MODIFIED
FORM U-13-60
ANNUAL REPORT
FOR THE PERIOD
BEGINNING JANUARY 1, 1995 AND ENDING DECEMBER 31, 1995
TO THE
U.S. SECURITIES AND EXCHANGE COMMISSION
OF
HEC INC.
AND SUBSIDIARIES
A SUBSIDIARY SERVICE COMPANY
DATE OF INCORPORATION: JUNE 19, 1990
STATE UNDER WHICH INCORPORATED:
THE COMMONWEALTH OF MASSACHUSETTS
LOCATION OF PRINCIPAL EXECUTIVE OFFICES OF REPORTING COMPANY
24 PRIME PARKWAY
NATICK, MA 01760
REPORT FILED PURSUANT TO ORDER DATED JULY 27, 1990
IN FILE NUMBER 70-7698
NAME, TITLE, AND ADDRESS OF OFFICER TO WHOM CORRESPONDENCE CONCERNING THIS
REPORT SHOULD BE ADDRESSED:
LINDA A. JENSEN, VICE PRESIDENT-FINANCE, TREASURER AND CLERK
HEC INC.
24 PRIME PARKWAY
NATICK, MA 01760
NAME OF PRINCIPAL HOLDING COMPANY UNDER WHICH REPORTING
COMPANY IS ORGANIZED:
NORTHEAST UTILITIES
INSTRUCTIONS FOR THE USE OF MODIFIED FORM U-13-60
1. NUMBER OF COPIES - EACH ANNUAL REPORT SHALL BE FILED IN DUPLICATE.
THE COMPANY SHOULD PREPARE AND RETAIN AT LEAST ONE EXTRA COPY FOR ITSELF IN CASE
CORRESPONDENCE WITH REFERENCE TO THE REPORT BECOMES NECESSARY.
2. DEFINITIONS - DEFINITIONS CONTAINED IN INSTRUCTION 01-8 TO THE UNIFORM
SYSTEM OF ACCOUNTS FOR MUTUAL SERVICE COMPANIES AND SUBSIDIARY SERVICE
COMPANIES, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, AS AMENDED FEBRUARY 2,
1979 SHALL BE APPLICABLE TO WORDS OR TERMS USED SPECIFICALLY WITHIN THIS FORM U-
13-60.
3. ORGANIZATION CHART - THE COMPANY SHALL SUBMIT WITH EACH ANNUAL REPORT
A COPY OF ITS CURRENT ORGANIZATION CHART.
LISTING OF SCHEDULES AND ANALYSIS OF ACCOUNTS
SCHEDULE OR PAGE
DESCRIPTION OF SCHEDULES AND ACCOUNTS ACCT. NO. NO.
- ------------------------------------- --------------- ---
DESCRIPTION OF SYSTEM OF ACCOUNTING 3
COMPARATIVE BALANCE SHEET SCHEDULE I 4-5
- -------------------------
COMPANY PROPERTY SCHEDULE II 6
ACCUMULATED PROVISION FOR DEPRECIATION AND
AMORTIZATION OF COMPANY PROPERTY SCHEDULE III 7
ACCOUNTS RECEIVABLE AND ACCOUNTS
RECEIVABLE FROM ASSOCIATE COMPANIES SCHEDULE V 8
MISCELLANEOUS DEFERRED DEBITS SCHEDULE IX 9
PROPRIETARY CAPITAL SCHEDULE XI 10
LONG-TERM DEBT SCHEDULE XII 11
CURRENT AND ACCRUED LIABILITIES SCHEDULE XIII 12
NOTES TO FINANCIAL STATEMENTS SCHEDULE XIV 13-14
COMPARATIVE INCOME STATEMENT SCHEDULE XV 15
- ----------------------------
ANALYSIS OF BILLING-NON-ASSOCIATE COMPANIES ACCOUNT 458 16
DEPARTMENTAL ANALYSIS OF SALARIES ACCOUNT 920 17
OUTSIDE SERVICES EMPLOYED ACCOUNT 923 18-19
MISCELLANEOUS GENERAL EXPENSES ACCOUNT 930.2 20
RENTS ACCOUNT 931 21
TAXES OTHER THAN INCOME TAXES ACCOUNT 408 22
NOTES TO STATEMENT OF INCOME SCHEDULE XVIII 23
(INCLUDED ABOVE)
ORGANIZATION CHART 24
- ------------------
ANNUAL REPORT OF: HEC INC.
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
DESCRIPTION OF THE SYSTEM OF ACCOUNTING EMPLOYED BY HEC INC.:
HEC INC. MAINTAINS ITS ACCOUNTING BOOKS AND RECORDS ON A COMPUTER NETWORK USING
A GENERAL LEDGER SOFTWARE PACKAGE DEVELOPED BY BST CONSULTANTS. THE CHART OF
ACCOUNTS IS A STANDARD SET DEVELOPED FOR ARCHITECTURAL AND ENGINEERING FIRMS.
