<PAGE 1>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ________________ to ________________
Commission File Number 1-7316
COMMONWEALTH ENERGY SYSTEM
(Exact name of registrant as specified in its Declaration of Trust)
Massachusetts 04-1662010
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Main Street, Cambridge, Massachusetts 02142-9150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 225-4000
(Former name, address and fiscal year, if changed since last report)
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 practicable date.
Outstanding at
Class of Common Stock May 1, 1999
Common Shares of Beneficial
Interest, $2 par value 21,540,550 shares
<PAGE>
<PAGE 2>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
COMMONWEALTH ENERGY SYSTEM
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
ASSETS
(Dollars in thousands)
March 31, December 31,
1999 1998
(Unaudited)
PROPERTY, PLANT AND EQUIPMENT, at original cost
Electric $ 967,294 $ 963,181
Gas 392,792 391,069
Other 118,509 118,717
1,478,595 1,472,967
Less - Accumulated depreciation and
amortization 470,309 462,153
1,008,286 1,010,814
Add - Construction work in progress
and nuclear fuel in process 9,181 8,510
1,017,467 1,019,324
EQUITY IN CORPORATE JOINT VENTURES
Nuclear electric power companies (2.5%
to 4.5%) 10,357 10,391
Other investments 3,562 3,640
13,919 14,031
RESTRICTED CASH - LONG-TERM 173,056 172,239
CURRENT ASSETS
Cash and cash equivalents 92,016 74,840
Restricted cash 21,094 21,094
Accounts receivable 145,038 122,064
Unbilled revenues 15,970 21,211
Inventories, at average cost 20,457 32,924
Prepaid property taxes 3,371 8,112
Other 7,489 5,466
305,435 285,711
DEFERRED CHARGES
Regulatory assets 217,611 210,628
Other 47,986 51,933
265,597 262,561
$1,775,474 $1,753,866
See accompanying notes.
<PAGE>
<PAGE 3>
COMMONWEALTH ENERGY SYSTEM
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
CAPITALIZATION AND LIABILITIES
(Dollars in thousands)
March 31, December 31,
1999 1998
(Unaudited)
CAPITALIZATION
Common share investment -
Common shares, $2 par value -
Authorized - 50,000,000 shares
Outstanding - 21,540,550 in 1999 and
21,533,820 in 1998 $ 43,081 $ 43,081
Amounts paid in excess of par value 112,210 112,170
Retained earnings 306,645 294,341
461,936 449,592
Redeemable preferred shares, less current
sinking fund requirements 11,350 11,380
Long-term debt, including premiums, less current
sinking fund requirements and maturing debt 384,555 385,602
857,841 846,574
CAPITAL LEASE OBLIGATIONS 10,795 10,982
CURRENT LIABILITIES
Interim Financing -
Notes payable to banks 7,825 2,000
Maturing long-term debt 38,500 49,000
46,325 51,000
Other Current Liabilities -
Current sinking fund requirements 8,498 8,123
Accounts payable 76,478 106,952
Accrued taxes -
Income 16,905 8,720
Local property and other 8,182 10,633
Other 97,789 67,985
207,852 202,413
254,177 253,413
DEFERRED CREDITS
Accumulated deferred income taxes 119,556 117,026
Regulatory liabilities 379,183 370,829
Purchased power contracts 57,421 59,507
Unamortized investment tax credits
and other 96,501 95,535
652,661 642,897
COMMITMENTS AND CONTINGENCIES
$1,775,474 $1,753,866
See accompanying notes.
<PAGE>
<PAGE 4>
COMMONWEALTH ENERGY SYSTEM
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in thousands except per share amounts - unaudited)
1999 1998
OPERATING REVENUES
Electric $139,987 $155,804
Gas 114,941 115,139
Steam and other 14,741 5,661
269,669 276,604
OPERATING EXPENSES
Fuel and purchased power 79,317 86,608
Cost of gas sold 55,382 55,377
Other operation and maintenance 65,177 58,490
Depreciation 13,806 16,179
Taxes -
Federal and state income 15,348 16,106
Local property and other 9,190 8,790
238,220 241,550
OPERATING INCOME 31,449 35,054
OTHER INCOME 609 695
INCOME BEFORE INTEREST CHARGES 32,058 35,749
INTEREST CHARGES
Long-term debt 8,578 8,517
Other interest charges 2,001 1,673
10,579 10,190
NET INCOME 21,479 25,559
Dividends on preferred shares 222 237
EARNINGS APPLICABLE
TO COMMON SHARES $ 21,257 $ 25,322
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 21,540,550 21,532,463
BASIC AND DILUTED EARNINGS
PER COMMON SHARE $ .99 $1.18
DIVIDENDS DECLARED PER
COMMON SHARE $.415 $.405
See accompanying notes.
<PAGE>
<PAGE 5>
COMMONWEALTH ENERGY SYSTEM
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in thousands - unaudited)
1999 1998
OPERATING ACTIVITIES
Net income $ 21,479 $ 25,559
Effects of noncash items -
Depreciation and amortization 16,745 18,719
Deferred income taxes and investment
tax credits, net 1,776 (341)
Earnings from corporate joint ventures (274) (488)
Dividends from corporate joint ventures 374 107
Change in working capital, exclusive of cash
and interim financing 2,891 16,458
Transition costs deferral (6,879) (14,332)
Power contract buy out (2,265) -
All other operating items 1,799 (4,560)
Net cash provided by operating activities 35,646 41,122
INVESTING ACTIVITIES
Additions to property, plant and equipment
(inclusive of AFUDC) -
Electric (5,193) (6,369)
Gas (1,839) (2,875)
Other (178) (1,923)
Net cash used for investing activities (7,210) (11,167)
FINANCING ACTIVITIES
Payment of dividends (9,174) (8,969)
Reimbursement of transaction costs 4,483 -
Proceeds from (payment of) short-term borrowings 5,825 (19,150)
Long-term debt issues refunded (10,000) -
Sinking funds payments (1,577) (1,113)
Net cash used for financing activities (10,443) (29,232)
Net increase in cash, cash equivalents and
restricted cash 17,993 723
Cash, cash equivalents and restricted
cash at beginning of period 268,173 4,299
Cash, cash equivalents and restricted
cash at end of period $286,166 $ 5,022
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (refunded) during the period:
Interest (net of capitalized amounts) $ 10,438 $ 10,509
Income taxes $ (1,332) $ 5,294
See accompanying notes.
