<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 September 30, 1997
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
(508-389-2000)
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 September 30, 1997.
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Statements of Income
Periods Ended September 30
(Unaudited)
<CAPTION>
Quarter Nine Months
------- -----------
1997 1996 1997 1996
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenue $404,990 $398,542 $1,180,050 $1,147,840
-------- -------- ---------- ----------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate 302,596 301,664 862,288 851,057
Other operation 51,398 53,253 149,478 152,855
Maintenance 8,185 7,790 24,489 23,087
Depreciation 12,638 12,037 37,714 36,112
Taxes, other than income taxes 7,620 7,372 24,534 23,855
Income taxes 4,932 2,888 19,988 12,866
-------- -------- ---------- ----------
Total operating expenses 387,369 385,004 1,118,491 1,099,832
-------- -------- ---------- ----------
Operating income 17,621 13,538 61,559 48,008
Other income (expense), net (198) (439) (2,305) (2,516)
-------- -------- ---------- ----------
Operating and other income 17,423 13,099 59,254 45,492
-------- -------- ---------- ----------
Interest:
Interest on long-term debt 6,688 6,735 20,775 20,196
Other interest 2,790 1,783 6,761 4,989
Allowance for borrowed funds used during
construction - credit (96) (193) (312) (657)
-------- -------- ---------- ----------
Total interest 9,382 8,325 27,224 24,528
-------- -------- ---------- ----------
Net income $ 8,041 $ 4,774 $ 32,030 $ 20,964
======== ======== ========== ==========
Statements of Retained Earnings
Retained earnings at beginning of period $171,581 $154,150 $ 165,936$ 150,308
Net income 8,041 4,774 32,030 20,964
Dividends declared on cumulative
preferred stock (779) (778) (2,336) (2,335)
Dividends declared on common stock (2,398) (1,199) (19,185) (11,990)
-------- -------- ---------- ----------
Retained earnings at end of period $176,445 $156,947 $ 176,445 $ 156,947
======== ======== ========== ==========
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
Statements of Income
Twelve Months Ended September 30
(Unaudited)
<CAPTION>
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
Operating revenue $1,570,747 $1,532,418
---------- ----------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate 1,131,940 1,113,387
Other operation 208,286 211,985
Maintenance 32,504 30,299
Depreciation 48,959 46,547
Taxes, other than income taxes 31,238 31,344
Income taxes 32,308 25,499
---------- ----------
Total operating expenses 1,485,235 1,459,061
---------- ----------
Operating income 85,512 73,357
Other income (expense), net (1,002) (2,298)
---------- ----------
Operating and other income 84,510 71,059
---------- ----------
Interest:
Interest on long-term debt 27,668 26,865
Other interest 8,245 6,377
Allowance for borrowed funds used during
construction - credit (395) (902)
---------- ----------
Total interest 35,518 32,340
---------- ----------
Net income $ 48,992 $ 38,719
========== ==========
Statements of Retained Earnings
Retained earnings at beginning of period $ 156,947 $ 134,531
Net income 48,992 38,719
Dividends declared on cumulative preferred stock (3,115) (3,114)
Dividends declared on common stock (26,379) (13,189)
---------- ----------
Retained earnings at end of period $ 176,445 $ 156,947
========== ==========
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>
September 30, December 31,
ASSETS 1997 1996
------ ---- ----
(In Thousands)
<S> <C> <C>
Utility plant, at original cost $1,554,942 $1,509,896
Less accumulated provisions for depreciation 455,510 430,585
---------- ----------
1,099,432 1,079,311
Construction work in progress 16,219 9,119
---------- ----------
Net utility plant 1,115,651 1,088,430
---------- ----------
Current assets:
Cash 2,131 2,356
Accounts receivable:
From sales of electric energy 132,040 165,866
Other (including $2,587,000 and $1,605,000 from affiliates) 4,128 2,600
Less reserves for doubtful accounts 14,487 13,146
---------- ----------
121,681 155,320
Unbilled revenues 45,348 43,390
Materials and supplies, at average cost 8,947 8,820
Prepaid and other current assets 24,652 25,923
---------- ----------
Total current assets 202,759 235,809
---------- ----------
Deferred charges and other assets 50,530 66,019
---------- ----------
$1,368,940 $1,390,258
========== ==========
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 155,310 155,310
Retained earnings 176,445 165,936
Unrealized gain on securities, net 109
---------- ----------
Total common equity 437,679 427,061