REVENUES AND EXPENSES ARE RECORDED ON AN ACCRUAL BASIS. A MORE DETAILED
DESCRIPTION OF HEC'S ACCOUNTING POLICIES CAN BE FOUND IN THE NOTES TO THE
FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
SCHEDULE I - COMPARATIVE BALANCE SHEET
Give balance sheet of the Company as of December 31, 1995 and 1994
- -------------------------------------------------------------------------------------
ACCOUNT ASSETS AND OTHER DEBITS AS OF DECEMBER 31
- -------------------------------------------------------------------------------------
1995 1994
<S> <C> <C>
COMPANY PROPERTY
101 Company property (Schedule II) $ 3,931,200 $ 3,780,878
107 Construction work in progress (Schedule II) 0 0
------------ ------------
Total Property 3,931,200 3,780,878
------------ ------------
108 Less accumulated provision for depreciation and
amortization of company property (Schedule III) 1,824,127 1,407,814
------------ ------------
Net Company Property 2,107,073 2,373,064
------------ ------------
INVESTMENTS
123 Investments in associate companies (Schedule IV) 0 0
124 Other Investments (Schedule IV) 0 0
------------ ------------
Total Investments 0 0
------------ ------------
CURRENT AND ACCRUED ASSETS
131 Cash 1,320,449 326,711
134 Special deposits 0 0
135 Working funds 1,600 1,600
136 Temporary cash investments (Schedule IV) 0 0
141 Notes receivable 0 0
143 Accounts receivable (Schedule V) 5,621,761 2,533,325
144 Accumulated provision of uncollectible accounts 0 0
145 Notes receivable from associate companies 0 0
146 Accounts receivable for associate companies (Schedule V 933,039 118,416
152 Fuel stock expenses undistributed 0 0
154 Materials and supplies 0 25,956
163 Stores expense undistributed 0 0
165 Prepayments 173,107 163,933
174 Miscellaneous current and accrued assets 0 0
------------ ------------
Total Current and Accrued Assets 8,049,956 3,169,941
------------ ------------
DEFERRED DEBITS
181 Unamortized debt expense 0 0
184 Clearing Accounts 0 0
186 Miscellaneous deferred debits (Schedule IX) 975,191 1,948,182
188 Research, development, or demonstration expenditures 0 0
190 Accumulated deferred income taxes 298 0
------------ ------------
Total Deferred Debits 975,489 1,948,182
------------ ------------
TOTAL ASSETS AND OTHER DEBITS $ 11,132,518 $ 7,491,187
============ ============
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
SCHEDULE I - COMPARATIVE BALANCE SHEET
Give balance sheet of the Company as of December 31, 1995 and 1994
- ------------------------------------------------------------- ------------ ------------
ACCOUNT LIABILITIES AND PROPRIETARY CAPITAL AS OF DECEMBER 31
- ------------------------------------------------------------- ------------ ------------
1995 1994
<S> <C> <C>
PROPRIETARY CAPITAL
201 Common stock issued (Schedule XI) $ 100 $ 100
211 Miscellaneous paid-in capital (Schedule XI) 3,991,845 4,315,498
215 Appropriated Retained Earnings (Schedule XI) 0 0
216 Unappropriated Retained Earnings (Schedule XI) (613,296) (979,877)
------------ ------------
Total Proprietary Capital 3,378,649 3,335,721
------------ ------------
LONG-TERM DEBT
223 Advances from associate companies (Schedule XII) 0 0
224 Other long-term debt (Schedule XII) 100,000 0
225 Unamortized premium on long-term debt 0 0
226 Unamortized discount on long-term debt 0 0
------------ ------------
Total Long Term Debt 100,000 0
------------ ------------
CURRENT AND ACCRUED LIABILITIES
231 Notes Payable 0 0
232 Accounts Payable 4,992,582 1,163,745
233 Notes payable to associate co's (Schedule XIII) 1,675,000 1,975,000
234 Accounts payable to associate co's (Schedule XIII) 119,885 36,812
236 Taxes accrued (140,693) (170,194)
237 Interest Accrued 0 0
238 Dividends declared 0 0
241 Tax collections payable (Schedule XIII) 49,626 22,295
242 Misc. current and accrued liabilities (Schedule XIII) 546,257 748,087
------------ ------------
Total Current and Accrued Liabilities 7,242,657 3,775,745
