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 0-8480
EASTERN EDISON COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1123095
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Mulberry Street, Brockton, Massachusetts
(Address of principal executive offices)
02402
(Zip Code)
(508)580-1213
(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, $25 par value 2,891,357 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EASTERN EDISON COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
ASSETS March 31, December 31,
1994 1993
Utility Plant in Service $ 785,342 $ 784,664
Less: Accumulated Provision for Depreciation
and Amortization 233,296 226,391
Net Utility Plant in Service 552,046 558,273
Construction Work in Progress 9,432 6,779
Net Utility Plant 561,478 565,052
Current Assets:
Cash and Temporary Cash Investments 11,592 697
Accounts Receivable - Associated Companies 12,392 11,220
- Other 37,313 37,153
Materials and Supplies 7,635 9,838
Other Current Assets 10,208 10,848
Total Current Assets 79,140 69,756
Deferred Debits and Other Non-Current Assets 106,387 107,465
Total Assets $ 747,005 $ 742,273
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Stock, $25 Par Value $ 72,284 $ 72,284
Other Paid-In Capital 47,249 47,249
Common Stock Expense (43) (43)
Retained Earnings 108,298 103,515
Total Common Equity 227,788 223,005
Redeemable Preferred Stock - Net 29,665 29,670
Preferred Stock Redemption Cost (4,855) (4,846)
Long-Term Debt - Net 264,156 264,134
Total Capitalization 516,754 511,963
Current Liabilities:
Accounts Payable - Associated Companies 3,077 4,221
- Other 20,057 22,611
Taxes Accrued 8,536 4,225
Interest Accrued 6,552 6,136
Other Current Liabilities 8,750 10,150
Total Current Liabilities 46,972 47,343
Deferred Credits and Other
Non-Current Liabilities 64,913 65,361
Accumulated Deferred Taxes 118,366 117,606
Total Liabilities and Capitalization $ 747,005 $ 742,273
<FN>
See accompanying notes to consolidated condensed financial statements.
EASTERN EDISON COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands)
Three Months Ended
March 31,
1994 1993
Operating Revenues $ 110,388 $ 105,581
Operating Expenses:
Fuel 23,137 20,420
Purchased Power 29,929 31,234
Other Operation and Maintenance 24,399 24,507
Depreciation and Amortization 6,415 6,644
Taxes - Other Than Income 2,955 2,453
- Current Income 5,263 4,882
- Deferred Income 1,469 445
Total 93,567 90,585
Operating Income 16,821 14,996
Allowance for Other Funds
Used During Construction 49 63
Other Income - Net 387 353
Income Before Interest Charges 17,257 15,412
Interest Charges:
Interest on Long-Term Debt 4,580 6,330
Other Interest Expense 897 397
Allowance for Borrowed Funds Used
During Construction(Credit) (68) (70)
Net Interest Charges 5,409 6,657
Net Income 11,848 8,755
Preferred Dividend Requirements 497 906
Consolidated Net Earnings $ 11,351 $ 7,849
<FN>
See accompanying notes to consolidated condensed financial statements.
EASTERN EDISON COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended
March 31,
1994 1993
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 11,848 $ 8,755
Adjustments to Reconcile Net Income to Net
Cash Provided from Operating Activities:
Depreciation and Amortization 6,836 7,495
Amortization of Nuclear Fuel 1,110 1,408
Deferred Taxes 1,452 428
Investment Tax Credit, Net (230) (268)
Allowance for Other Funds Used
During Construction (49) (63)
Other - Net (622) 1,194
Change in Operating Assets and Liabilities 1,139 (7,924)
Net Cash Provided From Operating Activities 21,484 11,025
CASH FLOW FROM INVESTING ACTIVITIES:
Construction Expenditures (3,621) (3,823)
Net Cash (Used in) Investing Activities (3,621) (3,823)
CASH FLOW FROM FINANCING ACTIVITIES:
Common Stock Dividends Paid to EUA (6,419) (5,522)
Preferred Dividends Paid (497) (906)
Financing Expenses (52)
Net Cash (Used in) Financing Activities (6,968) (6,428)
Net Increase in Cash and Temporary
Cash Investments 10,895 774
Cash and Temporary Cash Investments at
Beginning of Period 697 25,519
Cash and Temporary Cash Investments at
End of Period $ 11,592 $ 26,293
Cash paid during the period for:
Interest (Net of Capitalized Interest) $ 4,110 $ 8,490
Income Taxes $ 1,280 $ 2,650
<FN>
See accompanying notes to consolidated condensed financial statements.
EASTERN_EDISON_COMPANY
NOTES_TO_CONSOLIDATED_CONDENSED_FINANCIAL_STATEMENTS
The accompanying Notes should be read in conjunction with the Notes to
Consolidated Financial Statements appearing in Eastern Edison Company's
(Eastern Edison 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 the
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.
