<PAGE>
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, 1994
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
(508-366-9011)
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 March 31, 1994.
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Statements of Income
Periods Ended March 31
(Unaudited)
<CAPTION>
Three Months Twelve Months
------------ -------------
1994 1993 1994 1993
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenue $381,712 $378,441$1,471,811 $1,408,978
-------- ------------------ ----------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate285,162 277,475 1,089,605 1,053,782
Other operation 46,563 52,392 223,610 185,485
Maintenance 7,850 13,194 22,824 40,906
Depreciation 10,825 10,400 41,273 39,650
Taxes, other than income taxes 8,309 7,758 27,077 25,050
Income taxes 5,879 3,391 13,542 13,170
-------- ------------------ ----------
Total operating expenses 364,588 364,610 1,417,931 1,358,043
-------- ------------------ ----------
Operating income 17,124 13,831 53,880 50,935
Other income (expense) - net, including
related taxes (1,455) (1,109) (410) (421)
-------- ------------------ ----------
Operating and other income 15,669 12,722 53,470 50,514
-------- ------------------ ----------
Interest:
Interest on long-term debt 5,003 6,029 22,377 22,792
Other interest 1,167 707 4,099 3,948
Allowance for borrowed funds used during
construction - credit (73) (74) (297) (233)
-------- ------------------ ----------
Total interest 6,097 6,662 26,179 26,507
-------- ------------------ ----------
Net income $ 9,572 $ 6,060$ 27,291 $ 24,007
======== ================== ==========
Statements of Retained Earnings
Retained earnings at beginning of period$135,276 $134,670$ 129,681 $ 131,885
Net income 9,572 6,060 27,291 24,007
Dividends declared on cumulative
preferred stock (778) (857) (3,693) (3,428)
Dividends declared on common stock (6,595) (10,192) (14,988) (22,783)
Premium on redemption of preferred stock (816)
-------- ------------------ ----------
Retained earnings at end of period $137,475 $129,681$ 137,475 $ 129,681
======== ================== ==========
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.
</TABLE>
<PAGE>
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Balance Sheets
(Unaudited)
<CAPTION>
March 31, December 31,
ASSETS 1994 1993
------ ---- ----
(In Thousands)
<S> <C> <C>
Utility plant, at original cost $1,292,452 $1,279,194
Less accumulated provisions for depreciation 358,408 352,467
---------- ----------
934,044 926,727
Construction work in progress 19,893 18,558
---------- ----------
Net utility plant 953,937 945,285
---------- ----------
Current assets:
Cash 573 773
Accounts receivable:
From sales of electric energy 149,677 142,532
Other (including $1,814,000 and $3,517,000 from affiliates)14,019 22,881
Less reserves for doubtful accounts 12,100 10,534
---------- ----------
151,596 154,879
Unbilled revenues 37,400 43,400
Materials and supplies, at average cost 11,827 10,601
Prepaid and other current assets 18,642 19,990
---------- ----------
Total current assets 220,038 229,643
---------- ----------
Deferred charges and other assets 60,446 57,376
---------- ----------
$1,234,421 $1,232,304
========== ==========
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 141,310 141,310
Retained earnings 137,475 135,276
---------- ----------
Total common equity 384,600 382,401
Cumulative preferred stock 50,000 50,000
Long-term debt 264,683 264,719
---------- ----------
Total capitalization 699,283 697,120
---------- ----------
Current liabilities:
Long-term debt due within one year 10,000
Short-term debt (including $6,000,000 and $8,350,000
to affiliates) 50,470 37,925
Accounts payable (including $148,898,000 and $160,852,000
to affiliates) 157,744 178,117
Accrued liabilities:
Taxes 7,020 1,133
Interest 5,866 6,784
Other accrued expenses 68,693 69,823
Customer deposits 5,386 5,907
Dividends payable 7,373 5,575
---------- ----------
Total current liabilities 312,552 305,264
---------- ----------
Deferred federal and state income taxes 146,108 146,414
Unamortized investment tax credits 19,737 20,044
Other reserves and deferred credits 56,741 63,462
---------- ----------
$1,234,421 $1,232,304
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Statements of Cash Flows
Quarters Ended March 31
(Unaudited)
<CAPTION>
1994 1993
---- ----
(In Thousands)
<S> <C> <C>
Operating activities:
Net income $ 9,572 $ 6,060
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 10,825 10,400
