SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
AMENDMENT NO. 1
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-898
THE NARRAGANSETT ELECTRIC COMPANY
(exact name of registrant as specified in charter)
Rhode Island
(State or other
jurisdiction of
incorporation or
organization)
05-0187805
(I.R.S. Employer
Identification No.)
280 Melrose Street, Providence, RI 02901
(Address of principal executive offices)
Registrant's telephone number, including area code
(401) 941-1400
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 ( )
Common Shares, par value $50 per share, authorized and
outstanding: 1,132,487 shares at September 30, 1994.
The undersigned registrant hereby amends its Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
1994 by (i) adding Note C to the unaudited financial statements,
concerning a change in accounting principle, to Part I - Item 1
Financial Statements and (ii) by adding Exhibit 18 to Part II -
Item 6 Exhibits and Reports on Form 8-K. Part I - Item 1 and
Part II - Item 6 are restated in their entirety below:
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
THE NARRAGANSETT ELECTRIC COMPANY
Statements of Income
Periods Ended September 30
(Unaudited)
Quarter Nine Months
------- -----------
1994 1993 1994 1993
---- ---- ---- ----
(In Thousands)
Operating revenue $137,014 $136,174 $366,275 $367,850
-------- -------- -------- --------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate84,859 89,381 228,436 237,380
Other operation 19,126 17,659 52,454 53,639
Maintenance 3,112 2,608 9,339 9,430
Depreciation 6,650 4,652 19,980 13,727
Taxes, other than federal income taxes 8,975 9,198 27,414 27,452
Federal income taxes 3,355 2,915 4,594 4,304
-------- -------- -------- --------
Total operating expenses 126,077 126,413 342,217 345,932
-------- -------- -------- --------
Operating income 10,937 9,761 24,058 21,918
Other income:
Allowance for equity funds used
during construction 343 139 961 294
Other income (expense) - net (194) 23 (1,246) (1,017)
-------- -------- -------- --------
Operating and other income 11,086 9,923 23,773 21,195
-------- -------- -------- --------
Interest:
Interest on long-term debt 3,675 3,261 10,489 9,454
Other interest 685 387 1,913 1,364
Allowance for borrowed funds used during
construction - credit (504) (160) (1,160) (351)
-------- -------- -------- --------
Total interest 3,856 3,488 11,242 10,467
-------- -------- -------- --------
Net income $ 7,230 $ 6,435 $ 12,531 $ 10,728
======== ======== ======== ========
Statements of Retained Earnings
Retained earnings at beginning of period$ 84,755 $ 74,326 $ 81,659 $ 74,207
Net income 7,230 6,435 12,531 10,728
Dividends declared on cumulative
preferred stock (535) (619) (1,607) (1,396)
Dividends declared on common stock (1,132) (566) (2,265) (3,963)
Premium on redemption of preferred stock (361) (361)
-------- -------- -------- --------
Retained earnings at end of period $ 90,318 $ 79,215 $ 90,318 $ 79,215
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
Per share data is not relevant because the Company's common stock is wholly
owned by New England Electric System.
THE NARRAGANSETT ELECTRIC COMPANY
Statements of Income
Twelve Months Ended September 30
(Unaudited)
1994 1993
---- ----
(In Thousands)
Operating revenue $481,453 $484,787
-------- --------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate 301,952 310,343
Other operation 72,537 71,214
Maintenance 12,088 12,294
Depreciation 23,898 18,906
Taxes, other than federal income taxes 35,808 35,955
Federal income taxes 4,465 5,968
-------- --------
Total operating expenses 450,748 454,680
-------- --------
Operating income 30,705 30,107
Other income:
Allowance for equity funds used
during construction 1,210 303
Other income (expense) - net (863) (902)
-------- --------
Operating and other income 31,052 29,508
-------- --------
Interest:
Interest on long-term debt 13,751 12,728
Other interest 2,623 1,687
Allowance for borrowed funds used during
construction - credit (1,399) (469)
-------- --------
Total interest 14,975 13,946
-------- --------
Net income $ 16,077 $ 15,562
======== ========
Statements of Retained Earnings
Retained earnings at beginning of period $ 79,215 $ 71,460
Net income 16,077 15,562
Dividends declared on cumulative
preferred stock (2,143) (1,784)
Dividends declared on common stock (2,831) (5,662)
Premium on redemption of preferred stock (361)
-------- --------
Retained earnings at end of period $ 90,318 $ 79,215
======== ========
The accompanying notes are an integral part of these financial statements.
