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, 1996 Commission File No. 0-505
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BANGOR HYDRO-ELECTRIC COMPANY
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(Exact Name of Registrant as specified in its Charter
Maine 01-0024370
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
33 State Street, Bangor, Maine 04401
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 207-945-5621
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None
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Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Outstanding Common Stock, $5 Par Value - 7,331,510 Shares
June 30, 1996
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
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FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
PART I - FINANCIAL INFORMATION
PAGE
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Cover Page 1
Index 2
Consolidated Statements of Income 3
Management's Discussion and Analysis
of Financial Statements 4
Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995 20
Consolidated Statements of Capitalization 22
Consolidated Statements of Cash Flows 23
Consolidated Statements of Retained Earnings 24
Notes to the Consolidated Financial Statements 25
PART II - OTHER INFORMATION 31
Item 4 - Submission of Matters to a Vote of
Security Holders 32
Item 6 - Exhibits and Reports on Form 8-K 32
Signature Page 33
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
000's Omitted Except Per Share Amounts
(UNAUDITED)
3 Months Ended 6 Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---------------- -----------------
ELECTRIC OPERATING REVENUES $43,656 $43,694 $92,922 $91,957
---------------- -----------------
OPERATING EXPENSES:
Fuel for generation and purchased power $17,696 $30,631 $37,554 $59,549
Other operation and maintenance 7,759 8,155 15,496 15,389
Depreciation and amortization 1,775 1,807 3,735 3,356
Amortization of Seabrook Nuclear Unit 425 425 850 850
Amortization of contract buyouts 5,189 971 10,379 1,943
Taxes -
Property and payroll 1,293 1,252 2,583 2,469
State income 102 (346) 530 (45)
Federal income 381 (640) 2,305 1,004
---------------- -----------------
$34,620 $42,255 $73,432 $84,515
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OPERATING INCOME $ 9,036 $ 1,439 $19,490 $ 7,442
---------------- -----------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used
during construction $ 86 $ 135 $ 185 $ 354
Other, net of applicable income taxes 292 (203) 590 (119)
---------------- -----------------
$ 378 $ (68) $ 775 $ 235
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INCOME BEFORE INTEREST EXPENSE $ 9,414 $ 1,371 $20,265 $ 7,677
---------------- -----------------
INTEREST EXPENSE:
Long-term debt $ 5,985 $ 2,670 $12,042 $ 5,312
Other 849 529 1,760 1,110
Allowance for borrowed funds used
during construction (178) (132) (390) (342)
---------------- -----------------
$ 6,656 $ 3,067 $13,412 $ 6,080
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NET INCOME (LOSS) $ 2,758 $(1,696) $ 6,853 $ 1,597
DIVIDENDS ON PREFERRED STOCK 383 413 776 826
---------------- -----------------
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ 2,375 $(2,109) $ 6,077 $ 771
================ =================
WEIGHTED AVERAGE NUMBER OF SHARES 7,328 7,257 7,320 7,239
================ =================
EARNINGS (LOSS) PER COMMON SHARE, based on
the weighted average number of
shares outstanding during the period $ 0.32 $(0.29) $ 0.83 $ 0.11
================ =================
DIVIDENDS DECLARED PER COMMON SHARE $ 0.18 $ 0.18 $ 0.36 $ 0.51
================ =================
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, 1995 ("1995 Form 10-K") should be read in conjunction with the
comments below.
EARNINGS
The quarter ended June 30, 1996 resulted in earnings of $.32
per common share, compared to a loss of $.29 per common share for the quarter
ended June 30, 1995. The improvement in earnings is largely attributable to
expenses incurred in the second quarter of 1995 in connection with an outage
at the Maine Yankee nuclear power plant (Maine Yankee). The plant was not
operational during the second quarter of 1995, and the Company incurred
approximately $4.4 million in incremental replacement power costs and costs
associated with the Company's estimated total share of the steam tube
resleeving project (See more complete discussion of the Maine Yankee outage
in the 1995 Form 10-K). This compares to a much lower amount - approximately
$272,000 - in incremental replacement power costs in the second quarter of
1996, because Maine Yankee came back on line in late January 1996, but is
administratively restricted in its operation to 90% of its total capacity.
See further discussion on Maine Yankee below.
Also contributing to the earnings improvement in the second
quarter of 1996 was the 1995 buyout of two high cost power purchase contracts
from non-utility generating plants. That transaction has resulted in savings
of approximately $1.9 million or $.15 per common share after income taxes in
the second quarter of 1996. Earnings for the second quarter of 1996 were also
positively impacted by approximately $431,000, or $.06 per common share, in
investment tax credits utilized by the Company's unregulated wholly-owned
subsidiary, Penobscot Hydro Co. These investment tax credits, which were
utilized principally to reduce income taxes payable upon an Internal Revenue
Service (IRS) examination of the years 1993 and 1994, were flowed-through for
financial reporting purposes as a reduction of income tax expense.
