UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period _________________ to ___________________
Commission File Number 0-2602
BLACKSTONE VALLEY ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Rhode Island 05-0108587
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Washington Highway, Lincoln, Rhode Island
(Address of principal executive offices)
02865
(Zip Code)
(401)333-1400
(Registrant's telephone number including area code)
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..........
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Class Outstanding at October 31, 1995
Common Shares, $50 par value 184,062 shares
PART I - FINANCIAL INFORMATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BLACKSTONE VALLEY ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
(In Thousands)
December 31,
September 30, 1994
ASSETS 1995 (Restated)
Utility Plant in Service $ 133,665 $ 132,776
Less: Accumulated Provision for Depreciation
and Amortization 47,487 44,112
Net Utility Plant in Service 86,178 88,664
Construction Work in Progress 1,898 639
Net Utility Plant 88,076 89,303
Current Assets:
Cash and Temporary Cash Investments 436 472
Accounts Receivable - Associated Companies 393 470
- Other 18,410 14,955
Materials, Supplies and Other Current Assets 1,257 1,189
Total Current Assets 20,496 17,086
Deferred Debits and Other Non-Current Assets 16,773 15,024
Total Assets $ 125,345 $ 121,413
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Stock, $50 Par Value $ 9,203 $ 9,203
Other Paid-In Capital 17,908 17,908
Retained Earnings 9,688 10,069
Total Common Equity 36,799 37,180
Non-Redeemable Preferred Stock 6,130 6,130
Long-Term Debt 36,500 38,000
Total Capitalization 79,429 81,310
Current Liabilities:
Current Maturities 1,500 1,500
Accounts Payable - Associated Companies 21,059 9,509
- Other 260 603
Taxes Accrued 1,475 1,441
Interest Accrued 1,083 1,070
Other Current Liabilities 2,116 8,673
Total Current Liabilities 27,493 22,796
Accumulated Deferred Taxes, Deferred Credits
and Other Non-Current Liabilities 18,423 17,307
Total Liabilities and Capitalization $ 125,345 $ 121,413
See accompanying notes to condensed financial statements.
BLACKSTONE VALLEY ELECTRIC COMPANY
CONDENSED STATEMENTS OF INCOME
(In Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Operating Revenues $ 38,523 $ 38,449 $ 107,319 $ 107,310
Operating Expenses:
Purchased Power (principally from
an affiliate) 26,735 26,402 73,504 72,605
Other Operation and Maintenance 4,691 4,968 14,445 15,106
Voluntary Retirement Incentive 0 0 912
Depreciation 1,377 1,335 4,129 3,976
Taxes Other than Income 2,402 2,265 6,693 7,218
Income Taxes - Current 461 193 858 1,763
- Deferred (Credit) 373 657 796 (82)
Total 36,039 35,820 101,337 100,586
Operating Income 2,484 2,629 5,982 6,724
Other Income (Deductions) - Net 22 (4) (36) (2)
Income Before Interest Charges 2,506 2,625 5,946 6,722
Interest Charges:
Interest on Long-Term Debt 859 869 2,628 2,593
Other Interest Expense 131 250 443 633
Allowance for Borrowed Funds Used 0 0
During Construction (Credit) (20) (12) (48) (23)
Net Interest Charges 970 1,107 3,023 3,203
Net Income 1,536 1,518 2,923 3,519
Preferred Dividend Requirements 72 72 216 216
Net Earnings $ 1,464 $ 1,446 $ 2,707 $ 3,303
See accompanying notes to condensed financial statements.
BLACKSTONE VALLEY ELECTRIC COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
Nine Months Ended
September 30,
1995 1994
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 2,923 $ 3,519
Adjustments to Reconcile Net Income to Net
Cash Provided from Operating Activities:
Depreciation and Amortization 4,633 4,583
Deferred Taxes 796 (82)
Investment Tax Credit, Net (138) (131)
Allowance for Funds Used During Construction (5) (12)
Other - Net (668) (1,179)
Change in Operating Assets and Liabilities 1,249 (498)
Net Cash Provided From Operating Activities 8,790 6,200
CASH FLOW FROM INVESTING ACTIVITIES:
Construction Expenditures (4,022) (3,892)
Net Cash (Used In) Investing Activities (4,022) (3,892)
CASH FLOW FROM FINANCING ACTIVITIES:
Redemptions:
Long-Term Debt (1,500)
Common Stock Dividends Paid to EUA (3,088) (2,573)
Preferred Dividends Paid (216) (216)
Net Cash (Used In) Financing Activities (4,804) (2,789)
Net (Decrease) in Cash and Temporary Cash Investments (36) (481)
Cash and Temporary Cash Investments at Beginning of Period 472 757
Cash and Temporary Cash Investments at End of Period $ 436 $ 276
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (Net of Amount Capitalized) $ 2,559 $ 2,517
Income Taxes $ 380 $ 1,961
See accompanying notes to condensed financial statements.