Per share data is not relevant because the Company's common stock is wholly
owned by New England Electric System.
THE NARRAGANSETT ELECTRIC COMPANY
Balance Sheets
(Unaudited)
September 30,December 31,
ASSETS 1994 1993
------ ---- ----
(In Thousands)
Utility plant, at original cost $596,058 $534,569
Less accumulated provisions for depreciation 163,077 156,652
-------- --------
432,981 377,917
Construction work in progress 37,520 43,660
-------- --------
Net utility plant 470,501 421,577
-------- --------
Current assets:
Cash 328 838
Accounts receivable:
From sales of electric energy 50,549 55,795
Other (including $6,941,000 and $1,087,000 from affiliates)22,46211,701
Less reserves for doubtful accounts 4,377 3,800
-------- --------
68,634 63,696
Unbilled revenues 13,175
Fuel, materials and supplies, at average cost 6,331 4,572
Prepaid and other current assets 12,232 11,515
-------- --------
Total current assets 100,700 80,621
-------- --------
Deferred charges and other assets 55,381 53,709
-------- --------
$626,582 $555,907
======== ========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, par value $50 per share,
authorized and outstanding 1,132,487 shares $ 56,624 $ 56,624
Premiums on preferred stocks 170 170
Other paid-in capital 45,000 45,000
Retained earnings 90,318 81,659
-------- --------
Total common equity 192,112 183,453
Cumulative preferred stock 36,500 36,500
Long-term debt 178,893 155,972
-------- --------
Total capitalization 407,505 375,925
-------- --------
Current liabilities:
Short-term debt (including $23,625,000 and $19,725,000
to affiliates) 33,625 19,725
Accounts payable (including $48,903,000 and $43,468,000
to affiliates) 55,708 51,005
Accrued liabilities:
Taxes 1,979 1,712
Interest 3,134 4,921
Other accrued expenses 29,520 11,798
Customer deposits 5,524 5,622
Dividends payable 1,668 1,102
-------- --------
Total current liabilities 131,158 95,885
-------- --------
Deferred federal income taxes 67,013 63,494
Unamortized investment tax credits 8,645 9,026
Other reserves and deferred credits 12,261 11,577
-------- --------
$626,582 $555,907
======== ========
The accompanying notes are an integral part of these financial statements.
THE NARRAGANSETT ELECTRIC COMPANY
Statements of Cash Flows
Nine Months Ended September 30
(Unaudited)
1994 1993
---- ----
(In Thousands)
Operating Activities:
Net income $ 12,531 $ 10,728
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 19,980 13,727
Deferred federal income taxes and investment
tax credit - net 1,198 1,562
Allowance for funds used during construction (2,121) (645)
Amortization of unbilled revenues 4,105
Early retirement program 2,705
Decrease (increase) in accounts receivable,
net, and unbilled revenues (18,113) (7,863)
Decrease (increase) in fuel, materials, and supplies(1,759) 606
Increase (decrease) in accounts payable 4,703 3,145
Increase (decrease) in other current liabilities 11,999 (1,367)
Other, net 998 (2,455)
-------- --------
Net cash provided by operating activities $ 33,521 $ 20,143
-------- --------
Investing Activities:
Plant expenditures, excluding allowance for
funds used during construction $(66,725) $(45,398)
Other investing activities (900)
-------- --------
Net cash used in investing activities $(67,625) $(45,398)
-------- --------
Financing Activities:
Dividends paid on common stock $ (1,699) $ (5,095)
Dividends paid on preferred stock (1,607) (1,233)
Preferred stock - issues 20,000
Preferred stock - retirements (10,000)
Premium on redemption of preferred stock (361)
Long-term debt - issues 23,000 27,500
Long-term debt - retirements (14,900)
Premium on reacquisition of long-term debt (652)
Changes in short-term debt 13,900 10,700
-------- --------
Net cash provided by financing activities $ 33,594 $ 25,959
-------- --------
Net increase (decrease) in cash and cash equivalents$ (510) $ 704
Cash and cash equivalents at beginning of period 838 830
-------- --------
Cash and cash equivalents at end of period $ 328 $ 1,534
======== ========
Supplementary Information:
Interest paid less amounts capitalized $ 12,286 $ 11,122
-------- --------
Federal income taxes paid $ 703 $ 2,934
-------- --------
The accompanying notes are an integral part of these financial statements.
