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 September 30, 1995 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 - 7,284,903 Shares
September 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
----- -----
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 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 - September 30, 1995 and
December 31, 1994 15
Consolidated Statements of Capitalization 17
Consolidated Statements of Cash Flows 18
Consolidated Statements of Retained Earnings 19
Notes to the Consolidated Financial Statements 20
PART II - OTHER INFORMATION 30
Item 6 - Exhibits and Reports on Form 8-K 31
Signature Page 32
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
000's Omitted Except Per Share Amounts
(Unaudited)
3 Months Ended 9 Months Ended
Sept. 30, Sept. 30 Sept. 30, Sept. 30,
1995 1994 1995 1994
---------- -------- ---------- ----------
ELECTRIC OPERATING REVENUES $46,025 $42,575 $ 137,982 $ 128,614
---------- -------- ---------- ----------
OPERATING EXPENSES:
Fuel for generation $16,128 $20,076 $ 65,329 $ 65,464
Purchased power 2,495 3,882 12,843 10,448
Other operation and maintenance 11,078 7,341 26,467 25,315
Depreciation and amortization 1,808 1,357 5,164 3,950
Amortization of Seabrook Nuclear
Unit 424 424 1,274 1,274
Amortization of costs to terminate
purchased power contracts 5,190 972 7,133 2,267
Taxes -
Property and payroll 1,167 1,125 3,636 3,493
State income (65) 297 (110) 394
Federal income 262 1,512 1,266 2,834
---------- -------- ---------- ----------
$38,487 $36,986 $ 123,002 $ 115,439
---------- -------- ---------- ----------
OPERATING INCOME $ 7,538 $ 5,589 $ 14,980 $ 13,175
---------- -------- ---------- ----------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used
during construction $ 108 $ 248 $ 462 $ 1,013
Other, net of applicable
income taxes 302 52 183 35
---------- -------- ---------- ----------
$ 410 $ 300 $ 645 $ 1,048
---------- -------- ---------- ----------
INCOME BEFORE INTEREST EXPENSE $ 7,948 $ 5,889 $ 15,625 $ 14,223
---------- -------- ---------- ----------
INTEREST EXPENSE:
Long-term debt $ 6,150 $ 2,675 $ 11,462 $ 8,089
Other 1,149 363 2,259 1,075
Allowance for borrowed funds used
during construction (179) (221) (521) (1,116)
---------- -------- ---------- ----------
$ 7,120 $ 2,817 $ 13,200 $ 8,048
---------- -------- ---------- ----------
NET INCOME $ 828 $ 3,072 $ 2,425 $ 6,175
DIVIDENDS ON PREFERRED STOCK 450 413 1,276 1,239
---------- -------- ---------- ----------
EARNINGS APPLICABLE TO COMMON STOCK $ 378 $ 2,659 $ 1,149 $ 4,936
========== ======== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES 7,281 7,151 7,253 6,870
========== ======== ========== ==========
EARNINGS PER COMMON SHARE, based on
the weighted average number of
shares outstanding during the
period $ .05 $ .37 $ .16 $ .72
========== ======== ========== ==========
DIVIDENDS DECLARED PER COMMON SHARE $ .18 $ .33 $ .69 $ .99
========== ======== ========== ==========
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 September 30, 1995 resulted in earnings of $.05 per
common share, compared to earnings of $.37 per common share for the quarter
ended September 30, 1994. The difference in earnings is principally
attributable to recording the cost of an early retirement and involuntary
severance program in September 1995, amounting to a onetime, noncash charge
to operations of $2.3 million or $.32 per common share(net of income taxes),
as well as the impact of incurring higher costs for power to replace the
Company's share of Maine Yankee's output (see the discussion of Maine Yankee
below). The 1995 earnings per share number is based on a greater number of
common shares outstanding than in 1994.
IMPORTANT CURRENT ACTIVITIES
COST REDUCTIONS - As mentioned above, the Company recorded the costs
associated with an early retirement and involuntary severance program in the
third quarter of 1995. The program has resulted in approximately another 10%
reduction in the Company's workforce. Although this program will result in
future cost savings, accounting guidelines require that the Company record
the cost of the downsizing program in the period in which it was implemented.
