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 MARCH 31, 1994 Commission File No. 0-505
-------------- -----
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
Outstanding Common Stock, $5 Par Value - 7,112,674 Shares
March 31, 1994
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 MARCH 31, 1994
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 - March 31, 1994 and
December 31, 1993 13
Consolidated Statements of Retained Earnings 15
Consolidated Statements of Cash Flows 16
Notes to the Consolidated Financial Statements 17
PART II - OTHER INFORMATION 23
Item 6 - Exhibits and Reports on Form 8-K 24
Signature Page 25
<PAGE-2>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
000's Omitted Except Per Share Amounts
(Unaudited)
3 Months Ended
Mar. 31, Mar. 31,
1994 1993
------- -------
ELECTRIC OPERATING REVENUES:
Base rate revenue $19,731 $19,477
Fuel charge revenue 26,645 30,202
-------------------
$46,376 $49,679
OPERATING EXPENSES: -------------------
Fuel for generation $26,656 $30,117
Purchased power 3,182 3,921
Other operation and maintenance 9,875 6,547
Depreciation and amortization 1,298 1,244
Amortization of Seabrook Nuclear Project 425 425
Amortization of Costs to Terminate Purchased Power 324 -
Contract
Taxes -
Property and payroll 1,236 1,045
State income (42) 272
Federal income 384 1,329
-------------------
$43,338 $44,900
-------------------
OPERATING INCOME $ 3,038 $ 4,779
-------------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used
during construction $ 553 $ 359
Other, net of applicable income taxes (76) 77
-------------------
$ 477 $ 436
-------------------
INCOME BEFORE INTEREST EXPENSE $ 3,515 $ 5,215
-------------------
INTEREST EXPENSE:
Long-term debt $ 2,709 $ 2,361
Other 403 238
Allowance for borrowed funds used
during construction (692) (292)
-------------------
$ 2,420 $ 2,307
-------------------
NET INCOME $ 1,095 $ 2,908
DIVIDENDS ON PREFERRED STOCK 413 403
-------------------
EARNINGS APPLICABLE TO COMMON STOCK $ 682 $ 2,505
===================
WEIGHTED AVERAGE NUMBER OF SHARES 6,321 5,436
===================
EARNINGS PER COMMON SHARE,
based on the weighted average
number of shares outstanding
during the period $ .11 $ .46
===================
DIVIDENDS DECLARED PER COMMON SHARE $ .33 $ .33
===================
See notes to the consolidated financial statements.
<PAGE-3>
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, 1993
("1993 Form 10-K") should be read in conjunction with the comments below.
RESULTS OF OPERATIONS
FIRST QUARTER 1994 VERSUS FIRST QUARTER 1993
EARNINGS
As expected earnings for the quarter ended March 31, 1994 were
significantly below earnings achieved in the comparable 1993 quarter, despite
the base rate increase effective March 1, 1994 (discussed below). Earnings
for the quarter ended March 31, 1994 were $.11 per common share compared to
$.46 per common share for the quarter ended March 31, 1993. Absent the
impact of the early retirement program recorded in March of 1994 (mentioned
below), earnings for the first quarter of 1994 would have been $.37 per
common share.
In March 1994 the Company implemented an early retirement plan in which
forty employees accepted the early retirement offer. Although this will mean
future savings, accounting guidelines require that a substantial portion of
the cost of the plan be charged to operations in the period that the plan is
<PAGE-4>
implemented. Since the plan was implemented in the first quarter of 1994,
the Company experienced a one-time non-cash charge of $1.7 million or $.26
per common share (net of income taxes). This charge exceeds by approximately
$800,000 the amount estimated at the time of the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.
On March 1, 1994 the Company implemented new base rates as a result of
the Maine Public Utilities Commission ("MPUC") order of February 17 which
allowed an increase in base rates of $11.1 million and provided an authorized
return on common equity of 10.6%. The Company does not expect to realize this
level of return on common equity in 1994 due to several factors: Sales are
expected to be lower than the projections utilized by the MPUC in determining
the Company's base rate increase; in order to maintain continued sales to the
Company's second largest customer, James River (a large pulp and paper
manufacturer), the Company entered into a special contract with James River
which will reduce the base revenue contribution from that customer by about
$1 million annually from historical levels; and the one-time early retirement
program costs.
