SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1995 Commission File No. 0-505
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BANGOR HYDRO-ELECTRIC COMPANY
------------------------------------------------------
(Exact Name of Registrant as specified in its Charter
Maine 01-0024370
- ------------------------------- --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
33 State Street, Bangor, Maine 04401
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 207-945-5621
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None
- -----------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Outstanding Common Stock, $5 Par Value - 7,264,849 Shares
June 30, 1995
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
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FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
PART I - FINANCIAL INFORMATION
PAGE
----
Cover Page 1
Index 2
Consolidated Statements of Income 3
Management's Discussion and Analysis
of Financial Statements 4
Consolidated Balance Sheets - June 30, 1995 and
December 31, 1994 17
Consolidated Statements of Capitalization 19
Consolidated Statements of Cash Flows 20
Consolidated Statements of Retained Earnings 21
Notes to the Consolidated Financial Statements 22
PART II - OTHER INFORMATION 30
Item 2 - Changes in Securities 31
Item 4 - Submission of Matters to a Vote of
Security Holders 31
Item 6 - Exhibits and Reports on Form 8-K 31
Signature Page 33
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
000's Omitted Except Per Share Amounts
(UNAUDITED)
3 Months Ended 6 Months Ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
-------------------- --------------------
ELECTRIC OPERATING REVENUES 43,694 39,663 91,957 86,039
-------------------- --------------------
OPERATING EXPENSES:
Fuel for generation 24,243 18,732 49,201 45,388
Purchased power 6,388 3,384 10,348 6,566
Other operation and maintenance 8,155 8,099 15,389 17,974
Depreciation and amortization 1,807 1,295 3,356 2,593
Amortization of Seabrook Nuclear Unit 425 425 850 850
Amortization of costs to terminate
purchased power contract 971 971 1,943 1,295
Taxes -
Property and payroll 1,252 1,132 2,469 2,368
State income (346) 139 (45) 97
Federal income (640) 938 1,004 1,322
-------------------- --------------------
42,255 35,115 84,515 78,453
-------------------- --------------------
OPERATING INCOME 1,439 4,548 7,442 7,586
-------------------- --------------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used
during construction 135 212 354 765
Other, net of applicable income taxes (203) 59 (119) (17)
-------------------- --------------------
(68) 271 235 748
-------------------- --------------------
INCOME BEFORE INTEREST EXPENSE 1,371 4,819 7,677 8,334
-------------------- --------------------
INTEREST EXPENSE:
Long-term debt 2,670 2,705 5,312 5,414
Other 529 309 1,110 712
Allowance for borrowed funds used
during construction (132) (203) (342) (895)
-------------------- --------------------
3,067 2,811 6,080 5,231
-------------------- --------------------
NET INCOME (LOSS) (1,696) 2,008 1,597 3,103
DIVIDENDS ON PREFERRED STOCK 413 413 826 826
-------------------- --------------------
EARNINGS (LOSS) APPLICABLE TO COMMON
STOCK (2,109) 1,595 771 2,277
==================== ====================
WEIGHTED AVERAGE NUMBER OF SHARES 7,257 7,127 7,239 6,727
==================== ====================
EARNINGS (LOSS) PER COMMON SHARE, based
on the weighted average number of
shares outstanding during the period (0.29) 0.22 0.11 0.34
==================== ====================
DIVIDENDS DECLARED PER COMMON SHARE 0.18 0.33 0.51 0.66
==================== ====================
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Management's Discussion and Analysis of the Results of Operations and
Financial Condition contained in Bangor Hydro-Electric Company's (the
"Company") Annual Report on Form 10-K for the year ended December 31, 1994
("1994 Form 10-K") should be read in conjunction with the comments below.
EARNINGS
The quarter ended June 30, 1995 resulted in a loss of $.29 per common
share, compared to earnings of $.22 per common share for the quarter ended
June 30, 1994. The difference in earnings is principally attributable to the
impact of the necessity to incur higher costs for power to replace the
Company's share of Maine Yankee's output, as well as accruing, at June 30,
1995, the Company's estimated total share of the resleeving project costs
(see the discussion of Maine Yankee below). The 1995 loss per share number
is based on a greater number of common shares outstanding than in 1994.
IMPORTANT CURRENT ACTIVITIES
BUYBACK OF PURCHASED POWER CONTRACTS - As discussed previously, in early
1995 the Company reached an agreement to buy back two high-cost contracts for
the purchase of power from non-utility generators. The buyback agreement was
contingent upon a number of conditions, including negotiation of definitive
documentation, the ability of the Company to obtain satisfactory financing
arrangements, the securing of necessary governmental approvals and a
satisfactory agreement with another utility to which the Company was
reselling a portion of the electrical output from the plants.