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 two
quarters 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
are essentially completed, and the plant is anticipated to be operational 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.
ACQUISITION OF WHOLESALE CUSTOMER - On October 26, 1995, the Company
acquired the assets and service territory of its largest full requirements
wholesale customer for a purchase price of approximately $2.4 million. The
customer had annual retail revenues of approximately $1 million and served
approximately 1,800 customers.
REVENUES
The $3.45 million increase in total electric operating revenues was
attributable to an overall 9.8% increase in total (kilowatt hour) KWH sales
in the third quarter of 1995 as compared to 1994. The majority of this
increase is related to special contracts which the Company has entered into
with three large industrial customers. KWH sales to these customers
increased 41.2% in the quarter ended September 30, 1995 versus the comparable
1994 quarter, resulting in associated revenues increasing $1.9 million. KWH
sales for other customer classes increased by 1.3% in the third quarter of
1995 as compared to 1994. Increased revenues in the 1995 period were also
affected by the elimination of seasonal rates for certain customers in March
1995.
EXPENSES
The significant decrease in fuel for generation expense is related to
the buyback of the high cost non-utility generator purchased power contracts
on June 30, 1995, which eliminated fuel expense in the third quarter of 1995
for this non-utility generator (1994 comparable expense was $7.2 million);
the amortization of $252,000 in deferred fuel revenue related to
overcollections from customers under the fuel cost adjustment (FCA) (the
Company is amortizing the overcollected balance of $3.03 million as of
January 1, 1995 over a three year period); and certain purchased power costs
which are no longer reclassified to fuel for generation, due to the
elimination of the FCA (See below). These decreases are offset to some
extent by the elimination of the FCA in the first quarter of 1995, when the
Company began recording, as expense, the actual cost of fuel for generation.
Previously the Company had been permitted to adjust its rates retroactively
for changes in these costs. Also in the third quarter of 1995, the
incremental cost of Maine Yankee replacement power was $2.2 million.
The significant decrease in purchased power expense is a result of lower
operating costs at Maine Yankee while the plant is nonoperational, as well as
the Company recording no amortization of Maine Yankee refueling costs until
the plant is back on-line (anticipated to be at the end of 1995). The
Company in a prior rate case was allowed to normalize the cost of the Maine
Yankee refueling over a 19 month period, to match the refueling cycle. The
refueling cycle will not begin until the plant is operational again. At
September 30, 1995, the $2.4 million balance in deferred purchased power
costs is related to unamortized Maine Yankee refueling costs.
The $3.7 million increase in other O&M expense in the second quarter of
1995 was primarily a result of the previously mentioned early retirement and
involuntary severance program, which resulted in a $3.9 million charge to
other O&M in the third quarter of 1995. Also in the third quarter of 1995
bad debt expense increased by $428,000, due to higher levels of bad debt
write-offs. These increases were offset by a $243,000 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 due to the
workforce reduction in the third quarter of 1995, as well as higher levels of
capital labor in the 1995 quarter. Also reducing O&M expense in the 1995
quarter was a $392,000 reduction in active employee medical expenses.
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 amortization of costs to terminate purchased power
contracts was a result of the Company amortizing over a ten year period,
starting in July 1995, the costs to terminate the purchased power contract
which occurred in June 1995, amounting to monthly amortization of $1.4
million.
The increase in property and other taxes in the third quarter of 1995
was due principally to greater property taxes, which was a result of
increased property levels and property tax rates. These increases were offset
by reduced payroll taxes, as a result of lower employee levels in 1995 as
compared to 1994.
The decrease in income taxes was primarily a function of lower earnings
in the third 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 income, net, increased in the 1995 quarter due principally to
$345,000 of interest income earned on the debt service reserve fund set aside
in connection with the June 30, 1995 purchased power contracts buyback
financing with the Finance Authority of Maine (FAME).