In 1991, the Company's largest industrial customer, LCP Chemicals
("LCP"), filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
On February 18, 1994, the U.S. Bankruptcy Court approved the sale of
substantially all of LCP's assets, including its Orrington, Maine facility,
to Holtrachem Manufacturing Company, L.L.C., and the transfer of ownership
was recently completed. Based upon its representations to the Bankruptcy
Court, it appears to be Holtrachem's intent to continue operation of the LCP
facility at Orrington, Maine. As part of its plan to transfer the plant,
<PAGE-5>
Holtrachem and LCP negotiated a special rate contract with the Company. This
special rate contract was approved by the MPUC order dated March 10, 1994.
However, the Company cannot predict the on-going level of sales. Further, as
part of the plan to transfer the plant and to obtain the special rate
contract, LCP agreed to release all pending legal claims against the Company.
REVENUES
The base rate revenue increase of $254,000 or 1.3% was due principally
to the 15.9% base rate increase which took effect on March 1, 1994, and
increased total kilowatt hour ("KWH") sales of 1.45% for the quarter ended
March 31, 1994. While KWH sales to LCP were flat in the first quarter of
1994 as compared to 1993, base rate revenue decreased $308,000 due to the
implementation of the new contract previously discussed. KWH sales to James
River, in the first quarter of 1994 were 32.75% greater than in 1993, but
base revenues increased by only 5.4% due to the implementation of the lower
base rates.
Fuel charge revenue decreased by $3.6 million or 11.8% in the first
quarter of 1994 over the same quarter of 1993. This decrease was due to the
12.5% fuel rate decrease effective in November 1, 1993, offset by the overall
1.45% increase in KWH sales [excluding sales which are reclassified under
Accounting Release 14 ("AR 14")] in the first quarter of 1994. The AR 14
reclassification resulted in additional fuel charge revenue of $3.09 million
for the first quarter of 1994 as compared to $4.24 million for the same
quarter of 1993.
<PAGE-6>
EXPENSES
As a result of the deferred fuel accounting methodology followed by the
Company, whereby retail fuel expense is recorded to match the fuel cost
portion of fuel charge revenue, fuel expense has decreased in proportion to
the decreases in the fuel cost portion of fuel charge revenue. Fuel expense
was also impacted by the AR 14 reclassification, which resulted in an
increase of $3.09 million in fuel expense for the first quarter of 1994
compared to an increase of $4.24 million for the same quarter of 1993.
Purchased power expense decreased by $739,000 or 18.9% in the first
quarter of 1994 as compared to the same quarter of 1993. The decrease was
due primarily to lower capacity and transmission costs associated with the
Maine Yankee nuclear plant in the first quarter of 1994.
Other operation and maintenance ("O & M") expense increased $3,328,000
or 50.8% in the first quarter of 1994. This expense has increased due
principally to the implementation of the early retirement program in the
first quarter of 1994, which resulted in approximately $2.8 million of
expense being recorded. The other O&M increase was also impacted by the
Company charging to operations beginning in March 1994 the full amount of
other postretirement benefit expense under FASB 106 in excess of the amount
recorded on a pay-as-you-go basis, which amounted to $134,000 of expense in
the first quarter of 1994. The Company also began amortizing, effective
March 1, 1994, certain deferred charges for which recovery was received in
the recent base rate order from the MPUC, amounting to $83,000 in 1994. In
addition in the first quarter of 1994, pension income decreased $106,000 as
compared to the first quarter of 1993. O&M payroll increased $283,000 due to
<PAGE-7>
vested vacation benefits paid to early retirees upon retirement, a 3.5% wage
rate increase for bargaining unit employees effective January 1, 1994, as
well as lower levels of capitalized payroll in 1994 as compared to 1993.
Depreciation and amortization expense increased by $54,000 or 4.3% due
to an increase in depreciable property.