------------ ------------
DEFERRED CREDITS
253 Other deferred credits 0 0
255 Accumulated deferred investment tax credits 0 0
------------ ------------
Total Deferred Credits 0 0
------------ ------------
283 Accumulated Deferred Income Taxes 411,212 379,721
------------ ------------
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $ 11,132,518 $ 7,491,187
============ ============
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Year Ended December 31, 1995
SCHEDULE II - COMPANY PROPERTY
BALANCE AT BALANCE AT
BEGINNING OTHER 1/ CLOSE
DESCRIPTION OF YEAR ADDITIONS SALES CHANGES OF YEAR
- -------------------------------------------------------------------------- -----------------
COMPANY PROPERTY
Account
- ------
<S> <C> <C> <C> <C> <C>
301 ORGANIZATION 111,360 15,699 127,059
303 MISCELLANEOUS INTANGIBLE PLANT 0 0
304 LAND AND LAND RIGHTS 0 0
305 STRUCTURES AND IMPROVEMENTS 0 0
306 LEASEHOLD IMPROVEMENTS 6,032 5,334 11,366
307 EQUIPMENT 2/ 0 0
308 OFFICE FURNITURE & EQUIPMENT 806,868 145,301 (16,012) 936,157
309 AUTOMOBILES, OTHER VEHICLES 22,250 0 22,250
AND RELATED GARAGE EQUIPMENT
310 AIRCRAFT AND AIRPORT EQUIPMENT 0 0
311 OTHER COMPANY PROPERTY 3/ 2,834,368 2,834,368
--------------------------------------------------------
SUBTOTAL 3,780,878 166,334 (16,012) 0 3,931,200
--------------------------------------------------------
107 CONSTRUCTION WORK IN 0
PROGRESS 4/
--------------------------------------------------------
TOTAL 3,780,878 166,334 (16,012) 0 3,931,200
========================================================
1/ PROVIDE AN EXPLANATION OF THOSE CHANGES CONSIDERED MATERIAL:
2/ SUB-ACCOUNTS ARE REQUIRED FOR EACH CLASS OF EQUIPMENT OWNED. THE COMPANY
SHALL PROVIDE A LISTING BY SUB-ACCOUNT OF EQUIPMENT ADDITIONS DURING THE
YEAR AND THE BALANCE AT THE CLOSE OF THE YEAR.
Not applicable
3/ DESCRIBE OTHER COMPANY PROPERTY:
ENCORE Inservice Property
Encore Inservice Property - consists of energy efficient fixtures and metering equipment
installed in end user facilities under a program sponsored by a New England utility company.
HEC Inc. is paid based on the savings generated by the fixtures over a specified period of
time. The equipment remains the property of HEC Inc until the end of the contract and is
amortized over the life of the contract.
4/ DESCRIBE CONSTRUCTION WORK IN PROGRESS
None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1995
SCHEDULE III
ACCUMULATED PROVISION FOR DEPRECIATION AND
AMORTIZATION OF COMPANY PROPERTY
BALANCE AT ADDITIONS OTHER 1/ BALANCE
BEGINNING CHARGED TO CHANGES AT CLOSE
DESCRIPTION OF YEAR ACCT 403/404 SALES ADD/(DEDUCT) OF YEAR
- ---------------------------------------------------------------------------------------------
COMPANY PROPERTY
Account
- ------
<S> <C> <C> <C> <C> <C>
301 ORGANIZATION 100,224 14,733 12 114,969
303 MISCELLANEOUS INTANGIBLE PLANT 0 0
304 LAND AND LAND RIGHTS 0 0
305 STRUCTURES AND IMPROVEMENTS 0 0
306 LEASEHOLD IMPROVEMENTS 2,566 1,500 4,066
307 EQUIPMENT 2/ 0 0
308 OFFICE FURNITURE & EQUIPMENT 453,572 127,402 (14,230) 566,744
309 AUTOMOBILES, OTHER VEHICLES 7,530 4,223 11,753
AND RELATED GARAGE EQUIPMENT
310 AIRCRAFT AND AIRPORT EQUIPMENT 0 0
311 OTHER COMPANY PROPERTY 3/ 843,922 282,673 1,126,595
--------------------------------------------------------
TOTAL 1,407,814 430,531 (14,230) 12 1,824,127
========================================================
1/ PROVIDE AN EXPLANATION OF THOSE CHANGES CONSIDERED MATERIAL:
Impact of currency rate fluctuations.
3/ AMORTIZATION OF ENCORE PROPERTY-Encore Inservice Property consists of energy
efficient equipment installed in end-user facilities under a program sponsored by a
New England utility company. HEC Inc. is paid based on the savings generated by the
fixtures over a specified period of time. The equipment remains the property of HEC Inc.
until the end of the contract and is amortized over the life of the contract.