Deferred income taxes and investment tax credits - net (544) (8,245)
Allowance for funds used during construction (73) (74)
Early retirement program 7,665
Decrease (increase) in accounts receivable,
net and unbilled revenues 9,283 (9,138)
Decrease (increase) in materials and supplies (1,226) 140
Increase (decrease) in accounts payable (20,373) (26,063)
Increase (decrease) in other current liabilities 3,318 28,434
Other, net (2,725) (2,047)
-------- --------
Net cash provided by operating activities $ 8,057 $ 7,132
-------- --------
Investing activities:
Plant expenditures, excluding allowance for
funds used during construction $(19,612) $(18,036)
Other investing activities (5,616)
-------- --------
Net cash used in investing activities $(25,228) $(18,036)
-------- --------
Financing activities:
Dividends paid on common stock $ (4,796) $ (5,396)
Dividends paid on preferred stock (778) (857)
Long-term debt-issues 10,000 50,000
Long-term debt-retirements (20,000)
Premium on reacquisition of long-term debt (208)
Changes in short-term debt 12,545 (11,525)
-------- --------
Net cash provided by financing activities $ 16,971 $ 12,014
-------- --------
Net increase in cash and cash equivalents $ (200) $ 1,110
Cash and cash equivalents at beginning of period 773 738
-------- --------
Cash and cash equivalents at end of period $ 573 $ 1,848
======== ========
Supplementary information:
Interest paid less amounts capitalized $ 6,714 $ 5,708
-------- --------
Federal and state income taxes paid $ (1,900) $ 1,405
-------- --------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Note A
- ------
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.
Parties liable include past and present site owners and operators,
transporters that brought wastes to the site, and entities that
generated or arranged for disposal or treatment of wastes
ultimately disposed of at the site. 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. These products or by-products may not
have previously been considered hazardous, and may not currently be
considered hazardous, but may be identified as such by federal,
state, or local authorities in the future. The 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.
Federal and state environmental agencies, as well as private
parties, have contacted or initiated legal proceedings against the
Company regarding liability for cleanup of sites alleged to contain
hazardous waste or substances. 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 (DEP) for 14 sites at which hazardous
waste is alleged to have been disposed. The Company is also aware
of other sites which it may be held responsible for remediating and
it is likely that, in the future, the Company will become involved
in additional proceedings demanding contribution for the cost of
remediating additional hazardous waste sites.
The most prevalent type of hazardous waste sites that the
Company has been connected with are former manufactured gas
locations. Until the early 1970's, predecessors or affiliates of
the Company were in the gas business. There are approximately 35
locations in Massachusetts at which gas may have been manufactured
and/or stored. Of the manufactured gas locations, 17 have been
listed for investigation by the DEP. In a lawsuit involving one of
these sites, the United States Court of Appeals for the First
Circuit affirmed in 1993 an earlier adverse decision against the
Company, NEES and another subsidiary, New England Power Service
Company. The decision held these companies liable for cleanup of
the properties involved in the case.
<PAGE>
Note A - Continued
- ------
In 1993, the Massachusetts Department of Public Utilities
approved a rate agreement filed by the Company that resolved all
rate recovery issues related to Massachusetts manufactured gas
sites formerly owned by the Company, its predecessors, and its
affiliates, as well as certain other Massachusetts hazardous waste
sites. The agreement allows for environmental remediation costs
for such sites to be met from a special interest bearing fund
established on the Company's books in 1993 of $30 million. The
initial fund balance was not recoverable from customers. Annual
contributions of $3 million, adjusted for inflation, are being
added to the fund by the Company and are recoverable in rates.
Under the agreement, any shortfalls in the fund will be paid by the
Company and be recovered through rates over seven years, without
interest.