All of the necessary conditions were met, and on June 30, 1995, the
Company completed the buyback of the two purchased power contracts at a cost
of approximately $170 million, including transaction costs. Under the
Company's Alternative Marketing Plan (AMP), the buyback costs have been
deferred and recorded as a regulatory asset, to be amortized and collected
over a ten year period, beginning July 1, 1995. The cost of the buyback was
financed entirely by new debt instruments, thereby significantly increasing
the Company's indebtedness. The major components of the new debt are as
follows:
1. The Company has entered into a Loan Agreement with the Finance
Authority of Maine (FAME), a body corporate and politic and public
instrumentality of the State of Maine. Pursuant to authorizing legislation
in Maine, FAME issued $126 million of notes through a private placement, the
repayment of which is the responsibility of the Company under the terms of
the Loan Agreement. Of that amount, approximately $105 million was made
available to the Company to finance a portion of the buyback and
approximately $21 million was set aside in a capital reserve fund. The notes
bear interest at an annual rate of 7.03%, mature on July 1, 2005 and are
subject to a schedule of annual principal payments beginning on July 1, 1998.
The amount held in the capital reserve fund will be used to pay the final
installments of principal and interest due in 2005.
In order to secure the FAME notes, the Company executed a new General
and Refunding Mortgage Indenture and Deed of Trust establishing a lien on the
Company's property junior to the lien under the Company's First Mortgage
Bonds Indenture. After the issuance of $115 million in First Mortgage Bonds
to a group of bank lenders discussed below, the Company may not issue any
additional First Mortgage Bonds in the future except to the trustee under the
new General and Refunding Mortgage. The Company issued bonds to FAME under
the new mortgage in the amount of $126 million.
2. The Company entered into a Credit Agreement with a group of seven
banks consisting of a revolving credit facility in the initial amount of $55
million and a term loan in the amount of $60 million. The revolving credit
facility replaces the Company's short term credit facilities that existed
prior to the closing, and also provides for the issuance of a letter of
credit required to support $4.2 million of the Company's Pollution Control
Revenue Bonds. The revolving credit facility has a term of five years. The
term loan, used to finance a portion of the buyback cost, also has a five
year term and requires annual principal payments of $12 million beginning
June 30, 1996. The Credit Agreement has various options for interest charges
under variable rate formulas, but the Company is required to enter into a
transaction to cap or fix the rate of interest on the term loan within 120
days of the execution of the Agreement. The Credit Agreement is secured by
$115 million of non-interest bearing First Mortgage Bonds.
The debt instruments executed in connection with this financing contain
a number of covenants and restrictions that the Company believes to be usual
and customary for such a transaction, including limitations on the aggregate
amount of indebtedness that the Company may incur and restrictions on the
payment of dividends.
In addition to the buyback costs incurred to date, the Company is
committed under certain conditions to reimburse the Towns of Enfield and
Jonesboro for lost property tax revenues in an amount not expected to exceed
$1.4 million over a two year period. The Company believes that the
accomplishment of this transaction will provide substantial benefits for its
customers, and should enhance the Company's prospects for improved earnings
sooner than if the buyback did not occur.
REDUCTION OF DIVIDEND ON COMMON STOCK - The dividend on common stock was
reduced by $.15 from the prior quarterly level of $.33 per share that the
Company had been paying since early 1992. This results in a reduction in the
indicated annual rate from $1.32 to $.72.
The Company had announced in March 1995 that a reduction in the common
dividend was likely to occur in 1995. The reduction has been occasioned by
the continuing pressure on earnings and the necessity to avoid further rate
increases as the Company, along with the rest of the electric utility
industry, adjusts to a more competitive business environment. In addition,
as discussed above, the financing agreements in connection with the purchased
power contract buybacks restrict the Company's ability to continue with the
high common dividend payout ratios that the Company has been maintaining in
recent years.
Especially as a result of the financial impact of the Maine Yankee
outage, discussed below, the Company's common dividends will probably not be
covered by earnings in 1995, even after taking into consideration the
dividend reduction. Beyond 1995, though, the Company presently anticipates
that the common dividend payout, after this reduction, should be at a level
more appropriate for the risks and uncertainties with which the Company must
deal as the transition to greater competition continues.