IMPORTANT CURRENT ACTIVITIES
MAINE YANKEE - As previously discussed in the 1995 Form 10-K, in December
1995 the Nuclear Regulatory Commission's (NRC) Office of the Inspector
General (OIG) and its Office of Investigations (OI) initiated investigations
of certain allegations of wrongdoing by Maine Yankee and Yankee Atomic Power
Company (Yankee) in 1988 and 1989 in connection with Maine Yankee Plant
operating-license amendments. On May 9, 1996, the OIG, which was responsible
for investigating only the actions of the NRC Staff and not those of Maine
Yankee or Yankee, issued its report on its investigation. The report found
deficiencies in the NRC Staff's review, documentation, and communications
practices in connection with the license amendments, as well as, "significant
indications of possible licensee violations of NRC requirements and
regulations". Any such violations by Maine Yankee or Yankee would be within
the purview of the OI investigation, which is not yet complete. A separate
internal investigation commissioned by the boards of directors of Maine
Yankee and Yankee and conducted by an independent law firm noted several
areas that could have been improved, including regulatory communications,
definition of responsibilities between Maine Yankee and Yankee, and
documentation and tracking of regulatory compliance, but found no wrongdoing
by Maine Yankee or Yankee or any of their employees.
On June 7, 1996, the NRC formally notified Maine Yankee that
it planned to conduct an "Independent Safety Assessment" of the Maine Yankee
plant to provide an independent evaluation of the safety performance of Maine
Yankee and as a "follow-on" to the OIG report. The NRC stated that the
overall goals and objectives of the assessment were: "(a) provide an
independent assessment of conformance to the design and licensing basis; (b)
provide an independent assessment of operational safety performance; (c)
evaluate the effectiveness of licensee self-assessments, corrective actions
and improvement plans and; (d) determine root cause(s) of safety significant
findings and conclusions." The NRC further informed Maine Yankee that the
assessment would be carried out by a team of NRC personnel and contractors
who were "independent of any recent or significant involvement with the
licensing, regulation or inspection of Maine Yankee," and was expected to
last until early October, 1996. The Company, however, cannot predict the
outcome of the Independent Safety Assessment of the unfinished OI
investigation or how any findings from these proceedings may impact the
plant's operating license, its cost of operations, or any conditions required
for continued operation, including whether or not the plant may be required
to shut down or the duration of any required shutdown. Reductions in plant
output or a complete shutdown of the plant would impose additional costs to
the Company, which could be substantial, depending on the magnitude and
duration of any such operating restrictions and the amount and cost of any
replacement power.
On July 20, 1996, the Maine Yankee plant was taken off-line
after a comprehensive review by Maine Yankee of the plant's systems and
equipment revealed a need to add pressure-relief capacity to the plant's
primary component cooling system. On August 14, 1996, Maine Yankee started
the process of returning the plant to 90% of its operating capacity.
Replacement power costs for the Company during the voluntary shutdown,
assuming the facility returns to 90% of its operating capacity on August 16,
1996, are estimated at approximately $800,000 and will be recorded in the
third quarter of 1996.
FOLLOW-UP TO MPUC AMP PROCEEDING - As previously discussed by the Company,
the Maine Public Utilities Commission (MPUC), in conjunction with its review
of the Company's Alternative Marketing Plan (AMP), acknowledged with approval
the Company's commitment to attempt to cap existing electric rates for an
extended period. The MPUC also expressed a desire to formalize the details
of such a commitment by agreement of the affected parties. The Company was
unable to reach an agreement with the parties, and the MPUC held a formal
hearing early in 1996. On July 10, 1996, the MPUC issued an order in which
it declined to impose a formal rate cap plan. The Commission found that
because of changes in the electric utility industry, a formal plan is
unnecessary as an incentive for the Company to stabilize the level of its
rates. The MPUC also characterized the Company's commitment as a "promise to
customers" and found that the Company has ample market-oriented incentives to
honor that commitment.
POWER PURCHASE CONTRACT WITH PENOBSCOT ENERGY RECOVERY COMPANY - Also as
discussed before, one of the major problems facing the Company is the adverse
impact of high-cost contracts for the purchase of power from independent,
non-utility generators with which the Company was obliged to contract in the
1980's. In 1993, the Company terminated one such contract by paying the
generator a fixed sum, and in 1995 the Company terminated two other contracts
through similar transactions. While those contract buyouts required a major
financial commitment by the Company, they have resulted and are expected to
continue to result in substantial net savings in power supply costs.