Effective March 1, 1994 in connection with the recent base rate order
from the MPUC (previously discussed), the Company began amortizing the
deferred costs associated with the Beaver Wood Joint Venture purchased power
contract termination over a nine year period, in the amount of $324,000 per
month.
Property and payroll taxes increased $191,000 or 18.3% as a result of
higher levels of property taxes due to greater property levels, and higher
payroll taxes due to $147,000 in increased total payroll costs in the first
quarter of 1994.
Income taxes decreased $1,259,000 or 78.6% due principally to lower
taxable income. The effective federal income tax rate was 25% for the
quarter ended March 31, 1994 as compared to 30% for the 1993 quarter (See
Note 2).
Allowance for funds used during construction ("AFDC") increased; the
equity portion by $194,000 or 54.0% and the borrowed portion by $400,000 or
137.0% due principally to the accrual of carrying costs associated with the
above mentioned purchased power contract termination. In the first quarter
of 1994 approximately $676,000 in associated carrying costs were recorded.
In the first quarter of 1993 no such carrying costs were recorded. Effective
with the implementation of revised base rates on March 1, 1994, the Company
<PAGE-8>
discontinued the accrual of these carrying costs since the recovery of the
contract termination costs (including carrying costs and a return on
unamortized balances) is included in the revised rates. The increase in the
accrual of AFDC in 1994 was offset by the cessation of accruing AFDC on costs
related to the Basin Mills project effective December 31, 1993. In the first
quarter of 1993 $110,000 of AFDC was recorded on the Basin Mills costs.
Other income (expense), net of applicable taxes, declined by $153,000
due primarily to a change in LCP's electric rate.
Long-term debt interest expense increased by $348,000 or 14.7% due to
the issuance in June 1993 of $15 million of first mortgage bonds at an
interest rate of 7.3% and the issuance of $14.3 million of first mortgage
bonds at an interest rate of 12.25%. The latter bonds were issued in
exchange for other lenders' debt in connection with the buyout of the
purchased power contract with the Beaver Wood Joint Venture. These were
partially offset by reduced interest expense as a result of regular and
optional sinking fund payments on certain of the higher coupon bonds as well
as the redemption of the remaining balances of the 9.25% series due 2001,
8.25% series due 1999, and the 8.6% series due 2003.
Other interest expense is composed primarily of interest expense on
short term borrowings. This expense increased by $165,000 or 69% due to an
increase in average short term borrowings outstanding of approximately $16.5
million in the 1994 quarter as compared to 1993, offset by lower interest
rates in 1994.
<PAGE-9>
LIQUIDITY AND CAPITAL RESOURCES
The Consolidated Statements of Cash Flows reflect events in the first
quarters of 1994 and 1993 as they affect the Company's liquidity. Net cash
provided by operations was $13.2 million for the first quarter of 1994
compared with $8.5 million for the first quarter of 1993. The increase was
due in part to a $1.9 million reduction in accounts payable in the 1994
quarter as compared to a $3.9 million reduction in the 1993 quarter. In
addition, prepaid pension costs decreased by $1.7 million during the 1994
period against an $85,000 increase in the 1993 period. Further, the Company
received $1.2 million in funds from an escrow account related to certain
first mortgage bond indenture requirements in the first quarter of 1994.
These increases in cash flows were offset to some degree by a $1.8 million
reduction in net income in the first quarter of 1994 as compared to 1993.
Also reducing cash flows from operations was a $1.4 million increase in
accrued current income taxes in the 1993 quarter as compared to no change in
1994 quarter.
Deferred fuel, purchased power and interest costs decreased (which
represents an increase in cash flows) $5.7 million for the 1994 quarter as
compared to a $6.1 million decrease for the 1993 quarter.
On March 30, 1994 the Company completed a common stock offering that
raised approximately $14.1 million with the issuance and sale of 867,500 new
shares of common stock. The proceeds from the stock sale were utilized to
reduce the Company's short-term debt balance.
As previously discussed, external funds in the amount of $15 million
were provided in 1993 by the issue of first mortgage bonds. The documents
<PAGE-10>
governing these bonds do not provide for sinking fund payments. The bond
proceeds were used to reduce short-term debt balances and fund the Company's
construction program.