MAINE YANKEE - The Company has a 7% equity investment in the Maine
Yankee nuclear generating plant, which has been a low cost source of power
since it came on line in the early 1970's. As reported in the first quarter
of 1995, when the plant shut down for refueling earlier this year,
inspections resulted in discovering that the steam generator tubes were
degrading and would require extensive repair. After a thorough evaluation,
in May it was determined to resleeve all of the tubes in all three steam
generators. The cost of this repair is estimated at $40 million, of which
the Company is responsible for 7%. The resleeving costs are offset to some
extent by O&M savings at Maine Yankee, due to various cost cutting measures
being implemented by the Company while the plant is nonoperational. Repairs
have begun, and the project should be completed by the end of 1995. In
addition, the Company is incurring replacement power costs of approximately
$800,000 per month while the plant is off-line.
COST REDUCTIONS - The Company is in the process of implementing internal
cost reductions. During the remainder of 1995, the Company expects to reduce
its operation & maintenance (O&M) costs through a combination of workforce
reductions and cuts in discretionary spending. These cost reductions are
expected to be at least $3 million (annualized). The workforce reductions
will be accomplished with another early retirement plan and other involuntary
severance arrangements, and could result in a 13% reduction in the workforce.
As with the prior downsizing programs the Company has implemented, the cost
of the program must be recognized in full at the time it is implemented. The
Company cannot presently estimate that cost, but expects that it will be
recognized and recorded later in 1995.
DEVELOPMENTS UNDER THE COMPANY'S ALTERNATIVE MARKETING PLAN- On July 6,
1995, the Maine Public Utilities Commission (MPUC) approved the Company's
price reduction (to $.05/KWH) for residential space heating. The MPUC had
earlier this year approved many aspects of AMP which is intended to allow the
Company greater flexibility to price electricity at competitive levels with
other energy sources. Such pricing flexibility was advocated by the Company
as an important element of its plan to improve the financial performance of
the Company while maintaining stable rates for "core" customers by
identifying new markets for the Company's services. The residential space
heating price was the first major marketing initiative proposed by the
Company under AMP.
REVENUES
The $4.0 million increase in total electric operating revenues was
attributable to a 4.25% increase in total (kilowatt hour) KWH sales in the
second quarter of 1995 as compared to 1994 as well as a $1.2 million increase
in off-system sales (sales related to power pool and interconnection
agreements and resales of purchased power) for the quarter ended June 30,
1995 compared to the 1994 period. Increased revenues in the 1995 period were
also affected by the elimination of seasonal rates for certain customers in
March 1995.
EXPENSES
With the AMP order by the MPUC, and the elimination of the fuel cost
adjustment (FCA), the Company, in the first quarter of 1995, began recording,
as expense, the actual cost of fuel for generation. Previously the Company
had historically been permitted to adjust its rates retroactively for changes
in these costs. The significant increase in fuel and purchased power expense
in the second quarter of 1995 were a function of the elimination of the FCA,
as well as the resleeving and replacement power costs related to Maine Yankee
(previously discussed). These increases were offset to some extent by the
amortization of $252,000 in deferred fuel revenues in the second quarter of
1995, related to overcollections from customers under the FCA. The Company is
amortizing the overcollected balance of $3.03 million as of January 1, 1995
over a three year period.
The $56,000 increase in other O&M expense in the second quarter of 1995
was primarily a result of a $460,000 increase in bad debt write-offs, offset
by a $322,000 decrease in O&M payroll as compared to 1994. The decreased
payroll expense was a function of lower employee levels in the 1995 period as
compared to 1994.
The increase in depreciation and amortization expense was due to an
increase in depreciable property, as well as an increase in the composite
depreciation rate from 3.0% to 3.2%, resulting from a depreciation study
conducted by the Company.
The increase in property and other taxes in the second quarter of 1995
was due principally to greater property taxes, which was a result of
increased property levels and property tax rates.
The decrease in income taxes was primarily a function of a taxable loss
in the second quarter of 1995.
Allowance for funds used during construction (AFDC) decreased in 1995
relative to 1994 primarily due to decreased construction levels in the 1995
period.
Other deductions increased in the 1995 quarter due to the write-off of
preliminary survey and investigatory costs related to a proposed new facility
for the Company, which has been delayed indefinitely.
Other interest expense, which is composed primarily of interest expense
on short term borrowings, increased due to higher interest rates as well as a
$10.5 million increase in weighted average short term borrowings outstanding
in the 1995 quarter as compared to 1994.
SIX MONTHS OF 1995 VERSUS SIX MONTHS OF 1994
REVENUES
The $5.9 million increase in total electric operating revenues was
attributable to the 15.9% base rate increase effective March 1, 1994, the
previously mentioned elimination of seasonal rates for certain customers, an
overall 1.55% increase in KWH sales in the 1995 period as compared to 1994,
and off-system sales increased by $1.3 million in 1995.
