1
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 March 31, 1994
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 1-5366
EASTERN UTILITIES ASSOCIATES
(Exact name of registrant as specified in its charter)
Massachusetts 04-1271872
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Liberty Square, Boston, Massachusetts
(Address of principal executive offices)
02109
(Zip Code)
(617)357-9590
(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 April 30, 1994
Common Shares, $5 par value 19,611,430 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EASTERN UTILITIES ASSOCIATES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
March 31, December 31,
ASSETS 1994 1993
Utility Plant and Other Investments:
Utility Plant in Service $ 1,017,456 $ 1,016,453
Less: Accumulated Provision for Depreciation
and Amortization 305,635 296,995
Net Utility Plant in Service 711,821 719,458
Construction Work in Progress 12,711 8,728
Net Utility Plant 724,532 728,186
Investments in Jointly Owned Companies 73,031 73,632
Non-Utility Plant - Net 110,242 104,462
Total Plant and Other Investments 907,805 906,280
Current Assets:
Cash and Temporary Cash Investments 17,301 4,180
Accounts Receivable, Net 81,583 84,839
Notes Receivable 12,721 11,736
Materials and Supplies 11,040 13,133
Other Current Assets 16,703 16,340
Total Current Assets 139,348 130,228
Deferred Debits and Other Non-Current Assets 166,424 166,629
Total Assets $ 1,213,577 $ 1,203,137
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Shares, $5 Par Value $ 97,949 $ 95,163
Other Paid-In Capital 205,882 202,182
Common Share Expense (3,824) (3,822)
Retained Earnings 48,062 39,642
Total Common Equity 348,069 333,165
Non-Redeemable Preferred Stock - Net 6,900 6,900
Redeemable Preferred Stock - Net 25,039 25,053
Long-Term Debt - Net 495,841 496,816
Total Capitalization 875,849 861,934
Current Liabilities:
Long-Term Debt Due Within One Year 5,296 5,415
Notes Payable 46,048 37,168
Preferred Stock Sinking Fund 50 50
Accounts Payable 30,735 36,111
Taxes Accrued 9,206 12,299
Interest Accrued 9,662 10,688
Other Current Liabilities 20,097 19,285
Total Current Liabilities 121,094 121,016
Deferred Credits and Other Non-Current Liabilitie 81,863 82,747
Accumulated Deferred Taxes 134,771 137,440
Total Liabilities and Capitalization $ 1,213,577 $ 1,203,137
<FN>
See accompanying notes to consolidated condensed financial statements.
EASTERN UTILITIES ASSOCIATES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands Except Number of Shares and Per Share Amounts)
Three Months Ended
March 31,
1994 1993
Operating Revenues $ 150,197 $ 137,682
Operating Expenses:
Fuel 23,183 20,439
Purchased Power 34,902 35,010
Other Operation and Maintenance 44,291 38,124
Depreciation and Amortization 11,395 11,160
Taxes - Other Than Income 6,871 6,428
- Current Income 5,822 5,005
- Deferred Income 2,163 335
Total 128,627 116,501
Operating Income 21,570 21,181
Other Income - Net 5,310 4,195
Income Before Interest Charges 26,880 25,376
Interest Charges:
Interest on Long-Term Debt 9,773 10,967
Other Interest Expense 1,279 1,555
Allowance for Borrowed Funds Used
During Construction (Credit) (345) (387)
Net Interest Charges 10,707 12,135
Net Income 16,173 13,241
Preferred Dividends of Subsidiaries 583 994
Consolidated Net Earnings $ 15,590 $ 12,247
Weighted Average Number of
Common Shares Outstanding 19,388,017 17,283,603
Consolidated Earnings Per
Average Common Share $ 0.80 $ 0.71
Dividends Paid $ 0.36 $ 0.34
<FN>
See accompanying notes to consolidated condensed financial statements.