Cumulative preferred stock 50,000 50,000
Long-term debt 333,457 343,321
---------- ----------
Total capitalization 821,136 820,382
---------- ----------
Current liabilities:
Long-term debt due within one year 10,000 30,000
Short-term debt (including $4,725,000 and $5,275,000
to affiliates) 21,275 43,775
Accounts payable (including $172,896,000 and $157,603,000
to affiliates) 192,133 178,263
Accrued liabilities:
Taxes 4,326 961
Interest 6,899 9,635
Other accrued expenses 75,494 54,833
Customer deposits 4,303 4,308
Dividends payable 3,177 7,973
---------- ----------
Total current liabilities 317,607 329,748
---------- ----------
Deferred federal and state income taxes 171,802 177,778
Unamortized investment tax credits 15,739 16,566
Other reserves and deferred credits 42,656 45,784
---------- ----------
$1,368,940 $1,390,258
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Statements of Cash Flows
Nine Months Ended September 30
(Unaudited)
<CAPTION> 1997 1996
---- ----
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $ 32,030 $ 20,964
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 37,714 36,112
Deferred income taxes and investment tax credit, net (6,915) (11,458)
Allowance for borrowed funds used during construction (312) (657)
Decrease (increase) in accounts receivable, net
and unbilled revenues 31,681 17,633
Decrease (increase) in materials and supplies (127) 1,673
Decrease (increase) in prepaid and other current assets 1,271 (454)
Increase (decrease) in accounts payable 13,870 15,703
Increase (decrease) in other current liabilities 21,285 35,631
Other, net 14,157 4,516
-------- --------
Net cash provided by operating activities $144,654 $119,663
-------- --------
Investing Activities:
Plant expenditures, excluding allowance for
funds used during construction $(64,712) $(74,091)
Other investing activities (1,350) (211)
-------- --------
Net cash used in investing activities $(66,062) $(74,302)
-------- --------
Financing Activities:
Dividends paid on common stock $(23,981) $(11,991)
Dividends paid on preferred stock (2,336) (2,335)
Long-term debt-retirements (30,000)
Changes in short-term debt (22,500) (31,350)
-------- --------
Net cash used in financing activities $(78,817) $(45,676)
-------- --------
Net increase (decrease) in cash and cash equivalents $ (225) $ (315)
Cash and cash equivalents at beginning of period 2,356 1,840
-------- --------
Cash and cash equivalents at end of period $ 2,131 $ 1,525
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Note A - 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.
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. Massachusetts Electric Company (the
Company) is a wholly-owned distribution subsidiary of New England
Electric System (NEES). NEES subsidiaries have an internal
environmental audit program and an external waste disposal vendor
audit and qualification program intended to enhance compliance with
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 19
sites at which hazardous waste is alleged to have been disposed.
Private parties have also contacted or initiated legal proceedings
against the Company regarding hazardous waste cleanup. The most
prevalent types of hazardous waste sites with which the Company has
been associated are manufactured gas locations. The Company is
aware of approximately 35 such manufactured gas locations in
Massachusetts (including eight of the 19 locations for which the
Company is a PRP). The Company is currently aware of other
possible hazardous waste sites, and may in the future become aware
of additional sites, that it may be held responsible for
remediating.
In 1993, the Massachusetts Department of Public Utilities
approved a settlement agreement regarding the rate recovery of
remediation costs of former manufactured gas sites and certain
other hazardous waste sites located in Massachusetts. Under that
agreement, qualified costs related to these sites are paid out of
a special fund established on the Company's books. The Company
made an initial $30 million contribution to the fund. Rate-
recoverable contributions of $3 million, adjusted since 1993 for
inflation, are added annually to the fund along with interest and
any recoveries from insurance carriers and other third parties. At
September 30, 1997, the fund had a balance of $29 million. If a
Massachusetts restructuring and rate settlement is approved by the
Federal Energy Regulatory Commission, an additional $15 million
<PAGE>
Note A - Hazardous Waste - Continued
- ------------------------
will be transferred to the fund in 1997 out of existing reserves
for refunds.