EXPENSES
The increase in fuel and purchased power expenses in the 1995 period as
compared to 1994 are due to the same factors as noted for the second quarter
of 1995 versus the 1994 quarter.
The decrease in other O&M in 1995 was primarily a result of the early
retirement program implemented in the first quarter of 1994, which resulted
in a $2.8 million charge to operations in 1994. Also, as a result of the
corresponding reduction in employee levels, O&M payroll expense was $908,000
lower in the 1995 period as compared to 1994. These reductions were offset
by a $479,000 increase in bad debt expense, due to higher levels of write-
offs in 1995 versus 1994.
The reasons for the increases in depreciation and amortization expense,
as well as property and payroll taxes for the 1995 period as compared to 1994
are consistent with those previously discussed.
Effective March 1, 1994, the Company began amortizing deferred costs
associated with the Beaver Wood Joint Venture (Beaver Wood) purchased power
contract termination over a nine year period. Amortization expense in 1995
was $648,000 greater than the same 1994 period.
The decrease in income taxes was primarily a function of lower earnings
in the 1995 period as compared to 1994.
AFDC decreased in 1995 relative to 1994 primarily because the Company
ceased accruing carrying costs associated with the Beaver Wood purchased
power contract buyout when recovery was authorized by the MPUC on March 1,
1994. The decrease was also a function of lower levels of construction in the
1995 period.
Other interest expense increased principally due to higher interest
rates as well as a $2.4 million increase in weighted average short term
borrowings outstanding in the 1995 period as compared to 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Consolidated Statements of Cash Flows reflect events in the first
six months of 1995 and 1994 as they affect the Company's liquidity. Net cash
used in operations was $189.4 million for the period ended June 30, 1995 as
compared to $20.4 million of net cash provided by operations for the comparable
1994 period. As previously discussed, in June 1995 the Company incurred
$196.5 million in expenditures related to the Ultrapower purchased power
contracts buyback ($168.7 million) and related financing costs ($27.8
million). These financing costs included debt issuance costs ($2.2 million),
funding of the debt service reserve fund ($21.2 million), and collateral
pledged on the Company's letter of credit associated with its Pollution
Control Revenue Bonds ($4.4 million).
The decrease in cash flows was also due to deferred fuel revenue, which
decreased $1.9 million in the 1995 period as compared to a $4.2 million
increase for the 1994 period. Also accounts payable decreased $3.8 million
in 1995 as compared to a $1.1 million decrease in the 1994 period.
The purchased power contracts buyback costs were financed through the
issuance of $126 million of FAME revenue notes and $60 million of medium term
notes. Additional short-term borrowings were also made in the 1995 period
under the Company's revolving credit agreement to finance this transaction.
Under the Company's Dividend Reinvestment and Common Stock Purchase Plan
the Company realized a common stock investment of $773,000 through the
issuance of 79,706 new common shares in 1995 as compared to $662,000 in the
comparable 1994 period through the issue of 38,491 shares.
Also as discussed previously, the Company entered into a new revolving
credit agreement with a group of seven banks in June 1995.
