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 March 31, 1997 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 - 7,363,424 Shares
March 31, 1997
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, 1997
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, 1997 and
December 31, 1996 13
Consolidated Statements of Capitalization 15
Consolidated Statements of Cash Flows 16
Consolidated Statements of Retained Earnings 17
Notes to the Consolidated Financial Statements 18
PART II - OTHER INFORMATION 23
Item 6 - Exhibits and Reports on Form 8-K 24
Signature Page 25
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
000's Omitted Except Per Share Amounts
(UNAUDITED)
Three Months Ended
Mar. 31, Mar. 31,
1997 1996
---------- ----------
ELECTRIC OPERATING REVENUES $ 48,176 $ 48,161
---------- ----------
OPERATING EXPENSES:
Fuel for generation and purchased power $ 24,282 $ 18,753
Other operation and maintenance 7,762 7,737
Depreciation and amortization 2,752 1,960
Amortization of Seabrook Nuclear Unit 425 425
Amortization of contract buyouts 5,228 5,190
Taxes -
Property and payroll 1,412 1,290
State income (280) 257
Federal income (62) 2,095
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$ 41,519 $ 37,707
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OPERATING INCOME $ 6,657 $ 10,454
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OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used
during construction $ 95 $ 99
Other, net of applicable income taxes 297 298
---------- ----------
$ 392 $ 397
---------- ----------
INCOME BEFORE INTEREST EXPENSE $ 7,049 $ 10,851
---------- ----------
INTEREST EXPENSE:
Long-term debt $ 5,755 $ 6,057
Other 766 911
Allowance for borrowed funds used
during construction (188) (212)
---------- ----------
$ 6,333 $ 6,756
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NET INCOME $ 716 $ 4,095
DIVIDENDS ON PREFERRED STOCK 344 393
---------- ----------
EARNINGS APPLICABLE TO COMMON STOCK $ 372 $ 3,702
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES 7,363 7,312
========== ==========
EARNINGS PER COMMON SHARE, based on
the weighted average number of
shares outstanding during the period $ .05 $ .51
========== ==========
DIVIDENDS DECLARED PER COMMON SHARE $ .00 $ .18
========== ==========
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, 1996
(1996 Form 10-K) should be read in conjunction with the comments below.
EARNINGS
The quarter ended March 31, 1997 resulted in earnings of $.05 per common
share, compared to earnings of $.51 per common share for the quarter ended
March 31, 1996. The decline in first quarter earnings compared to 1996 is
attributable largely to the fact that the Maine Yankee nuclear power plant,
in which Bangor Hydro has a 7% interest, has been shut down since early
December 1996. While the plant remains shut down for repairs and
inspections, Bangor Hydro incurs approximately $1 million per month in
replacement power costs. Maine Yankee's operating budget has been
substantially increased as well, and these costs are being borne by its
owners. Aside from the Maine Yankee concerns, the economy in Bangor Hydro's
service area remains sluggish, and energy sales growth is low.
Earnings for the first quarter of 1997 were positively affected by three
transactions that were nonrecurring in nature. The Company recorded $335,000
in revenues from the sale of air emission allowances to a coal fired
generating facility, and $350,000 in revenue was recognized under a shared
savings distribution agreement with another utility. Also, the Company
recorded a $204,000 state income tax benefit as the result of an Internal
Revenue Service examination of the Company's 1994 federal income tax return.
Without the impact of these one-time events benefitting earnings, the Company
would have incurred a $.03 loss per common share in the first quarter of
1997.
IMPORTANT CURRENT ACTIVITIES
SUSPENSION OF COMMON DIVIDEND PAYMENT - At its March 19, 1997 meeting, the
Company's Board of Directors decided not to declare its regular quarterly
dividend on the Company's common stock because of current financial
pressures, primarily caused by the ongoing difficulties at the Maine Yankee
nuclear generating plant. The quarterly common dividend payment had
previously been reduced, from $.33 to $.18, in the second quarter of 1995,
and had been maintained at that level until the decision on March 19, 1997.