Long-term debt interest expense increased $3.5 million in the third
quarter of 1995 as compared to 1994 due to $186 million of borrowings on June
30, 1995 to finance the purchased power contracts buyback. The increase was
offset by the impact of required and optional sinking fund payments on the
Company's 12.25% first mortgage bonds.
Other interest expense, which is composed primarily of interest expense
on short term borrowings, increased due to higher interest rates as well as a
$17.9 million increase in weighted average short term borrowings outstanding
in the 1995 quarter as compared to 1994. The increased borrowings were a
result of the need for additional sources of financing for the purchased
power contracts buyback in June.
NINE MONTHS OF 1995 VERSUS NINE MONTHS OF 1994
REVENUES
The $9.4 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 4.3% increase in KWH sales in the 1995 period as compared to 1994,
and an increase in off-system sales of $798,000 in 1995. The majority of the
KWH sales increase is related to the previously discussed special contract
customers. KWH sales to these customers increased 22.5% in the 1995 period
as compared to 1994, resulting in associated revenues increasing $4.3
million. KWH sales for other customer classes decreased by .5% in the 1995
period as compared to 1994.
EXPENSES
The decrease in fuel for generation expenses in the 1995 period as
compared to 1994 is due principally to the same factors as noted for the
third quarter of 1995 versus the 1994 quarter.
The increase in purchased power expense is attributable to accruing the
Company's estimated total share of the Maine Yankee resleeving project costs
at June 30, 1995 (see the prior discussion on Maine Yankee). This increase
was offset by the same items as noted for the third quarter of 1995 versus
the third quarter of 1994.
The increase in other O&M in 1995 was primarily a result of the early
retirement and involuntary severance program in the third quarter of 1995, as
well as a $907,000 increase in bad debt expense in the 1995 period. These
increases were offset by 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
related to the 1994 and 1995 workforce reductions, O&M payroll expense was
$1.2 million lower in the 1995 period as compared to 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, amounting to $323,863 per
month. Effective July 1, 1995, the Company began amortizing deferred costs
associated with the most recent purchased power contracts termination over a
ten year period, amounting to $1,406,036 on a monthly basis. Consequently
amortization expense in 1995 was $4.6 million 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 Maine Public
Utilities Commission on March 1, 1994. The decrease was also a function of
lower levels of construction in the 1995 period.
The increase in long-term debt interest expense in the 1995 period as
compared to 1994 was due to the previously mentioned reasons.
Other interest expense increased principally due to higher interest
rates as well as a $7.6 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
nine months of 1995 and 1994 as they affect the Company's liquidity. Net
cash used in operations was $173.5 million for the period ended September 30,
1995. In June 1995 the Company expended $196.5 million related to the
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). Upon establishment of a new
letter of credit, the $4.4 million in collateral was released to the Company
in the third quarter of 1995. The receipt of these funds is reflected in the
statements of cash flows in other, net and was utilized to paydown
outstanding short-term debt.
Exclusive of the costs to buyback the purchased power contracts, which
were entirely debt financed (see below), cash flows provided by operations
were $23.1 million for the nine months ended September 30, 1995 as compared
to $21.8 million for the comparable 1994 period. With the elimination of the
purchased power contracts, the Company incurred no costs related to the
contracts in the period from July 1995 through September 1995, while in the
comparable 1994 period, the Company incurred approximately $7.2 million in
costs under the contracts. Another component of the increase in cash flows
from operations is the reduction in payroll costs in 1995 as compared to
1994. Due principally to the reduction in the workforce through the early
retirement plans in 1994 and 1995, labor costs were approximately $686,000
lower in the 1995 period as compared to 1994.
Also enhancing cash flows from operations in 1995 as compared to 1994 is
Company contributions to the defined benefit pension plans. For the nine
months ended September 30, 1994 the Company had contributed approximately
$1.2 million to the non-bargaining unit plan, while in the 1995 period, with
the merging of the bargaining unit and non-bargaining unit plans, no
contributions have been required. This is due to the overfunded status of
the bargaining unit plan prior to the merger.
These enhancements to cash flows from operations have been offset to
some extent by the additional costs incurred in 1995 to replace the Company's
share of Maine Yankee's output. These additional fuel costs have amounted to
$6.6 million for the period from February through September 1995 period.