In November 1992, the Financial Accounting Standards Board issued
Statement No. 112, "Employers' Accounting for Post-employment
Benefits." The Company was required to adopt this standard no later
than January 1, 1994. The estimated impact of this standard on the
Company is immaterial and therefore no liability has been recorded.
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 Eastern Edison,
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 Eastern Edison and its affiliated retail electric utilities -
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
First quarter 1993 Consolidated Net Earnings increased $3.5 million to
approximately $11.4 million as compared to Consolidated Net Earnings for the
same period of a year ago. Decreased interest expense, lower maintenance
expense and increased kilowatthour (kwh) sales were the major contributors to
this increase. Retail kwh sales posted a 3.2% gain with increases of 3.2%,
2.6% and 5.2% in the residential, commercial and industrial classes,
respectively primarily due to colder than normal weather in the first two
months of 1994 and improving economic conditions in the Company's service
territory. Despite the strong performance of kwh sales, the Company
anticipates that the economic recovery will remain slow for the foreseeable
future.
Operating_Revenues
Operating Revenues increased $4.8 million or 4.6% for the first quarter
of 1994 compared to the same period in 1993. This increase is due primarily to
increased recoveries of purchased power and fuel costs.
Operations_Expense
Fuel expense for the first quarter of 1994 as compared to the same period
in 1993 increased $2.7 million or 13.3%. This increase was due primarily to
increased generation by company owned units as a result of outages in the first
quarter of 1993. Canal Unit 2, which is 50% owned by Montaup, began a
scheduled outage on February 13, 1993 and returned to service on April 5, 1993
while Somerset Unit 6, a wholly-owned unit of Montaup was out of service for 29
days in March 1993.
Purchased Power expense for the first quarter of 1994 decreased
approximately $1.3 million or 4.2% as compared to the same period in 1993.
This decrease is due primarily to a reclassification of conservation and load
management normalization adjustments previously recorded as purchased power
expense.
Other Operation and Maintenance expenses for the first quarter of 1994
decreased approximately $0.1 million from the same period in 1993. This
decrease is due primarily to an increase in conservation and load management
expenses of $2.5 million which was offset by a reduction in maintenance
expenses at Montaup's Canal Unit 2 of approximately $1.0 million as a result of
its scheduled outage in 1993, a decrease in EUA Service Corporation (EUA
Service) allocated charges recorded as operation and maintenance expense and
continued attention to stringent cost control.
Interest Charges
Interest on long-term debt decreased by $1.8 million or 27.6% in the
first quarter of 1994 from the same period in 1993. This decrease is due to
Eastern Edison's refinancing of $195 million in long-term debt in 1993 at
substantially lower interest rates.
Income Taxes
Eastern Edison and Montaup's consolidated effective income tax rate for
the first quarter of 1994 was approximately 36.3% as compared to approximately
38.3% for the same period in 1993. Income taxes for the first quarter of 1993
included a provision for the anticipated increase in the Federal Income Tax
Rate on a retroactive basis.
Preferred Dividend Requirements
Preferred Dividend Requirements decreased $0.4 million or 45.1% 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
Eastern Edison's and Montaup's need for permanent capital is primarily
related to the construction of facilities required to meet the needs of their
existing and future customers.
Traditionally, cash construction requirements not met with internally gen
erated funds are obtained through short-term borrowings which are ultimately
funded with permanent capital. EUA System companies, including Eastern Edison
and Montaup, maintain short-term lines of credit with various banks aggregating
approximately $140 million. These credit lines are available to other
affiliated companies under joint credit line arrangements. At March 31, 1994,
these unused EUA System short-term lines of credit amounted to approximately
$94 million. Eastern Edison and Montaup had no short-term debt outstanding at
March 31, 1994. In the first quarter of 1994, internally generated funds
amounted to $14.2 million while cash construction requirements for the same
period were $3.6 million.
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) A Consent to Action in lieu of an Annual Meeting of Stockholders
executed on March 1, 1994 (Consent to Action) by Eastern Utilities
Associates, the holders of the entire issued and outstanding common
stock of Eastern Edison and the only class of stock entitled to vote
at the Annual Meeting of Stockholders.
(b) The Board of Directors as previously reported to the Commission in the
Company's annual report on Form 10-K for the year ended December 31,
1993 was re-elected in its entirety by the Consent to Action.
(c) The matters voted on in the Consent to Action were: (i) a vote fixing
the number of Directors of Eastern Edison at eight and re-electing the
entire Board and (ii) the election of the Treasurer and Clerk of the
Company.
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 under
signed thereunto duly authorized.
Eastern_Edison_Company___________
(Registrant)
Date: May_13,_1994 /s/Richard_M._Burns______________
Richard_M._Burns,_Vice_President
(on_behalf_of_the_Registrant_and
as Chief_Accounting_Officer)