SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR SECTION
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2002 Commission File No. 1-10922
------------- -------
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
------------
None
- ---------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
7% Preferred Stock, $100 Par Value
4 1/4% Preferred Stock, $100 Par Value
4% Preferred Stock Series A, $100 Par Value
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 ____
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2002
PART I - FINANCIAL INFORMATION
- ------------------------------
PAGE
----
Cover Page 1
Index 2
Consolidated Statements of Income 3
Management's Discussion and Analysis of Results of
Operations and Financial Condition 4
Consolidated Balance Sheets - June 30, 2002 and
December 31, 2001 24
Consolidated Statements of Capitalization 26
Consolidated Statements of Cash Flows 27
Consolidated Statements of Common Stock Investment 28
Notes to the Consolidated Financial Statements 29
PART II - OTHER INFORMATION 36
Item 4 - Submission of Matters to a Vote of
Security Holders 37
Item 6 - Exhibits and Reports on Form 8-K 38
Signature Page 39
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
000's Omitted Except Per Share Amounts
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
----------- ----------------------- -----------
Operating Revenues:
Electric operating revenue $ 25,451 $ 25,966 $ 54,983 $ 55,893
Off-System sales 12,421 4,893 19,328 9,729
Standard offer service 413 22,568 12,619 44,585
----------- ----------------------- ------------
$ 38,285 $ 53,427 $ 86,930 $ 110,207
----------- ----------------------- ------------
Operating Expenses:
Purchased power and fuel for generation $ 17,342 $ 8,912 $ 28,575 $ 16,679
Standard offer service purchased power 233 22,138 12,123 43,674
Other operation and maintenance 8,536 10,886 18,251 19,194
Depreciation and amortization 2,634 2,725 5,310 5,423
Regulatory amortizations 3,183 4,295 6,832 9,042
Taxes -
Local property and other 1,192 1,262 2,537 2,600
State and federal income 606 40 2,451 2,799
----------- ----------------------- ------------
$ 33,726 $ 50,258 $ 76,079 $ 99,411
----------- ----------------------- ------------
Operating Income $ 4,559 $ 3,169 $ 10,851 $ 10,796
----------- ----------------------- ------------
Other Income And (Deductions):
Allowance for equity funds used
during construction $ 131 $ 153 $ 245 $ 319
Other, net of applicable income taxes 496 205 579 598
----------- ----------------------- ------------
Income Before Interest Expense $ 5,186 $ 3,527 $ 11,675 $ 11,713
----------- ----------------------- ------------
Interest Expense:
Long-term debt $ 3,344 $ 3,566 $ 6,722 $ 7,153
Other 201 301 393 471
Allowance for borrowed funds used
during construction (124) (139) (233) (294)
----------- ----------------------- ------------
$ 3,421 $ 3,728 $ 6,882 $ 7,330
----------- ----------------------- ------------
Net Income (Loss) $ 1,765 $ (201)$ 4,793 $ 4,383
Dividends On Preferred Stock 67 67 133 133
----------- ----------------------- ------------
Earnings (Loss) Applicable To Common Stock $ 1,698 $ (268)$ 4,660 $ 4,250
=========== ======================= ============
Weighted Average Number of Shares Outstanding 7,363 7,363 7,363 7,363
=========== ======================= ============
Earnings (Loss) Per Common Share:
Basic $ .23 $ (.04) $ .63 $ .58
Diluted - (.03) - .52
=========== ======================= ============
Dividends Declared Per Common Share $ .48 $ .20 $ .48 $ .40
=========== ======================= ============
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, 2001
(2001 Form 10-K) should be read in conjunction with the comments below.
EARNINGS
For the quarters ended June 30, 2002 and 2001 basic earnings (loss)
per common share were $.23 and $(.04), respectively. Earnings were negatively
affected in the second quarter of 2001 by several items. The New England
independent system operator (ISO New England) costs associated with
transmission constraints were approximately $796,000 greater ($.06 reduction
in earnings per common share in 2001) in the 2001 quarter as compared to the
2002 quarter. In the second quarter of 2001 the Company recorded a $585,000
reserve ($.05 reduction in earnings per common share in 2001) associated with
adjustments to revenue related to filings with the New England Power Pool
(NEPOOL). Also in the 2001 quarter, the Company recorded approximately
$318,000 in expense ($.03 reduction in earnings per common share in 2001)
related to an increase in a environmental remediation reserve associated with
a waste removal site in which the Company was involved in the past. For a
complete discussion of this site, see the Environmental Matters section of
MD&A.
In the second quarter of 2001, the Company increased its reserve for
bad debts by $200,000 ($.02 reduction in earnings per common share in 2001)
due principally to a Chapter 11 bankruptcy filing by one of the Company's
largest industrial customers. Additionally reducing earnings in the 2001
quarter was the impact of an audit by the State of Maine associated with
investment tax credits claimed by the Company in prior years' income tax
returns. The audit resulted in the Company being assessed for improperly
claiming approximately $183,000 ($.02 reduction in earnings per common share
in 2001) of investment tax credits. Finally negatively impacting earnings in
the second quarter of 2001 was approximately $262,000 of incremental costs
($.02 reduction in earnings per common share in 2001) incurred in connection
with the Company's involvement in the development of a regional transmission
organization (RTO) in New England. As a result of an accounting order from
the Federal Energy Regulatory Commission (FERC), in the third quarter of 2001
the Company was allowed to defer those RTO related costs for future recovery
from the RTO.
Positively impacting earnings in the second quarter of 2002 was the
reclassification to a regulatory asset of an expense recorded in the first
quarter of 2002. The expense was related to a contractual arrangement
associated with a retiring officer of the Company (approximately $.03
increase in earnings per common share). As discussed under the section
"Important Current Activities", with the approval of the Company's
Alternative Rate Plan (ARP) in June 2002, the Company was allowed to defer
employee transition costs, which included this cost, associated with the
Company's major cost reduction efforts currently taking place.