<PAGE>
<PAGE 6>
COMMONWEALTH ENERGY SYSTEM
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) General Information
Commonwealth Energy System, the parent company, is referred to in this
report as the "Parent" and, together with its subsidiaries, is collec-
tively referred to as "COM/Energy." The Parent is an exempt public
utility holding company under the provisions of the Public Utility Holding
Company Act of 1935 with investments in four operating public utility
companies located in central, eastern and southeastern Massachusetts. In
addition, the Parent has interests in other utility and several non-
regulated companies. In December 1998, the Parent signed an Agreement and
Plan of Merger with BEC Energy, the parent company of Boston Edison
Company, that will create an energy delivery company serving approximately
1.3 million customers located entirely within Massachusetts including more
than one million electric customers in 81 communities and 240,000 gas
customers in 51 communities.
COM/Energy has 1,614 regular employees including 1,025 (64%) repre-
sented by various collective bargaining units covered by separate con-
tracts with expiration dates ranging from March 2001 through April 2003.
In response to the significant changes that have taken place in the
utility industry, COM/Energy sold substantially all of its non-nuclear
generating assets in 1998 to focus on the transmission and distribution of
energy and related services (see Note 2 (c)).
(2) Accounting Policies
(a) Principles of Accounting
COM/Energy's significant accounting policies are described in Note 2
of Notes to Consolidated Financial Statements included in its 1998 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
For interim reporting purposes, COM/Energy follows these same basic
accounting policies but considers each interim period as an integral part
of an annual period and makes allocations of certain expenses to interim
periods based upon estimates of such expenses for the year.
Generally, certain expenses which relate to more than one interim
period are allocated to other periods to more appropriately match revenues
and expenses. Principal items of expense which are allocated other than
on the basis of passage of time are depreciation and property taxes of the
gas subsidiary, Commonwealth Gas Company (Commonwealth Gas). These
expenses are recorded for interim reporting purposes based upon projected
gas revenue. Income tax expense is recorded using the statutory rates in
effect applied to book income subject to tax for each interim period.
The unaudited financial statements for the periods ended March 31,
1999 and 1998, reflect, in the opinion of the Parent, all adjustments
(consisting of only normal recurring accruals) necessary to summarize
fairly the results for such periods. In addition, certain prior period
<PAGE>
<PAGE 7>
COMMONWEALTH ENERGY SYSTEM
amounts are reclassified from time to time to conform with the presenta-
tion used in the current period's financial statements.
The results for interim periods are not necessarily indicative of
results for the entire year because of seasonal variations in the consump-
tion of energy and Commonwealth Gas' seasonal rate structure.
(b) Regulatory Assets and Liabilities
COM/Energy's operating utility companies are regulated as to rates,
accounting and other matters by various authorities, including the Federal
Energy Regulatory Commission (FERC) and the Massachusetts Department of
Telecommunications and Energy (DTE).
Based on the current regulatory framework, COM/Energy accounts for the
economic effects of regulation in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
the Effects of Certain Types of Regulation." Regulated subsidiaries of
the Parent have established various regulatory assets in cases where the
DTE and/or the FERC have permitted or are expected to permit recovery of
specific costs over time. Similarly, the regulatory liabilities estab-
lished by COM/Energy are required to be refunded to customers over time.
In the event the criteria for applying SFAS No. 71 are no longer met, the
accounting impact would be an extraordinary, non-cash charge to operations
of an amount that could be material. Criteria that give rise to the
discontinuance of SFAS No. 71 include: 1) increasing competition that
restricts COM/Energy's ability to establish prices to recover specific
costs, and 2) a significant change in the current manner in which rates
are set by regulators from cost based regulation to another form of
regulation. These criteria are reviewed on a regular basis to ensure the
continuing application of SFAS No. 71 is appropriate. Based on the
current evaluation of the various factors and conditions that are expected
to impact future cost recovery, COM/Energy believes that its regulatory
assets, including those related to generation, are probable of future
recovery.
As a result of electric industry restructuring, COM/Energy's retail
electric companies discontinued application of accounting principles
applied to their investment in electric generation facilities effective
March 1, 1998. COM/Energy will not be required to write off any of its
generation-related assets, including regulatory assets. These assets will
be retained on the Consolidated Condensed Balance Sheets because the
legislation and the DTE's plan for a restructured electric industry
specifically provide for their recovery through a non-bypassable transi-
tion charge.
<PAGE>
<PAGE 8>
COMMONWEALTH ENERGY SYSTEM
The principal regulatory assets included in deferred charges were as
follows:
March 31, December 31,
1999 1998
(Dollars in thousands)
Transition costs $ 56,725 $ 47,771
Maine Yankee unrecovered plant and
decommissioning costs 30,005 30,646
Fuel charge stabilization 26,537 26,682
Connecticut Yankee unrecovered plant and
decommissioning costs 24,291 25,185
Postretirement benefits costs 23,800 23,958
Deferred income taxes 15,737 15,737
Power contract buy-out 15,635 15,717
FERC Order 636 transition costs 6,206 5,968
Environmental costs 5,344 5,079
Yankee Atomic unrecovered plant and
decommissioning costs 3,125 3,676
Seabrook related costs 2,671 3,008
Other 7,535 7,201
$217,611 $210,628
The regulatory liabilities, reflected in the accompanying Consoli-
dated Condensed Balance Sheets, were as follows:
March 31, December 31,
1999 1998
(Dollars in thousands)
Regulatory liability related
to sale of generating assets $361,040 $354,226
Deferred income taxes 12,129 12,196
Demand-side management deferral 5,576 3,956
Other 438 451
$379,183 $370,829
The regulatory liability related to the sale of generating assets was
established pursuant to COM/Energy's divestiture filing that was approved
by the DTE in which COM/Energy agreed to use the net proceeds from the
sale of its non-nuclear generating assets to reduce transition costs that
are billed to its retail electric customers over the next several years as
a result of electric industry restructuring.
