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 from to
Commission file number 2-36005
ROCKLAND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 13-1727720
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Blue Hill Plaza, Pearl River, New York 10965
(Address of principal executive offices) (Zip Code)
(914) 352-6000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (l) 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
class of common stock, as of the close of the latest practicable date.
Common Stock - $100 Par Value 112,000 Shares
(Class) (Outstanding at April 30, 1994)
Table of Contents
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
at March 31, 1994 and December 31, 1993 2
Consolidated Statements of Income (Unaudited) for
the three months ended March 31, 1994 and
March 31, 1993 4
Consolidated Cash Flow Statements (Unaudited) for
the three months ended March 31, 1994 and
March 31, 1993 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 10
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROCKLAND ELECTRIC COMPANY
(A Wholly Owned Subsidiary of Orange and Rockland Utilities, Inc.)
Consolidated Balance Sheets (Unaudited)
Assets
March 31, December 31,
1994 1993
(Thousands of Dollars)
Utility Plant:
Electric $141,268 $140,584
Less accumulated depreciation 38,104 37,353
Net Utility Plant in Service 103,164 103,231
Construction work in progress 2,875 2,815
Net Utility Plant 106,039 106,046
Non-utility Property:
Non-utility property 7,492 7,397
Less accumulated depreciation and amortization 2,351 2,202
Net Non-utility Property 5,141 5,195
Current Assets:
Cash and cash equivalents 4,976 13,813
Temporary cash investments - 685
Customer accounts receivable, less allowance for
uncollectible accounts of $198 and $210 11,399 12,345
Accrued utility revenue 2,336 2,932
Other accounts receivable, less allowance for uncollectible
accounts of $69 and $52 2,086 2,358
Receivable from associated companies 2,110 314
Gas marketing accounts receivable, less allowance for
uncollectible accounts of $533 and $471 51,712 49,249
Materials and supplies (at average cost) 7,379 7,210
Prepayments and other current assets 19,439 3,914
Total Current Assets 101,437 92,820
Deferred Debits:
Income tax recoverable in future rates 7,130 7,085
Extraordinary property loss - Sterling Nuclear Project 4,461 4,594
Deferred revenue taxes 11,503 11,769
Deferred pension and other postretirement benefits 2,532 2,138
Unamortized debt expense (amortized over term of securities) 957 987
Other deferred debits 5,944 6,557
Total Deferred Debits 32,527 33,130
Total $245,144 $237,191
________ ________
The accompanying notes are an integral part of these statements.
/TABLE
ROCKLAND ELECTRIC COMPANY
(A Wholly Owned Subsidiary of Orange and Rockland Utilities, Inc.)
Consolidated Balance Sheets (Unaudited)
Capitalization and Liabilities
March 31, December 31,
1994 1993
(Thousands of Dollars)
Capitalization:
Common stock (112,000 shares outstanding) $ 11,200 $ 11,200
Capital stock expense (20) (20)
Retained earnings 79,936 78,904
Total Common Stock Equity 91,116 90,084
Long-term debt 43,704 43,866
Total Capitalization 134,820 133,950
Non-current Liabilities:
Reserve for claims and damages 226 268
Postretirement benefits 1,969 1,454
Total Non-current liabilities 2,195 1,722
Current Liabilities:
Long-term debt due within one year 891 891
Notes payable 3,100 1,200
Accounts payable 9,820 384
Gas marketing accounts payable 52,796 54,247
Amounts due to associated companies 9,640 10,904
Customer deposits 1,115 1,130
Accrued taxes 4,930 8,435
Accrued interest 871 1,667
Other current liabilities 199 307
Total Current Liabilities 83,362 79,165
Deferred Taxes and Other:
Deferred Federal income taxes 19,278 16,601
Deferred investment tax credits 2,559 2,587
Refundable fuel costs 1,006 1,656
Other deferred credits 1,924 1,510
Total Deferred Taxes and Other 24,767 22,354
Total $245,144 $237,191
________ ________
The accompanying notes are an integral part of these statements.
/TABLE
ROCKLAND ELECTRIC COMPANY
(A Wholly Owned Subsidiary of Orange and Rockland Utilities, Inc.)