IMPORTANT CURRENT ACTIVITIES
CURRENT REGULATORY PROCEEDINGS AND REORGANIZATION - As reported in the 2001
Form 10-K, on February 14, 2002, the Company presented to the Maine Public
Utilities Commission (MPUC) a proposed resolution of the ongoing ARP
proceeding that called for a multi-year freeze in the distribution portion of
the Company's rates. The ARP proceeding, as well as proposed proceedings to
implement a general increase in the Company's distribution rates and to
initiate a management investigation of the Company, were suspended to provide
the Company and interested parties additional time to negotiate a potential
settlement of these interrelated proceedings. On April 25, 2002, the Company
and other parties to the proceeding executed a stipulation to present to the
MPUC a single comprehensive ARP applying to the Company's MPUC jurisdictional
distribution revenue requirement and rates. On June 6, 2002, the MPUC
approved the ARP and also dismissed the pending management investigation of
the Company.
The terms of the ARP include a rate plan to be in effect through
December 31, 2007, with the Company's core distribution rates being adjusted
downward on July 1 of each year from 2003 to 2007, at annual rates ranging
from 2% to 2 3/4%. The Company is also allowed rate adjustments associated
with certain specified categories of costs. The ARP also includes a mechanism
whereby distribution returns on common equity outside of a certain range will
be shared evenly between the Company and ratepayers. The Company is also
required to meet certain customer service quality standards during the term
of the ARP, and rate reduction penalties will result from not meeting the
various performance measures as set forth in the stipulation. Finally, the
ARP provides the Company with an accounting order allowing for the deferral
of employee transition costs during 2002 and 2003 in connection with
reductions in cost of operations and maintenance (O&M), which are discussed
below. These deferred costs are being amortized over a ten year period,
starting in June 2002.
Successful implementation of the ARP necessitated a significant
decrease in the Company's operating costs. The restructuring, which
encompasses all aspects of the Company, is expected to reduce operating costs
by approximately 20%. The Company will also begin to transfer a portion of
its fixed costs to variable costs, and improve processes to enhance long-term
performance. As part of the restructuring, employment levels have been
adjusted downward in the second quarter of 2002 by 112 employees through
early retirement and severance packages. The total employee transition costs
incurred in the second quarter of 2002 were approximately $7.8 million and
recorded as a component of Other Regulatory Assets on the consolidated
balance sheets. Also, the Company recorded one month's of amortization
expense, amounting to approximately $65,000, associated with this regulatory
asset in the second quarter of 2002.
In February 2002, the MPUC issued an Order in connection with changes
in the Company's stranded cost rates. As a result of the Order, and to
recover the stranded costs created as a result of the restructuring of the
electric utility industry in the State of Maine, the Company's stranded cost
rates were increased effective March 1, 2002. The stranded cost rate
increase resulted in the Company's total electric rates increasing by
approximately 6.5%. The stranded cost rates are set for a period not to
exceed three years, although the Company has the right to seek adjustments to
these rates if certain economic situations occur.
Also effective March 1, 2002, the Company is no longer responsible
for being the standard-offer service provider. The Company, though, still
has a standard-offer related power supply commitment with a third party
through February 2004 amounting to approximately $54 million. The power
delivered under this contract is being resold to one of the new standard-
offer service providers, with estimated revenues to be realized of
approximately $40 million. The difference between the cost of the power and
the resale revenues are being recovered in the Company's stranded cost rates
starting March 1, 2002. As a result of the Company no longer being the
standard-offer provider effective in March 2002, and the previously discussed
power contract obligation, there is an impact on the comparability of
revenues and expenses for the 2002 periods presented in this filing in
relation to 2001.
REVENUES
With the implementation of competition in the electric utility
industry starting March 1, 2000, and excluding the standard-offer service
through February 2002, the Company no longer sells electricity to its
customers. The Company's transmission and distribution (T&D) and stranded
cost charges to customers, though, continue to be based on customers'
electricity usage measured in kilowatt-hours (kWh). Consequently, discussion
related to electric operating revenues will continue to have a kWh sales, or
hereafter referred to as energy sales, component.
Electric operating revenue decreased by $515,000 in the second
quarter of 2002 as compared to the second quarter of 2001. The decrease was
impacted by a 1.1% decrease in energy sales in the second quarter of 2002.
This reduction was principally attributable to unfavorable weather conditions
and the weak economy. Also, electric operating revenues were lower in the
second quarter of 2002 as a result of a $2.6 million reduction in certain
stranded cost related revenue deferrals. The reduction was primarily related
to the stranded cost rate change on March 1, 2002. Offsetting these items to
some extent in the second quarter of 2002 was the positive impact of the
implementation of the previously discussed stranded cost rate increase on
March 1, 2002.
Off-system sales, which are sales related to power pool and inter-
connection agreements and resales of purchased power, were approximately
$7.53 million greater in the second quarter of 2002 in relation to the
comparable 2001 quarter. The increase is due principally to the previously
discussed resale of power associated with the former standard-offer power
supply contract.
The $22.2 million decrease in standard-offer service revenues in the
second quarter of 2002 is due to the Company no longer being the standard-
offer provider effective March 1, 2002. The standard offer revenues recorded
in the second quarter of 2002 are a result of residual standard offer related
adjustments.
EXPENSES
Fuel for generation and purchased power expense, excluding the cost
of standard-offer service purchased power, increased $8.4 million in the
second quarter of 2002 as compared to 2001. The largest item affecting the
increased expense was approximately $8.8 million of costs in the second
quarter of 2002 associated with the previously discussed former standard-
offer power contract obligation. This increase was offset to some extent by
a $796,000 reduction in ISO New England costs associated with transmission
constraints in the second quarter of 2002.
