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
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
For the transition period _________________ to ___________________
Commission File Number 1-5366
EASTERN UTILITIES ASSOCIATES
(Exact name of registrant as specified in its charter)
Massachusetts 04-1271872
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Liberty Square, Boston, Massachusetts
(Address of principal executive offices)
02109
(Zip Code)
(617)357-9590
(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.
Class Outstanding at May 1, 1995
Common Shares, $5 par value 20,240,872 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EASTERN UTILITIES ASSOCIATES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
<S> <C> <C>
Utility Plant and Other Investments:
Utility Plant in Service $ 1,023,625 $ 1,020,859
Less: Accumulated Provision for Depreciation
and Amortization 312,833 304,034
Net Utility Plant in Service 710,792 716,825
Construction Work in Progress 15,534 8,389
Net Utility Plant 726,326 725,214
Investments in Jointly Owned Companies 69,925 70,675
Non-Utility Property - Net 111,331 107,803
Total Plant and Other Investments 907,582 903,692
Current Assets:
Cash and Temporary Cash Investments 13,808 20,109
Accounts Receivable, Net 82,994 89,348
Notes Receivable 13,301 13,906
Materials and Supplies 13,926 15,168
Other Current Assets 8,019 8,517
Total Current Assets 132,048 147,048
Deferred Debits and Other Non-Current Assets 182,670 183,309
Total Assets $ 1,222,300 $ 1,234,049
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Shares, $5 Par Value $ 100,308 $ 99,685
Other Paid-In Capital 213,616 212,990
Common Share Expense (3,880) (3,849)
Retained Earnings 60,003 56,617
Total Common Equity 370,047 365,443
Non-Redeemable Preferred Stock - Net 6,900 6,900
Redeemable Preferred Stock - Net 25,630 25,390
Long-Term Debt - Net 452,414 455,412
Total Capitalization 854,991 853,145
Current Liabilities:
Long-Term Debt Due Within One Year 42,402 41,601
Notes Payable 34,882 31,678
Preferred Stock Sinking Fund 50 50
Accounts Payable 27,838 33,442
Taxes Accrued 7,108 6,465
Interest Accrued 8,278 10,889
Other Current Liabilities 19,270 29,566
Total Current Liabilities 139,828 153,691
Deferred Credits and Other Non-Current Liabilities 86,965 89,313
Accumulated Deferred Taxes 140,516 137,900
Total Liabilities and Capitalization $ 1,222,300 $ 1,234,049
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands Except Number of Shares and Per Share Amounts)
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Operating Revenues $ 137,967 $ 150,197
Operating Expenses:
Fuel 22,284 23,183
Purchased Power 31,974 34,902
Other Operation and Maintenance 41,300 44,313
Depreciation and Amortization 11,757 11,395
Taxes - Other Than Income 6,557 6,849
- Current Income 3,951 5,822
- Deferred Income 2,061 2,163
Total 119,884 128,627
Operating Income 18,083 21,570
Other Income - Net 4,153 5,310
Income Before Interest Charges 22,236 26,880
Interest Charges:
Interest on Long-Term Debt 9,660 9,773
Other Interest Expense 1,248 1,279
Allowance for Borrowed Funds Used
During Construction (Credit) (558) (345)
Net Interest Charges 10,350 10,707
Net Income 11,886 16,173
Preferred Dividends of Subsidiaries 581 583
Consolidated Net Earnings $ 11,305 $ 15,590
Weighted Average Number of
Common Shares Outstanding 19,998,331 19,388,017
Consolidated Earnings Per
Average Common Share $ 0.57 $ 0.80
Dividends Paid $ 0.385 $ 0.36
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
<CAPTION>
EASTERN UTILITIES ASSOCIATES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 11,886 $ 16,173
Adjustments to Reconcile Net Income
to Net Cash Provided from Operating Activities:
Depreciation and Amortization 14,721 14,011
Deferred Taxes 2,262 2,293
Non-cash (Gains)/Expenses on Sales of Investments
in Energy Savings Projects (278) 2,056
Investment Tax Credit, Net (303) (295)
Allowance for Funds Used During Construction (146) (69)
Collections and sales of project
notes and leases receivables 1,427 1,312
Other - Net 359 (917)
Change in Operating Assets and Liabilities (9,773) (3,540)
Net Cash Provided From Operating Activities 20,155 31,024
CASH FLOW FROM INVESTING ACTIVITIES:
Construction Expenditures (21,147) (11,507