COM/Energy's regulatory assets, including the costs associated with
existing power contracts with three Yankee nuclear power plants that have
shut down permanently, and all of its regulatory liabilities are reflected
in rates charged to customers. Regulatory assets are to be recovered over
11 years pursuant to the legislation discussed below.
In November 1997, the Commonwealth of Massachusetts enacted a
comprehensive electric utility industry restructuring bill. On November
19, 1997, the Parent's electric subsidiaries filed a restructuring plan
with the DTE. The plan, approved by the DTE on February 27, 1998,
<PAGE>
<PAGE 9>
COMMONWEALTH ENERGY SYSTEM
provides that the Parent's retail electric subsidiaries, beginning March
1, 1998, initiate a ten percent rate reduction for all customer classes
and allow customers to choose their energy supplier. As part of the plan,
the DTE authorized the recovery of certain strandable costs and provides
that certain future costs may be deferred to achieve or maintain the rate
reductions that the restructuring bill mandates. The legislation gives
the DTE the authority to determine the amount of strandable costs that
will be eligible for recovery. Costs that will qualify as strandable
costs and be eligible for recovery include, but are not limited to,
certain above market costs associated with generating facilities, costs
associated with long-term commitments to purchase power at above market
prices from independent power producers and regulatory assets and associ-
ated liabilities related to the generation portion of the electric
business.
(c) Divestiture of Generation Assets
The cost of transitioning to competition will be mitigated, in part,
by the sale of COM/Energy's non-nuclear generating assets. On May 27,
1998, COM/Energy agreed to sell substantially all of its non-nuclear
generating assets (984 MW) to affiliates of The Southern Company of
Atlanta, Georgia. The sale was conducted through an auction process that
was outlined in a restructuring plan filed with the DTE in November 1997
in conjunction with the state's industry restructuring legislation enacted
in 1997. The sale was approved by the DTE on October 30, 1998 and by the
FERC on November 12, 1998. Proceeds from the sale of these assets, after
construction-related adjustments at the closing that occurred on December
30, 1998, amounted to approximately $453.9 million or 6.1 times their book
value of approximately $74.2 million. An adjustment of $5.1 million was
recorded in the first quarter of 1999 that reduced the book value to $69.1
million. The proceeds from the sale, net of book value, transaction costs
and certain other adjustments, amounts to $361 million and will be used to
reduce transition costs related to electric industry restructuring that
otherwise would have been collected through a non-bypassable transition
charge. COM/Energy has determined that this transaction was not a taxable
event because it provided no economic benefit to COM/Energy.
COM/Energy established Energy Investment Services, Inc. as the
vehicle to invest the net proceeds from the sale of Canal Electric
Company's (Canal Electric) generation assets and a portion of the proceeds
from the sale of Cambridge Electric Light Company's (Cambridge Electric)
generating assets. These proceeds will be invested in a conservative
portfolio of securities that is designed to maintain principal and earn a
reasonable return. Both the principal amount and income earned will be
used to reduce the transition costs that would otherwise be billed to
customers of Cambridge Electric and Commonwealth Electric Company (Common-
wealth Electric). The net proceeds have been classified as restricted
cash on the accompanying Consolidated Condensed Balance Sheet.
<PAGE>
<PAGE 10>
COMMONWEALTH ENERGY SYSTEM
(3) Commitments and Contingencies
Capital Expenditures
(a) Construction Program
COM/Energy is engaged in a continuous construction program presently
estimated at $327.9 million for the five-year period 1999 through 2003.
Of that amount, $63.4 million is estimated for 1999. The program is
subject to periodic review and revision.
(b) Acquisition
On June 1, 1998, Advanced Energy Systems, Inc. (AES), a wholly-owned
subsidiary of the Parent, acquired for $146.3 million all of the issued
and outstanding shares of capital stock of Harvard University's Medical
Area Total Energy Plant, Inc. subsidiary (MATEP) and all rights under
customer contracts owned by Harvard University. MATEP's principal asset
is a cogeneration plant that provides heating, chilled water service and
electricity to several hospitals, medical research centers and teaching
institutions in the 200-acre Longwood Medical Area of Boston pursuant to
the contracts that were assigned to AES. The purchase price was estab-
lished through a sealed-bid auction process and the transaction was
initially financed with a short-term bank loan of $150 million that was
subsequently reduced with the proceeds from an equity contribution from
the Parent to AES of approximately $40 million (financed with a 2-year
variable rate term note issued by the Parent). A permanent financing was
completed on August 26, 1998 that consisted of $112.5 million in 23-year
term notes at a rate of 6.924% with quarterly sinking fund payments
scheduled to begin on September 30, 2003 that escalate from $790,000 to
$2.7 million at the end of the term. These notes are secured by long-term
contracts between MATEP and its customers. The 2-year term note will be
repaid in two installments of $20 million each on July 1, 1999 and July 1,
2000. The variable interest rate averaged 5.794% during the first quarter
of 1999.
Results for MATEP are included in the accompanying Consolidated
Condensed Financial Statements from the date of acquisition.