EASTERN UTILITIES ASSOCIATES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended
March 31,
1994 1993
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 16,173 $ 13,241
Adjustments to Reconcile Net Income
to Net Cash Provided from Operating Activities:
Depreciation and Amortization 14,011 14,012
Deferred Taxes 2,293 511
Gains on Sales of Investments in Energy Savings
Projects Paid for with Notes Receivable (708) (248)
Investment Tax Credit, Net (295) (334)
Allowance for Funds Used During Construction (69) (74)
Other - Net (710) 2,747
Change in Operating Assets and Liabilities (3,747) (5,808)
Net Cash Provided From Operating Activities 26,948 24,047
CASH FLOW FROM INVESTING ACTIVITIES:
Construction Expenditures (7,238) (15,460
Acquisition of Northeast Energy Management, Inc. (8,567)
Increase in Other Investments (81)
Net Cash (Used in) Investment Activities (15,886) (15,460
CASH FLOW FROM FINANCING ACTIVITIES:
Issuances:
Common Stock 2,295 2,332
Long-Term Debt 7,926
Redemptions:
Long-Term Debt (9,042) (4,225)
Premium on Reacquisition and Financing Expenses (396) (114)
EUA Common Share Dividends Paid (7,021) (5,862)
Subsidiary Preferred Dividends Paid (583) (978)
Net Increase in Short-Term Debt 8,880 1,180
Net Cash Provided from (Used in) Financing Activities 2,059 (7,667)
Net Increase in Cash and Temporary Cash Investments 13,121 920
Cash and Temporary Cash Investments
at Beginning of Period 4,180 29,614
Cash and Temporary Cash Investments
at End of Period $ 17,301 $ 30,534
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (Net of Capitalized Interest) $ 10,759 $ 14,955
Income Taxes $ 1,607 $ 969
Supplemental schedule of non-cash investing activities:
Conversion of Investments in Energy Savings
Projects to Notes and Leases Receivable $ 1,986 $ 386
<FN>
See accompanying notes to consolidated condensed financial statements.
EASTERN_UTILITIES_ASSOCIATES
NOTES_TO_CONSOLIDATED_CONDENSED_FINANCIAL_STATEMENTS
The accompanying Notes should be read in conjunction with the Notes to
Consolidated Financial Statements incorporated in the Eastern Utilities
Associates (EUA or the Company) 1993 Annual Report on Form 10-K.
Note A - In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly its
financial position as of March 31, 1994 and December 31, 1993, and the
results of operations and cash flows for the three months ended March
31, 1994 and 1993. Certain reclassifications have been made to prior
period financial statements to conform to current period
classifications.
The Consolidated Condensed Statement of Income and the Consolidated
Condensed Statement of Cash Flows for the three month period ending
March 31, 1993 have been restated to reflect consolidation of EUA
Cogenex Partnerships which were previously accounted for as equity
investments. This restatement had no impact on Consolidated Net
Earnings.
In November 1992, the Financial Accounting Standards Board issued
Statement No. 112, "Employers' Accounting for Post-employment
Benefits." EUA was required to adopt this standard no later than
January 1, 1994. The estimated impact of this standard on EUA is
immaterial and therefore no liability has been be recorded.
On January 31, 1994, EUA Cogenex completed the acquisition of
Northeast Energy Management, Inc. (NEM) of Brunswick, Maine, in
exchange for $12.2 million of EUA Common Shares (464,579 shares) plus
the payment of outstanding contingent liabilities of NEM of
approximately $8.1 million. NEM is an energy services and demand side
management contracting company and is operating as a wholly-owned
subsidiary of EUA Cogenex. This acquisition has been accounted for
using the pooling method of accounting.
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 most years because more
electricity is sold due to weather conditions, fewer day-light hours,
etc.
Note C - Commitments and Contingencies:
Rate Activity
On March 21, 1994, Montaup Electric Company (Montaup), the wholesale
electric generating and transmission subsidiary of EUA, filed an
application with the Federal Energy Regulatory Commission (FERC) for
authorization to reduce its wholesale rates by $10.1 million, or three
percent. Montaup supplies electricity at wholesale to EUA's retail
electric utilities - Eastern Edison Company, Blackstone Valley
Electric Company and Newport Electric Corporation (Newport) - and to
two non-affiliated municipal utilities. This application is designed
to match more closely Montaup's revenues with its decreasing cost of
doing business resulting from, among other things, a reduced rate
base, lower interest costs and successful cost control efforts.