Note A
- ------
A 1986 Rhode Island Supreme Court decision held that the Rhode
Island Public Utilities Commission's (RIPUC) rate-making powers
include the authority to order refunds of amounts earned in excess
of an allowed return. As a result, the RIPUC monitors the
Company's earnings on a continuous basis.
Note B - Hazardous Waste
- ------------------------
The Federal Comprehensive Environmental Response, Compensation
and Liability Act, more commonly known as the "Superfund" law,
imposes strict, joint and several liability, regardless of fault,
for remediation of property contaminated with hazardous substances.
Parties liable include past and present site owners and operators,
transporters that brought wastes to the site, and entities that
generated or arranged for disposal or treatment of wastes
ultimately disposed of at the site.
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. These products or by-products may not
have previously been considered hazardous, and may not currently be
considered hazardous, but may be identified as such by federal,
state, or local authorities in the future. The New England
Electric System (NEES) subsidiaries currently have in place an
environmental audit program intended to enhance compliance with
existing federal, state, and local requirements regarding the
handling of potentially hazardous products and by-products.
Federal and state environmental agencies have contacted the
Company regarding liability for cleanup of sites alleged to contain
hazardous waste or substances. The Company has been named as a
potentially responsible party (PRP) by either the U.S.
Environmental Protection Agency or the Massachusetts Department of
Environmental Protection at two sites (one of which is located in
Massachusetts) at which hazardous waste is alleged to have been
disposed. The Company is also aware of other sites for which it
may be held responsible for remediating and it is likely that, in
the future, the Company will become involved in additional
proceedings demanding contribution for the cost of remediating
additional hazardous waste sites.
Gas was manufactured from coal in Rhode Island in the past.
The Company is aware of five sites on which gas was manufactured or
manufactured gas was stored that were owned either by the Company
Note B - Hazardous Waste - Continued
- ------------------------
or by its predecessor companies. It is not known to what extent
the Company would be held liable for hazardous wastes, if any, left
at these manufactured gas locations.
There are significant uncertainties as to the potential costs
to investigate and, when necessary, remediate any given hazardous
waste site. Factors such as the evolving nature of remediation
technology and regulatory requirements and the particular
characteristics of each site, including, for example, the size of
the site, the nature and amount of waste disposed at the site, and
the surrounding geography and land use, make precise estimates
difficult. A preliminary review by a consultant hired by the NEES
companies of the potential cost of investigating and, if necessary,
remediating Rhode Island manufactured gas sites resulted in costs
per site ranging from less than $1 million to $8 million. An
informal survey of other utilities conducted on behalf of NEES and
its subsidiaries indicated costs in a similar range.
There are also significant uncertainties as to the portion, if
any, of the investigation and remediation costs of any particular
hazardous waste site that may ultimately be borne by the Company.
The Company believes that hazardous waste liabilities for all
sites of which it is aware will not be material (10 percent of
common equity) to its financial position. Where appropriate, the
Company intends to seek recovery from its insurers and from other
PRPs, but it is uncertain whether, and to what extent, such efforts
will be successful.
Note C
- ------
Under a rate agreement approved in July 1994, the Company
began recognizing, for accounting purposes, revenues for
electricity delivered but not yet billed (unbilled revenue).
Unbilled revenues at September 30, 1994 were $13 million, of which
$3 million was recognized in the third quarter of 1994. The
remainder of $10 million at September 30, 1994 has been deferred
for recognition monthly through December 1995 and appears on the
balance sheet under the caption "Other accrued expenses".
Note D
- ------
In the opinion of the Company, these statements reflect all
adjustments (which include normal recurring adjustments) necessary
for a fair statement of the results of its operations for the
periods presented and should be considered in conjunction with the
notes to the financial statements in the Company's 1993 Annual
Report.
Part II - Item 6. Exhibits and Reports on Form 8-K
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
The Company is filing the following revised exhibit for
incorporation by reference into its registration statements on Form
S-3, Commission File Nos. 33-49455 and 33-50015:
12 Statement re computation of ratios
The Company is filing the following exhibit:
18 Coopers & Lybrand Preferability Letter re: accounting
change for unbilled revenues.
The Company is filing Financial Data Schedules.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Amendment No. 1 to Form
10-Q for the quarter ended September 30, 1994 to be signed on its
behalf by the undersigned thereunto duly authorized.
THE NARRAGANSETT ELECTRIC COMPANY
s/Howard W. McDowell
___________________________________
Howard W. McDowell
Controller, Authorized Officer, and
Principal Accounting Officer
Date: April 24, 1995