Collections on Notes and Lease Receivables of EUA Cogenex 487 193
Acquisition of Northeast Energy Management, Inc. (8,567)
Increase in Other Investments (81)
Net Cash (Used in) Investment Activities (20,660) (19,962
CASH FLOW FROM FINANCING ACTIVITIES:
Issuances:
Common Stock 1,509 2,295
Long-Term Debt 7,926
Redemptions:
Long-Term Debt (2,219) (9,042)
Premium on Reacquisition and Financing Expenses (30) (396)
EUA Common Share Dividends Paid (7,679) (7,021)
Subsidiary Preferred Dividends Paid (581) (583)
Net Increase in Short-Term Debt 3,204 8,880
Net Cash Provided from (Used in) Financing Activities (5,796) 2,059
Net Increase (Decrease) in Cash and Temp. Cash Investments (6,301) 13,121
Cash and Temporary Cash Investments
at Beginning of Period 20,109 4,180
Cash and Temporary Cash Investments
at End of Period $ 13,808 $ 17,301
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (Net of Capitalized Interest) $ 11,980 $ 10,759
Income Taxes $ 1,914 $ 1,607
Supplemental schedule of non-cash investing activities:
Conversion of Investments in Energy Savings
Projects to Notes and Leases Receivable $ 933 $ 1,986
See accompanying notes to consolidated condensed financial statements.
</TABLE>
EASTERN_UTILITIES_ASSOCIATES
NOTES_TO_CONSOLIDATED_CONDENSED_FINANCIAL_STATEMENTS
The accompanying Notes should be read in conjunction with the Notes to
Consolidated Financial Statements incorporated in the Eastern Utilities
Associates (EUA or the Company) 1994 Annual Report on Form 10-K.
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 its
financial position as of March 31, 1995 and the results of operations
and cash flows for the three months ended March 31, 1995 and 1994.
Certain reclassifications have been made to prior period financial
statements to conform to current period classifications. The year-end
consolidated condensed balance sheet data was derived from audited
financial statements but does not include all disclosures required
under generally accepted accounting principles.
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 EUA, 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 to EUA's retail
electric utilities - Eastern Edison Company (Eastern Edison),
Blackstone Valley Electric Company (Blackstone) 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
interest costs and successful cost control efforts.
On May 21, 1994, Montaup began billing the reduced rates, and on April
14, 1995 FERC approved a settlement agreement between Montaup and the
intervenors in the case calling for an annual reduction of
approximately $13.9 million (inclusive of the filed $10.1 million
reduction).
Montaup will refund to its customers the difference collected between
the $10.1 million filed reduction and the $13.9 million settled
reduction in the second quarter of 1995. Montaup has previously
reserved for this refund.
Maine Yankee
During the refueling-and-maintenance shutdown of the Maine Yankee
Nuclear Generating plant that started in early February of 1995, Maine
Yankee Atomic Power Company (Maine Yankee), the owner of the plant,
detected an increased rate of degradation of the plant's steam
generator tubes in excess of the number expected and started
evaluating several courses of action.
On April 7, 1995, Maine Yankee announced its intention to further
explore sleeving all 17,000 steam generator tubes. Although testing
of all tubes revealed that approximately 40% of the tubes are free of
defects, Maine Yankee plans to sleeve all of the tubes as a
preventative safety measure. Sleeving involves the inserting of a
tube of slightly smaller diameter into the defective tube, the sleeve
is welded in place and acts as a new tube. Sleeving is a proven
technology and must meet rigorous federal standards of safety and
licensing. If the sleeving option is approved and implemented, Maine
Yankee projects that the plant could return to service in the final
quarter of 1995.
Montaup owns 4% of the Common Stock of Maine Yankee, and its share of
the current estimated cost of the sleeving option could be
approximately $1.6 million. At this time, EUA cannot predict whether
this option will be approved for implementation or the ultimate impact
on EUA, if any, of this option or any other course of action which may
be taken with respect to the plant.