BLACKSTONE VALLEY ELECTRIC COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
The accompanying Notes should be read in conjunction with the Notes to
Financial Statements appearing in the Blackstone Valley Electric Company's
(Blackstone or the Company) 1994 Annual Report on Form 10-K and the Company's
Quarterly Report on Form 10-Q for the periods ended March 31, and June 30,
1995.
Note A - In the opinion of the Company, the accompanying unaudited condensed
financial statements contain all normal and recurring adjustments
necessary to present fairly the financial position of the Company as
of September 30, 1995 and December 31, 1994, and the results of
operations for the three and nine months ended September 30, 1995 and
1994 and cash flows for the nine months ended September 30, 1995 and
1994. Certain reclassifications have been made to prior period
financial statements to conform to current period classifications.
The Company has restated prior period balance sheets to correct an
error in the accrual of property tax expense. The Company had
previously over-accrued property tax expense. This correction
increased retained earnings by $1.9 million, lowered taxes accrued by
$3.0 million and increased accumulated deferred taxes by $1.1 million.
Note B - Results shown above for the respective interim periods are not neces-
sarily indicative of results to be expected for the fiscal years due
to seasonal factors which are inherent in electric utilities in New
England. A greater proportionate amount of revenues is earned in the
first and fourth quarters (winter season) of each year because more
electricity is sold due to weather conditions, fewer daylight hours,
etc.
Note C - On December 13, 1994, the United States District Court for the
District of Massachusetts (District Court) issued a judgment against
Blackstone, finding Blackstone liable to the Commonwealth of
Massachusetts (Commonwealth) for the full amount of response costs
incurred by the Commonwealth in the cleanup of 5,000 cubic yards of
soil mixed with oxide box waste, a by-product of manufactured gas at a
site at Mendon Road in Attleboro, Massachusetts. The judgment also
found Blackstone liable for interest and litigation expenses
calculated to the date of judgment. The total liability at December
31, 1994 was approximately $5.9 million, including approximately $3.6
million in interest which has accumulated since 1985.
Due to the uncertainty of the ultimate outcome of this proceeding and
anticipated recoverability, Blackstone recorded the $5.9 million
December 13, 1994 District Court judgment as a deferred debit and this
amount is included with Other Assets at December 31, 1994 and
September 30, 1995.
Blackstone filed a Notice of Appeal of the court's judgment and filed
its brief with the United States Court of Appeals for the First
Circuit (First Circuit) on February 24, 1995. On October 6, 1995 the
First Circuit vacated the District Court's judgment and ordered the
District Court to refer the matter to the EPA to determine whether a
chemical in the oxide box waste is a hazardous substance.
On January 20, 1995, Blackstone entered into an escrow agreement with
the Commonwealth whereby Blackstone deposited $5.9 million with an
escrow agent who transferred the funds into an interest bearing money
market account. The distribution of the proceeds of the escrow account
will be determined upon the final resolution of the judgment. No
additional interest expense will accrue on the judgment amount.
On January 28, 1994, Blackstone filed a complaint in the United States
District Court for the District of Massachusetts, seeking, among other
relief, contribution and reimbursement from Stone & Webster Inc., of
New York City and several of its affiliated companies (Stone &
Webster), and Valley Gas Company of Cumberland, Rhode Island (Valley)
for any damages incurred by Blackstone regarding the Mendon Road site.
On November 7, 1994 the court denied motions to dismiss the complaint
which were filed by Stone & Webster and Valley.
In addition, Blackstone has notified certain liability insurers and
has filed claims with respect to the Mendon Road site, as well as other
sites.
Item_2. Management's_Discussion_and_Analysis_of_Financial_Condition_and
Results of_Operations
The following is Management's discussion and analysis of certain
significant factors affecting the Company's earnings and financial condition
for the interim periods presented in this Form 10-Q.
Overview
Net Earnings for the three months ended September 30, 1995 were $1.5
million, relatively unchanged from net earnings for the same period in 1994.
Net earnings for the nine months ended September 30, 1995 were $2.7 million
versus $3.3 million for the nine months ended September 30, 1994. Earnings for
the year-to-date period of 1995 include a one-time charge of approximately
$550,000, on an after-tax basis, related to the voluntary retirement incentive
offer effective June 1, 1995 accepted by five Company employees (on an EUA
System basis, 49 employees accepted the offer).
Kilowatthour sales of electricity for the third quarter increased by 1.9%
and were essentially flat for the year-to-date period of 1995. Sales to
residential customers increased by 1.9% for the third quarter and 1.4% for the
year-to-date period as compared to the same periods of the previous year.
Sales to commercial customers were up 3.9% for the third quarter of 1995
largely due to warmer weather as compared to the same period of 1994.