Competitive pressures in the electric utility industry
together with the commitment acknowledged by the MPUC in the AMP proceeding
to stabilize electric rates are forcing the Company to continue to explore
potential cost savings throughout its operations, particularly with respect
to the costs of generating and purchasing power. One obvious place to look
for savings is the Company's power purchase contract with the Penobscot
Energy Recovery Company (PERC), a waste-to-energy facility located in
Orrington, Maine. That facility is another of the high-cost, non-utility
generators with whom the Company was obliged to contract in the 1980's.
Currently, the Company estimates that it is required under the contract to
pay approximately $15 million annually above the market value of the power
produced at the PERC plant, and it is expected that this differential will
increase during the remaining contract term of about 22 years.
A solution to the problem caused by the PERC contract is
complicated by the fact that many local municipalities rely on the plant for
disposal of their municipal solid waste. The Company has been exploring a
wide range of possible solutions but has not yet reached any final
conclusions on the preferred course of action. Discussions with various
interested parties (including PERC and the municipalities) are at the very
preliminary stage (even though the Company believes this matter must be
resolved expeditiously). Given the significant benefits that the elimination
of this contractual obligation will have on the Company's financial
condition, the Company will continue to focus much of its attention on
resolving this matter as quickly as possible.
ELECTRIC INDUSTRY RESTRUCTURING IN MAINE - As disclosed earlier, a 1995
Resolve of the Maine Legislature required the MPUC to conduct a study of
Maine's electric utility industry and to develop at least two plans for the
orderly transition to a competitive market for the retail purchase and sale
of electricity. The inquiry must be completed and a report must be submitted
to the Legislature no later than January 1, 1997. On July 19, 1996, the MPUC
issued a Draft Plan and solicited comments and criticisms in order to assist
in the development of the final plan to be submitted to the Legislature. In
broad outline, the Draft Plan recommends that:
1. As of January 2000, all Maine consumers would have the
option to choose an electric power supplier.
2. As of January 2000, Maine would not regulate as public
utilities companies producing or selling electric power.
3. Regulated public utilities would continue to provide
electric transmission and distribution services.
4. As of January 2000, Maine's "largest electric utilities"
(which, according to the MPUC, will include the Company) would be required to
structurally separate their generation assets and functions from transmission
and distribution functions (T&D). The Commission would require such utilities
to divest themselves of generation assets by 2006. The Commission would not
require municipal utilities and electric cooperatives to separate, nor to
divest, generation.
5. Existing contractual obligations with qualifying
facilities (QFs) (which will include the high-cost non-utility generators
with which the utilities were required to contract in the 1980's) would
remain with the T&D companies. T&D companies would periodically sell to the
highest bidders the rights to market the power associated with QF contracts.
The lawful obligations of the QF contracts would not be modified.
6. Standard offer service, at a price no higher on average
than available in 1999, would be available to customers who elect not to
choose an alternative generation provider, and for customers who cannot
obtain service on reasonable terms from the market.
7. The MPUC recommends the Legislature fund low-income
assistance programs through the general fund or by an equitable tax or
surcharge on all energy sources. In the alternative, low-income programs
would continue to be funded through the rates of the T&D companies.
8. All retail providers of generation would be required to
supply some of their product from renewable sources; retail providers could
satisfy this obligation with tradable credits.
Conservation and load management programs would be funded through the rates
of the T&D companies.
9. Utilities would have a reasonable opportunity to recover
generation-related costs stranded as a result of retail access.
The MPUC would work to ensure that the regional bulk power market is
structured to maintain reliability and to advance fair and efficient
competition.
The MPUC has solicited comments on the Draft Plan, which are
due in late August 1996. The Company is evaluating the Draft Plan and
expects to offer its comments at that time.
DEMAND-SIDE MANAGEMENT CONTRACT BUYOUT - In the second quarter of 1996 the
Company incurred approximately $1.7 million in costs to terminate a demand-
side management contract. These costs have been deferred, and the Company is
in the process of seeking an accounting order from the MPUC to defer and
amortize these costs over a six year period. It is management's belief that
the accounting order will be issued, since the MPUC has historically allowed
deferral of prudently incurred demand-side management costs. If the MPUC
does not allow deferral, the $1.7 million would be reflected as a charge to
operations at the time the company learned of the decision. In any event the
Company anticipates realizing approximately $1.3 million in savings from
terminating this contract.