Standard-offer purchased power expense decreased by approximately
$21.9 million in the second quarter of 2002 relative to the second quarter of
2001. The decrease was due to the Company no longer being the standard offer
service provider on March 1, 2002. As discussed above, there were some small
residual standard offer related purchased power adjustments in the second
quarter of 2002.
Other O&M expense decreased by approximately $2.4 million in the
second quarter of 2002 in comparison to the second quarter of 2001.
Principally as a result of the workforce reductions in the second quarter of
2002, O&M payroll expense was approximately $606,000 lower relative to the
2001 quarter. Also reducing other O&M expense by approximately $322,000 in
the 2002 quarter was the timing of expense recognition associated with State
of Maine regulatory assessments. Also, as discussed previously, there were
several items that increased other O&M expense in the second quarter of 2001,
including the $318,000 environmental remediation reserve, the $200,000 bad
debt reserve increase, and $262,000 in RTO related costs.
Regulatory amortizations represent current amortizations allowed in
the Company's distribution and stranded cost rates as allowed by the MPUC in
prior rate orders. These include the amortization of purchased power
contract buyouts/restructurings, Seabrook investment, deferred asset sale
gain, and other regulatory amortizations. Effective March 1, 2002, in
connection with the implementation of new stranded cost electric rates, the
Company began amortizing stranded cost related regulatory assets and
liabilities that had been previously deferred on the Company's balance sheet.
Also, certain existing stranded cost related amortizations were modified
effective March 1, 2002 in connection with the stranded cost rate change.
The following summarizes the components of the regulatory amortizations for
the second quarter of 2002 as compared to the second quarter of 2001 (in
000's):
2002 2001
Contract buyouts and restructurings $4,954 $5,639
Seabrook investment 425 425
Deferred asset sale gain (1,056) (2,155)
Other stranded cost related
regulatory assets and liabilities (1,495) 96
Distribution related regulatory
assets and liabilities 290 290
Employee transition costs 65 -
-------- --------
Total Regulatory Amortizations $3,183 $4,295
========= ========
The increase in total federal and state income taxes was principally
a function of greater earnings in the second quarter of 2002 as compared to
the 2001 quarter, as well as the impact of the additional income tax expense
in the 2001 quarter associated with the disallowed investment tax credits.
See Footnote 2 to the Consolidated Financial Statements for a reconciliation
of the Company's effective income tax rate.
OTHER INCOME AND (DEDUCTIONS) AND INTEREST EXPENS
Other income, net of income taxes increased by approximately $291,000
in the second quarter of 2002 principally as a result of the previously
discussed $384,000 expense reversal related to a contractual arrangement
associated with a retiring officer of the Company. Also, in the second
quarter of 2001, the Company incurred approximately $114,000 in costs
associated with the Company's merger with Emera, Inc.
Long-term debt interest expense decreased $222,000 in the second
quarter of 2002 relative to 2001 due primarily to a $15.1 million principal
payment on the Company's Finance Authority of Maine (FAME) Revenue Notes at
the end of June 2001 and the impact of monthly principal payments on the
$24.8 million medium term notes. These decreases were offset to some extent
by additional interest expense in the second quarter of 2002 resulting from
the issuance of a $13.7 million note in October 2001 with the Municipal
Review Committee (MRC) in connection with the exercise of common stock
warrants.
Other interest expense decreased $100,000 in the 2002 quarter due
principally to interest in the 2001 quarter associated with Internal Revenue
Service audit adjustments relating to prior year's income tax returns, as
well as fees paid in June 2001 in connection with an extension of the
Company's revolving credit facility. Also in the second quarter of 2002
there was a reduction in the amortization of debt issuance costs caused by
the end of the amortization period of certain deferred debt issuance costs.
These decreases were offset to some extent by higher interest expense in the
2002 quarter as a result of increased borrowings under the Company's
revolving credit facility. The increased borrowings were necessitated to some
extent by the debt service payment ($16.1 million in principal plus interest)
on the FAME Revenue Notes at the end of June 2002.
SIX MONTHS OF 2002 AS COMPARED TO THE SIX MONTHS OF 2001
EARNINGS
For the six months ended June 30, 2002 and 2001 basic earnings per
common share were $.63 and $.58, respectively. The increased earnings in the
2002 period were due to several factors, including most of the reasons
mentioned above for the second quarters of 2002 and 2001. RTO related costs
charged to expense were approximately $368,000 in the 2001 period, while 2002
costs are being deferred for future recovery ($.03 improvement in earnings
per common share in 2002), and ISO/New England costs associated with
transmission constraints were approximately $555,000 higher in the 2001
period as compared to 2002 ($.04 improvement in earnings per common share in
2002). These earnings improvements were offset somewhat as a result of
significant power outages caused by a major snow storm in January 2002.
Incremental service restoration expenses were approximately $501,000 higher
in the 2002 period relative to 2001 ($.04 reduction in earnings per common
share in 2002). Also expense associated with pension and other
postretirement benefits were approximately $707,000 greater ($.06 reduction
in earnings per common share) in 2002 as compared to 2001. Finally earnings
have been negatively affected in the 2002 period due to decreased revenues as
a result of lower energy sales. The reduced sales are due principally to
unfavorable weather conditions in much of the 2002 period as compared to 2001
and the weak economy.
REVENUES
Electric operating revenue decreased by $910,000 in the first six
months of 2002 in comparison to the 2001 period. The decrease was due to
several factors. Negatively affecting electric operating revenue in the first
six months of 2002 was the impact of a .5% decrease in energy sales,
resulting principally from the reasons previously discussed for the
comparable second quarters of 2002 and 2001. Electric operating revenues
were lower in 2002 as a result of a $2.8 million reduction in certain
stranded cost related revenue deferrals. Also, other revenues associated
with charging electric generators for wheeling power over the Company's
transmission lines and out of its service territory were approximately
$769,000 lower in first six months of 2002 compared to the 2001 period. The
decrease is due to the fact that the new standard offer service provider is
purchasing power from the Company to resell to standard offer customers in
the Company's service territory that, prior to March 1, 2002, was wheeled
outside of the service territory.