Under the Company's Dividend Reinvestment and Common Stock Purchase Plan
the Company realized a common stock investment of $354,000 through the issue
of 19,780 new common shares in the first quarter of 1994 as compared to
$363,000 in the first quarter of 1993 through the issue of 18,793 common
shares.
The Company's bank borrowings are provided through a $25 million
revolving credit facility as well as $30 million in lines of credit. The
revolving credit facility, which expires in May 1994, is currently being
renegotiated with the participating banks.
As previously discussed, the Company made regular and optional sinking
fund payments on certain of the higher rate coupon bonds and also redeemed
the remaining principal balances of several series of first mortgage bonds in
1993.
The Company has been actively pursuing attempts to renegotiate other
high-cost non-utility generator contracts. If an agreement to renegotiate or
terminate the terms of the contracts were reached, substantial resources
would be required on the part of the Company to complete the transaction. It
is possible that because of the size of the financial commitment that would
be necessary the Company and its customers would be able to realize only a
portion of the potential benefits from such contract restructuring.
<PAGE-11>
NEW ACCOUNTING STANDARDS
Effective January 1, 1994, the Company adopted Financial Accounting
Standards Board Statement No. 112 "Employers' Accounting for Postemployment
Benefits" (FASB 112). The effect of FASB 112 on the Company's results of
operations and financial position was not material.
<PAGE-12>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
ASSETS Mar. 31, Dec. 31,
1994 1993
--------- ---------
INVESTMENT IN UTILITY PLANT:
Electric plant in service, at original cost $ 254,723 $ 250,123
Less - Accumulated depreciation and amortization 72,418 71,184
----------------------
$ 182,305 $ 178,939
Construction in progress 26,966 26,602
----------------------
$ 209,271 $ 205,541
Investments in corporate joint ventures:
Maine Yankee Atomic Power Company $ 4,772 $ 4,756
Maine Electric Power Company, Inc. 125 125
------------------------
$ 214,168 $ 210,422
------------------------
OTHER INVESTMENTS, principally at cost $ 3,020 $ 4,474
------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,036 $ 2,387
Accounts receivable, net of reserve 18,141 18,763
Unbilled revenue receivable 5,302 7,162
Inventories, at average cost:
Material and supplies 2,996 3,220
Fuel oil 305 635
Prepaid expenses 1,371 1,574
Deferred fuel and interest costs - 2,569
Deferred purchased power costs 1,405 1,796
Current deferred income taxes 569 -
------------------------
Total current assets $ 31,125 $ 38,106
------------------------
DEFERRED CHARGES:
Investment in Seabrook Nuclear Project, net of
accumulated amortization of $22,103 in 1994
and $21,678 in 1993 $ 36,739 $ 37,164
Costs to terminate purchased power contract 40,653 40,302
Deferred regulatory asset 33,418 33,068
Prepaid pension costs 707 2,398
Demand-side management costs 3,664 3,691
Other 4,518 3,896
------------------------
Total deferred charges $ 119,699 $ 120,519
------------------------
Total assets $ 368,012 $ 373,521
========================
See notes to the consolidated financial statements.