The Company in each period made regular and optional sinking fund
payments on its 12.25% first mortgage bonds.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
ASSETS June 30, Dec. 31,
1995 1994
--------- ---------
INVESTMENT IN UTILITY PLANT:
Electric plant in service, at original cost $ 291,017 $ 274,830
Less - Accumulated depreciation and amortization 79,247 75,667
----------- -----------
$ 211,770 $ 199,163
Construction in progress 17,144 23,929
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$ 228,914 $ 223,092
Investments in corporate joint ventures:
Maine Yankee Atomic Power Company $ 4,754 $ 4,754
Maine Electric Power Company, Inc. 125 125
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$ 233,793 $ 227,971
----------- -----------
Funds held by trustee, principally at cost $ 21,196 $ -
----------- -----------
OTHER INVESTMENTS, principally at cost $ 8,367 $ 3,482
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 2,831 $ 1,956
Accounts receivable, net of reserve 18,047 19,130
Unbilled revenue receivable 6,977 8,611
Inventories, at average cost:
Material and supplies 2,865 2,992
Fuel oil 414 435
Prepaid expenses 1,420 1,681
Deferred purchased power costs 1,647 235
Current deferred income taxes 1,094
----------- -----------
Total current assets $ 34,201 $ 36,134
----------- -----------
DEFERRED CHARGES:
Investment in Seabrook Nuclear Project, net of
accumulated amortization of $24,227 in 1995
and $23,377 in 1994 $ 34,615 $ 35,465
Costs to terminate purchased power contracts 203,520 36,739
Deferred regulatory asset 30,491 33,537
Prepaid pension costs 1,778 2,082
Demand-side management costs 2,305 2,684
Other 5,039 3,156
----------- -----------
Total deferred charges $ 277,748 $ 113,663
----------- -----------
Total assets $ 575,305 $ 381,250
=========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
June 30, Dec. 31,
STOCKHOLDERS' INVESTMENT AND LIABILITIES 1995 1994
--------- ---------
CAPITALIZATION:
Common stock investment $ 103,508 $ 105,658
Preferred stock 4,734 4,734
Preferred stock subject to mandatory redemption,
less current sinking fund requirements 13,777 13,740
Long-term debt, net of current portion 288,922 116,367
----------- -----------
Total capitalization $ 410,941 $ 240,499
----------- -----------
CURRENT LIABILITIES:
Notes payable - banks $ 47,000 $ 27,000
----------- -----------
Other current liabilities -
Current portion of long-term debt and sinking
fund requirements on preferred stock $ 15,051 $ 2,961
Accounts payable 10,828 14,669
Dividends payable 1,703 2,766
Accrued interest 3,393 3,650
Customers' deposits 340 288
Deferred fuel revenue 2,521 3,025
Income taxes payable 966
----------- -----------
Total other current liabilities $ 33,836 $ 28,325
----------- -----------
Total current liabilities $ 80,836 $ 55,325
----------- -----------
DEFERRED CREDITS AND RESERVES:
Deferred income taxes - Seabrook $ 17,991 $ 18,434
Other accumulated deferred income taxes 48,557 50,084
Deferred regulatory liability 8,787 9,222
Unamortized investment tax credits 2,326 2,415
Other 5,867 5,271
----------- -----------
Total deferred credits and reserves $ 83,528 $ 85,426
----------- -----------
Total Stockholders' Investment and Liabilities $ 575,305 $ 381,250
=========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
000's Omitted
(UNAUDITED)
June 30, Dec. 31,
1995 1994
----------- ----------
COMMON STOCK INVESTMENT
Common stock, par value $5 per share- $ 36,325 $ 35,926
Authorized -- 10,000,000 shares in 1995 and 1994
Outstanding -- 7,264,849 shares in 1995 and
7,131,385 in 1994
Amounts paid in excess of par value 56,348 55,974
Retained earnings 10,835 13,758
----------- ----------
Total common stock investment $ 103,508 $ 105,658
----------- ----------
PREFERRED STOCK-Non participating, cumulative-
Par value $100 per share, authorized 600,000 shares
Not redeemable or redeemable soley at the option
of the issuer -
7%, Noncallable, 25,000 shares, authorized
and outstanding $ 2,500 $ 2,500
4-1/4%, Callable at $100, 4,840 shares,
authorized and outstanding 484 484
4%, Series A, Callable at $110, 17,500 shares,
authorized and outstanding 1,750 1,750
----------- ----------
$ 4,734 $ 4,734
----------- ----------
8.76%, Subject to mandatory redemption requirements-
Callable at 105.63% if called on or prior to
December 27, 1995, 150,000 shares authorized
and outstanding $ 15,277 $ 15,240
Less: Current sinking fund requirements 1,500 1,500
----------- ----------
$ 13,777 $ 13,740
----------- ----------
LONG-TERM DEBT
First Mortgage Bonds-
6-3/4% Series due 1998 $ 2,500 $ 2,500
10-1/4% Series due 2019 15,000 15,000
10-1/4% Series due 2020 30,000 30,000
8.98% Series due 2022 20,000 20,000
7.38% Series due 2002 20,000 20,000
7.30% Series due 2003 15,000 15,000
12-1/4% Series due 2001 9,773 11,128
----------- ----------
$ 112,273 $ 113,628