Predicting the potential costs to investigate and remediate
hazardous waste sites continues to be difficult. Factors such as
the evolving nature of remediation technology and regulatory
requirements and the particular characteristics of each site,
including, for example the size of the site, the nature and amount
of waste disposed at the site, and the surrounding geography and
land use, make precise estimates 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. At March
31, 1994, the Company had total reserves for environmental response
costs of $42 million and a related regulatory asset of $14 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, will not be material (10 percent of common equity) to
its financial position. Where appropriate, the Company intends to
seek recovery from its insurer and from other PRPs, but it is
uncertain whether, and to what extent, such efforts would be
successful.
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 1993 Annual
Report.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
---------------------------------------------------------
Condition and Results of Operations
-----------------------------------
Earnings
- --------
Net income for the first quarter of 1994 increased $4 million
compared to the corresponding prior period. Earnings in the first
quarter of 1993 included a one-time charge of $8 million, after tax
($13 million, before tax) associated with an early retirement offer
and a special severance program for non-union employees undertaken
by the Company as part of an organizational review. Excluding the
effects of this 1993 charge, 1994 first quarter earnings decreased
$4 million. This decrease reflects a $6 million seasonal reduction
in accrued unbilled revenue recorded in the first quarter compared
to the December 1993 level (see Rate Activity section), as well as
increased operating expenses. Although the Company experienced an
increase in kilowatthour (KWH) sales, the resulting increase in
revenues was offset by increased purchased power costs.
Rate Activity
- -------------
In 1993, the Massachusetts Department of Public Utilities
(MDPU) approved a rate agreement filed by the Company, the
Massachusetts Attorney General, and two groups of large commercial
and industrial customers.
<PAGE>
Under the agreement, effective December 1, 1993, the Company
began implementing an 11 month general rate decrease of $26 million
(annual basis), from the level of rates then in effect. This rate
reduction will continue in effect until October 31, 1994, after
which rates will increase to the previously approved levels. The
agreement also provides for rate discounts of up to $4 million
available for the period ending October 31, 1994 for large
commercial and industrial customers who sign agreements to give a
five year notice to the Company before they purchase power from
another supplier or generate any additional power themselves. The
notice provision may be reduced from five to three years under
certain conditions. These discounts will increase in November 1994
to a level of $11 million per year, representing a five percent
discount on base rates, if all eligible customers sign agreements.
Approximately 80 percent of eligible customers have signed
agreements. The Company also agreed not to increase its base rates
before October 1, 1995. The decrease in revenues is being offset
by the recognition for accounting purposes of revenues for
electricity delivered but not yet billed. The agreement provided
that unbilled revenue at September 30, 1993 of approximately $35
million be amortized over thirteen months commencing December 1,
1993.
The agreement also resolved all issues associated with
providing funds and securing rate recovery for environmental
<PAGE>
remediation costs of Massachusetts manufactured gas waste sites
formerly owned by the Company, its predecessors, and its
affiliates, as well as certain other environmental cleanup costs
(see Hazardous Waste section).
Demand-Side Management
- ----------------------
The Company files its conservation and load management
programs, also referred to in the industry as demand-side
management (DSM) programs, regularly with the MDPU and has received
approval to recover in rates estimated DSM expenditures on a
current basis. The rates provide for reconciling estimated
expenditures to actual DSM expenditures, with interest.
Expenditures subject to the reconciliation mechanism were $7.0
million in the first three months of 1994 and $47 million for the
full year 1993. Since 1990, the Company has been allowed to earn
incentives based on the results of its DSM program. The Company
must be able to demonstrate to the MDPU the electricity savings
produced by its DSM program before incentives are recorded. The
Company recorded $6.7 million of before-tax incentives in 1993.
The Company has received approval from the MDPU that will give it
the opportunity to continue to earn incentives on 1994 DSM program
results.
<PAGE>
Operating Revenue
- -----------------
Operating revenue for the first quarter March 31, 1994
increased by $3 million from the corresponding period in 1993. KWH
sales billed to ultimate customers increased by 2.3 percent in the
first quarter of 1994 compared to the corresponding prior period.
The increased sales reflect the colder weather conditions in the
first quarter of 1994 and an improving economy, partially offset by
a reduction of one billing day due to meter reading schedules. KWH
sales in 1994 are expected to increase approximately one and one-
half to two percent as compared to 1993.