REVENUES
Electric operating revenues were essentially flat in the
second quarter of 1996 as compared to 1995, due to only moderate growth in
energy sales (less than a 1% increase in the second quarter of 1996). This
is consistent with the observation that the economy in the Company's service
territory area remains sluggish. In addition, revenue growth is constrained
by the necessity to adjust prices downward to some customers and for some
uses in order to retain sales that would otherwise be lost to competitive
energy sources. However, the Company anticipates this pricing strategy will
result in greater sales and profits for the longer term.
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 and the previously mentioned return of Maine
Yankee to operation in January 1996. Fuel expense related to the purchased
power contracts buyback were $9.2 million lower in the second quarter of 1996
as compared to 1995. These decreases were offset somewhat by an increase in
the cost of fuel oil in the second quarter of 1996, which was minimized by
entering into hedging transactions with three financial institutions (see
more complete discussion of the hedging transactions in the 1995 Form 10-K).
The Company reduced its fuel expense by approximately $500,000 in the second
quarter of 1996 through entering into the fuel hedging agreements.
The $396,000 decrease in other O&M expense in the second
quarter of 1996 was due principally to a $255,000 decrease in O&M payroll
expense. The decreased labor costs are attributable to lower employee levels
in 1996 due to the early retirement and severance program in the third
quarter of 1995, which is offset to some extent by the 2% wage rate increase
for both union and nonunion employees effective November 1, 1995. Also
decreasing Other O&M expense in the second quarter of 1996 was a $293,000
reduction in bad debt expense, due to lower levels of bad debt write-offs in
the 1996 quarter. These decreases in other O&M expense were offset by a
$111,000 increase in pension expense in the second quarter of 1996 as
compared to the 1995 quarter.
The small decrease in depreciation and amortization expense in
the 1996 quarter was due to adjusting the depreciation accrual, resulting
from a reassessment of the levels of construction activity management
anticipates to be closed to electric plant in service in 1996.
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
contracts in June 1995, amounting to monthly amortization of $1.4 million.
The increase in property and other taxes in the second quarter
of 1996 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 1996 as
compared to 1995.
The increase in income taxes was primarily a function of
higher earnings in the second quarter of 1996 as compared to the 1995
quarter, offset by the impact of the previously discussed utilization of
$431,000 of investment tax credits in the 1996 quarter.
Other income, net, increased in the 1996 quarter due
principally to $355,000 of interest income earned on the $21 million capital
reserve fund set aside in connection with the June 30, 1995 purchased power
contracts buyback financing with the Finance Authority of Maine. Also, in
the second quarter of 1995 the Company wrote-off approximately $460,000 in
preliminary survey and investigation costs related to a proposed new facility
which was indefinitely delayed.
Long-term debt interest expense increased $3.3 million in the
second quarter of 1996 as compared to 1995 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 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 $130,000 in interest expense paid to the IRS related to the
previously discussed examination. Also included in other interest expense is
the amortization of issuance costs of various debt instruments. Due to the
issuance costs incurred in connection with financing the 1995 purchased power
contracts buyback, debt issuance cost amortization expense was approximately
$98,000 higher in the second quarter of 1996.
SIX MONTHS OF 1996 VERSUS SIX MONTHS OF 1995
The $965,000 increase in electric operating revenues is due
principally to a $1.5 million increase in off-system sales (sales related to
power pool and interconnection agreements and resales of purchased power).
KWH sales in the 1996 period increased by 1.3% (excluding off-system sales),
while related revenues decreased by 1.2%. The causes for the revenue
decreases were related to the previously discussed need to adjust prices
downward for some customers, as well as the elimination of seasonal rates for
certain customers effective in March 1995.
The decrease in fuel for generation and purchased power
expense in the 1996 period as compared to 1995 is due principally to the same
factors as noted for the second quarter of 1996 versus the 1995 quarter. The
increase in depreciation and amortization expense was due principally to an
increase in depreciable property in the 1996 period as compared to 1995.
The reasons for the increases in amortization of contract
buyouts, property and payroll taxes, as well as state and federal income
taxes for the 1996 period as compared to 1995 are consistent with those
previously discussed. Allowance for funds used during construction (AFDC)
decreased in the 1996 period primarily due to ceasing accrual of AFDC on
certain FERC hydro relicensing projects effective March 31, 1995.