Less: Current portion 1,551 1,461
----------- ----------
Total first mortgage bonds $ 110,722 $ 112,167
----------- ----------
Variable rate demand pollution control revenue bonds
Series 1983 due 2009 $ 4,200 $ 4,200
----------- ----------
Other Long-Term Debt-
Finance Authority of Maine - Taxable Electric Rate
Stabilization Revenue Notes, 7.03% Series 1995A,
due 2005 $ 126,000 $ -
----------- ----------
Medium Term Notes, Variable interest rate- LIBOR
plus 2% due 2000 $ 60,000 $ -
Less: Current portion 12,000 -
----------- ----------
$ 48,000 $ -
----------- ----------
Total long-term debt $ 288,922 $ 116,367
----------- ----------
Total Capitalization $ 410,941 $ 240,499
=========== ==========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
000's Omitted
(Unaudited)
1995 1994
--------- ---------
CASH FLOWS FROM OPERATIONS:
NET INCOME $ 1,597 $ 3,103
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 3,356 2,593
Amortization of Seabrook Nuclear Project 850 850
Costs to terminate purchased power contract (196,517) -
Amortization of costs to terminate purchased
power contract 1,943 1,295
Allowance for equity funds used during
construction (354) (765)
Deferred income tax provision 1,166 1,732
Deferred income taxes on Seabrook Nuclear Project (207) (208)
Deferred investment tax credits (89) (90)
Changes in assets and liabilities:
Deferred fuel, purchased power and interest costs (1,916) 4,221
Receivables, net and unbilled revenue 2,717 3,147
Materials, supplies and fuel oil 148 708
Prepaid pension costs 304 1,544
Accounts payable (3,841) (1,095)
Accrued interest (257) (65)
Accrued current income taxes (207) -
Accrued postretirement benefit costs (262) 1,445
Other current assets and liabilities, net 313 165
Other, net 1,851 1,794
----------------------
Net Cash (Used in) Provided By Operations $(189,405) $ 20,374
----------------------
CASH FLOWS FROM INVESTING:
Construction expenditures $ (9,249) $ (9,621)
Allowance for borrowed funds used during construction (342) (895)
----------------------
Net Cash Used in Investing $ (9,591) $ (10,516)
----------------------
CASH FLOWS FROM FINANCING:
Dividends on preferred stock $ (790) $ (790)
Dividends on common stock (4,757) (4,402)
Payments on long-term debt (1,355) -
Issuance of common stock:
Public offering 867,500 shares in 1994 - 14,084
Dividend reinvestment plan (79,706 shares in 1995
and 38,491 in 1994) 773 662
Issuance of long-term debt 186,000 (1,259)
Short-term debt, net 20,000 (20,000)
----------------------
Net Cash Provided (Used in) by Financing $ 199,871 $ (11,705)
----------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS $ 875 $ (1,847)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,956 2,387
----------------------
CASH AND CASH EQUIVALENTS - END OF SIX MONTHS $ 2,831 $ 540
======================
CASH PAID DURING THE SIX MONTHS FOR:
INTEREST (Net of Amount Capitalized) $ 5,883 $ 4,373
INCOME TAXES 178 -
======================
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
000's Omitted
(Unaduited)
1995 1994
----------- -----------
BALANCE AT JANUARY 1 $ 13,758 $ 17,386
ADD - NET INCOME 1,597 3,103
----------- -----------
$ 15,355 $ 20,489
----------- -----------
DEDUCT:
Dividends -
Preferred stock $ 790 $ 790
Common stock 3,693 4,701
Other 37 36
----------- -----------
$ 4,520 $ 5,527
----------- -----------
BALANCE AT JUNE 30 $ 10,835 $ 14,962
=========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
-------------
(Unaudited)
(1) BASIS OF PRESENTATION AND ACCOUNTING POLICIES:
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, have been condensed or omitted in this Form 10-Q
pursuant to the Rules and Regulations of the Securities and Exchange
Commission. However, in the opinion of Bangor Hydro-Electric Company, the
disclosures contained in this Form 10-Q are adequate to make the information
presented not misleading. The year end condensed balance sheet data was
derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the consolidated financial
statements and the notes thereto and all other information included in the
1994 Form 10-K.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements reflect all adjustments, including normal recurring
accruals, necessary to present fairly the financial position as of June 30,
1995 and the results of operations and cash flows for the periods ended June
30, 1995 and 1994.
The Company's significant accounting policies are described in the Notes
to the Consolidated Financial Statements included in its 1994 Form 10-K filed
with the Securities and Exchange Commission. For interim reporting purposes,
the Company follows these same basic accounting policies but considers each
interim period as an integral part of an annual period. Accordingly, certain
expenses are allocated to interim periods based upon estimates of such
expenses for the year.