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. The NEES
companies have recovered amounts from certain insurers, and, where
appropriate, the Company is seeking or intends to seek recovery
from other insurers and from other PRPs, but it is uncertain
whether, and to what extent, such efforts will be successful. At
September 30, 1997, the Company had total reserves for
environmental response costs of $36 million and a related
regulatory liability of less than $1 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, 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 became effective in 1997. These new
rules do not have a material effect on the Company's financial
position or results of operations.
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 1996 Annual
Report.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
---------------------------------------------------------
Condition and Results of Operations
-----------------------------------
This section contains management's assessment of Massachusetts
Electric Company's (the Company) (a wholly-owned distribution
subsidiary of New England Electric System (NEES)) 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 third quarter and first nine months of 1997
increased $3 million and $11 million, respectively, compared with
the corresponding periods in 1996. These increases are due to an
increase in kilowatt-hour (kWh) deliveries to ultimate customers
and a reduction in the level of the Company's purchased power cost
adjustment (PPCA) mechanism (see discussion in the "Operating
Revenues" section). KWh deliveries to ultimate customers increased
3.1 percent and 1.8 percent in the third quarter and first nine
months of 1997, respectively. The improving regional economy
contributed to the increase.
Industry Restructuring
- ----------------------
For a full discussion of industry restructuring activities in
Massachusetts, Rhode Island and New Hampshire, see "Industry
Restructuring" in the Company's Form 10-K for 1996.
Industry Restructuring Update
As previously reported, the Massachusetts settlement covering
customer choice and electric utility industry restructuring
provides for full recovery of the costs of generating assets and
oil and gas related assets (including regulatory assets) not
recoverable through the divestiture of New England Power Company's
(NEP) (a wholly-owned generation and transmission subsidiary of
NEES) generating business. The Massachusetts settlement was
approved by the Massachusetts Department of Public Utilities (MDPU)
and a companion wholesale settlement is now pending final approval
before the Federal Energy Regulatory Commission (FERC). Final FERC
action is expected later in 1997.
<PAGE>
On November 10, 1997, the Massachusetts House of
Representatives passed a bill which would provide Massachusetts
customers with the ability to choose their electric supplier on
March 1, 1998. The bill provides for the recovery of stranded
costs but contains provisions that could require Massachusetts
regulators to reexamine and recompute stranded costs. The bill
further requires electric companies to provide customers who do not
choose a supplier with a standard offer transition rate which is 10
percent below 1997 rates, with the discount growing to 15 percent
upon completion of divestiture of generating assets or so-called
"securitization" (or refinancing) of stranded costs. The
Massachusetts settlement, as approved by the MDPU this year, along
with the anticipated sale of our generating business described
below, is expected to allow the Company to meet the rate reduction
targets contained in the House bill. The Senate is expected to act
on the proposed legislation before the current session ends on
November 19, 1997.
On August 5, 1997, NEP and The Narragansett Electric Company
(Narragansett Electric) (a wholly-owned distribution subsidiary of
NEES) (collectively, the "Sellers") reached an agreement to sell
their nonnuclear generating business to USGen New England, Inc.
(USGen), an indirect wholly-owned subsidiary of PG&E Corporation.
The Sellers' nonnuclear generating business includes three fossil-
fuel generating stations and 15 hydroelectric generating stations,
totaling approximately 4,000 megawatt (MW) of capacity, with a book
value $1.1 billion.
USGen will pay the Sellers $1.59 billion in cash, of which $225
million will be contingent upon retail customers being able to
choose their electric supplier. Specifically, if customers
representing 89 percent of kWh sales of investor owned utilities in
Massachusetts, or 50 percent of kWh sales in New England, have the
ability to choose their electric supplier by January 1, 1999, the
Sellers will be entitled to the full contingent amount. If such
retail choice milestone is met after January 1, 1999, the
contingent portion of the purchase price declines ratably by $75
million over the year 1999, and $50 million per year thereafter
until the milestone is met. Payment of the contingent portion can
be deferred for up to two years, if retail choice is not the result
of legislation.