Due to efforts by the Company to control costs and enhance cash flows in
1995, construction expenditures have been reduced by $2.2 million in the 1995
period as compared to 1994.
As discussed in the 10-Q for the second quarter of 1995, the Company
reduced its quarterly dividend on common stock by $.15 from the prior
quarterly level of $.33 per share, effective for the quarter ending June 30,
1995. This reduction has improved cash flows through a $1.1 million decrease
in common dividend payments for the 1995 period. The Company in each period
made regular and optional sinking fund payments on its 12.25% first mortgage
bonds.
Under the Company's Dividend Reinvestment and Common Stock Purchase Plan
the Company realized a common stock investment of $1.0 million through the
issuance of 99,760 new common shares in 1995 as compared to $998,000 in the
comparable 1994 period through the issue of 63,764 shares.
The purchased power contracts buyback costs in June 1995 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. In connection with the $60 million of medium term notes, the
Company was required to enter into a transaction to cap or fix the rate of
interest within 120 days of June 30, 1995. In August 1995, the Company
entered into an agreement with three banks to cap the interest rate at 7.25%,
with the cost to cap the interest rate amounting to $624,000. These costs
are being amortized over the life of the term loan on a straight-line basis.
As discussed in the 10-Q for the second quarter of 1995, effective June
30, 1995, the Company entered into a Credit Agreement with a group of seven
banks providing a revolving credit facility in the initial amount of $55
million. The revolving credit facility has a term of five years.
With the completion of the purchased contract buyback in the second
quarter of 1995, the Company expects minimal financing needs for the
forseeable future.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
ASSETS Sept. 30, Dec. 31,
1995 1994
---------- ----------
INVESTMENT IN UTILITY PLANT:
Electric plant in service, at original cost $ 293,779 $ 274,830
Less - Accumulated depreciation and amortization 81,006 75,667
---------- ----------
$ 212,773 $ 199,163
Construction in progress 18,596 23,929
---------- ----------
$ 231,369 $ 223,092
Investments in corporate joint ventures:
Maine Yankee Atomic Power Company $ 4,754 $ 4,754
Maine Electric Power Company, Inc. 125 125
---------- -----------
$ 236,248 $ 227,971
---------- ----------
FUNDS HELD BY TRUSTEE, principally at cost $ 21,541 $ -
---------- ----------
OTHER INVESTMENTS, principally at cost $ 4,156 $ 3,482
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 3,605 $ 1,956
Accounts receivable, net of reserve 18,479 19,130
Unbilled revenue receivable 7,302 8,611
Inventories, at average cost:
Material and supplies 2,939 2,992
Fuel oil 464 435
Prepaid expenses 1,231 1,681
Deferred purchased power costs 2,419 235
Current deferred income taxes 1,094
---------- ----------
Total current assets $ 36,439 $ 36,134
---------- ----------
DEFERRED CHARGES:
Investment in Seabrook Nuclear Project, net of
accumulated amortization of $24,651 in 1995
and $23,377 in 1994 $ 34,191 $ 35,465
Costs to terminate purchased power contracts 197,330 36,739
Deferred regulatory asset 30,076 33,537
Prepaid pension costs 2,082
Demand-side management costs 2,115 2,684
Other 5,683 3,156
---------- ----------
Total deferred charges $ 269,395 $ 113,663
---------- ----------
Total assets $ 567,779 $ 381,250
========== ==========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
Sept. 30, Dec. 31,
STOCKHOLDERS' INVESTMENT AND LIABILITIES 1995 1994
--------- ---------
CAPITALIZATION:
Common stock investment $ 102,812 $ 105,658
Preferred stock 4,734 4,734
Preferred stock subject to mandatory redemption, less
current sinking fund requirements 13,832 13,740
Long-term debt, net of current portion 288,075 116,367
---------- ----------
Total capitalization $ 409,453 $ 240,499