Also as discussed previously, electric operating revenues were
positively affected by the stranded cost rate increase on March 1, 2002.
Also positively impacting electric operating revenues in the 2002 period was
the effect of a special rate contract with a large industrial customer.
Effective July 1, 2001, and running through March 31, 2002, the Company had a
special rate contract with a large industrial customer to provide fully
bundled electric service (both T&D and energy) to this customer. Formerly,
the Company was only providing T&D service to this customer. The Company
entered into a power purchase contract to procure the power necessary to
serve this customer under this contact. Principally as a result of the new
contract, the Company recognized approximately $1.4 million in greater
electric operating revenues associated with this customer in the 2002 period
as compared to the 2001 period.
Off-system sales were approximately $9.6 million greater in the 2002
period in relation to the 2001 period. The increase is due principally to
the previously discussed resale of power associated with the former standard-
offer power supply contract.
For the reason previously discussed, standard-offer service revenues
decreased approximately $32 million in the first six months of 2002 as
compared to the first six months of 2001.
EXPENSES
Fuel for generation and purchased power expense, excluding the cost
of standard-offer service purchased power, increased $11.9 million in the
2002 period as compared to 2001. The largest item affecting the increased
expense was approximately $11.5 million of costs in 2002 associated with the
previously discussed former standard-offer power contract obligation.
Consistent with the previously discussed reasons associated with the
quarters ending June 30, 2002 and 2001, standard-offer purchased power
expense for the first six months of 2002 relative to the first six months of
2001 decreased by approximately $31.6 million.
Other O&M expense decreased by approximately $943,000 in the first
six months of 2002 in comparison to the first six months of 2001. As
previously discussed, there were several items that increased other O&M
expense in the 2001 relative to 2002, including the $318,000 environmental
remediation reserve, the $200,000 bad debt reserve increase, and $368,000 in
RTO related costs. The Company also incurred approximately $155,000 less in
non-labor expense in 2002 associated with regulatory and legal activities,
due to the end of the Company's term as the standard offer service provider
and fewer regulatory related activities at the MPUC. Also, as a result of
cost reduction efforts in 2002, other O&M non-labor expenses were generally
lower as compared to 2001. Offsetting these decreases to some extent was a
$707,000 increase in pension and other postretirement benefits expense in
2002. The increased expense is principally attributable to decreases in the
discount rate used to actuarially compute the expense as well as reduced
returns on plan assets as a result of poor stock market performance.
The following summarizes the components of the regulatory
amortizations for the first six months of 2002 as compared to the first six
months of 2001 (in 000's):
2002 2001
---- ----
Contract buyouts and restructurings $10,365 $11,278
Seabrook investment 850 850
Deferred asset sale gain (3,099) (3,859)
Other stranded cost related
regulatory assets and liabilities (1,929) 193
Distribution related regulatory
assets and liabilities 580 580
Employee transition costs 65 -
-------- -------
Total Regulatory Amortizations $ 6,832 $ 9,042
======== =======
The decrease in total federal and state income taxes was principally
a function of the impact of the previously discussed disallowed investment
tax credits in 2002, as well as the impact of certain book/tax temporary
differences which are flowed-through for ratemaking purposes.
OTHER INCOME AND (DEDUCTIONS) AND INTEREST EXPENSE
Allowance for funds used during construction, which includes carrying
costs on certain regulatory assets and liabilities, decreased by $135,000 in
first six months of 2002 relative to the 2001 period. The decrease was
primarily a result of the implementation of new stranded cost rates on March
1, 2002, whereby the rate recovery of various regulatory assets began and the
accrual of carrying costs ended.
The decreases in long-term and other interest expense in the 2002
period in comparison to 2001 were principally attributable to the reasons
previously discussed for the quarters ending June 30, 2002 and 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Consolidated Statements of Cash Flows reflect events in the first
six months of 2002 and 2001 as they affect the Company's liquidity. Net
increase in cash from operating activities was $11.6 million in the 2002
period as compared to $10.8 million in 2001. The single largest item
affecting the comparability of operating cash flows in the two periods was
approximately $8.8 million in payments in 2001 in connection with the
exercise of the Company's common stock warrants. Operating cash flows are
also impacted in each period by the standard-offer service. In 2002, the
Company's standard-offer service costs exceeded revenues by approximately
$2.6 million, while in 2001, revenues exceeded associated costs by
approximately $3.5 million. Changes in accounts receivable and accounts
payable in the statement of cash flows are also greatly impacted by the
standard-offer related revenues and purchased power obligations. Decreasing
cash flows from operations in 2002 was a $3.5 million increase in income tax
payments in 2002 relative to 2001. Also negatively impacting operating cash
flows in 2002 was $2.7 million in payments associated with benefits provided
to terminated employees in connection with the previously discussed cost
reduction efforts.
Construction expenditures were approximately $1.3 lower in the 2002
period as compared to 2001 due to reductions in the Company's capital
spending in 2002.
In the 2002 period, the Company made a $3.5 million common dividend
payment to its parent company, Emera, Inc., while in 2001, which preceded the
Emera acquisition, common dividends of $.20 per share were paid to
shareholders in each of the first two quarters.
The increase in payments on long-term debt is due principally to
higher monthly principal payments on the $24.8 million medium term notes in
the 2002 period as compared to 2001, and at the end of June 2002 the Company
made a $16.1 million principal payment on the FAME revenue notes, as compared
to a $15.1 million principal payment at the end of June 2001. Also, the
Company made approximately $660,000 of principal payments in 2002 on the
$13.7 million MRC note.