(2) INCOME TAXES:
The following table reconciles a provision calculated by multiplying
income before federal income taxes by the statutory federal income tax rate
to the above provisions for federal income taxes:
Six Months Ended June 30,
---------------------------
1995 1994
---- ----
Amount % Amount %
--------- -- -------- --
(Dollars in Thousands)
Federal income tax provision
at statutory rate $ 851 34% $1,543 34%
Less permanent reductions in
tax expense resulting from
statutory exclusions from
taxable income 15 - 241 5
------- --- ------- ---
Federal income tax provision
before effect of temporary
differences $ 836 34% $1,302 29%
Plus temporary differences
that are flowed through for
ratemaking and accounting
purposes 127 4 33 -
------- --- ------- ---
Federal income tax provision $ 963 38% $1,335 29%
======= === ======= ===
3) INVESTMENT IN MAINE YANKEE AND MEPCO:
Condensed financial information for Maine Yankee Atomic Power Company
("Maine Yankee") and Maine Electric Power Company, Inc. ("MEPCO") is as
follows:
MAINE YANKEE MEPCO
----------------- -----------------
(Dollars in Thousands)
(Unaudited)
Operations for Six Months Ended
-------------------------------------
June 30 June 30 June 30 June 30
1995 1994 1995 1994
-------- -------- -------- --------
OPERATIONS:
As reported by investee-
Operating revenues $111,887 $82,249 $26,411 $ 7,788
======== ======== ======= =======
Earnings applicable to
common stock $ 3,432 $ 3,488 $ 53 $ 53
======== ======== ======= =======
Company's reported equity-
Equity in net income $ 240 $ 244 $ 7 $ 7
Deduct-Effect of
adjusting Company's
estimate to actual (112) (9) - -
-------- -------- ------- -------
Amounts reported by
Company $ 128 $ 235 $ 7 $ 7
======== ======== ======= =======
MAINE YANKEE MEPCO
------------------ ----------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
FINANCIAL POSITION AT
JUNE 30 DEC 31 JUNE 30 DEC 31
1995 1994 1995 1994
------- ------ ------- ------
FINANCIAL POSITION:
As reported by investee-
Total assets $561,887 $549,910 $ 9,198 $ 6,563
Less-
Preferred stock 18,600 19,200 - -
Long-term debt 98,999 118,666 1,730 1,730
Other liabilities and
deferred credits 375,037 344,550 6,590 3,955
-------- -------- -------- -------
Net assets $ 69,251 $ 67,494 $ 878 $ 878
======== ======== ======== =======
Company's reported equity -
Equity in net assets $ 4,848 $ 4,725 $ 125 $ 125
(Deduct)add- Effect
of adjusting Company's
estimate to actual (94) 29 - -
-------- -------- -------- -------
Amounts reported by
Company $ 4,754 $ 4,754 $ 125 $ 125
======== ======== ======== ========
(4) ALTERNATIVE MARKETING PLAN:
With the Maine Public Utilities Commission's (MPUC) order on
February 14, 1995, approving many aspects of the Company's Alternative
Marketing Plan proposal, the fuel adjustment clause and deferred fuel
accounting were eliminated effective January 1, 1995. Consequently, in the
first quarter of 1995, base and fuel cost adjustment (FCA) rates were
combined into one overall rate, and the associated revenues have been
reflected as Electric Operating Revenues.
As of January 1, 1995, the Company's collections under the FCA had
exceeded its costs by approximately $3.03 million. The MPUC allowed the
Company to retain the overcollection and ordered that the amount be amortized
over a period of three years beginning January 1, 1995.
(5) MAINE YANKEE OUTAGE:
The Company has a 7% equity investment in the Maine Yankee nuclear
generating plant, which has been a low cost source of power since it came on
line in the early 1970's. As reported in the first quarter of 1995, when the
plant shut down for refueling earlier this year, inspections resulted in
discovering that the steam generator tubes were degrading and would require
extensive repair. After a thorough evaluation, in May it was determined to
resleeve all of the tubes in all three steam generators. The cost of this
repair is estimated at $40 million, of which the Company is responsible for
7%. The Company has accrued for its estimated share of the resleeving
project costs as of June 30, 1995. The resleeving costs are offset to some
extent by O&M savings at Maine Yankee, due to various cost cutting measures
by the Company while the plant is nonoperational. Repairs have begun, and
the project should be completed by the end of 1995. In addition, the Company
is incurring replacement power costs of approximately $800,000 per month
while the plant is off-line.
(6) BUYBACK OF PURCHASED POWER CONTRACTS:
As discussed in the first quarter, earlier in 1995 the Company
negotiated agreements to "buy back" its high-cost commitment to purchase
power from two identical non-utility generating plants. The transaction,
valued at approximately $170 million, was completed on June 30, 1995. Under
AMP the buyback costs have been deferred and recorded as a regulatory asset,
to be amortized and collected over a ten year period, beginning July 1, 1995.