---------- ----------
CURRENT LIABILITIES:
Notes payable - banks $ 38,000 $ 27,000
---------- ----------
Other current liabilities -
Current portion of long-term debt and sinking fund
requirements on preferred stock $ 15,146 $ 2,961
Accounts payable 9,658 14,669
Dividends payable 1,706 2,766
Accrued interest 6,158 3,650
Customers' deposits 356 288
Deferred fuel revenue 2,269 3,025
Income taxes payable 966
---------- ----------
Total other current liabilities $ 35,293 $ 28,325
---------- ----------
Total current liabilities $ 73,293 $ 55,325
---------- ----------
DEFERRED CREDITS AND RESERVES:
Deferred income taxes - Seabrook $ 17,770 $ 18,434
Other accumulated deferred income taxes 48,871 50,084
Deferred regulatory liability 8,647 9,222
Unamortized investment tax credits 2,282 2,415
Accrued pension cost 672
Other 6,791 5,271
---------- ----------
Total deferred credits and reserves $ 85,033 $ 85,426
---------- ----------
Total Stockholders' Investment and Liabilities $ 567,779 $ 381,250
========== ==========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
000's Omitted
(Unaudited)
Sept. 30, Dec. 31,
1995 1994
----------------------
COMMON STOCK INVESTMENT
Common stock, par value $5 per share- $ 36,425 $ 35,926
Authorized -- 10,000,000 shares
Outstanding -- 7,284,903 shares in 1995 and
7,131,385 in 1994
Amounts paid in excess of par value 56,486 55,974
Retained earnings 9,901 13,758
----------------------
Total common stock investment $ 102,812 $ 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
4.25%, 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
----------------------
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 $ 15,332 $ 15,240
Less: Current sinking fund requirements 1,500 1,500
----------------------
$ 13,832 $ 13,740
----------------------
LONG-TERM DEBT
First Mortgage Bonds-
6.75% Series due 1998 $ 2,500 $ 2,500
10.25% Series due 2019 15,000 15,000
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
12.25% Series due 2001 9,021 11,128
----------------------
$ 111,521 $ 113,628
Less: Current portion 1,646 1,461
----------------------
Total first mortgage bonds $ 109,875 $ 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 $ 288,075 $ 116,367
----------------------
Total Capitalization $ 409,453 $ 240,499
======================
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
000's Omitted
(Unaudited)
1995 1994
--------- --------
CASH FLOWS FROM OPERATIONS:
NET INCOME $ 2,425 $ 6,175
Adjustments to reconcile net income to net cash
(used in) provided by operations:
Depreciation and amortization 5,164 3,950
Amortization of Seabrook Nuclear Project 1,274 1,274
Costs to terminate purchased power contract (196,698) --
Amortization of costs to terminate purchased
power contracts 7,133 2,267
Payment received related purchased power contract
termination 1,000 1,000
Cost of early retirement and involuntary
severance plan 3,836 2,801
Base rate case amortizations included in
operation and maintenance 864 705
Allowance for equity funds used during
construction (462) (1,013)
Deferred income tax provision 1,304 3,407
Deferred investment tax credits (133) (134)
Changes in assets and liabilities:
Deferred fuel revenue and purchased power (2,940) 2,261
Receivables, net and unbilled revenue 1,960 2,043
Prepaid pension costs -- (1,113)
Accounts payable (5,011) (3,258)
Accrued interest 2,508 (1,268)
Current and deferred income taxes (220) --
Accrued pension costs 205 --
Accrued postretirement benefit costs 570 620
Other current assets and liabilities, net 542 823
Other, net 3,192 1,239
----------- ----------
Net Cash (Used in) Provided By Operations $ (173,487) $ 21,779
----------- ----------
CASH FLOWS FROM INVESTING:
Construction expenditures $ (12,997) $ (15,198)
Allowance for borrowed funds used during construction (521) (1,116)
----------- ----------
Net Cash (Used in) Investing $ (13,518) $ (16,314)
----------- ----------
CASH FLOWS FROM FINANCING:
Dividends on preferred stock $ (1,185) $ (1,185)