The acquisition was accounted for under the purchase method of
accounting. The purchase price was allocated based on the fair value of
assets acquired and resulted in the recognition of an intangible asset
amounting to approximately $31 million that is being amortized on a
straight-line basis over fifteen years.
Based on unaudited data, the following pro forma summary presents the
consolidated results of operations for the three months ended March 31,
1998 as if the acquisition had occurred at the beginning of the year
presented:
<PAGE>
<PAGE 11>
COMMONWEALTH ENERGY SYSTEM
Three Months Ended
March 31,
1998
(Dollars in thousands except per share amounts)
Revenues $290,404
Net Income
Applicable to
Common Shares $ 24,875
Basic and Diluted
Earnings per
Common Share $1.16
The pro forma results do not purport to be indicative of the results
of operations that actually would have resulted had the acquisition been
made at the beginning of the year presented, or of results that may occur
in the future.
(c) Pilgrim Power Contract
Commonwealth Electric has an 11% (73.6 megawatts) contract entitle-
ment in the output of the Pilgrim nuclear power plant, located in Plym-
outh, MA, which is expected to be sold by Boston Edison Company (Boston
Edison) in 1999 to Entergy Nuclear Generating Company (Entergy). In
conjunction with this sale, Commonwealth Electric has reached an agreement
with Boston Edison to buy out of this life-of-the-unit contract, termi-
nating Commonwealth Electric's rights and obligations under the contract
regarding the power output of the plant. Pursuant to the buy out agree-
ment, Commonwealth Electric will pay between $100 million and $115 million
to terminate this contract with Boston Edison, subject to adjustment at
closing. On April 29, 1999, the Nuclear Regulatory Commission issued an
order approving the transfer of the operating license for the plant from
Boston Edison to Entergy. The buy out is expected to be completed in the
second quarter of 1999. It is anticipated that the buy out will be paid
for with funds currently held by affiliate Energy Investment Services,
Inc. (see Note 2(c)). In a transaction related to the sale of the Pilgrim
plant, Commonwealth Electric will buy power generated by the Pilgrim plant
from Entergy on a declining basis through 2004.
<PAGE>
<PAGE 12>
COMMONWEALTH ENERGY SYSTEM
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Merger with BEC Energy
The electric utility industry has continued to change in response to
legislative and regulatory mandates that are aimed at lowering prices for
energy by creating a more competitive marketplace. These pressures have
resulted in an increasing trend in the electric industry to seek competi-
tive advantages and other benefits through business combinations. On
December 5, 1998, the Parent and BEC Energy (BEC), headquartered in
Boston, Massachusetts, entered into an Agreement and Plan of Merger (the
Merger Agreement). Pursuant to the Merger Agreement, the Parent and BEC
will be merged into a new holding company to be known as NSTAR. Holders
of Parent common shares will receive 1.05 shares of NSTAR common stock for
each share held while BEC common shareholders will receive one share of
NSTAR common stock for each share held. In addition, current Parent and
BEC common shareholders have the right to receive cash rather than NSTAR
common stock in the amount of $44.10 for each share held, up to an
aggregate maximum of $300 million. At the close of the merger, Parent
shareholders will own approximately 32% of NSTAR common stock and BEC
shareholders will own approximately 68%. The merger is expected to occur
shortly after the satisfaction of certain conditions, including the
receipt of certain regulatory approvals including that of the DTE. The
regulatory approval process is expected to be completed during the second
half of 1999.
The merger will create an energy delivery company serving approxi-
mately 1.3 million customers located entirely within Massachusetts,
including more than one million electric customers in 81 communities and
240,000 gas customers in 51 communities.
Shareholder votes on the merger will be held as part of each of the
Parent's and BEC's annual shareholder meetings scheduled for June 24,
1999. The Merger Agreement may be terminated under certain circumstances,
including by any party if the merger is not consummated by December 5,
1999, subject to an automatic extension of six months if the requisite
regulatory approvals have not yet been obtained by such date. The merger
will be accounted for using the purchase method of accounting.
Upon effectiveness of the merger, Thomas J. May, BEC's current
Chairman, President and Chief Executive Officer (CEO), will become the
Chairman and CEO of NSTAR. Russell D. Wright, the Parent's current
President and CEO, will become the President and Chief Operating Officer
of NSTAR and will serve on NSTAR's board of trustees. Also, upon effec-
tiveness of the merger, NSTAR's board of trustees will consist of the
Parent's and BEC's current trustees.
<PAGE>
<PAGE 13>
COMMONWEALTH ENERGY SYSTEM
Financial Condition
Capital resources of the Parent and its subsidiaries are derived
principally from retained earnings. Supplemental interim funds are
borrowed on a short-term basis and, when necessary, replaced with new
equity and/or debt issues through permanent financing secured on an
individual company basis. The Parent purchases 100% of all subsidiary
common stock issues and provides, to the extent possible, a portion of the
subsidiaries' short-term financing needs. These capital resources provide
the funds required for the subsidiary companies' construction programs,
current operations, debt service and other capital requirements.
For the current three-month period, cash flows from operating
activities amounted to approximately $35.6 million and reflect net income
of $21.5 million and noncash items including depreciation of $13.8 million
and amortization of $2.9 million. The change in working capital since
December 31, 1998, exclusive of cash, restricted cash, cash equivalents
and interim financing, amounted to $2.9 million and had a positive impact
on cash flows from operating activities, reflecting a lower level of
unbilled revenues ($5.2 million), inventories ($12.5 million) and prepaid
taxes ($4.7 million) coupled with a higher level of other current liabili-
ties ($30.2 million) and accrued taxes ($5.7 million). These factors were
offset, in part, by a decline in accounts payable ($30.5 million) and a
higher level of accounts receivable ($23 million) and other current assets
($2 million).