The buyback was financed entirely with new debt instruments. The
Company entered into a loan agreement with the Finance Authority of Maine
(FAME), which issued and sold $126 million of revenue notes, bearing interest
at a rate of 7.03%, which the Company is obliged to repay. Of that amount,
$105 million was made available to the Company to fund a portion of the
buyback transaction, and approximately $21 million has been set aside in a
debt service reserve fund which, absent the Company's default, will be used
to pay the final installments of principal and interest on the notes at
maturity in 2005. In order to secure the FAME notes, the Company executed a
new General and Refunding Mortgage Indenture and Deed of Trust establishing a
second mortgage on the Company's property, and issued bonds to FAME under the
new mortgage in the amount of $126 million.
The remainder of the buyback was financed by a new credit
agreement with a group of seven banks. The credit agreement consists of a
revolving credit facility in the initial amount of $55 million and a term
loan in the amount of $60 million. The revolving credit facility replaces
the Company's short-term credit facilities that existed prior to the closing
of this transaction, has a term of five years, and also provides for the
issuance of a letter of credit required to support $4.2 million of the
Company's Pollution Control Revenue Bonds. To secure the existing letter of
credit related to the Pollution Control Revenue Bonds, until the new letter
of credit could be issued, the Company deposited approximately $4.4 million
of the proceeds from this financing with a third party trustee. These funds
were released to the Company upon the issuance of the new letter of credit in
August 1995. This amount has been included with Other Investments on the
Company's consolidated balance sheet at June 30, 1995. The term loan, used
to finance a portion of the buyback, also has a five year term and requires
annual principal payments of $12 million beginning in June 1996. Borrowings
under the credit agreement are at variable rates, but the interest rate on
the term loan must be fixed or capped within 120 days of the closing. The
Company issued $115 million of non-interest bearing First Mortgage Bonds as
security for the credit agreement.
The debt instruments executed in connection with this financing
contain a number of covenants and restrictions that the Company believes to
be usual and customary for such a transaction, including
a limitation on the aggregate amount of indebtedness the Company may incur
and restrictions on the payment of dividends.
(7) RECLASSIFICATIONS:
Certain 1994 amounts have been reclassified to conform with
presentation used in Form 10-Q for the quarter ended June 30, 1995.
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDING JUNE 30, 1995
PART II
Item 2. Changes in Securities
- ------ ---------------------
As previously noted, on June 30, 1995, the Company entered into separate
loan agreements with the Finance Authority of Maine and with a group of
banks, both agreements being secured by bonds issued by the Company. Under
each agreement, commencing with calendar year 1996, the Company is prohibited
from making common stock dividends or distributions in excess of 70% of
earnings applicable to common stock without the approval of the lenders.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Company held its annual meeting of stockholders on May 17, 1995.
The only matter submitted to a vote was the election of three Class III
Directors for terms ending in 1998. The following persons were elected to
fill those positions pursuant to the corresponding tabulation of votes:
For Withheld
--- --------
Jane J. Bush 472,461 15,891
David M. Carlisle 472,461 13,762
Carroll R. Lee 472,462 15,904
The terms of office of the following Directors, members of Class I and
Class II, continued after the annual meeting:
Robert S. Briggs
William C. Bullock, Jr.
Alton E. Cianchette
Helen Sloane Dudman
G. Clifton Eames
Robert H. Foster
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
Exhibits - None.
--------
Reports on Form 8-K
-------------------
A Current Report on Form 8-K dated June 14, 1995 announcing a reduction
in common stock dividends was submitted during the period covered by this
Report. The company also announced plans for reducing internal operation and
maintenance expenses.
A second Current Report on Form 8-K dated July 10, 1995 describing three
other events was also submitted during the period covered by this Report. The
Company announced and described the completion of the buyback transaction of
two purchased power contracts, the approval by the Maine Public Utilities
Commission of a reduced residential space heating rate and an agreement to
acquire the Union River Electric Cooperative.
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDED JUNE 30, 1995
The information furnished in this report reflects all adjustments which
are, in the opinion of management, necessary to a fair statement of the
results for the interim period.
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.
BANGOR HYDRO-ELECTRIC COMPANY
-----------------------------
(Registrant)
/s/ Robert C. Weiser
-----------------------------
Dated: August 11, 1995
Robert C. Weiser
Treasurer
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Bangor
Hydro-Electric Company's Form 10-Q for the second quarter of 1995 and is
qualified in its entirety by reference to such 10-Q.
</LEGEND>
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<NAME> BANGOR HYDRO-ELECTRIC COMPANY
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