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
Consolidated net earnings for the quarter ended March 31, 1995 were $11.3
million. Net Earnings for the same period of 1994 amounted to $15.6 million.
Net Earnings contributions by Business Unit for the first three months of 1995
and 1994 were as follows (000's):
Three Months Ended March 31,
1995 1994
Core Electric Business $10,636 $13,227
Energy Related Business 507 2,249
Corporate 162 114
Consolidated $11,305 $15,590
======= =======
Net Earnings of the Core Electric Business for the first quarter of 1995
decreased by $2.6 million primarily due to decreased kilowatthour (kwh) sales
and a full quarter's impact of Montaup's wholesale rate reduction implemented
on May 21, 1994. The first quarter of 1995 was 18% warmer than the same period
of a year ago causing a 3.8% decrease in total primary kWh sales. However,
while total primary sales dropped, sales to industrial customers posted a 3.7%
gain signaling a continuation of the slow but steady economic recovery in the
Core Electric service territories.
Net Earnings of our Energy Related Business Unit decreased by
approximately $1.7 million in the first quarter of 1995 as compared to the same
period of a year ago. This decrease is due primarily to a $1.3 million
decrease in EUA Energy Investment Corporation (EUA Energy) earnings resulting
mainly from additional research and development expenses recorded in the first
quarter of 1995. EUA Cogenex Corporation's (EUA Cogenex) earnings contribution
fell approximately $400,000 in the first quarter due primarily to lower project
sales.
Operating_Revenues
Operating Revenues for the first three months of 1995 decreased by $12.2
million to approximately $138.0 million when compared to the same period of
1994. Operating Revenues by Business Unit for the first quarter of 1995 and
1994 were as follows (000's):
Three Months Ended March 31,
1995 1994
Core Electric Business $122,738 $132,448
Energy Related Business 15,229 17,749
Corporate 0 0
Consolidated $137,967 $150,197
======== ========
Core Electric Business revenues decreased $9.7 million due primarily to a
reduction of approximately $3.9 million in Montaup's wholesale revenues
resulting from a full quarter's impact of its wholesale rate reduction
implemented on May 21, 1994, recoveries of decreased fuel, purchased power and
conservation and load management expenses aggregating $5.2 million as discussed
below and the impacts of lower kWh sales.
EUA Cogenex revenues, which account for all of the Energy Related Business
Unit revenues, decreased by $2.5 million.
Operating_Expenses
Fuel expense of the Core Electric Business for the first quarter of 1995
decreased from that of the same period in 1994 by approximately $900,000 or
3.9% due primarily to the decrease in kWh sales, offset somewhat by a 9.7%
increase in the average cost of fuel in the first quarter of 1995 as compared
to the same period of 1994. Also offsetting the impact of lower kWh sales was
approximately $1.2 million of purchased power-energy previously recorded as
purchased power expense by Newport now recorded as fuel expense by Montaup as a
result of Newport becoming an all-requirements customer of Montaup effective
May 21, 1994.
Purchased Power expense for the first quarter of 1995 decreased $2.9
million or 8.4% as compared to last year's first quarter due primarily to a
decrease of approximately $2.1 million resulting from contracts which expired
in October 1994 aggregating 41 mw. The reclassification of Purchased Power
expense to fuel expense as discussed above also contributed to this decrease.
Other Operation and Maintenance (O&M) expenses for the quarter ended March
31, 1995 decreased approximately $3.0 million or 6.8% from the same period in
1994 due to the following:
Core Electric Business O&M expenses decreased by $1.9 million due
primarily to decreased direct expenses such as wages, benefits, distribution
and production expenses aggregating $1.4 million and decreased conservation and
load management expenses of $1.4 million. Offsetting these decreases somewhat
were increases in indirect expenses totaling $800,000 related to jointly owned
unit expenses and FAS106 expenses.
O&M expenses of the Energy Related Business decreased by approximately
$900,000 resulting from decreased EUA Cogenex O&M expenses of approximately
$2.7 million offset by additional development and operating expenses of EUA
Energy aggregating approximately $1.8 million.