Construction expenditures for the current three-month period were
approximately $7.2 million, including an allowance for funds used during
construction (AFUDC) and nuclear fuel. Construction expenditures and the
preferred and common dividend requirements of the Parent ($9.2 million)
were funded entirely with internally-generated funds.
On February 12, 1999, the holders of the Parent's Cumulative Pre-
ferred Shares (Series A 4.80%, Series B 8.10% and Series C 7.75%) were
notified that each series would be redeemed in full effective April 1,
1999. The redemption price of $102 for Series A and $101 for each of
Series B and C, plus accrued dividends, was paid by the Parent on April 1,
1999.
Results of Operations
The following is a discussion of certain significant factors which
have affected operating revenues, expenses and net income during the
periods included in the accompanying Consolidated Condensed Statements of
Income. This discussion should be read in conjunction with the Notes to
Condensed Financial Statements appearing elsewhere in this report.
<PAGE>
<PAGE 14>
COMMONWEALTH ENERGY SYSTEM
A summary of the period to period changes in the principal items
included in the Consolidated Condensed Statements of Income for the three
months ended March 31, 1999 and 1998 and unit sales for these periods are
shown below:
Three Months
Ended March 31,
1999 and 1998
Increase (Decrease)
(Dollars in thousands)
Operating Revenues -
Electric $(15,817) (10.2)%
Gas (198) (0.2)
Steam and other 9,080 160.4
(6,935) (2.5)
Operating Expenses -
Fuel and purchased power (7,291) (8.4)
Cost of gas sold 5 -
Other operation and maintenance 6,687 11.4
Depreciation (2,373) (14.7)
Taxes -
Local property and other 400 4.6
Federal and state income (758) (4.7)
(3,330) (1.4)
Operating Income (3,605) (10.3)
Other Income (86) (12.4)
Income Before Interest Charges (3,691) (10.3)
Interest Charges 389 3.8
Net Income (4,080) (16.0)
Dividends on preferred shares (15) (6.3)
Earnings Applicable to Common Shares $ (4,065) (16.1)
Unit Sales -
Electric - Megawatthours (MWH)
Retail 51,072 4.3
Wholesale (684,175) (60.0)
(633,103) (27.3)
Gas - Billions of British Thermal Units (BBTU)
Firm 1,840 12.7
Interruptible and other 336 21.5
Transportation 262 11.1
2,438 13.3
<PAGE>
<PAGE 15>
COMMONWEALTH ENERGY SYSTEM
The following is a summary of electric unit sales and gas throughput
for the periods indicated:
Three Months Ended
March 31,
1999 1998
Electric Sales - MWH
Residential 502,530 472,219
Commercial 627,561 596,860
Industrial 91,412 101,280
Other 6,616 6,688
Total retail 1,228,119 1,177,047
Wholesale to other systems 456,152 1,140,327
Total 1,684,271 2,317,374
Gas Sales - BBTU
Residential 10,395 8,768
Commercial 4,446 4,052
Industrial 707 815
Other 750 823
Total firm 16,298 14,458
Off-system 1,383 1,037
Interruptible 516 526
Total 18,197 16,021
Transportation 2,629 2,367
Total throughput 20,826 18,388
Electric Revenues, Fuel and Purchased Power Costs
Operating revenues from regulated operations for the current quarter
were $18.3 million lower than the corresponding period in 1998 primarily
due to rate reductions resulting from electric industry restructuring
legislation, and a net decrease in electricity purchased for resale, fuel
and transmission charges of $7.3 million (8.4%). As a result of industry
restructuring, COM/Energy has unbundled its rates and provided customers
with a ten percent rate reduction as of March 1, 1998 that was subsequently
increased to approximately 12% and 16% for Commonwealth Electric and
Cambridge Electric, respectively, effective January 1, 1999 in conjunction
with COM/Energy's restructuring plan as approved by the DTE. Operating
revenues from two non-regulated subsidiaries increased by $2.5 million for
the current quarter.
This legislation also provides customers with the opportunity to
purchase generation supply in the competitive market. Unbundled delivery
rates are composed of a customer charge (to collect metering and billing
costs), a distribution charge (to collect the costs of delivering electric-
ity), a transition charge (to collect past costs for investments in
generating plants and costs related to power contracts), a transmission
charge (to collect the cost of moving the electricity over high voltage
lines from a generating plant), an energy conservation charge (to collect
costs for demand-side management programs) and a renewable energy charge
(to collect the cost to support the development and promotion of renewable
energy projects). Electricity supply services provided by COM/Energy
include optional standard offer service and default service. Standard
offer service is the electricity that is supplied by the local distribution
<PAGE>
<PAGE 16>
COMMONWEALTH ENERGY SYSTEM
company (such as Commonwealth Electric and Cambridge Electric) until a
competitive supplier is chosen by the customer. It is designed as a seven-
year transitional service to give the customer time to learn about competi-
tive power suppliers. The price of standard offer service will increase
over time. Default service is the electricity that is supplied by the
local distribution company when a customer is not receiving power from
either standard offer service or a competitive power supplier. The market
price for default service will fluctuate based on the average market price
for power. Amounts collected through these various charges will be
reconciled to actual expenditures on an on-going basis. Currently, 87.4%
of retail customers receive standard offer service, 12.5% of retail
customers receive default service and 0.1% of retail customers receive
electricity supply services from competitive power suppliers. For further
information on electric industry restructuring, refer to COM/Energy's 1998
Annual Report on Forms 10-K and 10-K/A.
Total unit sales decreased in the current quarter despite a 4.3%
increase in retail sales as wholesale sales decreased by 60%. This
decrease was mainly attributable to the sale of Canal Units 1 and 2 in
December 1998.
Gas Revenues and Cost of Gas Sold
Operating revenues from regulated operations increased by $1.7
million during the current quarter due primarily to a 13.3% increase in
total throughput partially offset by a $4.9 million decrease in the cost of
gas sold. Also during the current quarter, operating revenues from an
unregulated subsidiary decreased by $1.9 million compared to the same
period of 1998 due to the sale of that subsidiary's assets in February
1999.