As part of the rate filing, Montaup is seeking authorization to become
an "all-requirements" supplier for Newport. Montaup currently
provides only a portion of Newport's electricity requirements.
FERC can allow Montaup to implement the rate reduction as early as May
21, 1994, pending final adjudication and approval.
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
Consolidated net earnings for the quarter ended March 31, 1994 increased
$3.3 million or 27% to $15.6 million from first quarter 1993 earnings. Net
Earnings contributions by Business Unit for the first three months of 1994 and
1993 were as follows (000's):
Three Months Ended March 31,
1994 1993
Core Electric Business $13,227 $ 9,608
Energy Related Business 2,249 1,965
Corporate 114 674
Consolidated $15,590 $12,247
======= =======
Net Earnings of the Core Electric Business for the first quarter of 1994
increased by $3.6 million primarily due to a significant decrease in long-term
debt interest expense and preferred dividend requirements as a result of system
refinancings, increased kilowatthour (kwh) sales and close attention to cost
control.
Net Earnings of our Energy Related Business Unit increased by
approximately $0.3 million in the first quarter of 1994 as compared to the same
period of a year ago. A $0.4 million increase in earnings contribution of EUA
Cogenex Corporation was slightly offset by a decrease in EUA Ocean State
Corporation's contribution.
The Corporate Business Unit Net Earnings for the first quarter of 1994
compared to the same period in 1993 decreased by approximately $0.6 million due
primarily to the 1993 recognition of $1.5 million of investment tax credits by
Eastern Utilities Associates (the Parent Company) related to the EUA Power
settlement agreement. Offsetting this decrease somewhat was the Parent
Company's recovery of approximately $0.9 million resulting from a settlement
with the Vermont Electric Generation and Transmission Cooperative, Inc.
(Vermont Co-op) relating to Seabrook Nuclear Project payments previously
withheld by Vermont Co-op.
Operating_Revenues
Operating Revenues for the first three months of 1994 increased by $12.5
million or 9.1% when compared to the same period of 1993. Operating Revenues
by Business Unit for the first quarter of 1994 and 1993 were as follows (000's):
Three Months Ended March 31,
1994 1993
Core Electric Business $132,448 $126,085
Energy Related Business 17,749 11,597
Corporate 0 0
Consolidated $150,197 $137,682
======== ========
Core Electric Business revenues by increased $6.4 million due primarily to
increased recoveries of conservation and load management costs of $2.5 million,
an increase in fuel cost recoveries of $2.8 million, and increased base
revenues of EUA's retail subsidiaries as a result of increased kwh sales.
EUA Cogenex revenues, which account for all of the Energy Related Business
Unit revenues, increased by $6.1 million due primarily to the recognition of
additional energy savings project sales of approximately $4.5 million and to
the acquisition of James L. Day Co. and Northeast Energy Management, Inc. in
December, 1993 and January, 1994, respectively.
KWH Sales
Total primary kwh sales of electricity by EUA's Core Electric Business
Unit increased by 2.9% in the first three months of 1994 compared to the same
period last year primarily due to colder than normal weather in the first two
months of the year and improving economic conditions in EUA's service
territory. Despite the strong performance of kwh sales, the Company
anticipates that the economic recovery will remain slow for the foreseeable
future.
Operations_Expense
Fuel expense of the Core Electric Business for the first quarter of 1994
increased from that of the same period in 1993 by approximately $2.7 million or
13.4%. This increase is due primarily to increased generation by company owned
units in 1994 as a result of scheduled outages experienced in the first quarter
of 1993. Canal Unit 2, which is 50% owned by EUA's indirect subsidiary Montaup
Electric Company (Montaup), began a scheduled outage on February 13, 1993 and
returned to service on April 5, 1993 while Somerset Unit No. 6, a wholly-owned
unit of Montaup was out of service for 29 days in March 1993.
Other Operation and Maintenance expenses for the quarter ended March 31,
1994 increased approximately $6.2 million or 16.2% from the same period in
1993. This increase is due primarily to increased EUA Cogenex expenses of
approximately $5.2 million due, in part, to the aforementioned acquisitions.