Dividends on common stock (6,065) (6,754)
Payments on long-term debt (2,107) (2,595)
Issuances of common stock:
Public offering 867,500 shares in 1994 -- 14,084
Dividend reinvestment plan (99,760 shares in 1995
and 63,764 in 1994) 1,011 998
Issuances of long-term debt 186,000 --
Short-term debt, net 11,000 (11,000)
----------- ----------
Net Cash Provided By (Used in) Financing $ 188,654 $ (6,452)
----------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS $ 1,649 $ (987)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,956 2,387
----------- ----------
CASH AND CASH EQUIVALENTS - END OF NINE MONTHS $ 3,605 $ 1,400
=========== ==========
CASH PAID DURING THE NINE MONTHS FOR:
INTEREST (Net of Amount Capitalized) $ 10,000 $ 8,089
INCOME TAXES 277 --
=========== ==========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
000's Omitted
(Unaudited)
1995 1994
----------- -----------
BALANCE AT JANUARY 1 $ 13,758 $ 17,386
ADD - NET INCOME 2,425 6,175
----------- -----------
$ 16,183 $ 23,561
----------- -----------
DEDUCT:
Dividends -
Preferred stock $ 1,185 $ 1,185
Common stock 5,005 7,062
Other 92 54
----------- -----------
$ 6,282 $ 8,301
----------- -----------
BALANCE AT SEPTEMBER 30 $ 9,901 $ 15,260
========== ==========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September
30, 1995 and the results of operations and cash flows for the periods ended
September 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 provisions for federal income taxes:
NINE MONTHS ENDED SEPT.30,
1995 1994
AMOUNT % AMOUNT %
(Dollars in Thousands)
Federal income tax provision
at statutory rate $1,268 34% $3,212 34%
Plus(less)permanent differences
in tax expense resulting
from statutory exclusions
from taxable income 14 - (323) 4
------- --- ------- ---
Federal income tax provision
before effect of temporary
differences $1,282 34% $2,889 30%
Plus(less) temporary differences
that are flowed through for
ratemaking and accounting
purposes 99 3 (20) -
------- --- ------- ---
Federal income tax provision $1,381 37% $2,869 30%
======= === ======= ===
(3) INVESTMENT IN JOINTLY OWNED FACILITIES:
Condensed financial information for Maine Yankee Atomic Power Company
("Maine Yankee"), Maine Electric Power Company, Inc. ("MEPCO"), Bangor-
Pacific Hydro Associates ("BPHA") and Chester SVC Partnership ("Chester") is
as follows:
MAINE YANKEE MEPCO
----------------- -----------------
(Dollars in Thousands)
(Unaudited)
Operations for Nine Months Ended
-------------------------------------
Sept.30, Sept.30, Sept.30, Sept.30,
1995 1994 1995 1994
-------- -------- -------- --------
OPERATIONS:
As reported by investee-
Operating revenues $156,722 $128,496 $41,650 $17,572
======== ======== ======= =======
Earnings applicable to
common stock $ 5,254 $ 5,283 $ 79 $ 79
======== ======== ======= =======
Company's reported equity-
Equity in net income $ 368 $ 370 $ 11 $ 11
Deduct-Effect of
adjusting Company's
estimate to actual - (14) - -
-------- -------- ------- -------
Amounts reported by
Company $ 368 $ 356 $ 11 $ 11
======== ======== ======= =======
MAINE YANKEE MEPCO
--------------- -----------------
(Dollars in Thousands)
(Unaudited)
Financial Position at
Sept.30, Dec. 31, Sept.30, Dec. 31,
1995 1994 1995 1994
-------- -------- -------- --------
FINANCIAL POSITION:
As reported by investee-
Total assets $563,809 $549,910 $ 6,446 $ 6,563
Less-
Preferred stock 18,600 19,200 - -
Long-term debt 98,999 118,666 870 1,730
Other liabilities and
deferred credits 375,137 344,550 4,698 3,955
-------- -------- -------- -------
Net assets $ 71,073 $ 67,494 $ 878 $ 878
======== ======== ======== =======
Company's reported equity -
Equity in net assets $ 4,975 $ 4,725 $ 125 $ 125
(Deduct)add- Effect
of adjusting Company's
estimate to actual (221) 29 - -
--------- -------- -------- -------
Amounts reported by
Company $ 4,754 $ 4,754 $ 125 $ 125
========= ======== ======== =======
BPHA Chester
----------------- -----------------