USGen will also reimburse the NEES companies for $85 million of
costs associated with early retirement and special severance
programs for employees affected by industry restructuring. USGen
will purchase NEP's entitlement in approximately 1,100 MW of power
procured under long-term contracts. NEP will make a monthly fixed
contribution toward the above-market cost of the purchased power of
<PAGE>
between $12.5 million and $14.2 million per month from closing
through January 2008. These amounts are recoverable under the
terms of the Massachusetts settlement. USGen will be responsible
for the balance of the costs under the purchased power contracts.
USGen will assume responsibility for environmental conditions
at the Sellers' generating stations. USGen will also assume NEP's
obligations under long-term fuel and fuel transportation contracts
and certain existing collective bargaining agreements.
The sale is subject to approval by various state and federal
regulatory agencies. The timing of such approval is uncertain;
however, approval is unlikely before the spring of 1998. Closing
is contingent upon all regulatory approvals being obtained by
February 1999.
Under the Massachusetts settlement, the proceeds from the sale
will be used to offset the stranded costs which the Company
recovers from customers. The Company estimates that, upon
completion of the sale, prices for its customers would decrease on
average by approximately 15 percent below today's prices.
Workforce Reduction
The NEES companies expect to implement substantial workforce
reductions during 1998 as a result of industry restructuring and
the sale of the generating business. The NEES companies have
reached an agreement with all three of their unions regarding
benefits and other assistance including early retirement and
severance programs, to union employees that are affected by these
events. The NEES companies have also announced similar early
retirement and severance programs for management employees. The
costs of such programs are expected to be substantially recovered
from the proceeds of the sale of the generating business.
Risk Factors
This Form 10-Q contains statements that may be considered
forward looking statements as defined under the securities laws.
Actual results may differ materially. As disclosed in the
Company's Form 10-K for the year ended 1996, there are several risk
factors which could affect actual results. While the NEES
companies believe that the sale agreement with USGen and other
developments constitute substantial progress in resolving the
uncertainty regarding the impact from industry restructuring,
significant risks remain. These include, but are not limited to:
(i) the potential that ultimately the Massachusetts settlement will
not be implemented in the manner anticipated by NEES, and (ii) the
<PAGE>
possibility of state or federal legislation that would increase the
risks above those contained in the settlement. The major risk
factors affecting the Company relate to the possibility of adverse
regulatory or judicial decisions or legislation which limit the
level of revenues the Company is allowed to charge for its services
or affect the costs the Company incurs.
To the extent that neither the divestiture of NEP's nonnuclear
generation nor retail choice occurs in 1998, under the
Massachusetts settlement pending before the FERC, approximately 73
percent of the amount of NEP's 1998 earnings in excess of 11.75
percent return on equity must be refunded to the Company until its
earnings cap is met, and then used to reduce stranded costs. The
Company's earnings cap requires it to refund one-half of earnings
between 11 percent and 12.5 percent and all earnings in excess of
12.5 percent. In addition, the NEES companies will also incur
costs associated with the transition after the sale is completed.
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. Statement of 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. The Company believes that the
continuing rate-making policies and practices of the MDPU and the
terms of the Massachusetts settlement 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, despite the progress made to date, it is possible
that the final restructuring plans ultimately ordered by regulatory
bodies would not reflect full recovery of stranded costs, including
a fair return on those costs as they are being recovered. In
addition, it is possible that future methods of setting
performance-based distribution rates may not be considered cost-
based as required by FAS 71. 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.
<PAGE>
Year 2000 Computer Issues
- -------------------------
In the next two years, most large companies will face a
potentially serious information systems (computer) problem because
most software application and operational programs written in the
past will not properly recognize calendar dates beginning in the
year 2000. This could force computers to either shut down or lead
to incorrect calculations. The NEES companies began the process of
identifying the changes required to their computer programs and
hardware during 1996. The necessary modifications to the NEES
companies' centralized financial, customer, and operational
information systems are expected to be completed by the end of
1998. The NEES companies believe they will incur approximately $20
million of costs associated with making the necessary modifications
identified to date to the centralized systems. Substantially all
of these costs are expected to be incurred prior to December 31,
1998. Noncentralized systems are currently being reviewed for Year
2000 problems. The NEES companies are unable to predict the costs
to be incurred for correction of such noncentralized systems, but
expect the scope and schedule for such work to be less complex than
for its centralized information systems.