Core Electric Business expenses increased due primarily to increased
conservation and load management expenses of $2.5 million offset somewhat by
lower Canal Unit 2 maintenance expense of $1.0 million resulting from the
outage discussed above and continued close attention to cost control.
Income Taxes
The EUA system's composite federal and state effective tax rate was
approximately 36.5% for the quarter ended March 31, 1994 compared to
approximately 32.8% for the same period in 1993. The increase is primarily
attributable to the recognition by the Parent Company of $1.5 million of
investment tax credits in the first quarter of 1993 related to the EUA Power
settlement agreement.
Other_Income_and (Deductions) -_Net
Other Income and (Deductions)-Net increased $1.1 million or 27.2% in the
current year-to-date period as compared to the corresponding period in the
prior year due primarily to the $0.9 million Vermont Co-op settlement
previously discussed.
Interest_Charges
Interest on Long-Term Debt for the first quarter of 1994 decreased
approximately $1.2 million or 10.9% as compared to the same period of 1993.
The period's decrease is due primarily to Eastern Edison Company's (Eastern
Edison) refinancing of $195 million of long-term debt at substantially lower
interest rates. Offsetting this decrease somewhat was the issuance by EUA
Cogenex of $50 million of Unsecured Notes at 7% in October 1993.
Preferred Dividends of Subsidiaries
Preferred Dividend requirements decreased $0.4 million or 41.3% as a
result of Eastern Edison's redemption of all of its outstanding 4.64%, 8.32%,
9.00% and 9.80% series of Preferred Stock aggregating $41.6 million and
subsequent issuance of $30 million of 6 5/8% series of Preferred Stock.
Liquidity_and_Sources_of_Capital
The EUA system's need for permanent capital is primarily related to
investments in facilities required to meet the needs of its existing and future
customers.
Traditionally, cash construction requirements not met with internally
generated funds are financed through short-term borrowings which are ultimately
funded with permanent capital. At March 31, 1994, EUA System companies
maintained short-term lines of credit with various banks aggregating approxi
mately $140 million. Outstanding short-term Debt at March 31, 1994 and
December 31,1993 by Business Unit was as follows (000's):
March 31, 1994 December 31, 1993
Core Electric Business $ 0 $ 0
Energy Related Business 21,667 8,588
Corporate 24,381 28,580
Consolidated $46,048 $37,168
======= =======
For the three months ended March 31, 1994, internally generated funds
available after the payment of dividends amounted to approximately $24.0
million while the EUA System's cash construction requirements amounted to
approximately $7.2 million for the same period. In addition to construction
expenditures, energy related investments of EUA Cogenex amounted to
approximately $8.6 million in the first quarter of 1994. Various laws,
regulations and contract provisions limit the use of EUA's internally generated
funds such that the funds generated by one subsidiary are not generally
available to fund the operations of another subsidiary.
On April 18, 1994, the Trustees of EUA noted to increase the quarterly
dividend 2.5 cents per share from 36 cents per share to 38.5 cents per share.
The first quarterly dividend at the new rate of will be payable May 16, 1994.
On January 6, 1994, Newport Electric Corporation (Newport) issued $7.9
million of variable rate Electric Energy Facilities Revenue refunding Bonds due
2011. With the proceeds, Newport redeemed its 12% and 8.5% series Energy
Facilities Revenue Bonds aggregating $7.9 million.
PART II - OTHER INFORMATION
Item_6. Exhibits_and_Reports_on_Form_8-K
(a) Exhibits - None
(b) Reports on Form 8-K
- On January 25, 1994, the Registrant filed a current report on
Form 8-k with respect to Item 5. (Other Events).
- On March 23, 1994, the Registrant filed a current report on
Form 8-K with respect to Item 5. (Other Events).
- On March 28, 1994, the Registrant filed a current report on
Form 8-K with respect to Item 5. (Other Events).
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.
Eastern_Utilities_Associates______
(Registrant)
Date: May_13,_1994 /s/Richard M. Burns
Richard M. Burns, Comptroller
(on behalf of the Registrant and
as Chief Accounting Officer)