Other income, net, and long-term debt interest expense
increased in the 1996 period as compared to 1995 due to the same reasons
discussed previously. Other interest expense increased in the 1996 period
due to the reasons discussed under the second quarter of 1996 versus 1995, as
well as due to a $3.5 million increase in weighted average short-term
borrowings outstanding in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Consolidated Statements of Cash Flows reflect events in
the 1996 and 1995 periods as they affect the Company's liquidity. Net cash
provided by operations was $20.8 million for the six months ended June 30,
1996, as compared to net cash used in operations of $189.4 million for the
comparable 1995 period. Without the impact of the $196.5 million in costs to
terminate the purchased power contract in June of 1995, which were fully
financed, net cash provided by operations was $7.1 million for the 1995
period. With the elimination of the previously discussed purchased power
contracts in June 1995, the Company's net cash provided by operations for the
1996 period, as compared to 1995, was positively impacted by approximately
$11.4 million. Also positively impacting cash flows from operations were the
incremental costs incurred to replace the Company's share of Maine Yankee's
output, the cost of refueling the Maine Yankee plant in 1995 and the
Company's share of the resleeving project costs recorded in the second
quarter of 1995. These additional costs related to the Maine Yankee shutdown
in 1995 amounted to $9.0 million, while the cost of the additional
replacement fuel in 1996 was $1.2 million.
Offsetting these cash flow benefits in the 1996 period was the
$1.7 million in costs incurred to terminate a demand-side management
contract, as well as $1.7 million paid for additional income taxes resulting
from the previously discussed IRS examination and 1996 estimated federal and
state income tax payments.
Due to efforts by the Company to control costs and enhance
cash flows in 1996, construction expenditures have been reduced by $1.2
million in 1996 as compared to 1995.
As discussed in the Form 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 $2.2 million
decrease in common dividend payments for the 1996 period. In June 1996 the
Company repaid $12 million of principal on its medium term notes, and also,
in each period, made sinking fund payments on its 12.25% first mortgage
bonds. In the first quarter of 1996 the Company made a sinking fund payment
of $1.5 million on its 8.76% mandatory redeemable preferred stock. As
discussed in more detail in the footnotes to the consolidated financial
statements contained in the 1995 Form 10-K, the Company, in the first quarter
of 1996 made a $115,000 payment to this preferred stockholder related to a
"make whole provision" under the preferred stock agreement.
Under the Company's Dividend Reinvestment and Common Stock
Purchase Plan the Company realized a common stock investment of $338,000
through the issuance of 29,953 new common shares in 1996 as compared to
$773,000 in the comparable 1995 period through the issue of 79,706 shares.
In June 1995 the Company financed the cost of the purchased
power contract buyback through the issuance of $186 million in long-term debt
(see more complete discussion of the transaction in the 1995 Form 10-K).
With the completion of the purchased contract buyback in the
second quarter of 1995, the Company expects minimal external financing needs
for the foreseeable future, absent any financing which may be necessary to
mitigate the high costs of the PERC contract.
NEW ACCOUNTING STANDARD
In March 1995 the Financial Accounting Standards Board issued
Statement No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Asset to be Disposed Of", effective for financial
statements for fiscal years beginning after December 15, 1995. The Company
implemented this standard in the first quarter of 1995. With the cost of the
Company's long-lived assets and intangibles currently being recovered through
its electric rates, the effect of FAS 121 on the Company's results of
operations and financial position in the first six months of 1996 was not
significant. Management cannot predict the outcome of further competition
and deregulation of the electric utility industry on the application of this
standard.
OTHER
The Company occasionally makes forward-looking statements such as forecasts
and projections of expected future performance or statements of the Company's
plans and objectives. These forward-looking statements may be contained in
filings with the Securities and Exchange Commission, press releases, and oral
statements. Actual results could potentially differ materially from these
statements. Therefore, no assurances can be given that such forward-looking