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIAIRES
For the Twelve Months Ended December 31, 1995
SCHEDULE V - ACCOUNTS RECEIVABLE AND
ACCOUNTS RECEIVABLE FROM ASSOCIATE COMPANIES
INSTRUCTIONS: Complete the following schedule listing accounts receivable and
accounts receivable from each associate company. Where the service
company has provided accomodation or convenience payments for
associate companies, a separate listing of total payments for each
associate company by sub-account should be provided.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
- -------------------------------------------------- ---------------------- -----------
Account
- ------
<S> <C> <C>
143 Accounts Receivable from clients $ 2,533,325 $ 5,621,761
------------ -----------
TOTAL $ 2,533,325 $ 5,621,761
============ ===========
146 Accounts Receivable from Associate Companies
Connecticut Light & Power Company $ 110,546 $ 811,649
Western Massachusetts Electric Company 0 91,591
Public Service of New Hampshire 7,870 29,799
------------ -----------
TOTAL $ 118,416 $ 933,039
============ ===========
</TABLE>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1995
SCHEDULE IX - MISCELLANEOUS DEFERRED DEBITS
INSTRUCTIONS: Provide detail of items in this account. Items less than
$10,000 may be grouped, showing the number of items in each
group.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
- ---------------------------------------------------- ------------- ----------
Account
- -------
186 Miscellaneous Deferred Debits
Accrued Revenue for energy systems & design
contracts, net $1,948,182 $ 957,691
West Virginia Legal Receivable 0 17,500
---------- ----------
TOTAL $1,948,182 $ 975,191
========== ==========
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1995
SCHEDULE XI - PROPRIETARY CAPITAL
NUMBER OF PAR OR STATED OUTSTANDING CLOSE OF
SHARES VALUE NUMBER OF PERIOD
ACCT. CLASS OF STOCK AUTHORIZED PER SHARE SHARES TOTAL AMOUNT
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
201 COMMON STOCK 100 1 100 100
- ---------------------------------------------------------------------------------------------
INSTRUCTIONS: Classify amounts in each account with brief explanations, disclosing
the general nature of transactions which give rise to the
reported amounts.
DESCRIPTION AMOUNT
- ---------------------------------------------------------------------------------------------
211 Miscellaneous paid-in-capital 4,000,000
211.84 Currency Translation Adjustment (8,155)
215 Appropriated Retained Earnings 0
------------
TOTAL 3,991,845
============
INSTRUCTIONS: Give particulars concerning net income or (loss) during the year,
distinguishing between compensation for the use of capital owed or
net loss remaining for servicing nonassociates per the General
Instructions of the Uniform Systems of Accounts. For dividends paid
during the year in cash or otherwise, provide rate percentage,
amount of dividend, date declared and date paid.
BALANCE AT NET INCOME BALANCE AT
BEGINNING OR DIVIDENDS CLOSE
DESCRIPTION OF YEAR LOSS PAID OF YEAR
- ---------------------------------------------------------------------------------------------
216 Unappropriated Retained Earnings (979,877) 366,581 0 (613,296)
------------------------------------------------------
TOTAL (979,877) 366,581 0 (613,296)
======================================================
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC. AND SUBSIDIARIES
For the Year Ended December 31, 1995
SCHEDULE XII
LONG-TERM DEBT
INSTRUCTIONS Advances from associate companies should be reported separately for advances in
notes, and advances on open account. Names of associate companies from which
advances were received shall be shown under the class and series of obligation
column. for Account 224 - - Other long-term debt provide the name of creditor
company or organization, terms of obligation, date of maturity, interest rate, and
the amount authorized and outstanding.
- ------------------------------------------------------------------------------------------------
TERMS OF OBLIG. DATE BALANCE BALANCE
AT AT
NAME OF CLASS & SERIES OF INTEREST AMOUNT BEGINNING DEDUCTIONS CLOSE
CREDITOR OF OBLIGATION MATURITY RATE AUTHORIZED OF YEAR ADDITIONS (1) OF YEAR
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ACCOUNT 223 - $ $ $ $ $
ADVANCES FROM
ASSOCIATE
COMPANIES:
ACCOUNT 224 - 8.04% Secured 12/31/2000 8.04% 250,000 0 100,000 100,000
OTHER LONG- Note-
TERM DEBT: Arizona Public Service
--------- --------- --------- --------- -------
$ 250,000 $ 0 $ 100,000 $ 0 $100,000
========= ========= ========= ========= =======
(1) GIVE AN EXPLANATION OF DEDUCTIONS:
</TABLE>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1995
SCHEDULE XIII - CURRENT ACCRUED LIABILITIES
INSTRUCTIONS: Provide balance of notes and accounts payable to each
associate company. Give descriptions and amount of
miscellaneous current and accrued liabilities. Items
less than $10,000 may be grouped, showing the number
of items in each group.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
- --------------------------------------------- ------------- ----------
Account
- -------
233 NOTES PAYABLE TO ASSOCIATE COS. $ 1,975,000 $1,675,000
---------- ----------
TOTAL $ 1,975,000 $1,675,000
========== ==========
234 ACCOUNTS PAYABLE TO ASSOCIATE COS.
Northeast Utilities Service Company $ 36,812 $ 119,885
---------- ----------
TOTAL $ 36,812 $ 119,885
========== ==========
241 TAX COLLECTIONS PAYABLE $ 22,295 $ 49,626
---------- ----------
TOTAL $ 22,295 $ 49,626
========== ==========
242 MISCELLANEOUS CURRENT AND
ACCRUED VENDOR LIABILITIES
Accrued Audit Fee $ 12,200 $ 20,200
Accrued Commissions 24,476 38,872
Accrued Incentive Expense 140,000 226,564
Accrued Accounts Payable 428,931 35,193
Accrued Lighting Maintenance 37,350 31,152
Reserve for energy savings guarantee 104,000 104,000
Deferred Compensation 0 46,805
Accrued West Virginia Legal Credit 0 17,500
Miscellaneous (15 Items) 1,130 25,971
---------- ----------
TOTAL $ 748,087 $ 546,257
========== ==========
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
SCHEDULE XIV
NOTES TO FINANCIAL STATEMENTS
INSTRUCTIONS: THE SPACE BELOW IS PROVIDED FOR IMPORTANT NOTES REGARDING THE
FINANCIAL STATEMENTS OR ANY ACCOUNT THEREOF. FURNISH
PARTICULARS AS TO ANY SIGNIFICANT CONTINGENT ASSETS OR
LIABILITIES EXISTING AT THE END OF THE YEAR. NOTES RELATING
TO FINANCIAL STATEMENTS SHOWN ELSEWHERE IN THIS REPORT MAY BE
INDICATED HERE BY REFERENCE.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(A) GENERAL
-------
HEC INC. (THE "COMPANY"), A WHOLLY-OWNED SUBSIDIARY OF NORTHEAST
UTILITIES ("NU"), PROVIDES DESIGN AND ENERGY SERVICES FOR ENGINEERING AND
INSTALLATION OF ENERGY EFFICIENT EQUIPMENT. IN 1995, THE COMPANY
ESTABLISHED A NEW SUBSIDIARY, SOUTHWEST HEC ENERGY SERVICES L.L.C.
("SOUTHWEST HEC"). SOUTHWEST HEC WAS ESTABLISHED TO PROVIDE ENERGY
SERVICES IN THE SOUTHWESTERN UNITED STATES AND NORTHERN MEXICO. THE
CONSOLIDATED STATEMENTS OF THE COMPANY INCLUDE THE ACCOUNTS OF SOUTHWEST
HEC AND TWO WHOLLY-OWNED SUBSIDIARIES, HEC ENERGY CONSULTING CANADA INC.
AND HEC INTERNATIONAL CORPORATION. SIGNIFICANT INTERCOMPANY TRANSACTIONS
HAVE BEEN ELIMINATED IN CONSOLIDATION.
(B) REVENUE RECOGNITION
-------------------
REVENUES INCLUDE AMOUNTS EARNED UNDER CONTRACTS FOR THE DESIGN AND
INSTALLATION OF ENERGY SYSTEMS AND THE REALIZATION OF ENERGY SAVINGS.
CERTAIN REVENUES ARE RECOGNIZED BY THE PERCENTAGE-OF-COMPLETION METHOD AS
WORK PROGRESSES FOR CONTRACTS IN PROCESS. OTHER REVENUES ARE RECOGNIZED AS
SAVINGS ARE REALIZED BY CUSTOMERS. LOSSES ON CONTRACTS ARE FULLY
RECOGNIZED IN THE PERIOD THEY BECOME ESTIMABLE. PARTICIPATION IN ENERGY
SAVINGS FOR CERTAIN FIXED PERIODS SUBSEQUENT TO RECOVERY OF INSTALLED COST
OF ENERGY SYSTEMS ARE RECOGNIZED IN THE PERIODS SUCH SAVINGS ARE ACHIEVED.
(C) DEPRECIATION
------------
DEPRECIATION AND AMORTIZATION ARE PROVIDED USING STRAIGHT-LINE METHODS OVER
THE ESTIMATED USEFUL LIVES OF THE ASSETS.
(D) ORGANIZATION COSTS
------------------
COSTS INCURRED TO ORGANIZE THE COMPANY AND ITS SUBSIDIARIES ARE CAPITALIZED
AND AMORTIZED USING THE STRAIGHT LINE METHOD OVER A FIVE YEAR PERIOD. THE
AMORTIZATION PERIODS BEGAN ON JULY 1, 1990 FOR THE COMPANY AND ON NOVEMBER
1, 1994 FOR HEC INTERNATIONAL CORPORATION AND HEC ENERGY CONSULTING CANADA,
INC.
(2) SHORT-TERM DEBT
---------------
THE COMPANY IS A PARTICIPANT IN THE NORTHEAST UTILITIES SYSTEM MONEY POOL
(POOL). AS A LIMITED PARTICIPANT, HEC IS LIMITED TO BORROWING FUNDS
PROVIDED BY NU PARENT. THE POOL PROVIDES A MORE EFFICIENT USE OF THE CASH
RESOURCES OF THE SYSTEM, AND REDUCES OUTSIDE SHORT-TERM BORROWINGS.
NORTHEAST UTILITIES SERVICE COMPANY (A WHOLLY-OWNED SUBSIDIARY OF NU)
ADMINISTERS THE POOL AS AGENT FOR THE MEMBER COMPANIES. BORROWING BASED ON
LOANS FROM NU PARENT BEAR INTEREST AT NU PARENT'S COST AND MUST BE REPAID
BASED UPON THE TERMS OF NU PARENT'S ORIGINAL BORROWING. AT DECEMBER 31,
1995 AND 1994, HEC HAD APPROXIMATELY $1.7 MILLION AND $2.0 MILLION IN
BORROWINGS AT 4.7 AND 4.9 PERCENT RESPECTIVELY, FROM THE POOL.