Consolidated Statements of Income (Unaudited)
Three Months
Ended March 31,
1994 1993
(Thousands of Dollars)
Operating Revenues:
Electric operations $ 31,343 $ 30,536
Diversified activities 96,625 82,001
Total Operating Revenues 127,968 112,537
Operating Expenses:
Operations:
Electricity purchased for resale-net 16,147 15,905
Non-utility gas marketing purchases 91,075 78,450
Other expenses of operation 10,493 9,780
Maintenance 1,225 940
Depreciation and amortization 1,141 1,087
Taxes other than income taxes 4,818 4,584
Federal income taxes (1,864) 193
Deferred Federal income taxes 2,598 82
Deferred investment tax credit (28) (31)
Total Operating Expenses 125,605 110,990
Income From Operations 2,363 1,547
Other Income and (Deductions):
Allowance for other funds used
during construction 7 -
Investigation costs (662) -
Other - net 152 114
Taxes other than income taxes (11) (10)
Federal income taxes 238 26
Deferred Federal income taxes (34) (38)
Total Other Income and (Deductions) (310) 92
Income Before Interest Charges 2,053 1,639
Interest Charges:
Interest on long-term debt 803 908
Other interest 192 118
Amortization of debt premium and expense-net 35 17
Allowance for borrowed funds used
during construction (10) -
Total Interest Charges 1,020 1,043
Net Income $ 1,033 $ 596
________ _______
Average number of common shares (000's) 112 112
________ _______
Earnings per average common share $ 9.22 $ 5.32
________ _______
The accompanying notes are an integral part of these statements.
/TABLE
ROCKLAND ELECTRIC COMPANY
(A Wholly Owned Subsidiary of Orange and Rockland Utilities, Inc.)
Consolidated Cash Flow Statements (Unaudited)
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
Cash Flow from Operations:
Net income $ 1,033 $ 596
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,115 912
Deferred Federal income taxes 2,632 120
Deferred investment tax credit (28) (31)
Deferred fuel costs (650) (509)
Allowance for funds used during construction (17) -
Changes in certain current assets and liabilities:
Temporary cash investments 685 128
Accounts and gas marketing accounts receivable,
net and accrued utility revenue (649) (1,393)
Receivable from associated companies (1,796) 478
Materials and supplies (169) 406
Prepayments and other current assets (15,525) 320
Operating and gas marketing accounts payable 7,985 1,279
Amounts due to associated companies (1,264) 5,923
Accrued taxes (3,505) 4,039
Accrued interest (796) (779)
Other current liabilities (123) 395
Other-net 1,412 (424)
Net Cash (Used in) Provided by Operations (9,660) 11,460
Cash Flow from Investing Activities:
Additions to plant (927) (786)
Allowance for funds used during construction 17 -
Net Cash Used in Investing Activities (910) (786)
Cash Flow from Financing Activities:
Proceeds from:
Issuance of long-term debt - 20,000
Retirements of:
Long-term debt (167) (16,492)
Net borrowings under short-term debt arrangements 1,900 -
Net Cash Provided by Financing Activities 1,733 3,508
Net Change in Cash and Cash Equivalents (8,837) 14,182
Cash and Cash Equivalents at Beginning of Period 13,813 14,827
Cash and Cash Equivalents at End of Period $ 4,976 $29,009
_______ _______
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 1,779 $ 1,751
_______ _______
The accompanying notes are an integral part of these statements.
/TABLE
ROCKLAND ELECTRIC COMPANY
(A Wholly Owned Subsidiary of Orange and Rockland Utilities, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of March 31, 1994, the consolidated
statements of income for the three month periods ended March 31, 1994 and
1993, and the consolidated cash flow statements for the three month
periods then ended have been prepared by Rockland Electric Company (the
"Company") without an audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position and results of operations at
March 31, 1994, and for all periods presented, have been made. The
amounts in the consolidated balance sheet as of December 31, 1993 are
from audited financial statements.
2. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
unaudited consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
December 31, 1993 Form 10-K Annual Report. The results of operations for
the period ended March 31, 1994 are not necessarily indicative of the
results of operations for the full year.
3. The results of the Company's wholly owned non-utility subsidiary, Saddle
River Holdings Corporation, are consolidated for financial reporting
purposes. All significant intercompany balances and transactions have
been eliminated.
4. Contingencies at March 31, 1994 are substantially the same as the
contingencies described in the "Notes to Consolidated Financial
Statements" included in the Company's December 31, 1993 Form 10-K Annual
Report.
5. Certain amounts from prior years have been reclassified to conform with
the current year presentation.
6. Effective January 1, 1994 the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112 "Employers' Accounting for
Postretirement Benefits" which required the recording of a liability of
approximately $.2 million. The adoption of Statement No. 112 did not
have a significant impact on the results of current operations because of
the recording of offsetting regulatory assets.
ROCKLAND ELECTRIC COMPANY
(A Wholly Owned Subsidiary of Orange and Rockland Utilities, Inc.)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Performance
The Company's consolidated earnings per average common share outstanding for
the first quarter of 1994 amounted to $9.22 as compared to $5.32 for the first
quarter of 1993. The increase of $3.90 per share is the result of a number of
factors as discussed in the "Results of Operations".
Average common shares outstanding, all of which are owned by Orange and
Rockland Utilities, Inc. (the "Parent") were 112,000 shares for both the first
quarter of 1994 and 1993.
Allowance for Funds Used During Construction ("AFDC") amounted to 1.6% of Net
Income for the quarter ended March 31, 1994 and had no effect on Net Income
for the first quarter of 1993.
Capital Resources and Liquidity
At the end of the first quarters of 1994 and 1993 the Company had available
bank lines of credit of $10 million for its utility business. In addition,
non-utility lines of credit amounted to $15 million at March 31, 1994. The
non-utility subsidiaries may undertake short-term borrowing or make short-term
investments. The average daily balance of short-term borrowings for the three
months ended March 31, 1994 amounted to approximately $2.2 million at an
effective interest rate of 6.5% compared to $49,000 at an effective rate of
6.5% for the first three months of 1993. The average daily balance of
temporary cash investments for the three months ended March 31, 1994 was $13.8
million as compared to $8.5 million for the first three months of 1993.
Construction expenditures, excluding AFDC, amounted to $.9 million for the
first three months of 1994 as compared to $.8 million for the same period of
1993.
Rate Activity
In January 1992, an increase in electric rates of $5.1 million was granted by
the New Jersey Board of Regulatory Commissioners ("NJBRC") in response to the
Company's March 18, 1991 petition requesting a $12.9 million increase in base
rates. This increase includes a 12% rate of return on equity. In addition,
the NJBRC initiated a Phase II proceeding in this case to address the effect
of the State of New Jersey's June 1, 1991 tax legislation. That legislation
changed the procedure under which certain taxes are collected from New Jersey
utilities. Previously, utilities had been subject to a 12.5% gross receipts
and franchise tax which the utilities paid in lieu of property taxes; however,
the new tax is based upon the number of units of energy (kwh or therms)
delivered by a utility rather than revenues. The legislation also requires
that utilities accelerate payment to the State of the taxes collected. As a
result, the Company is required to make additional tax payments of
approximately $16 million during the period 1993-1994. On November 12, 1992
the NJBRC issued a Decision and Order approving the recovery of the additional
tax over a ten year period. A carrying charge of 7.5% on the unamortized
balance was also approved. The amount of unrecovered accelerated payments is
included in Deferred Revenue Taxes.
On February 26, 1993 the New Jersey Department of Public Advocate, Division of
Rate Counsel ("Rate Counsel") filed a Notice of Appeal from the NJBRC Decision
and Order with the Superior Court of New Jersey Appellate Division, stating as
grounds for the appeal that the Decision is arbitrary and capricious and would
result in unjust and unreasonable rates. Rate Counsel's brief and the
Company's brief in response were filed in October 1993. On March 21, 1994,
the Superior Court of New Jersey, Appellate Division, upheld the NJBRC
Decision, stating the NJBRC used proper rate-making principles and utilized
its expertise.