Operating Revenue
- -----------------
The following table summarizes the changes in operating
revenue:
Increase (Decrease) in Operating Revenue
Third Quarter Nine Months
------------- ------------
1997 vs 1996 1997 vs 1996
------------- ------------
(In Millions)
Deliveries to ultimate customers $ 7 $10
PPCA mechanism (1) 7
Fuel recovery 1 15
Demand-Side Management (DSM) (1) (2)
Other - 2
--- ---
$ 6 $32
=== ===
<PAGE>
For a discussion of deliveries to ultimate customers, see the
"Earnings" section.
The PPCA mechanism is designed to allow the Company to pass on
to its customers changes in purchased energy costs resulting from
rate increases or decreases by NEP. The mechanism is also designed
to pass on to customers the effects of NEP's seasonal rates. Due
to reduced peak demand levels, primarily in the month of May 1997,
refunds recorded under this mechanism were less in 1997 than in
1996. The provisions of the Company's restructuring settlement
required the PPCA mechanism to end effective July 31, 1996.
However, since the Massachusetts settlement has not yet been
approved by the FERC, the Company has continued to accrue refund
provisions of $16 million related to the assumed operation of the
PPCA mechanism since July 31, 1996 ($9 million in 1996 and $7
million in 1997, to date). In addition, at December 31, 1996 the
Company had deferred approximately $8 million of storm damage
costs. In accordance with the Massachusetts restructuring
settlement signed in 1997, the Company will not be permitted
recovery of approximately $2 million of such storm damage costs.
The increase in fuel recovery revenues is due to increased
replacement power fuel purchases by NEP due to reduced generation
by 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.
<PAGE>
Operating Expenses
- ------------------
The following table summarizes the changes in operating
expenses which are discussed below:
Increase (Decrease) in Operating Expenses
Third Quarter Nine Months
------------- ------------
1997 vs 1996 1997 vs 1996
------------- ------------
(In Millions)
Purchased electric energy:
Fuel costs $ 1 $15
Other - (4)
Other operation and maintenance:
DSM (1) (2)
Other - -
Depreciation - 2
Taxes 2 8
--- ---
$ 2 $19
=== ===
For a discussion of increased fuel costs, refer to the
"Operating Revenues" section.
The decrease in other purchased electric energy in the first
nine months of 1997 is principally due to a reduction in peak
demand charges, reflecting milder weather in the first quarter of
1997.
Utility Plant Expenditures and Financing
- ----------------------------------------
Cash expenditures for utility plant totaled $65 million in the
first nine months of 1997. The funds necessary for utility plant
expenditures during the period were provided by net cash from
operating activities, after the payment of dividends. On October
<PAGE>
3, 1997, the Company issued $15 million of long-term debt. The
Company plans to issue an additional $35 million of long-term debt
by the end of 1997. Bond issuances are to be used to retire
maturing bonds and fund capital expenditures.
On November 7, 1997, NEES commenced cash tender offers for any
and all outstanding shares of the Company's preferred stock, which
totals approximately $50 million. Concurrently with the offer, the
Company's Board of Directors is soliciting proxies for use at a
special meeting of preferred shareholders. The special meeting is
being held to consider amendments to the Company's By-Laws and
Articles of Incorporation which would remove a limitation on the
ability of the Company to issue unsecured debt without approval of
preferred shareholders. The offer expires on December 12, 1997.
At September 30, 1997, the Company had $21 million of short-
term debt outstanding including $17 million of commercial paper
borrowings. The Company currently has lines of credit with banks
totaling $90 million. These lines of credit are available to
provide liquidity support for commercial paper borrowings and other
corporate purposes. There were no borrowings under these lines of
credit at September 30, 1997.
For the twelve-month period ending September 30, 1997, the
ratio of earnings to fixed charges was 3.21.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Information concerning the restructuring dockets before the
Federal Energy Regulatory Commission, discussed in Part I of this
report in Management's Discussion and Analysis of Financial
Condition and Results of Operations, is incorporated herein by
reference and made a part hereof.