statements and estimates will be achieved.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
ASSETS June 30, Dec. 31,
1996 1995
--------- ---------
INVESTMENT IN UTILITY PLANT:
Electric plant in service, at original cost $ 311,447 $ 300,374
Less - Accumulated depreciation and amortization 85,732 81,934
-- ----------- ---------
$ 225,715 $ 218,440
Construction work in progress 15,516 18,151
-- ----------- ---------
$ 241,231 $ 236,591
Investments in corporate joint ventures:
Maine Yankee Atomic Power Company $ 5,014 $ 5,014
Maine Electric Power Company, Inc. 125 125
-- ----------- ---------
$ 246,370 $ 241,730
-- ----------- ---------
OTHER INVESTMENTS, principally at cost $ 4,713 $ 4,185
-- ----------- ---------
FUNDS HELD BY TRUSTEE, at cost $ 21,203 $ 21,192
-- ----------- ---------
CURRENT ASSETS:
Cash and cash equivalents $ 1,337 $ 1,424
Accounts receivable, net of reserve 19,157 18,226
Unbilled revenue receivable 7,559 8,821
Inventories, at average cost:
Material and supplies 2,945 3,029
Fuel oil 486 106
Prepaid expenses 1,350 1,738
Deferred Maine Yankee refueling costs 1,680 2,419
-- ----------- ---------
Total current assets $ 34,514 $ 35,763
-- ----------- ---------
DEFERRED CHARGES:
Investment in Seabrook Nuclear Project, net of
accumulated amortization of $25,926 in 1996
and $25,076 in 1995 $ 32,917 $ 33,766
Costs to terminate purchased power contracts, net
of accumulated amortization of $25,940 in 1996
and $15,561 in 1995 181,761 192,140
Deferred regulatory assets 30,726 30,328
Demand-side management costs 3,311 1,946
Other 4,523 5,026
-- ----------- ---------
Total deferred charges $ 253,238 $ 263,206
-- ----------- ---------
Total assets $ 560,038 $ 566,076
= ========= = =========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
June 30, Dec. 31,
STOCKHOLDERS' INVESTMENT AND LIABILITIES 1996 1995
--------- ---------
CAPITALIZATION:
Common stock investment $ 106,970 $ 103,192
Preferred stock 4,734 4,734
Preferred stock subject to mandatory redemption,
exclusive of current sinking fund requirements 12,185 12,070
Long-term debt, net of current portion 275,176 288,075
-- ----------- ---------
Total capitalization $ 399,065 $ 408,071
-- ----------- ---------
CURRENT LIABILITIES:
Notes payable - banks $ 40,000 $ 35,000
-- ----------- ---------
Other current liabilities -
Current portion of long-term debt and sinking
fund requirements on preferred stock $ 15,362 $ 16,939
Accounts payable 9,499 10,526
Dividends payable 1,682 1,709
Accrued interest 3,770 4,908
Customers' deposits 349 349
Deferred fuel revenue 1,513 2,017
-- ----------- ---------
Total other current liabilities $ 32,175 $ 36,448
-- ----------- ---------
Total current liabilities $ 72,175 $ 71,448
-- ----------- ---------
DEFERRED CREDITS AND RESERVES:
Deferred income taxes - Seabrook $ 17,097 $ 17,546
Other accumulated deferred income taxes 53,613 50,775
Deferred regulatory liability 8,268 8,568
Unamortized investment tax credits 2,266 2,354
Accrued pension 650 626
Other 6,904 6,688
-- ----------- ---------
Total deferred credits and reserves $ 88,798 $ 86,557
-- ----------- ---------
Total Stockholders' Investment and Liabilities $ 560,038 $ 566,076
= ========= = =========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
000's Omitted
(UNAUDITED)
June 30, Dec. 31,
1996 1995
--------------------
COMMON STOCK INVESTMENT
Common stock, par value $5 per share- $ 36,658 $ 36,508
Authorized -- 10,000,000 shares
Outstanding -- 7,331,510 shares in 1996 and
7,301,557 in 1995
Amounts paid in excess of par value 56,798 56,611
Retained earnings 13,514 10,073
--------------------
Total common stock investment $ 106,970 $ 103,192
--------------------
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 105.01% if called on or prior to
December 27, 1996,
150,000 shares authorized and 135,000 shares
outstanding in 1996 and
150,000 shares outstanding in 1995 $ 13,800 $ 15,363
Less: Sinking fund requirements 1,615 3,293
--------------------
$ 12,185 $ 12,070
--------------------
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 8,222 9,021
--------------------
$ 110,722 $ 111,521
Less: Sinking fund requirements 1,746 1,646
--------------------
Total first mortgage bonds $ 108,976 $ 109,875
--------------------
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 $ 126,000
--------------------
Medium Term Notes, Variable interest rate- LIBO
Rate plus 2%,
due 2000 $ 48,000 $ 60,000
Less: Current portion of long-term debt 12,000 12,000
--------------------
$ 36,000 $ 48,000
--------------------
Total long-term debt $ 275,176 $ 288,075
--------------------
Total Capitalization $ 399,065 $ 408,071
====================
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
000's Omitted
(Unaudited)
1996 1995
-------- ---------