The following table summarizes the changes in operating
revenue:
Increase (Decrease) in Operating Revenue
First Quarter
-------------
1994 vs 1993
------------
(In Millions)
Fuel recovery $ 3
Demand-side management program recovery 1
General rate changes (7)
Sales increase and other 4
Unbilled revenue amortized under
rate agreement 8
Change in accrued unbilled revenue (6)
---
$ 3
===
<PAGE>
The Company's rates contain a fuel clause and a purchased
power cost adjustment mechanism (PPCA) provision. The PPCA is
designed to allow the Company to pass on to its customers changes
in purchased energy costs (excluding fuel) resulting from rate
increases or decreases by New England Power Company (NEP). The
PPCA also passes on to customers the seasonal effects from NEP's
purchased power rates to the Company. General rate changes reflect
a general rate decrease that went into effect in the fourth quarter
of 1993 and will stay in effect until October 31, 1994 when rates
will increase to their previously authorized level. This decrease
was offset by the amortization of $8 million of unbilled revenue
pursuant to the 1993 rate agreement. The Company is now
recognizing quarterly seasonal fluctuations in unbilled revenues on
an ongoing basis which for the first quarter of 1994 was a decrease
of $6 million. For a further discussion of rate changes, see the
Rate Activity section.
<PAGE>
Operating Expenses
- ------------------
The following table summarizes the changes in operating
expenses which are discussed below:
Increase (Decrease) in Operating Expenses
First Quarter
-------------
1994 vs 1993
-------------
(In Millions)
Purchased electric energy:
Fuel costs $ 3
Purchases and demand charges from NEP 5
Other operation and maintenance:
Demand-side management program expenses 1
Other (12)
Taxes 3
----
$ -
====
The increase in purchases and demand charges from NEP
primarily reflects an increase of 3.9 percent in peak demand levels
in the first quarter. The decrease in other operation and
maintenance-other reflects the one-time costs amounting to $13
million associated with an early retirement offer and special
severance program recorded in the first quarter of 1993.
The increase in taxes in the first quarter of 1994 is
primarily due to increased income, the effects of the increase in
the Federal corporate income tax rate from 34 percent to 35 percent
<PAGE>
which went into effect in the third quarter of 1993 retroactive to
January 1, 1993, and increased property taxes.
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.
Parties liable include past and present site owners and operators,
transporters that brought wastes to the site, and entities that
generated or arranged for disposal or treatment of wastes
ultimately disposed of at the site. 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. These products or by-products may not
have previously been considered hazardous, and may not currently be
considered hazardous, but may be identified as such by federal,
state, or local authorities in the future. The 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.
<PAGE>
Federal and state environmental agencies, as well as private
parties, have contacted or initiated legal proceedings against the
Company regarding liability for cleanup of sites alleged to contain
hazardous waste or substances. The Company has been named as a
potentially responsible party (PRP) by either the U.S.
Environmental Protection Agency (EPA) or the Massachusetts
Department of Environmental Protection (DEP) for 14 sites at which
hazardous waste is alleged to have been disposed. The Company is
also aware of other sites which it may be held responsible for
remediating and it is likely that, in the future, the Company will
become involved in additional proceedings demanding contribution
for the cost of remediating additional hazardous waste sites.
The most prevalent type of hazardous waste sites that the
Company has been connected with are former manufactured gas
locations. Until the early 1970's, predecessors or affiliates of
the Company were in the gas business. There are approximately 35
locations in Massachusetts at which gas may have been manufactured
and/or stored. Of the manufactured gas locations, 17 have been
listed for investigation by the DEP. In a lawsuit involving one of
these sites, the United States Court of Appeals for the First
Circuit affirmed in 1993 an earlier adverse decision against the
Company, NEES and another subsidiary, New England Power Service
Company. The decision held these companies liable for cleanup of
the properties involved in the case.
<PAGE>
In 1993, the MDPU approved a rate agreement filed by the
Company (see Rate Activity section) that resolved all rate recovery
issues related to Massachusetts manufactured gas sites formerly
owned by the Company, its predecessors, and its affiliates, as well
as certain other Massachusetts hazardous waste sites. The
agreement allows for environmental remediation costs for such sites
to be met from a special interest bearing fund established on the
Company's books in 1993 of $30 million. The initial fund balance
was not recoverable from customers. Annual contributions of $3
million, adjusted for inflation, are being added to the fund by
the Company and are recoverable in rates. Under the agreement, any
shortfalls in the fund will be paid by the Company and be recovered
through rates over seven years, without interest.