The increase in unit sales to firm customers (12.7%) reflects higher
sales to all customer segments due to cooler weather conditions experienced
during the first quarter of 1999 compared to the same period last year.
Heating degree days for the quarter were 7.6% greater than the first
quarter of 1998 but 7.2% less than normal. The fluctuation in interrupti-
ble and other sales reflects the competitive market that exists today in
the natural gas industry.
Other Operating Expenses
For the current quarter, other operation and maintenance increased by
$6.7 million (11.4%) and reflects costs associated with the MATEP facility
that was acquired in June 1998 ($4 million), expenses incurred related to
the pending merger with BEC Energy ($1.9 million), costs associated with
the sale of the assets of an unregulated subsidiary ($1.8 million) and
higher conservation and load management costs ($1.7 million). These
increases were partially offset by a decline in insurance and employee
benefits costs ($1.6 million).
Depreciation decreased $2.4 million (14.7%) during the current
quarter and reflects the aforementioned sale of COM/Energy's generating
assets in December 1998 partially offset by depreciation related to the
MATEP facility. Federal and state income taxes decreased $758,000 (4.7%)
during the current quarter reflecting the level of pre-tax income.
<PAGE>
<PAGE 17>
COMMONWEALTH ENERGY SYSTEM
The increase of $400,000 (4.6%) in local property and other taxes for the
current quarter was due primarily to real estate taxes associated with
MATEP and higher tax rates and assessments offset, in part, by the absence
of real estate taxes related to the generating assets that were sold.
Interest Charges
The increase in total interest charges for the current three-month
period mainly reflects interest expense on amounts deferred in conjunction
with COM/Energy's restructuring plan as approved by the DTE and the
issuance of 23-year term notes in August 1998 partially offset by maturing
long-term debt and scheduled sinking fund payments.
Industry Restructuring - Gas
Unbundled Gas Rates
New unbundled rates for Commonwealth Gas went into effect on November
1, 1998. The unbundled rates were developed in accordance with a Settle-
ment Agreement reached by participants in the Massachusetts Gas Unbundling
Collaborative (the Collaborative) that was filed with the DTE on June 29,
1998 and approved on August 15, 1998. The new unbundled rates reflect the
separation of the company's gas supply function from its local distribution
function.
Commencing with the billing month of November 1998, Commonwealth Gas
has a Seasonal Cost of Gas Adjustment Clause (CGAC) and a Local Distribu-
tion Adjustment Clause (LDAC) that provide for the recovery, from firm
customers or Default Service customers, of certain costs previously
recovered through base rates. The CGAC provides for rates that must be
approved semi-annually by the DTE. The LDAC provides for rates that
require annual approval.
As part of its new unbundled rates, Commonwealth Gas modified its
existing CGAC to allow for the following changes: (a) the addition of
provisions that allow for the recovery of certain bad-debt expenses; (b)
new formulas that no longer adjust the Gas Adjustment Factors for the
seasonal embedded gas costs that were in existing sales rates; (c) updated
provisions reflecting the ratemaking requirements for non-core revenue
margins; and (d) the removal of provisions for the recovery of environmen-
tal remediation costs and FERC Order 636 transition costs, which will
instead be recovered through the LDAC.
Commonwealth Gas' new LDAC recovers conservation charges, environ-
mental remediation costs, balancing penalty revenue credits, and costs
associated with its participation in the Collaborative.
For additional information related to gas industry restructuring,
refer to the 1998 Annual Report on Forms 10-K and 10-K/A.
Environmental Matters
Commonwealth Gas is participating in the assessment of a number of
former manufactured gas plant (MGP) sites and alleged MGP waste disposal
<PAGE>
<PAGE 18>
COMMONWEALTH ENERGY SYSTEM
locations to determine if and to what extent such sites have been contami-
nated and whether Commonwealth Gas may be responsible for remedial actions.
The DTE has approved recovery of costs associated with MGP sites. Common-
wealth Gas is also involved in certain other known or potentially contami-
nated sites where the associated costs may not be recoverable in rates.
For additional information on other related environmental matters, refer to
the 1998 Annual Report on Forms 10-K and 10-K/A.
New Accounting Standard
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 establishes accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments
embedded in other contracts possibly including fixed-price fuel supply and
power contracts) be recorded on the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a
company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15,
1999 and may be implemented as of the beginning of any fiscal quarter after
issuance but cannot be applied retroactively. SFAS No. 133 must be applied
to derivative instruments and certain derivative instruments embedded in
hybrid contracts that were issued, acquired or substantively modified after
December 31, 1997 and, at the company's election, before January 1, 1998.
The adoption of SFAS No. 133 is not expected to have a material
impact on COM/Energy's results of operations or financial condition.
Year 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any
computer program that has date sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result
in a temporary inability to process transactions or engage in normal
business activities. COM/Energy has been involved in Year 2000 compliancy
since 1996.
COM/Energy, on a coordinated basis and with the assistance of RCG
Information Technologies and other consultants, is addressing the Year 2000
issue. COM/Energy has followed a five-phase process in its Year 2000
compliance efforts, as follows: Awareness (through a series of internal
announcements to employees and through contacts with vendors); Inventory
(all computers, applications and embedded systems that could potentially be
affected by the Year 2000 problem); Assessment (all applications or
components and the impact on overall business operations and a plan to
correct deficiencies and the cost to do so); Remediation (the modification,
<PAGE>
<PAGE 19>
COMMONWEALTH ENERGY SYSTEM
upgrade or replacement of deficient hardware and software applications and
infrastructure modifications); and Testing (a detailed, comprehensive
testing program for the modified critical component, system or software
that involves the planning, execution and analysis of results).