<PAGE-13>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omit
(Unaudited)
Mar. 31, Dec. 31,
STOCKHOLDERS' INVESTMENT AND LIABILITIES 1994 1993
--------- ---------
CAPITALIZATION:
Common stock, par $5 per share -
Authorized - 7,500,000 shares
Outstanding - 7,112,674 shares in 1994 and
6,225,394 in 1993 $ 35,563 $ 31,127
Amounts paid in excess of par value 55,420 45,431
Retained Earnings 15,721 17,386
------------------------
106,704 93,944
Preferred stock, non-participating, cumulative,
par value $100 per share, authorized - 400,000
shares in 1994 and 1993
Not redeemable or redeemable solely at the
option of the Company 4,734 4,734
Subject to mandadory redemption requirements -
8.76% non-voting not redeemable prior to
December 27, 1994, 150,000 shares authorized 15,186 15,168
and outstanding
Long-term debt, exclusive of current sinking fund 117,787 119,126
requirements
------------------------
Total capitalization $ 244,411 $ 232,972
------------------------
CURRENT LIABILITIES:
Notes payable - banks $ 16,000 $ 36,000
------------------------
Other current liabilities -
Current sinking fund requirements of long-term debt $ 1,377 $ 1,297
Accounts payable 14,052 15,961
Dividends payable 2,742 2,449
Accrued interest 2,424 3,706
Customers' deposits 495 498
Deferred fuel and interest costs 2,705 -
------------------------
Total other current liabilities $ 23,795 $ 23,911
------------------------
Total current liabilities $ 39,795 $ 59,911
------------------------
Deferred income taxes - Seabrook $ 19,025 $ 19,176
Other accumulated deferred income taxes 48,896 47,001
Deferred regulatory liability 9,217 9,347
Unamortized investment tax credits 2,227 2,272
Other 4,441 2,842
------------------------
Total deferred credits and reserves $ 83,806 $ 80,638
------------------------
Total Stockholders' Investment and Liabilities $ 368,012 $ 373,521
========================
See notes to the consolidated financial statements.
<PAGE-14>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 19
000's Omitted
(Unaudited)
1994 1993
-------- --------
BALANCE AT JANUARY 1 $17,386 $21,639
ADD - NET INCOME 1,095 2,908
----------------------
$18,481 $24,547
----------------------
DEDUCT:
Dividends -
Preferred stock $ 395 $ 395
Common stock 2,347 1,795
Other 18 8
----------------------
$ 2,760 $ 2,198
----------------------
BALANCE AT MARCH 31 $15,721 $22,349
======================
See notes to the consolidated financial statements.
<PAGE-15>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
000's Omitted
(Unaudited)
1994 1993
CASH FLOWS FROM OPERATIONS: --------- ---------
NET INCOME $ 1,095 $ 2,908
Adjustments to reconcile net income to net cash
provided by (used in) operations:
Depreciation and amortization 1,298 1,244
Amortization of Seabrook Nuclear Project 425 425
Amortization of costs to terminate purchased
power contract 324 -
Allowance for equity funds used during construction (553) (359)
Deferred income tax provision 405 438
Deferred income taxes on Seabrook Nuclear Project (104) (104)
Deferred investment tax credits (45) (45)
Changes in assets and liabilities:
Deferred fuel, purchased power and interest costs 5,665 6,079
Receivables, net and unbilled revenue 2,482 1,824
Materials, supplies and fuel oil 554 21
Prepaid pension costs 1,691 (85)
Accounts payable (1,909) (3,881)
Accrued interest (1,282) (636)
Accrued current income taxes - 1,363
Other current assets and liabilities, net 688 148
Other, net 2,441 (860)
----------------------
Net Cash Provided By Operations $ 13,175 $ 8,480
----------------------
CASH FLOWS FROM INVESTING:
Construction expenditures $ (4,564) $ (5,162)
Allowance for borrowed funds used during construction (692) (292)
----------------------
Net Cash Used in Investing $ (5,256) $ (5,454)
----------------------
CASH FLOWS FROM FINANCING:
Dividends on preferred stock $ (395) $ (395)
Dividends on common stock (2,054) (1,789)
Payments on long-term debt (1,259) (3,500)
Issuances of common stock:
Public offering (867,500 shares in 1994) 14,084 -
Dividend reinvestment plan (19,780 shares in 1994
and 18,793 shares in 1993) 354 363
Short-term debt, net (20,000) 3,000
----------------------
Net Cash Used in Financing $ (9,270) $ (2,321)
----------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS $ (1,351) $ 705
CASH AND CASH EQUIVALENTS - BEGINNING OF QUARTER 2,387 1,488
----------------------
CASH AND CASH EQUIVALENTS - END OF QUARTER $ 1,036 $ 2,193
======================
CASH PAID DURING THE QUARTER FOR:
INTEREST (Net of Amount Capitalized) $ 3,709 $ 2,405
INCOME TAXES - -
======================
See notes to the consolidated financial statements.
<PAGE-16>
BANGOR HYDRO-ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(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. These statements should be read in conjunction
with the consolidated financial statements and the notes thereto and all
other information included in the 1993 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
March 31, 1994 and the results of operations and cash flows for the quarters
ended March 31, 1994 and 1993.