The Company had maintained full borrowing capacity under its
revolving credit facility from the second quarter of 1999 through June 2001,
but it became necessary to renew borrowings under the revolving line in June
2001 to fund the $15.1 million FAME debt payment. The Company's utilization
of the line of credit was also impacted by the merger related costs and the
cash payments to common stock warrant holders in 2001. The Company also
utilized this line of credit to provide the funds necessary to make the $16.1
million FAME debt payment in June 2002. The Company's borrowings under this
arrangement amounted to $26 million at June 30, 2002 as compared to $6
million at June 30, 2001. On June 29, 2001, the Company extended the
revolving credit agreement until October 1 and then until March 31, 2002, and
the agreement has since been further extended until June 30, 2003 with some
modifications. The facility was increased to $60 million to accommodate debt
retirements that will occur in 2002 (including the FAME payment in June 2002)
and act as a bridge financing until permanent financing is put in place. The
terms are similar to the prior amendment, with the major differences being
the addition of another pricing level to recognize the Company's improved
credit and modifications to some of the financial covenants. Also, the
Company extended until June 1, 2003 the promissory note that was entered into
in 2001. This note allows the Company to borrow up to an additional $10
million. This unsecured facility is used by the Company to manage working
capital needs, and the interest rate setting mechanism and other major terms
of the note are similar to terms in the revolving credit agreement.
ENVIRONMENTAL MATTERS
The Company is regulated by the United States Environmental
Protection Agency (EPA) as to compliance with the Federal Water Pollution
Control Act, the Clean Air Act, and several federal statutes governing the
treatment and disposal of hazardous wastes. The Company is also regulated by
the Maine Department of Environmental Protection (DEP) under various Maine
environmental statutes. The Company is actively engaged in complying with
these federal and state acts and statutes, and it has not, to date,
encountered material difficulties in connection with such compliance.
In 1992, the Company received notice from the DEP that it was
investigating the cleanup of several sites in Maine that were used in the
past for the disposal of waste oil and other hazardous substances, and that
the Company, as a generator of waste oil that was disposed at those sites,
may be liable for certain cleanup costs. The Company learned in October 1995
that the EPA placed one of those sites on the National Priorities List under
the Comprehensive Environmental Response, Compensation and Liability Act and
would pursue potentially responsible parties. With respect to this site, the
Company is one of a number of waste generators under investigation.
The Company has recorded a liability, based on currently available
information, for what it believes are the estimated environmental remediation
costs that the Company expects to incur for this waste disposal site.
Additional future environmental cleanup costs are not reasonably estimable
due to a number of factors, including the unknown magnitude of possible
contamination, the appropriate remediation methods, and possible effects of
future legislation or regulation and the possible effects of technological
changes. At June 30, 2002, the liability recorded by the Company for its
estimated environmental remediation costs amounted to approximately $421,000.
The Company's actual future environmental remediation costs may change as
additional factors become known.
The Company estimates that during 2002 it will incur approximately
$171,000 in operations expense to comply with environmental standards for
air, water and hazardous materials. This amount may change based on facts
and circumstances that occur in 2002.
DISCLOSURES ABOUT MARKET RISK
The Company's major financial market risk exposure is changing interest
rates. Changes in interest rates will affect interest paid on variable rate
debt and the fair value of fixed rate debt. The Company manages interest
rate risk through a combination of both fixed and variable rate debt
instruments and an interest rate swap, which is associated with the Company's
medium term notes (See Note 13 to the 2001 Form 10-K). As of June 30, 2002,
the Company had $1.5 million of medium term notes outstanding which bear
floating, LIBOR-based rates (1.84% LIBO rate at June 30, 2002). The interest
rate swap fixes the interest rate on the medium term notes at 5.72% for the
full notional amount of the debt. See Note 5 to the 2001 Form 10-K for a
discussion of these medium term notes.
OTHER
Management's discussion and analysis of results of operations and
financial condition contains items that are "forward-looking" as defined in
the Private Securities Litigation Reform Act of 1995. These statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those anticipated in the forward-looking statements.
Readers should not place undue reliance on forward-looking statements, which
reflect management's view only as of the date hereof. The Company undertakes
no obligation to publicly revise these forward-looking statements to reflect
subsequent events or circumstances. Factors that might cause such differences
include, but are not limited to, the Company's reorganization, future
economic conditions, relationships with lenders, developments in the
legislative, regulatory and competitive environments in which the Company
operates and other circumstances that could affect revenues and costs.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2002, the Financial Accounting Standards Board issued
Statement No. 143, "Accounting for Asset Retirement Obligations". This
Statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. It applies to legal obligations
associated with the retirement of long-lived assets that result from
acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. This Statement
is effective for financial statements issued for fiscal years beginning after
June 15, 2002. Management does not believe that the implementation of this
Statement will materially impact the Company's financial position, earnings
or cash flows, principally as a result of the regulatory accounting utilized
by the Company.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
June 30, Dec. 31,
Assets 2002 2001
----------- -----------
Investment In Utility Plant:
Electric plant in service, at original cost $ 329,477 $ 328,560
Less - Accumulated depreciation and amortization 94,633 93,985
----------- ------------
$ 234,844 $ 234,575
Construction work in progress 7,175 7,308
----------- -----------
$ 242,019 $ 241,883