Under an agreement with the NJBRC to return to customers funds misappropriated
by employees, RECO has refunded to New Jersey ratepayers $94,100 through
reductions in the applicable fuel adjustment charges in February and March
1994. The Company has also pledged to return any other funds that are
discovered to have been misappropriated.
Results of Operations:
QUARTERLY COMPARISON
Earnings per average common share outstanding for the first quarter of 1994
amounted to $9.22 per share as compared to $5.32 for the first quarter of
1993. This increase in earnings reflects the improved operating results of
the gas marketing subsidiary, lower interest charges, and higher electric
sales, offset by expenses associated with the continuing investigation and
litigation involving misappropriations of Company funds.
Utility Revenues
Electric operating revenues including fuel cost recoveries increased by $.8
million in the first quarter of 1994 as compared to the same quarter of 1993.
The components of the changes in electric operating revenues for the quarter
ended March 31, 1994 as compared to the same quarter of 1993 are as follows:
(Millions of Dollars)
Retail sales:
Base Rates* $ .4
Fuel cost recoveries (.1)
Sales volume changes .5
Total $ .8
_____
* Includes miscellaneous surcharges
Retail sales of electricity for the first quarter increased by 2.1% or 6,069
megawatt hours ("Mwh") from the same quarter of 1993. This increase is the
result of an increase in the average number of customers and usage when compared
to the first quarter of 1993.
Purchased Power Costs
Purchased power costs increased by $.2 million in the first quarter of 1994 as
compared to the same quarter of 1993. The components of the changes in
electric energy costs are as follows:
(Millions of Dollars)
Changes in Kilowatt-hours purchased .3
Deferred fuel charges ( .1)
Total $ .2
_____
The average cost per kilowatt-hour purchased was 5.22 cents for the quarters
ended March 31, 1994 and 1993.
Other Operating and Maintenance Expenses
Other operating and maintenance expenses, excluding purchased power costs and
gas marketing purchases, increased by $1.7 million in the first quarter of
1994 as compared to the same period of 1993. This increase is the result of
increases of $1.2 million in diversified activities expenses and $.5 million
in utility operating expenses. The utility operating expenses primarily
reflect increases in maintenance costs of $.3 million, higher amortization of
Demand Side Management ("DSM") costs which are being recovered through revenue
in the current period of $.2 million and increases in taxes of $.2 million,
offset by a decrease in miscellaneous operating expenses of $.2 million.
Diversified Activities
The Company's diversified activities, which are conducted through it's wholly
owned non-utility subsidiaries, consist of natural gas marketing and
communications.
Revenues from diversified activities increased by $14.6 million in the first
quarter of 1994 as compared to the same quarter of 1993, as a result of the
gas marketing subsidiary's success in adding customers and increasing sales
volumes. These revenues were offset by increases in operating expenses, which
included higher gas purchases of $12.6 million. Other operating expenses
increased by $1.2 million.
Other Income, Deductions and Interest Charges - Net
Other income, net of interest charges and other deductions, decreased $.4
million during the first quarter of 1994 when compared to the first quarter of
1993. This decrease is primarily the result of an increase in outside
professional and consultative services relating to the ongoing investigation,
partially offset by the decrease in interest expense on long-term debt
resulting from lower interest rates resulting from debt refinancings.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of a criminal action brought against Linda Winikow, a former Vice
President of the Parent and the Company, by the Rockland County (New York)
District Attorney and her subsequent guilty pleas to charges of grand larceny
(a class D felony), commercial bribery (a class A misdemeanor), and making a
campaign contribution under a false name (an unclassified misdemeanor), which
pleas were entered in the Supreme Court of the State of New York. Ms.
Winikow's sentencing on these pleas, originally scheduled for April 7, 1994,
has been rescheduled to the Fall of 1994.