(3) LONG-TERM DEBT
--------------
SOUTHWEST HEC ENTERED INTO A 8.04% DEBT AGREEMENT WITH ARIZONA PUBLIC
SERVICE ("APS") ON DECEMBER 7, 1995. THE NOTE REQUIRES AN INITIAL LOAN OF
$100,000 WITH ADDITIONAL ADVANCES TO SOUTHWEST HEC OF $50,000 QUARTERLY,
BEGINNING APRIL 1, 1996, UNTIL A MAXIMUM BALANCE OF $250,000 IS REACHED.
APS HAS A TEN YEAR OPTION TO CONVERT THE NOTE INTO A 50% OWNERSHIP INTEREST
IN SOUTHWEST HEC.
(4) DEFINED CONTRIBUTION PLAN
-------------------------
THE COMPANY PARTICIPATES IN NU'S 401(K) PLAN WHICH COVERS SUBSTANTIALLY ALL
EMPLOYEES. ELIGIBLE EMPLOYEES MAY CONTRIBUTE UP TO 16% OF THEIR
COMPENSATION TO THE PLAN, AND THE COMPANY WILL CONTRIBUTE UP TO 3% OF EACH
EMPLOYEES COMPENSATION. EMPLOYEES BECOME VESTED IN CONTRIBUTIONS BY
SPECIFIED PERCENTAGES OVER A FIVE YEAR PERIOD.
(5) LEASES
------
THE COMPANY HAS CERTAIN OPERATING LEASES FOR OFFICES AND EQUIPMENT EXPIRING
AT VARIOUS DATES THROUGH 1999. DURING 1995 AND 1994, HEC CHARGED
APPROXIMATELY $242,000 AND $220,000, RESPECTIVELY, IN OPERATING LEASE
RENTAL PAYMENTS TO OPERATING EXPENSE. FUTURE MINIMUM RENTALS PAYABLE FOR
OPERATING LEASES ARE AS FOLLOWS:
1996 $ 247,823
1997 206,302
1998 205,262
1999 106,762
---------
TOTAL $ 766,149
=========
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1995 and 1994
SCHEDULE XV - STATEMENT OF INCOME
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
ACCOUNT DESCRIPTION 1995 1994
- --------------------------------------------------------------------------------
INCOME
457 Services rendered to Associate Companies $ 2,531,854 $ 651,902
458 Services rendered to Nonassociate Companies 30,889,001 20,041,894
421 Miscellaneous Income/(Loss) 209,396 162,886
----------- ------------
TOTAL INCOME 33,630,251 20,856,682
=========== ============
EXPENSE
904 Reserve for Uncollectible Accounts 63,600 68,685
920 Salaries and Wages 3,085,753 3,124,744
921 Office Supplies and Expense 8,928,617 5,448,943
922 Administrative Expense transferred-credit 0 0
923 Outside Services Employed 19,227,545 10,205,462
924 Property Insurance 41,747 53,684
925 Injuries and Damages 115,897 109,326
926 Employee Pensions and Benefits 347,701 323,313
928 Regulatory Commission Expense 0 0
930.1 General Advertising Expense 4,890 0
930.2 Miscellaneous General Expense 74,108 83,795
931 Rents 254,435 247,327
935 Maintenance of Structures and Equipment 36,691 12,645
403 Depreciation and Amortization Expense 415,798 389,821
404 Amortization - Organization Costs 14,733 22,272
408 Taxes other than Income Taxes 250,905 264,589
409 Income Taxes 251,333 (79,575)
410 Provision for Deferred Income Taxes 24,341 208,128
411 Provision for Deferred Income Taxes-Credit 6,852 50,705
411.5 Investement Tax Credit 0 0
426.1 Donations 0 0
426.5 Other Deductions 0 0
427 Interest on Long-term Debt 0 0
428 Amortize Debt Expenses 0 0
430 Interest on Debt to Associate Companies 116,722 101,672
431 Other Interest Expense 2,002 328
----------- ------------
TOTAL EXPENSE 33,263,670 20,635,864
----------- ------------
NET INCOME/(LOSS) $ 366,581 $ 220,817
=========== ============
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1995
ANALYSIS OF BILLING
NONASSOCIATE COMPANIES
ACCOUNT 458
EXCESS
OR TOTAL
DEFICIENCY AMOUNT
DESCRIPTION TOTAL COST 458-4 BILLED
- ----------------------------------------------- -------------
ENERGY MANAGEMENT SERVICES $ 29,987,938
DEMAND SIDE MANAGEMENT SERVICES 434,542
CONSULTING SERVICES 466,521
-------------
TOTAL $ 30,889,001
=============
INSTRUCTIONS: Provide a brief description of the services
rendered to each nonassociate company.
Energy Management Services:
Engineering and installation of energy conservation measures.
Demand Side Management Services:
Engineering and consulting services in the design,
implementation, and evaluation of demand side management
programs.