Investments in corporate joint ventures:
Maine Yankee Atomic Power Company $ 4,425 $ 4,422
Maine Electric Power Company, Inc. 975 853
----------- -----------
$ 247,419 $ 247,158
----------- -----------
Other Investments, at cost $ 3,492 $ 3,498
----------- -----------
Funds held by trustee, at cost $ 22,694 $ 22,695
----------- -----------
Current Assets:
Cash and cash equivalents $ 782 $ 885
Accounts receivable, net of reserve
of $844 for 2002 and $761 for 2001 22,850 19,269
Unbilled revenue receivable 5,861 15,380
Inventories, at average cost:
Material and supplies 2,500 2,532
Fuel oil 47 53
Prepaid expenses 228 671
----------- -----------
Total current assets $ 32,268 $ 38,790
----------- -----------
Regulatory Assets and Deferred Charges:
Goodwill-EMERA Acquisition $ 82,537 $ 82,537
Investment in Seabrook nuclear project 22,722 23,572
Costs to terminate/restructure purchased
power contracts 82,335 92,057
Maine Yankee decommissioning costs 30,045 37,307
Above-market purchased power contract obligations 68,113 73,954
Other regulatory assets 59,653 52,657
Other deferred charges 5,003 4,020
----------- -----------
Total regulatory assets and deferred charges $ 350,408 $ 366,104
----------- -----------
Total Assets $ 656,281 $ 678,245
=========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
June 30, Dec. 31,
2002 2001
Stockholders' Investment and Liabilities ----------- -----------
Capitalization:
Common stock investment $ 206,757 $ 205,557
Preferred stock 4,734 4,734
Long-term debt, net of current portion 114,216 131,968
----------- -----------
Total capitalization $ 325,707 $ 342,259
----------- -----------
Current Liabilities:
Notes payable - banks $ 26,000 $ 8,000
----------- -----------
Other current liabilities -
Current portion of long-term debt $ 40,261 $ 43,246
Accounts payable 23,429 22,492
Dividends payable 66 66
Accrued interest 2,629 2,663
Customers' deposits 598 573
Current income taxes (refundable) payable (3,815) 1,917
----------- -----------
Total other current liabilities $ 63,168 $ 70,957
----------- -----------
Total current liabilities $ 89,168 $ 78,957
----------- -----------
Regulatory and Other Long-term Liabilities:
Deferred income taxes - Seabrook $ 11,781 $ 12,224
Other accumulated deferred income taxes 47,998 47,405
Maine Yankee decommissioning liability 30,045 37,307
Deferred gain on asset sale 11,471 14,574
Above-market purchased power contract obligations 68,113 73,954
Other regulatory liabilities 15,060 18,962
Unamortized investment tax credits 1,249 1,312
Accrued pension and postretirement benefit costs 43,600 39,655
Other long-term liabilities 12,089 11,636
----------- -----------
Total regulatory and other long-term liabilities $ 241,406 $ 257,029
----------- -----------
Total Stockholders' Investment and Liabilities $ 656,281 $ 678,245
=========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
000's Omitted
(Unaudited)
June 30, Dec. 31,
2002 2001
---------- ----------
Common Stock Investment
Common stock, no par value, stated value $5 per share $ 36,817 $ 36,817
-Authorized--10,000,000 shares
-Outstanding--7,363,424 shares
Amounts paid in excess of par value 165,352 165,352
Accumulated other comprehensive loss (7) (47)
Retained earnings 4,595 3,435
---------- ----------
Total common stock investment $ 206,757 $ 205,557
---------- ----------
Preferred Stock
Non-participating, cumulative, par value $100 per share,
authorized 600,000 shares, not redeemable or
redeemable solely at the option of the issuer-
7%, Noncallable, 25,000 shares
authorized and outstanding $ 2,500 $ 2,500
4.25%, 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
---------- ----------
Long-Term Debt
First Mortgage Bonds-
10.25% 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
---------- ----------
$ 85,000 $ 85,000
---------- ----------
Other Long-Term Debt-
Finance Authority of Maine - Taxable Electric Rate
Stabilization Revenue Notes,
7.03% Series 1995A, due 2005 $ 55,400 $ 71,500
Medium Term Notes, Variable interest rate-
LIBO rate plus 1.125%, due 2002 1,485 5,460
Municipal Review Committee Note, 5%, due 2008 12,574 13,235
Other Miscellaneous Notes Payable, 3.90%, due 2006 18 19
---------- ----------
$ 69,477 $ 90,214
Less: Current portion of long-term debt 40,261 43,246
---------- ----------
$ 29,216 $ 46,968
---------- ----------
Total Long-Term Debt $ 114,216 $ 131,968
---------- ----------
Total Capitalization $ 325,707 $ 342,259
========== ==========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
000's Omitted
(Unaudited)
Six Months Ended
June 30, June 30,
2002 2001
---------------------
Cash Flows From Operating Activities:
Net income $ 4,793 $ 4,383
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 5,310 5,423
Amortization of Seabrook nuclear project 850 850
Amortization of contract buyouts
and restructuring 10,365 11,278
Amortization of deferred asset sale gain (3,099) (3,859)
Other amortizations 289 819
Allowance for equity funds used
during construction (245) (319)
Deferred income tax provision and amortization
of investment tax credits (121) (3,989)
Changes in assets and liabilities:
Costs to restructure purchased power contract (500) (500)
Deferred standard-offer service costs (2,563) 3,503
Deferred special rate contract revenues (418) (1,726)
Employee transition costs (2,703) -
Exercise of PERC warrants-cash paid in lieu
of issuing shares - (8,845)
Accounts receivable, net and unbilled revenue 5,938 2,355
Accounts payable (1,445) (876)
Accrued interest (34) (20)
Current income taxes (5,731) 1,489
Accrued pension and postretirement benefit costs 2,340 1,398
Other current assets and liabilities, net 506 413
Other, net (1,892) (979)
---------------------
Net Increase in Cash From Operating Activities: $ 11,640 $ 10,798
---------------------
Cash Flows From Investing Activities:
Construction expenditures $ (5,140)$ (6,423)
Allowance for borrowed funds used during construction (233) (294)
---------------------
Net Decrease in Cash From Investing Activities $ (5,373)$ (6,717)
---------------------
Cash Flows From Financing Activities:
Dividends on preferred stock $ (133)$ (133)
Dividends on common stock (3,500) (2,945)
Payments on long-term debt (20,737) (18,115)
Short-term debt, net 18,000 6,000
---------------------
Net Decrease in Cash From Financing Activities $ (6,370)$ (15,193)
---------------------
Net Decrease in Cash and Cash Equivalents $ (103)$ (11,112)
Cash and Cash Equivalents at Beginning of Period 885 12,463
---------------------
Cash and Cash Equivalents at End of Period $ 782 $ 1,351
=====================
Cash Paid During the Period for:
Interest (Net of Amount Capitalized) $ 6,476 $ 6,762
Income Taxes 9,349 5,866
=====================
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF COMMON STOCK INVESTMENT
000's Omitted
(Unaudited)
Accum.