PROPOSED INCREASE IN RATES - In a major initiative to improve the Company's
financial outlook, on March 3, 1997, the Company filed with the Maine Public
Utilities Commission (the MPUC) notice of intent to file for a general
increase in rates. In the notice, the Company notified the MPUC that it
expected to seek a two step rate increase of $5 million beginning in 1998 and
$4.5 million beginning in 1999. This would represent an overall increase of
about 3% per year over the two year period. While the decision to increase
rates runs counter to the strategies articulated by the Company in recent
years, the Company believes it is important to hold the increases to minimum
levels while providing a level of financial relief that will restore the
Company's position to acceptable levels.
RATE EMERGENCY RATE REQUEST - On April 1, 1997, the Company filed with the
MPUC a Petition for Temporary Rates to increase its rates by an amount that
would increase its annual revenues by $10 million effective June 1, 1997.
Under Maine law, a utility must ordinarily notify the MPUC two months in
advance of the filing of a request for a general increase in rates and the
MPUC then has 9 months to investigate that request. The Company provided
such a notice to the MPUC on March 3, 1997. However, under certain
circumstances, the MPUC may allow a utility to implement a requested increase
in rates on a temporary basis pending the conclusion of its investigation of
the utility s request for a general increase in rates.
In making its Petition for a Temporary Increase in Rates, the Company
cited the continuing impact on the Company s financial condition and cash
flow of the ongoing outage at the Maine Yankee nuclear power plant. The
Company also cited potential noncompliance with financial covenants contained
in its bank credit agreement (including the fixed charge coverage ratio,
discussed below, as to which a temporary waiver of noncompliance is in
effect) and the need to maintain adequate borrowing capacity for working
capital purposes, including mandatory debt repayments. The Company cannot
predict the outcome of its Petition.
BANK CREDIT AGREEMENT COVENANT COMPLIANCE - The Company's credit agreement
with its lending banks contains a number of covenants keyed to the Company's
financial condition and performance. One such covenant, contained in its
Credit Agreement dated June 30, 1995 with a group of seven banks, requires
the Company maintain a consolidated fixed charge ratio of 1.5 to 1.0
(defined as the ratio of the sum of the Company s net income, income tax
expense and interest expense to the Company s interest expense, subject to a
few minor adjustments) on a rolling four quarter basis. Based on the
unaudited actual first quarter 1997 financial results, the Company was out of
compliance with this covenant. The Company has obtained a temporary waiver
of the noncompliance effective through May 15, 1997 and a second waiver
effective through June 6, 1997. The Company also projects that later in 1997
or during 1998 it may not maintain compliance with other financial covenants
contained in its lending agreements. Failure to comply with these financial
covenants is an Event of Default under the Credit Agreement that may result
in restrictions on the Company s continuing access to adequate borrowing
capacity for working capital purposes, including mandatory debt repayments.
As indicated above, the costs of the ongoing outage at Maine Yankee,
including replacement power costs, is a principal factor affecting the
Company s financial condition and cash flow.
MAINE YANKEE - As discussed in the 1996 Form 10-K, Maine Yankee, in which the
Company has a 7% ownership interest, continued to be out of service during
the first quarter of 1997. The plant has been off-line since early December
1996 when it was shut down to address cable separation and associated issues.
Since then, Maine Yankee also determined that a portion of the nuclear fuel
in the reactor was defective and had to be replaced, thereby extending the
shutdown into a refueling outage. During the refueling outage, the Company
and other sponsors of Maine Yankee are reviewing their analyses of the
economics of operating the plant, the risks and potential benefits of
continued operation, and other considerations relevant to the future of the
plant. In addition, Maine Yankee is evaluating the sale of the plant or its
ownership interests to a potential purchaser that has expressed preliminary
interest.
The Company cannot predict when or whether the plant will return to
service of whether any form of sale of the plant or transfer of Maine Yankee
ownership interests will take place. The Company has been incurring
replacement power costs of approximately $1 million per month while the plant
is out of service, and expects such costs to continue at the same rate until
the plant returns to service. In addition to the replacement power costs,
the Company has been bearing 7% of the additional costs being incurred at
Maine Yankee necessary to return the plant to service. While Maine Yankee's
board of directors approved a budget that included about $30 million in
additional operating and maintenance costs in 1997, revised budgets and
actual results for the first quarter of 1997 indicate that these costs will
be substantially greater.