COM/Energy's inventory phase required an assessment of all date
sensitive information and transaction processing computer systems and
determined that approximately 90% of its software systems needed some
modifications or replacement. Plans were developed and are being imple-
mented to correct and test all affected systems, with priorities assigned
based on the importance of the activity. COM/Energy has identified the
software and hardware installations that are necessary. All installations
are expected to be completed and tested by mid-1999.
COM/Energy has also inventoried its non-information technology
systems that may be date sensitive (facilities, electric and gas opera-
tions, energy supply/production and distribution) that use embedded
technology such as micro-controllers and micro-processors. COM/Energy has
completed its assessment of these non-information technology systems and
determined that 20% of these systems required remediation or replacement.
COM/Energy is approximately 94% complete in its efforts to resolve non-
compliance with Year 2000 requirements related to these systems and antici-
pates that these systems will be updated or replaced as necessary and
tested by mid-1999.
At present, the remediation phase for information technology as it
applies to hardware and non-technology issues is scheduled for completion
by June 1, 1999. The testing phase for Year 2000 compliance is approxi-
mately 85% complete and is scheduled to be concluded by June 30, 1999. All
other phases are complete.
Modifying and testing COM/Energy's information and transaction
processing systems from 1996 through 2000 is currently expected to cost
approximately $9.85 million, including approximately $900,000, $3.1 million
and $1.9 million incurred through 1997, 1998 and the first quarter of 1999,
respectively. Approximately $3.95 million is expected to be spent in the
remainder of 1999 and in 2000. Year 2000 costs have been expensed as
incurred and will continue to be funded from operations.
In addition to its internal efforts, COM/Energy has initiated formal
communications with its significant suppliers to determine the extent to
which COM/Energy may be vulnerable to its suppliers' failure to correct
their own Year 2000 issues. As of April 1, 1999, COM/Energy has received
responses from approximately 82% of those entities contacted, and nearly
all have indicated that they are or will be Year 2000 compliant. Failure
of COM/Energy's significant suppliers to address Year 2000 issues could
have a material adverse effect on COM/Energy's operations, although it is
not possible at this time to quantify the amount of business that might be
lost or the costs that could be incurred by COM/Energy. Contact with
significant vendors is continuing and inadequate or marginal responses are
being pursued by COM/Energy. COM/Energy is prepared to replace certain
suppliers or to initiate other contingency plans should these vendors not
respond to COM/Energy's satisfaction by July 1, 1999.
<PAGE>
<PAGE 20>
COMMONWEALTH ENERGY SYSTEM
In addition, parts of the global infrastructure, including national
banking systems, electrical power grids, gas pipelines, transportation
facilities, communications and governmental activities, may not be fully
functional after 1999. Infrastructure failures could significantly reduce
COM/Energy's ability to acquire energy and its ability to serve its custom-
ers as effectively as they are now being served. COM/Energy is identifying
elements of the infrastructure that are critical to its operations and is
obtaining information as to the expected Year 2000 readiness of these ele-
ments.
COM/Energy has started its contingency planning for critical opera-
tional areas that might be effected by the Year 2000 issue if compliance by
COM/Energy is delayed. COM/Energy's gas and electric operations currently
have emergency operating plans as well as information technology disaster
recovery plans as components of its standard operating procedures. These
plans will be enhanced to identify potential Year 2000 risks to normal
operations and the appropriate reaction to these potential failures
including contingency plans that may be required for any third parties that
fail to achieve Year 2000 compliance. All necessary contingency plans are
expected to be completed by June 30, 1999, although in certain cases,
especially infrastructure failures, there may be no practical alternative
course of action available to COM/Energy.
COM/Energy is working with other energy industry entities, both
regionally and nationally with respect to Year 2000 readiness and is
cooperating in the development of local and wide-scale contingency plan-
ning.
While COM/Energy believes its efforts to address the Year 2000 issue
will allow it to be successful in avoiding any material adverse effect on
COM/Energy's operations or financial condition, it recognizes that failing
to resolve Year 2000 issues on a timely basis would, in a "most reasonably
likely worst case scenario," significantly limit its ability to acquire and
distribute energy and process its daily business transactions for a period
of time, especially if such failure is coupled with third party or infra-
structure failures. Similarly, COM/Energy could be significantly effected
by the failure of one or more significant suppliers, customers or compo-
nents of the infrastructure to conduct their respective operations after
1999. Adverse affects on COM/Energy could include, among other things,
business disruption, increased costs, loss of business and other similar
risks.
The foregoing discussion regarding Year 2000 project timing, effec-
tiveness, implementation and costs includes forward-looking statements that
are based on management's current evaluation using available information.
Factors that might cause material changes include,but are not limited to,
the availability of key Year 2000 personnel, the readiness of third
parties, and COM/Energy's ability to respond to unforeseen Year 2000
complications.
<PAGE>
<PAGE 21>
COMMONWEALTH ENERGY SYSTEM
Forward-Looking Statements
This discussion contains statements which, to the extent it is not a
recitation of historical fact, constitute "forward-looking statements" and
is intended to be subject to the safe harbor protection provided by the
Private Securities Litigation Reform Act of 1995. A number of important
factors affecting the Parent's business and financial results could cause
actual results to differ materially from those reflected in the forward-
looking statements or projected amounts. Those factors include develop-
ments in the legislative, regulatory and competitive environment, certain
environmental matters, demands for capital and new business development
expenditures and the availability of cash from various sources.