The Company's significant accounting policies are described in the
Notes to the Consolidated Financial Statements included in its 1993 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
In accordance with Financial Accounting Standard Board ("FASB")
Statement No. 109 "Accounting for Income Taxes" ("FASB 109") the Company
recorded the following amounts as of March 31, 1994 and December 31, 1993:
(000's)
1994 1993
------ -------
Deferred income taxes on temporary
differences on which deferred income
taxes had not been previously accrued $32,719 $32,464
Effect of the 1987 change to lower
income tax rates (offset by the
1% rate increase in 1993) to be
refunded to customers over time (7,956) (8,061)
Establishment of deferred tax assets
on unamortized investment tax credits (1,261) (1,286)
------- -------
Net additional deferred income taxes
under FASB 109 $23,502 $23,117
======= =======
<PAGE-17>
CONSOLIDATED FINANCIAL NOTES - (CONTINUED)
(2) INCOME TAXES - (CONTINUED)
The individual components of federal and state income taxes reflected in
the Statements of Income for the three months ended March 31, 1994 and
March 31, 1993 are as follows:
1994 1993
---------- ----------- -----------------------
Federal State Federal State
------- ----- ------- -----
Current $ - $ 984,915 $ 377,614 $
Deferred-short-term (700,039) 131,338 (137,787) (49,240)
Deferred-long-term:
Other 1,181,838 (163,987) 651,995 (27,083)
Seabrook (85,479) (18,181) (85,479) (18,181)
Investment tax credit, net (44,544) - (44,544) -
--------- --------- --------- ---------
Total provision
for income taxes $ 351,776 $ (50,830) $1,369,100 $ 283,110
Charged to other
income 31,985 9,222 (40,193) (11,155)
--------- --------- --------- --------
Charged to operating
expense $ 383,761 $ (41,608) $1,328,907 $ 271,955
========== ========== ========== =========
<PAGE-18>
CONSOLIDATED FINANCIAL NOTES - (CONTINUED)
(2) INCOME TAXES - (CONTINUED)
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:
THREE MONTHS ENDED MARCH 31,
1994 1993
AMOUNT % AMOUNT %
(Dollars in Thousands)
Federal income tax provision
at statutory rate $ 474 34% $1,566 34%
Less (Plus) temporary differences
resulting from statutory exclusions
from taxable income, and temporary
differences that are flowed through
for rate making and accounting
purposes:
Dividend received deduction related
to earnings of associated companies 30 2 36 1
Equity component of AFDC 188 13 108 2
Amortization of equity component
of AFDC on recoverable Seabrook
investment (39) (3) (39) (1)
Amortization of debt component of
AFDC and capitalized overheads on
recoverable Seabrook investment (37) (3) (37) (1)
Book depreciation greater than tax
depreciation on assets acquired
before 1971 (73) (5) (73) (1)
State income tax liability deducted
for federal income tax purposes (14) (1) 117 2
Reversal of excess deferred income
taxes (7) - 39 1
Other 74 6 46 1
------ --- ------ ---
Federal income tax provision $ 352 25% $1,369 30%
====== === ====== ===
The differences between the federal income tax expense reported on
the Statements of Income, and the federal and state income tax liability as
reflected on the Company's tax returns, are caused by temporary differences
on which deferred taxes are provided and recovered through rates. The table
on the next page shows the components of deferred tax expense as reported in
the Statements of Income for the three months ended March 31, 1994 and 1993.