SPECIAL CONTRACTS WITH LARGE INDUSTRIAL CUSTOMERS - Effective January 1, 1997
the Company renegotiated the revenue sharing portion of a special rate
contract with its largest industrial customer. The rate for this customer is
based in part on a revenue sharing arrangement whereby the revenues for
service vary depending on the price and volume of product sold by the
industrial customer to its customers. Under the revised revenue sharing
formula, the Company estimates that annual revenues from the revenue sharing
could be reduced by approximately $2.6 million. The Company also entered
into a special rate contract with a large pulp and paper manufacturer,
effective April 1, 1997. Annual revenues for this customer are estimated to
be reduced by approximately $1.5 million due to the reduced rate. It was
necessary to reduce rates to this pulp and paper manufacturer in order to
retain the customer, since the customer was exploring self-generation for its
energy needs.
EMPLOYEES - On February 26, 1997, the employees of the Company's customer
service center, approximately 50 employees, voted to join the International
Brotherhood of Electrical Workers (AFL-CIO). To date no contract has been
negotiated between the Company and the union with respect to these new
members.
REVENUES
While there was an overall 1.9% increase in total kilowatt hour (KWH)
sales (excluding off-system sales) in the first quarter of 1997 over first
quarter 1996 sales, associated revenues only increased by .2% due to the
effect of adjusting prices downward to some customers in order to retain
sales that would otherwise be lost to competitive pressures. The lack of
growth in sales remains a function of the continued sluggish economy in the
Company's service territory. Revenues related to the previously discussed
revenue sharing arrangement with the Company's largest industrial customer
decreased by approximately $986,000 in the first quarter of 1997 as compared
to the 1996 quarter. Positively impacting revenues in the first quarter of
1997 were the previously discussed sale of air emission allowances and
revenue associated with the shared distribution savings with another utility.
EXPENSES
Fuel for generation and purchased power expense increased principally
due to the previously mentioned shutdown of Maine Yankee during the entire
first quarter of 1997 and the increase in its operating and maintenance
expenditures in 1997. In the first quarter of 1997 the Company incurred
approximately $3.5 million in incremental Maine Yankee replacement power
costs, as compared to $934,000 in the first quarter of 1996. In the 1996
quarter, Maine Yankee operated for approximately 2 1/2 months. The Company
has also borne a greater level of Maine Yankee operating costs, which
increased by approximately $1.6 million in 1997, as compared to the 1996
quarter. Under the Company's fuel hedging program, fuel expense was reduced
by $158,000 in the 1997 quarter, as compared to a $1.1 million reduction in
the 1996 quarter.
Other operation and maintenance (O&M) expense increased by only $25,000
in the first quarter of 1997, due principally to the Company's efforts to
control costs and conserve cash. O&M payroll expense decreased by $184,000
due to a reduction in overtime labor in 1997 (fewer storms in the winter of
1997 compared to 1996), and higher level of payroll being charged to the
Company's capital program. These decreases were offset by slightly higher
employee levels in 1997 and the impact of wage rate increases.
The $793,000 increase in depreciation and amortization expense was due
principally to the ending of the amortization of the overaccumulated
depreciation reserve in 1996 (See the 1996 Form 10-K for a more complete
discussion). This amortization resulted in a $438,000 reduction in
depreciation expense in the first quarter of 1996. Also increasing
depreciation and amortization expense in the 1997 quarter were anticipated
property additions for 1997, including the effect of the implementation of
three large information system projects in 1997.
The increase in property and other taxes in the first quarter of 1997
was due principally to greater property taxes, which was a result of
increased property levels and property tax rates.
The decrease in income taxes was primarily a function of lower earnings
in the first quarter of 1997 as compared to the 1996 quarter. Also reducing
income tax expense in the 1997 quarter was the previously discussed $204,000
state income tax benefit. See Footnote 2 to the Consolidated Financial
Statements for a reconciliation of the Company's effective income tax rate.
Allowance for funds used during construction decreased in 1997 relative
to 1996 primarily due to lower levels of construction expenditures in the
1997 quarter.