CASH FLOWS FROM OPERATIONS:
NET INCOME $ 6,853 $ 1,597
Adjustments to reconcile net income to net cash
provided by (used in) operations:
Depreciation and amortization 3,735 3,356
Amortization of Seabrook Nuclear Project 850 850
Costs to terminate purchased power contract (196,517)
Amortization of contract buyouts 10,379 1,943
Base rate case amortizations included in operation
and maintenance 535 576
Allowance for equity funds used during construction (185) (354)
Cost to terminate demand-side management contract (1,703)
Deferred income tax provision 2,027 959
Deferred investment tax credits (88) (89)
Changes in assets and liabilities:
Deferred fuel revenue and Maine Yankee refueling
costs 235 (1,916)
Receivables, net and unbilled revenue 331 2,717
Materials, supplies and fuel oil (296) 148
Accounts payable (1,027) (3,841)
Accrued interest (1,138) (257)
Current and deferred income taxes (371) (207)
Other current assets and liabilities, net 388 313
Other, net 267 1,317
---------------------
Net Cash Provided By (Used In) Operations $ 20,792 $ (189,405)
---------------------
CASH FLOWS FROM INVESTING:
Construction expenditures $ (8,027)$ (9,249)
Allowance for borrowed funds used during construction (390) (342)
---------------------
Net Cash (Used In) Investing $ (8,417)$ (9,591)
---------------------
CASH FLOWS FROM FINANCING:
Dividends on preferred stock $ (757)$ (790)
Dividends on common stock (2,630) (4,757)
Repayments on long-term debt (12,798) (1,355)
Sinking fund and make whole provision payments on
mandatory redeemable preferred stock (1,615)
Issuances of common stock
Dividend reinvestment plan (29,953 shares in 1996
and 79,706 in 1995) 338 773
Issuance of long-term debt 186,000
Short-term debt, net 5,000 20,000
---------------------
Net Cash (Used In) Provided By Financing $ (12,462)$ 199,871
---------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS $ (87)$ 875
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,424 1,956
---------------------
CASH AND CASH EQUIVALENTS - END OF SIX MONTHS $ 1,337 $ 2,831
= ========= =========
CASH PAID DURING THE SIX MONTHS FOR:
INTEREST (Net of Amount Capitalized) $ 14,066 $ 5,883
INCOME TAXES 1,703 178
= ========= =========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
000's Omitted
(Unaduited)
1996 1995
----------- -----------
BALANCE AT JANUARY 1 $ 10,073 $ 13,758
ADD - NET INCOME 6,853 1,597
----------- -----------
$ 16,926 $ 15,355
----------- -----------
DEDUCT:
Dividends -
Preferred stock $ 724 $ 790
Common stock 2,636 3,693
Other 52 37
----------- -----------
$ 3,412 $ 4,520
----------- -----------
BALANCE AT JUNE 30 $ 13,514 $ 10,835
= ========= = =========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
--------------
(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 1995 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, 1996 and the results of operations and cash flows
for the periods ended June 30, 1996 and 1995.
The Company's significant accounting policies are described in the
Notes to the Consolidated Financial Statements included in its 1995 Form
10-K filed with the Securities and Exchange Commission. For interim
reporting purposes, the Company follows these same basic accounting
policies but considers each interim period as an integral part of an annual
period. Accordingly, certain expenses are allocated to interim periods
based upon estimates of such expenses for the year.
(2) INCOME TAXES:
------------
The following table reconciles a provision calculated by multiplying
income before federal income taxes by the statutory federal income tax
rate to the above provisions for federal income taxes:
SIX MONTHS ENDED JUNE 30,
------------------------
1996 1995
---- ----
AMOUNT % AMOUNT %
------- -- ------ --
(Dollars in Thousands)
Federal income tax provision
at statutory rate $3,450 34% $ 851 34%
Less permanent reductions in
tax expense resulting from
statutory exclusions from
taxable income (2) - (15) -
------ --- ----- ---
Federal income tax provision
before effect of temporary
differences and investment
tax credits $3,448 34% $ 836 34%
(Less)Plus temporary differences
that are flowed through for
ratemaking and accounting
purposes (195) (2) 216 8
Less utilization and amortization
of investment tax credits (593) (6) (89) (4)
------ --- ------ ---
Federal income tax provision $2,660 26% $ 963 38%
====== === ====== ===
The Company utilized approximately $431,000 in investment tax credits
of the Company's unregulated wholly-owned subsidiary, Penobscot Hydro Co.
These investment tax credits, which were utilized principally to reduce
income taxes payable upon an Internal Revenue Service (IRS) examination of
the years 1993 and 1994, were flowed-through for financial reporting
purposes as a reduction of income tax expense.