<PAGE-19>
CONSOLIDATED FINANCIAL NOTES - (CONTINUED)
(2) INCOME TAXES - (CONTINUED)
1994 1993
----------- -----------
Seabrook Nuclear Project $ (103,660) $ (103,660)
Tax depreciation in excess of book depreciation 686,335 654,449
Costs to terminate purchased power contract 2,989,147 -
Deferred fuel and purchased power costs (2,300,935) (1,126,271)
State taxes provided for ratemaking purposes
but not paid 231,282 31,489
Deferred interest costs 7,397 54,610
Costs of removal 49,392 42,191
Demand-side management costs (23,060) 79,961
FERC licensing costs - 602,955
Prepaid pension costs (664,893) 33,949
FASB 106 costs (365,423) -
Other (160,090) 64,552
--------- -----------
Total deferred income tax expense $ 345,492 $ 334,225
=========== ===========
(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
THREE MONTHS ENDED
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
1994 1993 1994 1993
-------- -------- -------- --------
OPERATIONS:
As reported by investee-
Operating revenues $39,316 $41,817 $ 5,048 $ 1,393
======= ======= ======= =======
Earnings applicable to
common stock $ 1,707 $ 2,105 $ 26 $ 26
======= ======= ======= =======
Company's reported equity-
Equity in net income $ 119 $ 147 $ 4 $ 4
Add (deduct) - Effect of
adjusting Company's
estimate to actual (18) - - -
------- ------- ------- -------
Amounts reported by Company $ 101 $ 147 $ 4 $ 4
======= ======= ======= =======
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CONSOLIDATED FINANCIAL NOTES - (CONTINUED)
(3) INVESTMENT IN MAINE YANKEE AND MEPCO - CONTINUED
MAINE YANKEE MEPCO
(Dollars in Thousands)
(Unaudited)
Financial Position At
Mar. 31, Dec. 31, Mar. 31, Dec. 31,
1994 1993 1994 1993
-------- -------- -------- --------
FINANCIAL POSITION:
As reported by investee-
Total assets $528,456 $534,817 $7,644 $ 6,363
Less-
Preferred stock 19,200 19,800 - -
Long-term debt and
long-term notes 103,333 115,333 3,450 2,590
Other Liabilities and
deferred credits 338,437 332,030 3,316 2,895
-------- -------- ------ -------
Net assets $ 67,486 $ 67,654 $ 878 $ 878
======== ======== ====== =======
Company's reported equity-
Equity in net assets $ 4,724 $ 4,736 $ 125 $ 125
Add (deduct) - Effect of
adjusting Company's
estimate to actual 48 20 - -
-------- -------- ------ -------
Amounts reported by
Company $ 4,772 $ 4,756 $ 125 $ 125
======== ======== ====== =======
(4) BUYOUT OF PURCHASED POWER CONTRACT
In June 1993 the Company negotiated an agreement to cancel it
purchased power agreement with the Beaver Wood Joint Venture ("Beaver Wood").
In connection with the cancellation, the Company paid Beaver Wood $24 million
and additionally issued $14.3 million of a new series of 12.25% First
Mortgage Bonds due July 15, 2001 to the holders of Beaver Wood's debt in
substitution for Beaver Wood's previously outstanding 12.25% Secured Notes.
Also in connection with the agreement, Beaver Wood paid the Company $1
million at the time of settling the transaction and has agreed to pay the
Company $1 million annually for the next six years. These payments are
secured by a mortgage on the property of the Beaver Wood facility.
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CONSOLIDATED FINANCIAL NOTES - (CONTINUED)
(4) BUYOUT OF PURCHASED POWER CONTRACT - CONTINUED
In May 1993 the Company received an accounting order from the Maine Public
Utilities Commission ("MPUC") which stipulated that the Company may seek
recovery of the costs associated with the buyout in a future base rate case,
as well as record carrying costs on the deferred balance. Effective with the
implementation of the new base rates on March 1, 1994, the Company began
recovering over a nine year period the deferred balance of $34,977,179 (net
of the $6 million anticipated to be received from Beaver Wood) at a monthly
amortization of $323,863.
(5) RECLASSIFICATIONS
Certain 1993 amounts have been reclassified to conform with
presentation used in Form 10-Q for the quarter ended March 31, 1994.
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BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDING MARCH 31, 1994
PART II
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS - None.
REPORTS ON FORM 8-K
A Current Report on Form 8-K dated March 2, 1994 relating to the
Company's financial statements for the calendar year ending December 31,
1993 was submitted during the period covered by this Report.
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BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDED MARCH 31, 1994
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: May 10, 1994 -------------------------
Robert C. Weiser
Treasurer
(Chief Financial Officer)
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