Long-term debt interest expense decreased $302,000 in the first quarter
of 1997 as compared to 1996 due to $12 million in principal repayments on the
Company's $60 million medium term notes on June 30, 1996, as well as sinking
fund payments on the Company's 12.25% first mortgage bonds.
Other interest expense, which is composed principally of interest
expense on short term borrowings, decreased due to a $5.0 million decrease in
weighted average short-term borrowings outstanding in the 1997 quarter as
compared to 1996 and a reduction in average short-term interest rates in
1997.
LIQUIDITY AND CAPITAL RESOURCES
The Consolidated Statements of Cash Flows reflect events in the first
quarters of 1997 and 1996 as they affect the Company's liquidity. Net cash
provided by operations decreased by $4.7 million in the first quarter of 1997
as compared to the 1996 quarter. Negatively impacting cash flows from
operations in the 1997 quarter were the incremental costs incurred to replace
the Company's share of Maine Yankee's output. These additional fuel costs
amounted to $3.5 million for the first quarter of 1997 as compared to
$934,000 for the 1996 quarter. Cash flows were also reduced by the
additional Maine Yankee operating costs, costs associated with the current
refueling in progress at the Plant, and the Company's share of the cable
separation repair (see the 1996 Form 10-K for a more complete discussion).
Offsetting these cash flow decreases in the first quarter of 1997 were
improved collections of the Company's accounts receivable, resulting in a
cash flow benefit of $1.2 million, as compared to a $21,000 deterioration in
accounts receivable in the 1996 quarter.
Due to efforts by the Company to control costs and enhance cash flows in
1997, construction expenditures were reduced by $400,000 in the 1997 quarter
as compared to 1996.
The Company in each quarter made sinking fund payments on its 12.25%
first mortgage bonds. Also 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 1996 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.
In 1997 the Company amended its Dividend Reinvestment and Common Stock
Purchase Plan (the Plan) to allow for the option of purchasing shares either
in the open market or from newly issued shares sold by the Company. The
Company anticipates that for the foreseeable future common stock will be
purchased on the open market. In the first quarter of 1996, under the Plan,
the Company realized a common stock investment of $163,000 through the
issuance of 13,542 new common shares.
For a discussion of liquidity and capital resources, see the Company's
1996 Form 10-K.
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 March 31, Dec. 31,
1997 1996
--------- ---------
INVESTMENT IN UTILITY PLANT:
Electric plant in service, at original cost $ 321,108 $ 317,833
Less - Accumulated depreciation and
amortization 89,835 87,736
--------- ---------
$ 231,273 $ 230,097
Construction work in progress 18,149 18,554
--------- ---------
$ 249,422 $ 248,651
Investments in corporate joint ventures:
Maine Yankee Atomic Power Company $ 5,008 $ 5,014
Maine Electric Power Company, Inc. 125 125
--------- ---------
$ 254,555 $ 253,790
--------- ---------
OTHER INVESTMENTS, principally at cost $ 4,582 $ 4,813
--------- ---------
FUNDS HELD BY TRUSTEE, at cost $ 21,544 $ 21,199
--------- ---------
CURRENT ASSETS:
Cash and cash equivalents $ 3,942 $ 1,274
Accounts receivable, net of reserve 20,285 20,691
Unbilled revenue receivable 8,476 9,230
Inventories, at average cost:
Material and supplies 2,935 2,994
Fuel oil 627 303
Prepaid expenses 887 1,672
Deferred Maine Yankee refueling costs 967 896
--------- ---------
Total current assets $ 38,119 $ 37,060
--------- ---------
DEFERRED CHARGES:
Investment in Seabrook Nuclear Project, net
of accumulated amortization of $27,200
in 1997 and $26,775 in 1996 $ 31,642 $ 32,067
Costs to terminate purchased power contracts,
net of accumulated amortization of $41,626
in 1997 and $36,398 in 1996 166,475 171,703
Deferred regulatory assets 30,976 29,498
Demand-side management costs 2,400 2,632
