substantially lower interest rates.
Preferred Dividend Requirements
Preferred Dividend Requirements decreased $0.3 million or 37.1% and $0.7
million or 41.4% in the three and six month periods ended June 30, 1994 as
compared to the same periods of 1993. These decreases are a result of Eastern
Edison's redemption of all of its outstanding 4.64%, 8.32%, 9.00% and 9.80%
series of Preferred Stock aggregating $41.6 million and subsequent issuance of
$30 million of 6 5/8% series of Preferred Stock.
Liquidity and Sources of Capital
Eastern Edison's and Montaup's need for permanent capital is primarily
related to the construction of facilities required to meet the needs of their
existing and future customers.
Traditionally, cash construction requirements not met with internally
generated funds are obtained through short-term borrowings which are ultimately
funded with permanent capital. EUA System companies, including Eastern Edison
and Montaup, maintain short-term lines of credit with various banks aggregating
approximately $140 million. These credit lines are available to other
affiliated companies under joint credit line arrangements. At June 30, 1994
and December 31, 1993, these unused EUA System short-term lines of credit
amounted to approximately $104.5 million and $102.8 million, respectively.
Year-to-date June 30, 1994 and 1993 internally generated funds amounted to
$22.1 and $21.6 million, respectively, while cash construction requirements for
the same periods were $9.7 and $10.9 million, respectively.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
- None filed in the quarter ended June 30, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the under
signed thereunto duly authorized.
Eastern Edison Company___________
(Registrant)
Date: August 11, 1994 /s/ Richard M. Burns_____________
Richard M. Burns, Vice President
(on behalf of the Registrant and
as Chief Accounting Officer)