<PAGE>
<PAGE 22>
COMMONWEALTH ENERGY SYSTEM
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
COM/Energy is subject to legal claims and matters arising from its
course of business including when Cambridge Electric was an intervenor
in an appeal at the Massachusetts Supreme Judicial Court (SJC) filed
by the Massachusetts Institute of Technology (MIT) involving a DTE
decision approving a customer transition charge (CTC) for the recovery
of stranded investment costs. By its terms, the CTC was terminated on
March 1, 1998, coincident with the retail access date established by
the Massachusetts Legislature in the Electric Industry Restructuring
Act. On September 18, 1997, the SJC remanded the CTC matter to the
DTE for further consideration. The SJC stated that, although recovery
of prudent and verifiable stranded costs by utility companies is in
the public interest and consistent with the Public Utility Regulatory
Policies Act, the insufficiencies of the DTE's subsidiary findings
precluded the SJC from undertaking a meaningful review of the DTE's
calculations that formed the basis of the CTC. The DTE is in the
process of determining whether to hear additional evidence in the
remand or to rely on the record and pleadings already filed. At this
time, management is unable to predict the ultimate outcome of this
proceeding.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults by the Company on its Senior Securities
None
Item 4. Results of Votes of Security Holders
None
Item 5. Other Information
None
<PAGE>
<PAGE 23>
COMMONWEALTH ENERGY SYSTEM
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
Filed herewith as Exhibit 1 is the Financial Data Schedule for
the three months ended March 31, 1999.
Filed herewith as Exhibit 2 is the restated Financial Data
Schedule for the year ended December 31, 1998.
(b) Reports on Form 8-K
One report on Form 8-K was filed during the three months ended
March 31, 1999. The report, dated January 14, 1999, relates to
an event that occurred on December 30, 1998 regarding the sale
of substantially all of COM/Energy's non-nuclear generating
assets.<PAGE>
<PAGE 24>
COMMONWEALTH ENERGY SYSTEM
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.
COMMONWEALTH ENERGY SYSTEM
(Registrant)
Principal Financial and
Accounting Officer
JAMES D. RAPPOLI
James D. Rappoli,
Financial Vice President
and Treasurer
Date: May 17, 1999
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains restated summary financial information extracted from
the balance sheet, statement of income and statement of cash flows contained
in Form 10-K of Commonwealth Energy System for the fiscal year ended December
31, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<CIK> 0000071304
<NAME> COMMONWEALTH ENERGY SYSTEM
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> YEAR
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,019,324
<OTHER-PROPERTY-AND-INVEST> 14,031
<TOTAL-CURRENT-ASSETS> 285,711
<TOTAL-DEFERRED-CHARGES> 262,561
<OTHER-ASSETS> 172,239
<TOTAL-ASSETS> 1,753,866
<COMMON> 43,081
<CAPITAL-SURPLUS-PAID-IN> 112,170
<RETAINED-EARNINGS> 294,341
<TOTAL-COMMON-STOCKHOLDERS-EQ> 449,592
11,380
0
<LONG-TERM-DEBT-NET> 385,602
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 2,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 57,123
820
<CAPITAL-LEASE-OBLIGATIONS> 10,982
<LEASES-CURRENT> 1,340
<OTHER-ITEMS-CAPITAL-AND-LIAB> 835,027
<TOT-CAPITALIZATION-AND-LIAB> 1,753,866
<GROSS-OPERATING-REVENUE> 980,115
<INCOME-TAX-EXPENSE> 26,253
<OTHER-OPERATING-EXPENSES> 865,002
<TOTAL-OPERATING-EXPENSES> 891,255
<OPERATING-INCOME-LOSS> 88,860
<OTHER-INCOME-NET> 12,453
<INCOME-BEFORE-INTEREST-EXPEN> 101,313
<TOTAL-INTEREST-EXPENSE> 46,909
<NET-INCOME> 54,404
930
<EARNINGS-AVAILABLE-FOR-COMM> 53,474
<COMMON-STOCK-DIVIDENDS> 34,928
<TOTAL-INTEREST-ON-BONDS> 37,435
<CASH-FLOW-OPERATIONS> 81,949
<EPS-PRIMARY> 2.48
<EPS-DILUTED> 2.48
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet, statement of income and statement of cash flows contained in
Form 10-Q of Commonwealth Energy System for the three months ended March 31,
1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000071304
<NAME> COMMONWEALTH ENERGY SYSTEM
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<PERIOD-TYPE> 3-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,017,467
<OTHER-PROPERTY-AND-INVEST> 13,919
<TOTAL-CURRENT-ASSETS> 305,435
<TOTAL-DEFERRED-CHARGES> 265,597
<OTHER-ASSETS> 173,056
<TOTAL-ASSETS> 1,775,474
<COMMON> 43,081
<CAPITAL-SURPLUS-PAID-IN> 112,210
<RETAINED-EARNINGS> 306,645
<TOTAL-COMMON-STOCKHOLDERS-EQ> 461,936
11,350
0
<LONG-TERM-DEBT-NET> 384,555
<SHORT-TERM-NOTES> 7,825
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 46,178
820
<CAPITAL-LEASE-OBLIGATIONS> 10,795
<LEASES-CURRENT> 1,258
<OTHER-ITEMS-CAPITAL-AND-LIAB> 850,757
<TOT-CAPITALIZATION-AND-LIAB> 1,775,474
<GROSS-OPERATING-REVENUE> 269,669
<INCOME-TAX-EXPENSE> 15,348
<OTHER-OPERATING-EXPENSES> 222,872
<TOTAL-OPERATING-EXPENSES> 238,220
<OPERATING-INCOME-LOSS> 31,449
<OTHER-INCOME-NET> 609
<INCOME-BEFORE-INTEREST-EXPEN> 32,058
<TOTAL-INTEREST-EXPENSE> 10,579
<NET-INCOME> 21,479
222
<EARNINGS-AVAILABLE-FOR-COMM> 21,257
<COMMON-STOCK-DIVIDENDS> 8,954
<TOTAL-INTEREST-ON-BONDS> 8,578
<CASH-FLOW-OPERATIONS> 35,646
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
</TABLE>