Other 3,609 3,867
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Total deferred charges $ 235,102 $ 239,767
--------- ---------
Total assets $ 553,902 $ 556,629
========= =========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
March 31, Dec. 31,
STOCKHOLDERS' INVESTMENT AND LIABILITIES 1997 1996
--------- ---------
CAPITALIZATION:
Common stock investment $ 108,693 $ 108,321
Preferred stock 4,734 4,734
Preferred stock subject to mandatory redemption,
exclusive of current sinking fund requirements 10,685 10,671
Long-term debt, net of current portion 273,209 274,221
--------- ---------
Total capitalization $ 397,321 $ 397,947
--------- ---------
CURRENT LIABILITIES:
Notes payable - banks $ 32,000 $ 32,500
--------- ---------
Other current liabilities -
Current portion of long-term debt and sinking
fund requirements on preferred stock $ 15,561 $ 15,447
Accounts payable 10,586 13,433
Dividends payable 329 1,687
Accrued interest 4,905 3,719
Customers' deposits 330 360
Deferred fuel revenue 756 1,008
--------- ---------
Total other current liabilities $ 32,467 $ 35,654
--------- ---------
Total current liabilities $ 64,467 $ 68,154
--------- ---------
DEFERRED CREDITS AND RESERVES:
Deferred income taxes - Seabrook $ 16,435 $ 16,651
Other accumulated deferred income taxes 56,824 54,806
Deferred regulatory liability 8,116 8,446
Unamortized investment tax credits 2,131 2,179
Accrued pension 629 640
Other 7,979 7,806
--------- ---------
Total deferred credits and reserves $ 92,114 $ 90,528
--------- ---------
Total Stockholders' Investment and Liabilities $ 553,902 $ 556,629
========= =========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
000's Omitted
(Unaudited)
Mar. 31, Dec. 31,
1997 1996
-------- --------
COMMON STOCK INVESTMENT
Common stock, par value $5 per share- $ 36,817 $ 36,817
Authorized -- 10,000,000 shares
Outstanding -- 7,363,424 shares in 1997 and 1996
Amounts paid in excess of par value 56,969 56,969
Retained earnings 14,907 14,535
-------- --------
Total common stock investment $ 108,693 $ 108,321
-------- --------
PREFERRED STOCK-Non participating, cumulative-
Par value $100 per share, authorized 600,000 shares
Not redeemable or redeemable solely at the option
of the issuer-
7%, Noncallable, 25,000 shares, authorized
and outstanding $ 2,500 $ 2,500
4.25%, Callable at $100, 4,840 shares,
authorized and outstanding 484 484
4%, Series A, Callable at $110, 17,500 shares,
authorized and outstanding 1,750 1,750
-------- --------
$ 4,734 $ 4,734
-------- --------
8.76%, Subject to mandatory redemption requirements-
Callable at 104.38% if called on or prior to De-
cember 27, 1997, 150,000 shares authorized and
120,000 shares outstanding in 1997 and 1996$ 12,279 $ 12,265
Less: Sinking fund requirements 1,594 1,594
-------- --------
$ 10,685 $ 10,671
-------- --------
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 6,476 7,375
-------- --------
$ 108,976 $ 109,875
Less: Sinking fund requirements 1,967 1,854
-------- --------
Total first mortgage bonds $ 107,009 $ 108,021
-------- --------
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 $ 48,000
Less: Current portion of long-term debt 12,000 12,000
-------- --------
$ 36,000 $ 36,000
-------- --------
Total long-term debt $ 273,209 $ 274,221
-------- --------
Total Capitalization $ 397,321 $ 397,947
======== ========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
000's Omitted
(Unaudited)
1997 1996
-------- --------
Cash Flows From Operations:
Net Income $ 716 $ 4,095
Adjustments to reconcile net income to net cash
provided by (used in) operations:
Depreciation and amortization 2,752 1,960
Amortization of Seabrook Nuclear Project 425 425
Amortization of contract buyouts 5,228 5,190
Other amortizations 473 249
Allowance for equity funds used during
construction (95) (99)
Deferred income tax provision (134) 2,691
Deferred investment tax credits (48) (44)
Changes in assets and liabilities:
Deferred fuel revenue and Maine Yankee (323) 84
refueling costs
Accounts receivable, net and unbilled 1,160 (21)
revenue
Accounts payable (2,847) (1,389)