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1995
DEPARTMENTAL ANALYSIS OF SALARIES
ACCOUNT 920
NAME OF DEPARTEMENT OR SALARY NUMBER OF
SERVICE FUNCTION EXPENSE PERSONNEL
- ------------------------------------------ ----------------------
ADMINISTRATION $ 880,580 13
ENGINEERING 1,635,917 44
MARKETING 569,256 11
---------- ---------
TOTAL $3,085,753 68
========== =========
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For Twelve Months Ended December 31, 1995
OUTSIDE SERVICES EMPLOYED
ACCOUNT 923
From Whom "A"-Associate
Purchased "NA"-Nonassociate Amount
- -------------------------------------------------------- -----------
SUBCONTRACTOR SERVICES
Advance Energy & Lighting NA $ 262,358
Agam-Delta NA 119,006
Ahlstrom Schaeffer NA 79,486
Jack Ames PE NA 12,000
Black & McDonald NA 493,992
B&G NA 562,972
Baldwin-Hall NA 631,583
Bulbtronics NA 56,606
Candela Systems NA 111,102
Carrier Building Systems NA 86,356
CVM Electric NA 278,635
Delphi Mechancial NA 1,313,240
Diversified Lighting NA 96,251
Dual-Lite NA 50,625
Dynamic Energy Products NA 41,174
EEM NA 2,534,406
Egg Electric NA 513,366
Electri-Comm NA 366,334
Engineering Handling NA 22,425
Gas Plants Incorportated NA 52,500
Graybar Electric NA 696,025
Guarantee Mechanical NA 150,272
Hi-Amp NA 558,617
Honeywell Incorporated NA 2,467,573
Imperial Lighting NA 102,590
Industrial Engineers NA 43,181
Janzzo Heating NA 32,619
Johnson Controls NA 17,714
Kensington Construction NA 17,160
E.W. Kuhn Electric NA 614,839
Kovalsky & Carr Electric NA 57,449
Lakhani & Jordon Engineering NA 79,922
Landis & Gyr Powers NA 113,216
Liberty Appratus NA 385,152
Marlin Construction NA 18,100
McQuay International NA 254,409
Metaloptics NA 135,437
Mirrorlight NA 17,607
The Mitchell Partnership NA 54,742
ML Systems NA 138,816
Montana Supply NA 77,380
New England Mechancial NA 17,028
New York State Theater NA 44,832
Northern Peabody, Inc. NA 54,754
O'Connell Electric NA 71,351
PEM NA 448,727
Purvis Electric NA 34,962
Queens Industrial NA 37,163
Rolands NA 1,436,401
Rocco Russo, Ltd NA 21,398
Anthony Russo NA 575,705
Schlesinger Electric NA 185,380
Schwing Electric NA 301,190
Sheraden Lighting NA 152,958
Snyder General NA 222,798
Sullivan Benson Co. NA 10,050
Stay-Lite Lighting NA 127,004
Syracuse Merit Electric NA 205,510
Thermal Management NA 64,350
Unalite Electric NA 49,999
United Energy Group NA 69,989
Vanderlinde Electric NA 58,122
Wesco NA 95,057
Miscellaneous (80 items) NA 423,672
-----------
TOTAL SUBCONTRACTORS $18,425,637
-----------
CONSULTING SERVICES
Barakat & Chamberlin NA 14,216
Energy Planning NA 29,692
St.Onge, Ruff & Associates NA 27,836
Cambridge Energy Services NA 33,800
Controlled Energies NA 32,034
PEM Electric NA 136,626
EEM NA 256,535
Ventana NA 41,018
Miscellaneous (25 items) NA 151,124
-----------
TOTAL CONSULTING SERVICES $ 722,881
-----------
LEGAL SERVICES
Miscellaneous (3 items) NA $ 27,866
-----------
AUDITING SERVICES
Arthur Andersen NA $ 20,673
-----------
MARKETING AGENTS & CONSULTANTS
Pequod Associates, Inc. 23,000
Miscellaneous (2 Items) 758
-----------
TOTAL MARKETING AGENTS & CONSULTANTS 23,758
-----------
OTHER PROFESSIONAL SERVICES
Miscellaneous (3 items) NA $ 6,730
-----------
TOTAL $19,227,545
===========
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1995
MISCELLANEOUS GENERAL EXPENSE
ACCOUNT 930.2
INSTRUCTIONS: Provide a listing of the amount included in Account
930, "Miscellaneous General Expense," classifying
such expenses according to their nature. Payments
and expenses permitted by Section 321(b)(2) of the
Federal Election Campaign Act, as amended by Public
Law 94-283 in 1976 (2 U.S.C Section 441(b)(2) shall
be separately classified.
DESCRIPTION AMOUNT
- --------------------------------------------------------- --------
Utilities $ 17,287
Recruiting 16,747
Miscellaneous 40,074
--------
TOTAL $ 74,108
========
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1995
RENTS
ACCOUNT 931
INSTRUCTIONS: Provide a listing of the amount included in
Account 931 "Rents," classifying such expenses
by major groupings of property, as defined in
the account definition of the Uniform System
of Accounts.