Amounts Other Total
Paid in Compre- Common
Common Excess of Retained hensive Stock
Stock Par Value Earnings Loss Investment
----------- ----------------------------------- -----------
Balance December 31, 2000 $ 36,817 $ 58,643 $ 41,960 $ - $ 137,420
Net income - - 4,383 - 4,383
Other comprehensive loss
net of taxes:
Unrealized loss on interest
rate swap - - - (62) (62)
-----------
Total comprehensive income 4,321
-----------
Cash dividends declared on-
Preferred stock - - (133) - (133)
Common stock - - (2,945) - (2,945)
Exercise of warrants-cash paid
in lieu of issuing shares - (3,843) - - (3,843)
----------- ----------- ----------- ----------- -----------
Balance June 30, 2001 $ 36,817 $ 54,800 $ 43,265 $ (62) $ 134,820
=========== =========== =========== =========== ===========
Balance December 31, 2001 $ 36,817 $ 165,352 $ 3,435 $ (47)$ 205,557
Net income - - 4,793 - 4,793
Other comprehensive loss
net of taxes:
Unrealized gain on interest
rate swap - - - 40 40
-----------
Total comprehensive income 4,833
-----------
Cash dividends declared on-
Preferred stock - - (133) - (133)
Common stock - - (3,500) - (3,500)
----------- ----------- ----------- ----------- -----------
Balance June 30, 2002 $ 36,817 $ 165,352 $ 4,595 $ (7)$ 206,757
=========== =========== =========== =========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
-------------
(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 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 consolidated
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,
footnotes and all other information included in the 2001 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, 2002 and the results of operations and cash
flows for the periods ended June 30, 2002 and 2001.
The Company's significant accounting policies are described in the
Notes to the Consolidated Financial Statements included in its 2001
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 federal income tax provision:
Six Months Ended June 30,
------------------------
2002 2001
---- ----
Amount % Amount %
------ -- ------ --
(Dollars in Thousands)
Federal income tax provision
at statutory rate $2,691 35.0 $2,737 35.0
(Less)Plus permanent reductions
in tax expense resulting
from statutory exclusions
from taxable income (50) (.6) 103 1.3
------ ---- ------ ----
Federal income tax provision before
effect of temporary differences
and investment tax credits $2,641 34.4 $2,840 36.3
Less temporary differences that
are flowed through for rate-
making and accounting purposes (242) (3.2) (219) (2.8)
Less utilization and amortization
of investment tax credits (63) (.8) (70) (.9)
------ ---- ------ ----
Federal income tax provision $2,336 30.4 $2,551 32.6
====== ==== ====== ====
(3) INVESTMENT IN JOINTLY OWNED FACILITIES:
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,
2002 2001 2002 2001
OPERATIONS: -------- -------- -------- --------
As reported by investee-
Operating revenues $ 30,008 $ 31,877 $ 2,254 $ 2,682
======== ======== ======== ========
Earnings applicable to
common stock $ 1,992 $ 2,253 $ 729 $ 978
======== ======== ======== ========
Company's reported equity-
Equity in net income $ 139 $ 158 $ 104 $ 139
Add(Deduct)-Effect of
adjusting Company's
estimate to actual 4 12 24 45
-------- -------- -------- --------
Amounts reported by Company $ 143 $ 166 $ 128 $ 184
======== ======== ======== ========
MAINE YANKEE MEPCO
------------ -----
(Dollars in Thousands - Unaudited)
Financial Position at
----------------------------------------
June 30, Dec. 31, June 30, Dec. 31,
2002 2001 2002 2001
FINANCIAL POSITION: --------- --------- --------- --------
As reported by investee-
Total assets $ 695,202 $ 802,118 $ 7,574 $ 6,870
Less-
Long-term debt 26,400 31,200 - -
Other liabilities and
deferred credits 605,532 707,643 793 770
---------- ---------- -------- --------
Net assets $ 63,270 $ 63,275 $ 6,781 $ 6,100
========== ========== ======== ========
Company's reported equity-
Equity in net assets $ 4,429 $ 4,429 $ 963 $ 866
Add (deduct) effect of
adjusting Company's
estimate to actual (4) (7) 12 (13)
---------- ---------- -------- --------
Amounts reported by Co. $ 4,425 $ 4,422 $ 975 $ 853
========== ========== ======== ========
(4) EARNINGS PER SHARE:
The following table reconciles basic and diluted earnings per
common share assuming all outstanding stock warrants were converted to
common shares, for the 2001 periods only.