Accrued interest 1,186 1,039
Current and deferred income taxes 110 (403)
Accrued postretirement benefit costs 500 (335)
Other current assets and liabilities, net 490 (73)
Other, net (473) 471
-------- --------
Net Cash Provided By Operations $ 9,120 $ 13,840
-------- --------
Cash Flows From Investing:
Construction expenditures $ (3,179) $ (3,595)
Allowance for borrowed funds used during
construction (188) (212)
-------- --------
Net Cash Used In Investing $ (3,367) $ (3,807)
-------- --------
Cash Flows From Financing:
Dividends on preferred stock $ (362) $ (395)
Dividends on common stock (1,325) (1,314)
Payments on long-term debt (898) (798)
Payments on mandatory redeemable preferred stock - (1,615)
Issuances:
Common stock
Dividend reinvestment plan - 163
Short-term debt, net (500) -
-------- --------
Net Cash Used In Financing $ (3,085) $ (3,959)
-------- --------
Net Change in Cash and Cash Equivalents $ 2,668 $ 6,074
Cash and Cash Equivalents at Beginning
of Period 1,274 1,424
-------- --------
Cash and Cash Equivalents at End of Period $ 3,942 $ 7,498
======== ========
Cash Paid During the Three Months For:
Interest (Net of Amount Capitalized) $ 4,906 $ 5,472
Income Taxes - -
======== ========
See notes to consolidated financial statements
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
000's Omitted
(Unaudited)
1997 1996
---------- ----------
BALANCE AT JANUARY 1 $ 14,535 $ 10,073
ADD - NET INCOME 716 4,095
---------- ----------
$ 15,251 $ 14,168
---------- ----------
DEDUCT:
Dividends -
Preferred stock $ 329 $ 362
Common stock 0 1,317
Other 15 30
---------- ----------
$ 344 $ 1,709
---------- ----------
BALANCE AT MARCH 31 $ 14,907 $ 12,459
========== ==========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(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
1996 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,
1997 and the results of operations and cash flows for the periods ended March
31, 1997 and 1996.
The Company's significant accounting policies are described in the Notes
to the Consolidated Financial Statements included in its 1996 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:
Three Months Ended March 31,
-----------------------------
1997 1996
---- ----
Amount % Amount %
--------- --- -------- ---
(Dollars in Thousands)
Federal income tax provision
at statutory rate $ 198 34% $2,267 34%
Plus (Less)permanent reductions
in tax expense resulting
from statutory exclusions
from taxable income 11 2 (6) -
----- ---- ------ ---
Federal income tax provision before
effect of temporary differences
and investment tax credits $ 209 36% $2,261 34%
Plus (Less) temporary differences that
that are flowed through for rate-
making and accounting purposes (25) (4) (47) (1)
(Less) utilization and amortization
of investment tax credits (85) (15) (119) (2)
----- ---- ------ ---
Federal income tax provision $ 99 17% $2,095 31%
===== ==== ====== ===
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
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(Dollars in Thousands)
(Unaudited)
Operations for Three Months Ended
----------------------------------
Mar.31, Mar.31, Mar.31, Mar.31,
1997 1996 1997 1996
OPERATIONS: -------- -------- -------- ------
As reported by investee-
Operating revenues $63,864 $41,812 $12,995 $14,860
======= ======= ======= =======
Earnings applicable to
common stock $ 1,766 $ 1,786 $ 307 $ 56
======= ======= ======= =======
Company's reported equity-
Equity in net income $ 124 $ 125 $ 44 $ 8
(Deduct)-Effect of
adjusting Company's
estimate to actual (2) (50) (41) (4)
------- ------- ------- -------
Amounts reported by Company $ 122 $ 75 $ 3 $ 4
======= ======= ======= =======
MAINE YANKEE MEPCO
------------------ --------------
(Dollars in Thousands)
(Unaudited)
Financial Position at
-----------------------------------
Mar.31, Dec. 31, Mar.31, Dec. 31,
1997 1996 1997 1996
FINANCIAL POSITION: -------- -------- ------- -------
As reported by investee-
Total assets $642,683 $602,061 $ 7,086 $10,727
Less-
Preferred stock 17,400 18,000 - -
Long-term debt 124,332 103,332 570 620