Voluntary Retirement Incentive Offer
On March 15, 1995, EUA announced a corporate reorganization which, among
other things, consolidated management of Eastern Edison Company, Blackstone and
Newport Electric Corporation. As part of the reorganization, a voluntary
retirement incentive (VRI) was offered to sixty-six EUA System employees,
including nine employees of Blackstone. Forty-nine of those eligible for the
program, including five Blackstone employees, accepted the incentive and
retired effective June 1, 1995. The cost of this incentive program amounted to
a one-time $900,000 pre-tax ($550,000 after-tax) charge to Blackstone's second
quarter 1995 earnings. The estimated payback period is approximately 18
months.
Operating_Revenues
Operating revenues for the third quarter and nine months ended September
30, 1995 were essentially flat as compared to those of the same periods in
1994. For the quarter, purchased power recoveries increased by approximately
$0.3 million (see Operating Expenses below) offset by a $0.2 million decrease
in transmission rental revenue. For the year-to-date period, purchased power
recoveries increased by approximately $0.9 million, offset by a $0.8 million
decrease in transmission rental revenue.
Operating Expenses
Purchased Power expense for the quarter and nine months ended September
30, 1995 increased approximately $0.3 million or 1.3% and $0.9 million or 1.2%,
respectively, as compared to the same periods of 1994. For the year-to-date
period the average cost of fuel increased 17.2% in 1995 compared to the same
period of 1994. This increase was partially offset by a wholesale rate
decrease by the company's supplier, Montaup Electric Company (Montaup)
effective May 21, 1994. For the third quarter of 1995, the average cost of
fuel rose 12.5% as compared to the same period of 1994.
Other Operation and Maintenance expenses during the three and nine months
ended September 30, 1995 decreased by approximately $280,000 or 5.6% and
$660,000 or 4.4%, respectively, when compared to the same periods of 1994.
These decreases are primarily due to the Company's continued strict attention
to cost control including savings realized from the VRI discussed above,
decreased FAS106 expenses and lower rent expense related to the March 1995
purchase of the Company's general office and operations buildings which were
previously leased.
Effective Income Tax Rate
Blackstone's effective income tax rate increased for the nine months
ended September 30, 1995 from approximately 32.3% to 36.1% when compared with
the same period of a year ago due primarily to decreased consolidated tax
benefits.
Electric Utility Industry Restructuring
On May 12, 1995, Blackstone along with other members of the Rhode Island
Electric Industry Restructuring Collaborative (the Rhode Island Collaborative),
submitted to the Rhode Island Public Utilities Commission (RIPUC) a Report and
Set of Interdependent Principles addressing industry restructuring.
The Rhode Island Collaborative consists of a number of different
utilities, industrial users, environmental groups and consumer advocates.
These principles are intended to be statements of the consensus position by the
signatories of the interdependent principles that should underlie any electric
industry restructuring proposal and include but are not limited to principles
addressing stranded cost recovery, unbundling of services and demand side
management programs. The filing was submitted on the condition it be approved
in full by the RIPUC. The RIPUC is assessing the principles and is expected to
make recommendations to implement a competitive environment in the industry.
On August 16, 1995, the RIPUC issued an order regarding the principles
submitted by the Rhode Island Collaborative (the "RIPUC Order"). The RIPUC
Order accepts all but one of the principles with minor modifications to certain
language in others and adds a new principle which supports negotiation (as
opposed to litigation) to resolve conflicts as restructuring moves forward.
The one principle that was not accepted provided for subsidization of renewable
energy sources. Although not disagreeing with the Collaborative on the
importance of resource and fuel diversity, the RIPUC invites the Collaborative
to address how to incorporate renewables into the competitive marketplace in
other ways. The Rhode Island Order also directs the Collaborative to proceed
with negotiations on the issues presented in the principles and to submit a
progress report to the RIPUC by February 1, 1996.
Liquidity_and_Sources_of_Capital
Blackstone's need for permanent capital is primarily related to
investments in facilities required to meet the needs of its existing and future
customers.
Traditionally, construction requirements in excess of internally
generated funds are financed through short-term borrowings which are ultimately
funded with permanent capital. At September 30, 1995, EUA System companies,
including Blackstone, maintained short-term lines of credit with various banks
aggregating approximately $150 million. These credit lines are available to
other affiliated companies under joint credit line arrangements. At September
30, 1995 and December 31, 1994, these unused EUA System short-term lines of
credit amounted to approximately $121.3 million and $118.3 million,
respectively. Blackstone had no short-term debt outstanding at September 30,
1995 or December 31, 1994.
During the first nine months of 1995 Blackstone's internally generated
funds amounted to approximately $4.9 million while cash construction
requirements for the same period amounted to approximately $4.0 million which
includes the $1.3 million purchase of the Company's general office and
operations building in the first quarter of 1995 which were previously leased.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
See Notes to Condensed Financial Statements, Note C for a discussion
of a legal proceeding involving the company.
Item_6. Exhibits_and_Reports_on_Form_8-K
(a) Exhibits - None
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant
during the three months ended September 30, 1995.
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.
Blackstone_Valley_Electric_Company
(Registrant)
Date: November 13,_1995 /s/Richard M. Burns
Richard M. Burns, Vice President
(on behalf of the Registrant and
as Chief_Accounting_Officer)