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 Six Months Ended
-----------------------------------
Jun. 30, Jun. 30, Jun. 30, Jun. 30,
1996 1995 1996 1995
-------- -------- -------- --------
OPERATIONS:
As reported by investee-
Operating revenues $ 84,880 $111,887 $ 29,559 $ 26,411
======== ======== ======== ========
Earnings applicable to
common stock $ 3,546 $ 3,432 $ 111 $ 53
======== ======== ======== ========
Company's reported equity-
Equity in net income $ 248 $ 240 $ 16 $ 7
Add(Deduct)-Effect of
adjusting Company's
estimate to actual 1 (112) (9) -
-------- -------- -------- --------
Amounts reported by
Company $ 249 $ 128 $ 7 $ 7
======== ======== ======== ========
MAINE YANKEE MEPCO
---------------- -----------------
(Dollars in Thousands)
(Unaudited)
Financial Position at
Jun. 30, Dec. 31, Jun. 30, Dec. 31,
1996 1995 1996 1995
-------- -------- -------- --------
FINANCIAL POSITION:
As reported by investee-
Total assets $570,997 $580,958 $ 7,860 $ 5,919
Less-
Preferred stock 18,000 18,600 - -
Long-term debt 97,332 109,999 - 870
Other liabilities and
deferred credits 384,418 381,158 6,924 4,171
-------- -------- ------- -------
Net assets $ 71,247 $ 71,201 $ 936 $ 878
======== ======== ======= =======
Company's reported equity-
Equity in net assets $ 4,987 $ 4,984 $ 133 $ 125
Add (deduct) - Effect
of adjusting Company's
estimate to actual 27 30 (8) -
-------- -------- ------ ------
Amounts reported by
Company $ 5,014 $ 5,014 $ 125 $ 125
======== ======== ======== =======
BPHA Chester
----------------- -----------------
(Dollars in Thousands)
(Unaudited)
Operations for Six Months Ended
-------------------------------------
Jun. 30, Jun. 30, Jun. 30, Jun. 30,
1996 1995 1996 1995
-------- -------- -------- --------
OPERATIONS:
As reported by investee-
Operating revenues $ 4,330 $ 4,054 $ 2,386 $ 2,515
======= ======== ======= =======
Net Income $ 1,705 $ 1,460 $ - $ -
======= ======== ======= =======
Company's reported equity
in net income $ 853 $ 730 $ - $ -
======= ======== ======= =======
Financial Position at
Jun. 30, Dec. 31, Jun. 30, Dec. 31,
1996 1995 1996 1995
-------- -------- -------- --------
FINANCIAL POSITION:
As reported by investee-
Total assets $ 40,752 $ 41,007 $ 29,439 $30,048
Less-
Long-term debt 31,600 32,600 27,612 28,204
Other liabilities 2,295 2,255 1,827 1,844
-------- -------- -------- --------
Net assets $ 6,857 $ 6,152 $ - $ -
======== ======== ======== ========
Company's reported equity
in net assets $ 3,428 $ 3,076 $ - $ -
======== ======== ======== ========
4. NEW ACCOUNTING PRONOUNCEMENT:
----------------------------
In March 1995 the Financial Accounting Standards Board issued
Statement No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Asset to be Disposed Of", effective for
financial statements for fiscal years beginning after December 15, 1995.
The Company implemented this standard in the first quarter of 1995. With
the cost of the Company's long-lived assets and intangibles currently
being recovered through its electric rates, the effect of FAS 121 on the
Company's results of operations and financial position in the first
quarter of 1996 was not significant. Management cannot predict the
outcome of the possibility of further competition and deregulation of the
electric utility industry, or the application of this standard.
5. DEMAND-SIDE MANAGEMENT CONTRACT BUYOUT:
--------------------------------------
In the second quarter of 1996 the Company incurred approximately
$1.7 million in costs to terminate a demand-side management contract.
These costs have been deferred, and the Company is in the process of
seeking an accounting order from the Maine Public Utilities Commission
(MPUC) to defer and amortize these costs over a six year period. It is
management's belief that the accounting order will be issued, since there
is historical precedence by the MPUC for deferral of prudently incurred
demand-side management costs.
6. RECLASSIFICATIONS:
-----------------
Certain 1995 amounts have been reclassified to conform with the
presentation used in Form 10-Q for the quarter ended June 30, 1996.
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDING JUNE 30, 1996
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
The Company held its annual meeting of stockholders on May 15, 1996.
The only matter submitted to a vote was the election of three Class I
Directions for terms ending in 1999. The following persons were elected to
fill those positions pursuant to the corresponding tablulations of votes:
Alton E. Cianchette 510,913 11,724
Marion M. Kane 509,675 12,962
Norman A. Ledwin 509,998 12,639
The terms of office of the following Directors, members of Class II and
Class III, continued after the annual meeting:
Robert S. Briggs
William C. Bullock, Jr.
Jane J. Bush
David M. Carlisle
G. Clifton Eames
Carroll R. Lee
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, 1996
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: August 13, 1996 -----------------------------
Frederick S. Samp
Vice President - Finance & Law
(Chief Financial Officer)