Other_Income_and (Deductions) -_Net
Other Income and (Deductions)-Net decreased $1.2 million in the first
quarter of 1995 as compared to the corresponding period in the prior year due
primarily to a one-time settlement received in 1994 by Eastern Utilities
Associates (the Parent Company) totaling $900,000 related to Seabrook Nuclear
Project payments previously withheld by the Vermont Electric Generation and
Transmission Cooperative, Inc.
Liquidity_and_Sources_of_Capital
The EUA System's need for permanent capital is primarily related to
investments in facilities required to meet the needs of its existing and future
customers.
Traditionally, cash construction requirements not met with internally
generated funds are financed through short-term borrowings which are ultimately
funded with permanent capital. At March 31, 1995, EUA System companies
maintained short-term lines of credit with various banks aggregating approxi-
mately $150 million. Outstanding short-term Debt at March 31, 1995 and
December 31, 1994 by Business Unit was as follows (000's):
March 31, 1995 December 31, 1994
Core Electric Business $ 650 $ 0
Energy Related Business 27,633 23,476
Corporate 6,599 8,202
Consolidated $34,882 $31,678
======= =======
For the three months ended March 31, 1995, internally generated funds
available after the payment of dividends amounted to approximately $22.1
million while the EUA System's cash construction requirements amounted to
approximately $21.1 million for the same period. Various laws, regulations and
contract provisions limit the use of EUA's internally generated funds such that
the funds generated by one subsidiary are not generally available to fund the
operations of another subsidiary.
On April 17, 1995, the Trustees of EUA voted to increase the quarterly
dividend 1.5 cents per share from 38.5 cents per share to 40 cents per share.
The first quarterly dividend at the new rate of will be payable May 15, 1995 to
shareholders of record on May 1, 1995.
Voluntary Retirement Incentive Offer
On March 15, 1995, EUA announced a corporate reorganization which, among
other things, will consolidate management of Eastern Edison, Blackstone and
Newport. David H. Gulvin, formerly President of Blackstone and Newport, was
named Senior Vice President of Eastern Edison, Blackstone and Newport. John D.
Carney, President of Eastern Edison was named President of Blackstone and
Newport, also. As part of the reorganization, a voluntary retirement incentive
effective June 1, 1995, was offered to sixty-six EUA System employees. EUA
expects a majority of the eligible personnel to accept and anticipates taking a
one-time charge to earnings in the second quarter of this year to reflect the
cost of this early retirement incentive. The final amount of this charge will
depend on the final number of eligible employees that accept the offer. The
estimated payback period is approximately 18 months.
PART II - OTHER INFORMATION
Item 5. Other Information
On March 29, 1995, the Federal Energy Regulatory Commission (FERC) issued
a Notice of Proposed Rulemaking (NOPR) which will require public utilities
that own or control interstate transmission facilities to offer to other
utilities "open access" transmission service on a non-discriminatory basis and
file open access transmission tariffs. FERC also proposes to allow in certain
circumstances the collection of charges for the recovery of stranded costs
associated with requiring open access tariffs when former wholesale or retail
customers change power suppliers. The Commission's purpose in proposing the
new rules is to encourage competition in the bulk power market. At this time,
management is unable to predict the ultimate impact, if any, of the NOPR on the
EUA System.
On May 1, 1995 EUA Cogenex completed the acquisition of Highland Energy
Group, Inc. (Highland) of Boulder, Colorado in exchange for $4.2 million of EUA
Common Shares (176,258 shares) plus a possible deferred payment of up to $3.8
million in EUA Common Shares contingent upon post acquisition performance.
Highland is an energy services and demand side management company operating as
a wholly-owned subsidiary of EUA Cogenex.
Item_6. Exhibits_and_Reports_on_Form_8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
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
undersigned thereunto duly authorized.
Eastern_Utilities_Associates______
(Registrant)
Date: May_12,_1995 /s/ Clifford J. Hebert, Jr.
Clifford J. Hebert, Jr., Treasurer
(on behalf of the Registrant and
as Chief Financial Officer)
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