Item 4.Submission of Matters to a Vote of Security-Holders
- -------------------------------------------------------------
On September 21, 1997, a Special Meeting of Stockholders was
held. The number of directors of the Company was increased from
eleven to twelve by unanimous vote of the 2,398,111 shares having
general voting rights represented at the meeting.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
The Company is filing the following revised exhibit for
incorporation by reference into its registration statement on Form
S-3, Commission File No. 33-59145.
12 Statement re computation of ratios
The Company is filing Financial Data Schedules.
The Company filed a report on Form 8-K dated August 6, 1997,
containing Item 5, Other Events.
<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 September 30, 1997 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: November 13, 1997
Exhibit Index
<PAGE>
Exhibit Index
-------------
Exhibit Description Page
- ------- ----------- ----
12 Statement re computation of Filed herewith
ratios
27 Financial Data Schedule Filed herewith
<PAGE>
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Computation of Ratio of Earnings to Fixed Charges
(SEC Coverage)
(Unaudited)
<CAPTION>
12 Months
Ended
September 30, 1997 Years Ended December 31,
Actual -------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
-------------- ---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 48,992 $37,926 $29,101 $34,726 $23,779 $34,905
- ----------
Add income taxes and fixed charges
- ----------------------------------
Current federal income taxes 28,059 25,867 9,437 (6,762) 5,606 3,977
Deferred federal income taxes (2,286) (6,052) 6,156 24,932 3,430 13,451
Investment tax credits - net (1,107) (1,118) (1,132) (1,228) (1,228) (1,228)
Massachusetts franchise tax 5,621 4,479 3,935 4,681 3,348 3,858
Interest on long-term debt 27,669 27,089 25,901 20,967 23,403 21,910
Interest on short-term debt and other 8,245 6,473 6,784 6,366 3,638 3,657
-------- ------- ------- ------- ------- -------
Net earnings available for fixed charges $115,193 $94,664 $80,182 $83,682 $61,976 $80,530
-------- ------- ------- ------- ------- -------
Fixed charges:
Interest on long-term debt $ 27,669 $27,089 $25,901 $20,967 $23,403 $21,910
Interest on short-term debt and other 8,245 6,473 6,784 6,366 3,638 3,657
-------- ------- ------- ------- ------- -------
Total fixed charges $ 35,914 $33,562 $32,685 $27,333 $27,041 $25,567
======== ======= ======= ======= ======= =======
Ratio of earnings to fixed charges $3.21 2.82 2.45 3.06 2.29 3.15
- ----------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS
OF MASSACHUSETTS ELECTRIC COMPANY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,115,651
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 202,759
<TOTAL-DEFERRED-CHARGES> 50,530 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,368,940
<COMMON> 59,953
<CAPITAL-SURPLUS-PAID-IN> 201,172
<RETAINED-EARNINGS> 176,445
<TOTAL-COMMON-STOCKHOLDERS-EQ> 437,679 <F3>
0
50,000
<LONG-TERM-DEBT-NET> 333,457
<SHORT-TERM-NOTES> 4,725
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 16,550
<LONG-TERM-DEBT-CURRENT-PORT> 10,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 516,529
<TOT-CAPITALIZATION-AND-LIAB> 1,368,940
<GROSS-OPERATING-REVENUE> 1,180,050
<INCOME-TAX-EXPENSE> 19,988
<OTHER-OPERATING-EXPENSES> 1,098,503
<TOTAL-OPERATING-EXPENSES> 1,118,491
<OPERATING-INCOME-LOSS> 61,559
<OTHER-INCOME-NET> (2,305)
<INCOME-BEFORE-INTEREST-EXPEN> 59,254
<TOTAL-INTEREST-EXPENSE> 27,224
<NET-INCOME> 32,030
2,336
<EARNINGS-AVAILABLE-FOR-COMM> 29,694
<COMMON-STOCK-DIVIDENDS> 19,185
<TOTAL-INTEREST-ON-BONDS> 20,775
<CASH-FLOW-OPERATIONS> 144,654
<EPS-PRIMARY> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Total deferred charges includes other assets.
<F2> Per share data is not relevant because the Company's common stock is
wholly-owned by New England Electric System.
<F3> Total common stockholders equity is reflected net of unrealized gain on
securities.
</FN>