Other liabilities and
deferred credits 427,848 409,392 4,845 9,110
-------- -------- ------- -------
Net assets $ 73,103 $ 71,337 $ 1,671 $ 997
======== ======== ======= =======
Company's reported equity-
Equity in net assets $ 5,117 $ 4,994 $ 237 $ 142
(Deduct) Add - Effect
of adjusting Company's
estimate to actual (109) 20 (112) (17)
-------- -------- ------- -------
Amounts reported by Company $ 5,008 $ 5,014 $ 125 $ 125
======== ======== ======= =======
BPHA Chester
----------------- -----------------
(Dollars in Thousands)
(Unaudited)
Operations for Three Months Ended
-------------------------------------
Mar.31, Mar.31, Mar.31, Mar.31,
1997 1996 1997 1996
------- ------- -------- -------
OPERATIONS:
As reported by investee-
Operating revenues $ 1,806 $ 2,088 $ 1,134 $ 1,222
======= ======= ======= =======
Net Income $ 559 $ 799 $ - $ -
======= ======= ======= =======
Company's reported equity
in net income $ 280 $ 400 $ - $ -
======= ======= ======= =======
Financial Position at
Mar. 31, Dec. 31, Mar. 31, Dec. 31,
1997 1996 1997 1996
-------- -------- -------- --------
FINANCIAL POSITION:
As reported by investee-
Total assets $39,877 $39,864 $28,456 $28,898
Less-
Long-term debt 30,075 30,600 26,725 27,021
Other liabilities 2,337 2,359 1,731 1,877
------- ------- ------- -------
Net assets $ 7,465 $ 6,905 $ - $ -
======= ======= ======= =======
Company's reported equity
in net assets $ 3,733 $ 3,453 $ - $ -
======= ======= ======= =======
4. BANK CREDIT AGREEMENT COVENANT COMPLIANCE:
The Company's credit agreement with its lending banks contains a
number of covenants keyed to the Company's financial condition and
performance. One such covenant, contained in its Credit Agreement dated
June 30, 1995 with a group of seven banks, requires the Company maintain a
consolidated fixed charge ratio of 1.5 to 1.0 (defined as the ratio of the
sum of the Company s net income, income tax expense and interest expense to
the Company s interest expense, subject to a few minor adjustments) on a
rolling four quarter basis. Based on the unaudited actual first quarter
1997 financial results, the Company was out of compliance with this
covenant. The Company has obtained a temporary waiver of the noncompliance
effective through May 15, 1997 and a second waiver effective through June
6, 1997. The Company also projects that later in 1997 or during 1998 it
may not maintain compliance with other financial covenants contained in its
lending agreements. Failure to comply with these financial covenants is an
Event of Default under the Credit Agreement that may result in restrictions
on the Company s continuing access to adequate borrowing capacity for
working capital purposes, including mandatory debt repayments. As of March
31, 1997 the Company has classified the Medium Term Notes as long-term, the
classification which the Company believes to be most appropriate. If in
the future it became likely that the lenders would call the debt, then the
outstanding borrowings could be classified as short-term.
5. RECLASSIFICATIONS:
Certain 1996 amounts have been reclassified to conform with the
presentation used in Form 10-Q for the quarter ended March 31, 1997.
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDING MARCH 31, 1997
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS - None.
--------
REPORTS ON FORM 8-K
-------------------
Two Current Reports on Form 8-K, one dated February 19, 1997 and one dated
March 19, 1997, were filed in the first quarter of 1997. The filing dated
February 19, 1997 was regarding the operations of the Maine Yankee nuclear
generating facility. The filing dated March 19, 1997 was regarding the
Company's suspension of its common dividend.
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDED MARCH 31, 1997
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
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(Registrant)
Dated: May 15, 1997 /s/ Frederick S. Samp
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Frederick S. Samp
Vice President - Finance & Law
(Chief Financial Officer)