Predicting the potential costs to investigate and remediate
hazardous waste sites continues to be difficult. Factors such as
the evolving nature of remediation technology and regulatory
requirements and the particular characteristics of each site,
including, for example the size of the site, the nature and amount
of waste disposed at the site, and the surrounding geography and
land use, make precise estimates 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. At March
31, 1994, the Company had total reserves for environmental response
<PAGE>
costs of $42 million and a related regulatory asset of $14 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, will not be material (10 percent of common equity) to
its financial position. Where appropriate, the Company intends to
seek recovery from its insurer and from other PRPs, but it is
uncertain whether, and to what extent, such efforts would be
successful.
Electric and Magnetic Fields (EMF)
- ---------------------------------
In recent years, concerns have been raised about whether EMF,
which occur near transmission and distribution lines as well as
near household wiring and appliances, cause or contribute to
adverse health effects. Numerous studies on the effects of these
fields, some of them sponsored by electric utilities (including
NEES companies), have been conducted and are continuing. Some of
the studies have suggested associations between certain EMF and
various types of cancer, while other studies have not substantiated
such associations. In February 1993, the EPA called for
significant additional research on EMF. It is impossible to
predict the ultimate impact on the Company and the electric utility
industry if further investigations were to demonstrate that the
present electricity delivery system is contributing to increased
risk of cancer or other health problems.
<PAGE>
Several state courts have recognized a cause of action for
damage to property values in transmission line condemnation cases
based on the fear that power lines cause cancer. It is difficult
to predict what impact there would be on the Company if this cause
of action is recognized in Massachusetts and in contexts other than
condemnation cases.
Competitive Conditions
- ----------------------
The electric utility business is being subjected to increasing
competitive pressures, stemming from a combination of increasing
electric rates, improved technologies, and new regulations and
legislation intended to foster competition. Currently, the most
prominent form of competition in the electric utility industry is
in the bulk power market in which non-utility generating sources
have noticeably increased their market share. This change
indirectly affects the Company as it purchases all of its energy
requirements from NEP. Electric utilities are also facing
increased competition in the retail market primarily from
alternative fuel suppliers (principally natural gas companies) for
heating and cooling, customer-owned generation to displace
purchases from electric utilities, and direct competition among
electric utilities to attract major new manufacturing facilities to
their service territories. In the future, the potential exists for
electric utilities and non-utility generators to sell electricity
<PAGE>
to retail customers of other electric utilities. For example, the
California Public Utilities Commission recently announced a
proposal that would give certain large retail customers in that
state, by the year 1996, and all other retail customers by the year
2002, the option of selecting their electricity provider. Power
purchased from another provider would still be delivered over the
local utility's transmission network which, under the proposal,
would be subject to broader access. Other states, including
Massachusetts have considered or are in the process of considering
options to foster increased competition.
The NEES companies are responding to current and anticipated
competitive pressures in a variety of ways including cost control
and a corporate reorganization into separate retail and wholesale
business units. The retail business unit, which includes the
Company, is responding to competition through the development of
value-added services for customers and the offering of economic
development rates to encourage businesses to locate in the
Company's service territory. In its recent rate settlement, the
Company was able to change the standard terms under which it offers
service to commercial and industrial customers to extend the notice
period a customer must give from one to two years before purchasing
electricity from others or generating any additional electricity
for the customer's own use. In addition, the Company began offering
a discount from base rates in return for a contract requiring the
<PAGE>
customer to provide five years written notice before purchasing
electricity from others or generating any additional electricity
for the customer's own use. The discount is available to customers
with average monthly peak demands over 500 kilowatts.
Since a large part of the Company's costs represent the cost
of power purchased from NEP, its competitive position is affected
by NEP's ability to control costs. NEP is controlling costs and
positioning itself for increased competition through such means as
terminating certain purchased power contracts, past and future
shutdowns of uneconomic generating stations, and rapid amortization
of certain plant assets.