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of the termination for cause of the employment of James F. Smith
as Chief Executive Officer of the Parent and his removal as Chairman of the
Board of Directors of the Parent. As stated therein, Mr. Smith has the right
under his employment agreement with the Parent to contest his termination for
cause in an arbitration proceeding. By letter to the Parent dated
May 5, 1994, Mr. Smith, through his attorney, has indicated his intention to
seek arbitration of his termination for cause and the Parent's claims asserted
against him in Orange and Rockland v. Smith, an action brought by the Parent
against Mr. Smith in New York State Supreme Court. In its complaint, served
on March 16, 1994, the Parent alleges causes of action against Mr. Smith for
breaches of fiduciary duty, inducing breach of fiduciary duty by others,
fraud, conversion, unjust enrichment and waste. The Parent does not believe
that the claims asserted in its lawsuit should be subject to arbitration.
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of an action entitled Feiner v. Orange and Rockland Utilities,
Inc., et al., a purported ratepayer class action complaint against the Parent
which was filed in the United States District Court, Southern District of New
York. As stated therein, the complaint alleges that the defendants violated
RICO and New York common law by using false and misleading testimony to obtain
rate increases from the NYPSC and used funds obtained from ratepayers in
furtherance of an alleged scheme to make illegal campaign contributions and
other illegal payments. Plaintiffs seek damages in the amount of $900 million
(which they seek to treble pursuant to the RICO statute). On February 18,
1994, the Parent filed a motion to dismiss this action. On April 11, 1994,
plaintiff filed its opposition to this motion and on April 21, 1994, the
Parent filed its reply. A hearing on the motion to dismiss was held before
Judge Brieant on April 22, 1994.
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of an action entitled Patents Management Corporation v. Orange and
Rockland Utilities, Inc., et al. ("Patents Management"), a purported
shareholder derivative complaint filed in the Supreme Court of the State of
New York, County of New York, and Gross v. Orange and Rockland Utilities, Inc.
("Gross"), a purported shareholder class action complaint, filed in the United
States District Court, Southern District of New York. At a status conference
held on April 22, 1994, Judge Brieant scheduled a further conference with
regard to the Gross litigation on July 22, 1994. Plaintiff's attorney in
Patents Management has agreed to proceed in this litigation according to the
schedule set by Judge Brieant with regard to the Gross suit.
On March 31, 1994, Bernstein v. Orange and Rockland Utilities, Inc. and
James F. Smith, a purported shareholder class action complaint, was filed in
the United States District Court, Southern District of New York. Plaintiff
alleges that various Securities and Exchange Commission ("SEC") filings of the
Parent during the period between March 2 and August 18, 1993 contained false
and misleading information or omitted to state material facts necessary to
make the statements therein not misleading, and thereby violated Section 10 of
the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5
promulgated thereunder, by failing to disclose what the plaintiff alleges was
a "scheme" by the Parent to make illegal political payments and campaign
contributions to various public officials and politicians. As a result,
plaintiff claims, during such period persons who purchased the stock of the
Parent did so at artificially inflated prices. The Bernstein complaint seeks
unspecified money damages. The Parent intends to vigorously contest the
claims brought against it in this complaint. At a status conference held on
April 22, 1994, Judge Brieant scheduled a further conference with regard to
this action on July 22, 1994.
The Bernstein complaint also asserts a claim against Mr. Smith under
Section 20 of the Exchange Act. Plaintiff alleges that during the time period
in question, Mr. Smith, then the Chief Executive Officer of the Parent and the
Company, Chairman of the Parent's Board of Directors, and a member of the
Company's Board of Directors, was a controlling person of the Parent and thus
should be held liable under Section 20 for causing, or preventing the Parent
from engaging in, the wrongful acts alleged in the complaint.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
Reference is made to Item 14(b), Reports on Form 8-K, in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993, for a
description of (a) a Current Report on Form 8-K dated February 10, 1994, filed
by the Company with the SEC on February 17, 1994; and (b) a Form 8-K/A dated
February 10, 1994, filed by the Company on February 22, 1994.
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.
ROCKLAND ELECTRIC COMPANY
(Registrant)
Date: May 12, 1994 By TERRY L. DITTRICH
Terry L. Dittrich
Acting Controller
Date: May 12, 1994 By ROBERT J. McBENNETT
Robert J. McBennett
Treasurer