(Amounts in 000's, except per share data)
For the Three Months For the Six Months
Ended Ended
-------------------- ------------------
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
-------- -------- -------- ---------
Earnings (loss)
applicable to
common stock $ 1,698 $ (268) $ 4,660 $ 4,250
-------- -------- -------- --------
Average common
shares outstanding 7,363 7,363 7,363 7,363
Plus: incremental
shares from assumed
conversion - 750 - 836
------- -------- -------- -------
Average common shares
outstanding plus
assumed warrants
converted 7,363 8,114 7,363 8,199
------- -------- -------- -------
Basic earnings(loss)
per common share $ .23 $ (.04) $ .63 $ .58
======= ======= ======= =======
Diluted earnings (loss)
per common share $ .23 $ (.03) $ .63 $ .52
======= ======= ======= =======
(5) ALTERNATIVE RATE PLAN AND REORGANIZATION:
As reported in the 2001 Form 10-K, on February 14, 2002, the
Company presented to the Maine Public Utilities Commission (MPUC) a
proposed resolution of the ongoing Alternative Rate Plan (ARP)
proceeding that called for a multi-year freeze in the distribution
portion of the Company's rates. The ARP proceeding, as well as
proposed proceedings to implement a general increase in the Company's
distribution rates and to initiate a management investigation of the
Company, were suspended to provide the Company and interested parties
additional time to negotiate a potential settlement of these
interrelated proceedings. On April 25, 2002, the Company and other
parties to the proceeding executed a stipulation to present to the MPUC
a single comprehensive ARP applying to the Company's MPUC jurisdictional
distribution revenue requirement and rates. On June 6, 2002, the MPUC
approved the ARP and also dismissed the pending management investigation
of the Company.
The terms of the ARP include a rate plan to be in effect through
December 31, 2007, with the Company's core distribution rates being
adjusted downward on July 1 of each year from 2003 to 2007, at annual
rates ranging from 2% to 2 3/4%. The Company is also allowed rate
adjustments associated with certain specified categories of costs. The
ARP also includes a mechanism whereby distribution returns on common
equity outside of a certain range will be shared evenly between the
Company and ratepayers. The Company is also required to meet certain
customer service quality standards during the term of the ARP, and rate
reduction penalties will result from not meeting the various performance
measures as set forth in the stipulation. Finally, the ARP provides the
Company with an accounting order allowing for the deferral of employee
transition costs during 2002 and 2003 in connection with reductions in
cost of operations and maintenance, which are discussed below. These
deferred costs are being amortized over a ten year period, starting in
June 2002.
Successful implementation of the ARP necessitated a significant
decrease in the Company's operating costs. The restructuring, which
encompasses all aspects of the Company, is expected to reduce operating
costs by approximately 20%. The Company will also begin to transfer a
portion of its fixed costs to variable costs, and improve processes to
enhance long-term performance. As part of the restructuring, employment
levels have been adjusted downward in the second quarter of 2002 by 112
employees through early retirement and severance packages. The total
employee transition costs incurred in the second quarter of 2002 were
approximately $7.8 million and recorded as a component of Other
Regulatory Assets on the consolidated balance sheets. Also, the Company
recorded one month's of amortization expense, amounting to approximately
$65,000, associated with this regulatory asset in the second quarter of
2002.
(6) NEW ACCOUNTING PRONOUNCEMENT:
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets", effective for years beginning after December 15,
2001. Statement 142 addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB Opinion
No. 17, "Intangible Assets". Goodwill will no longer be amortized, but
it will be reviewed at least annually for impairment. Statement 142
specifies that at the time of adoption an impairment review should be
performed. If an impairment of the existing goodwill is
determined, any charge would be recorded as a cumulative effect of a
change in accounting principle. Subsequent impairment charges would be
presented within operating results. In 2001, the Company adopted the
non-amortization provision for goodwill associated with its acquisition
by Emera, Inc (Emera). The Company adopted the remaining provisions of
Statement 142 effective January 1, 2002. As a result of its initial
goodwill impairment test, the Company has determined that no goodwill
impairment exists.
There is no pro forma effect of Statement 142, assuming the Company
had adopted this standard as of January 1, 2001, since the goodwill
associated with the Emera acquisition has not been amortized.
(7) RECLASSIFICATIONS:
Certain 2001 amounts have been reclassified to conform with the
presentation used in Form 10-Q for the quarter ended June 30, 2002.
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDING JUNE 30, 2002
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
The Company held its annual meeting of shareholders on April 24, 2002.
The following matters were submitted to a vote.
PROPOSAL I
- ----------
Election of three Class I Directors for terms expiring in 2005. The
following persons were elected to fill those positions pursuant to the
corresponding tabulations of votes:
TOTAL VOTE FOR TOTAL VOTE WITHHELD
-------------- -------------------
Robert S. Briggs 33,370 3,083
Norman A. Ledwin 33,411 3,042
Elizabeth A. MacDonald 33,382 3,071
The terms of the following Directors, members of Class II and Class III,
continued after the annual meeting:
Jane J. Bush
Christopher G. Huskilson
Carroll R. Lee
David McD. Mann
Richard J. Smith
Ronald E. Smith
PROPOSAL II
- -----------
To amend the Articles of Incorporation of the Company to reduce the par
value of the Company's common stock from $5.00 to $0.00.
For: 30,756
Against: 3,659
Abstain: 2,038
PROPOSAL III
- ------------
To amend the Articles of Incorporation of the Company to use its unreserved
and unrestricted capital surplus, as defined in the Maine Business
Corporation Act, to make capital distributions as permitted by Section 517
of the Maine Business Corporation Act or to repurchase its own common or
preferred shares as permitted by Section 518 of the Maine Business
Corporation Act, and to authorize the Company's Board of Directors to direct
such a capital distribution or such a repurchase of common or preferred
shares from time-to-time, to the extent such a distribution or
repurchase is not contrary to any other provision of these Articles, on such
terms as they deem reasonable and in the best interests of the Company.
For: 16,046
Against: 3,428
Abstain: 1,226
Broker Non-Votes: 15,753
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
Exhibits: None.
--------
Reports on Form 8-K: None.
-------------------
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDED JUNE 30, 2002
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.
SIGNATURE
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/ David R. Black
Dated: August 8, 2002 ______________________________
David R. Black
Manager-Finance & Accounting
(Chief Accounting Officer)