Electric utility rates are generally based on a utility's
costs. Therefore, electric utilities are subject to certain
accounting standards that are not applicable to other business
enterprises in general. These accounting rules allow regulated
entities, in appropriate circumstances, to establish regulatory
assets and to defer the income statement impact of certain costs
that are expected to be recovered in future rates. The effects of
competition could ultimately cause the operations of the Company,
or a portion thereof, to cease meeting the criteria for application
of these accounting rules. While the Company does not expect to
cease meeting these criteria in the near future, if this were to
occur, accounting standards of enterprises in general would apply
and immediate recognition of any previously deferred costs would be
<PAGE>
necessary in the year in which these criteria were no longer
applicable.
Utility Plant Expenditures and Financings
- -----------------------------------------
Cash expenditures for utility plant totaled $20 million in the
first three months of 1994. The funds necessary for utility plant
expenditures during the period were primarily provided by proceeds
from the issuance of additional short-term and long-term debt.
During the first three months of 1994, the Company issued $10
million of first mortgage bonds bearing an interest rate 7.05
percent. In May 1994, the Company issued an additional $5 million
of new long-term debt bearing an interest rate of 8.08 percent.
The Company plans to issue an additional $35 million of first
mortgage bonds in 1994.
At March 31, 1994, the Company had $50 million of short-term
debt outstanding including $44 million in the form of commercial
paper borrowings. The Company currently has lines of credit with
banks totaling $63 million which are available to provide liquidity
support for commercial paper borrowings and other corporate
purposes. There were no borrowings under these lines of credit at
March 31, 1994.
For the twelve-month period ending March 31, 1994, the ratio
of earnings to fixed charges was 2.55.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Information concerning the Company's rate filing for demand-side
management programs, 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 March 16, 1994, the Annual Meeting of Stockholders was held.
The following actions were taken by the unanimous vote of the
2,398,111 shares having general voting rights represented at the
meeting:
The number of directors for the ensuing year was fixed at
twelve.
The following were elected as directors:
Urville J. Beaumont
Joan T. Bok
Sally L. Collins
John H. Dickson
Charles B. Housen
Kathryn A. McCarthy
Patricia A. McGovern
John F. Reilly
John W. Rowe
Richard P. Sergel
Richard M. Shribman
Roslyn M. Watson
Michael E. Jesanis was elected Treasurer and Robert King Wulff
was elected Clerk.
Coopers & Lybrand was selected as auditor for 1994.
<PAGE>
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. 33-49453 and 33-50033.
12 Statement re computation of ratios
<PAGE>
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, 1994 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: May 11, 1994
Exhibit Index
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Exhibit Index
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Exhibit Description Page
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12 Statement re computation of Filed herewith
ratios
Exhibit 12
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MASSACHUSETTS ELECTRIC COMPANY
Computation of Ratio of Earnings to Fixed Charges
(SEC Coverage)
(Unaudited)
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12 Months
Ended
March 31, 1994 Years Ended December 31,
Actual -------------------------------------------------------------
(Unaudited) 1993 1992 1991 1990 1989
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(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net Income $27,291 $23,779 $34,905 $25,243 $35,192 $19,389
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Add income taxes and fixed charges
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Current federal income taxes 1,334 5,606 3,977 8,568 14,681 8,169
Deferred federal income taxes 9,830 3,430 13,451 3,889 1,044 (845)
Investment tax credits - net (1,228) (1,228) (1,228) (1,194) (1,225) (1,412)
Massachusetts franchise tax 3,708 3,348 3,858 2,920 3,765 2,165
Interest on long-term debt 22,377 23,403 21,910 20,157 20,626 17,602
Interest on short-term debt and other4,099 3,638 3,657 3,643 3,090 5,257
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Net earnings available for fixed charges$67,411$61,976 $80,530 $63,226 $77,173 $50,325
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Fixed charges:
Interest on long-term debt $22,377 $23,403 $21,910 $20,157 $20,626 $17,602
Interest on short-term debt and other4,099 3,638 3,657 3,643 3,090 5,257
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Total fixed charges $26,476 $27,041 $25,567 $23,800 $23,716 $22,859
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Ratio of earnings to fixed charges 2.55 2.29 3.15 2.66 3.25 2.20
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