(Dollars in Thousands)
(Unaudited)
Operations for Nine Months Ended
-------------------------------------
Sept 30, Sept 30, Sept 30, Sept 30,
1995 1994 1995 1994
-------- -------- -------- --------
OPERATIONS:
As reported by investee-
Operating revenues $ 5,453 $ 5,222 $ 3,729 $ 3,910
======= ======== ======= =======
Net Income $ 1,520 $ 820 $ - $ -
======= ======== ======= =======
Company's reported equity
in net income $ 760 $ 410 $ - $ -
======= ======== ======= =======
Financial Position at
Sept 30, Dec. 31, Sept 30, Dec. 31,
1995 1994 1995 1994
-------- -------- -------- --------
FINANCIAL POSITION:
As reported by investee-
Total assets $ 40,898 $ 41,789 $ 30,361 $31,325
Less-
Long-term debt 33,075 34,950 28,499 29,387
Other liabilities 2,201 2,477 1,862 1,938
-------- -------- -------- -------
Net assets $ 5,622 $ 4,362 $ - $ -
======== ======== ======== =======
Company's reported equity
in net assets $ 2,811 $ 2,181 $ - $ -
======== ======== ======== =======
(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 (AMP) 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 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
are essentially completed, and the plant is anticipated to be operational 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. 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 was required to be
fixed or capped within 120 days of the closing. In August 1995, the Company
entered into agreements with three banks to cap the interest rate at 7.25%,
with the cost to cap the interest rate amounting to $624,000. These costs
are being amortized over the life of the term loan on a straight-line basis.
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) EARLY RETIREMENT AND INVOLUNTARY SEVERANCE PROGRAM:
In the third quarter of 1995 the Company implemented an early
retirement and involuntary severance plan, which resulted in approximately a
10% reduction in the Company's workforce. The cost of the program, amounting
to $3.9 million, was charged to other operation and maintenance expense in
the third quarter of 1995.
(8) RECLASSIFICATIONS:
Certain 1994 amounts have been reclassified to conform with the
presentation used in Form 10-Q for the quarter ended September 30, 1995.
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDING SEPTEMBER 30, 1995
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS -
Exhibit 4.1 Loan Agreement by and between Finance Authority of Maine and
Bangor Hydro-Electric Company.
Exhibit 4.2 Credit Agreement Dated as of June 30, 1995 among Bangor Hydro-
Electric Company, the banks named therein, Chemical Bank, as Administrative
Agent and Fleet Bank of Maine and the First National Bank of Boston, as Co-
Agents.
Exhibit 4.3 Purchase Contract dated as of June 28, 1995 among the Finance
Authority of Maine and Bangor Hydro-Electric Company and Prudential
Securities Incorporated.
Exhibit 4.4 General and Refunding Mortgage Indenture and Deed of Trust -
Bangor Hydro-Electric Company to Chemical Bank, As Trustee Dated as of June
1, 1995.
Exhibit 4.5 Supplemental Indenture Dated as of June 15, 1995 to General and
Refunding Mortgage Indenture and Deed of Trust dated as of June 1, 1995
(Bangor Hydro-Electric Company to Chemical Bank).
Exhibit 4.6 Supplemental Indenture Dated as of June 29, 1995 to Mortgage and
Deed of Trust dated as of July 1, 1936 (Bangor Hydro-Electric Company to
Citibank, N.A. As Trustee).
Exhibit 10.1 Purchase agreement between Babcock-Ultrapower Jonesboro and
Bangor Hydro-Electric Company.
Exhibit 10.2 Purchase agreement between Babcock-Ultrapower West Enfield and
Bangor Hydro-Electric Company.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter for which this report is
submitted.
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDED SEPTEMBER 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/ Frederick S. Samp
Dated: November 10, 1995 ______________________________
Frederick S. Samp
Vice President - Finance & Law
(Chief Financial Officer)