DESCRIPTION AMOUNT
- ----------------------------------------------------- ----------
Office Space $ 242,314
Equipment Rental 12,121
----------
TOTAL $ 254,435
==========
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1995
TAXES OTHER THAN INCOME TAXES
ACCOUNT 408
INSTRUCTIONS: Provide an analysis of Account 408, "Taxes Other than Income
Taxes. Separate the analysis into two groups: (1) other than
U.S. Government taxes, and (2) U.S. Government taxes. Specify
each of the various kinds of taxes and show the amounts
thereof. Provide a subtotal for each class of tax.
AMOUNT
---------
<S> <C>
KIND OF TAX
1) Other than U.S. Government taxes
City & County Taxes $ 1,096
State Franchise Taxes 4,569
State Unemployment Taxes 34,595
---------
Subtotal $ 40,260
---------
2)U.S. Government taxes
Employer's FICA Tax $ 205,817
Federal Unemployment Taxes 4,828
---------
Subtotal $ 210,645
---------
TOTAL $ 250,905
=========
</TABLE>
ANNUAL REPORT OF HEC INC AND SUBSIDIARIES
For the Year Ended December 31, 1995
SCHEDULE XVIII
NOTES TO STATEMENTS OF INCOME
INSTRUCTIONS: The space below is provided for important notes regarding the
statement of income or any account thereof. Furnish
particulars as to any significant increases in services rendered
or expenses incurred during the year. Notes relating to
financial statements shown elsewhere in this report may be
indicated here by reference.
See Notes to Financial Statements on pages 13 through 14.
ANNUAL REPORT OF HEC INC. AND SUBSIDIARIES
ORGANIZATION CHART (AS OF DECEMBER 31, 1995)
President - Thomas W. Philbin, Ph.D.
- Vice President - David S. Dayton
- Vice President - Customer Service - H. Donald Burbank, P.E.
- Vice President - Finance, Treasurer and Clerk - Linda Jensen
- Vice President - Operations - James B. Redden, P.E.
ANNUAL REPORT OF HEC INC. AND SUBSIDIARIES
SIGNATURE CLAUSE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935 and the rules and regulations of the
Securities and Exchange Commission issued thereunder, the
undersigned company has duly caused this report to be signed on
its behalf by the undersigned officer thereunto duly authorized.
HEC INC. AND SUBSIDIARIES
----------------------------
(Name of Reporting Company)
By: /s/ Linda Jensen
-------------------------------
(Signature of Signing Officer)
Linda Jenson, Vice President-
Finance, Treasurer and Clerk
-----------------------------
(Printed Name and Title of
Signing Officer)
Date: April 26, 1996
--------------------
<TABLE> <S> <C>
<ARTICLE>OPUR2
<CIK>0000875017
<NAME>HEC INC. AND SUBSIDIARIES
<MULTIPLIER>1
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<BOOK-VALUE> PER-BOOK PER-BOOK
<NET-SERVICE-COMPANY-PROPERTY> 2,107,073 2,373,064
<TOTAL-INVESTMENTS> 0 0
<TOTAL-CURRENT-ASSETS> 8,049,956 3,169,941
<TOTAL-DEFERRED-DEBITS> 975,489 1,948,182
<OTHER-ASSETS-AND-DEBITS> 0 0
<TOTAL-ASSETS-AND-DEBITS> 11,132,518 7,491,187
<TOTAL-PROPRIETARY-CAPITAL> 3,378,649 3,335,721
<TOTAL-LONG-TERM-DEBT> 100,000 0
<NOTES-PAYABLE> 0 0
<NOTES-PAYABLE-ASSOCIATE-COMP> 1,675,000 1,975,000
<OTHER-CURR-AND-ACCRUED-LIAB> 5,567,657 1,800,745
<TOTAL-DEFERRED-CREDITS> 0 0
<DEFERRED-INCOME-TAX> 411,212 379,721
<TOT-LIABIL-AND-PROPRIET-CAP> 11,132,518 7,491,187
<SERVICES-ASSOCIATE-COMPANIES> 2,531,854 651,902
<SERVICES-NON-ASSOCIATE-COMP> 30,889,001 20,041,894
<MISC-INCOME-OR-LOSS> 209,396 162,886
<TOTAL-INCOME> 33,630,251 20,856,682
<SALARIES-AND-WAGES> 3,085,753 3,124,744
<EMPLOYEE-PENSION-AND-BENEFIT> 347,701 323,313
<OTHER-EXPENSES> 29,830,216 17,187,807
<TOTAL-EXPENSES> 33,263,670 20,635,864
<NET-INCOME> 366,581 220,817
<TOTAL-EXPENSES-DIRECT-COST> 33,263,670 20,635,864
<TOTAL-EXPENSES-INDIRECT-COST> 0 0
<TOT-EXP-DIRECT-AND-INDIRECT> 33,263,670 20,635,864
<PERSONNEL-END-OF-YEAR> 68 73
</TABLE>
