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
March 31, 1999
For the quarterly period ended. . . . . . . .. . . . . . . . . .
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from. . . . . . . .to. . . . . . . . .
1-14766
Commission file number. . . . . . . . . . . .. . . . . . . . . .
Energy East Corporation
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Exact name of registrant as specified in its charter)
New York 14-1798693
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 12904, Albany, New York 12212-2904
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Address of principal executive offices) (Zip Code)
(518) 434-3049
Registrant's telephone number, including area code . . . . . . .
N/A
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
Former name, former address and former fiscal year, if changed
since last report.
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 [ ]
The number of shares of common stock (par value $.01 per
share) outstanding as of April 30, 1999 was 117,128,928.
TABLE OF CONTENTS
PART I
Page
Item 1. Financial Statements . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
(a) Liquidity and Capital Resources . . . . . 7
(b) Results of Operations . . . . . . . . . . 12
PART II
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . 13
Item 5. Other Information . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. . . . . . . . . . . . . . . . . 14
(b) Reports on Form 8-K . . . . . . . . . . . 14
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . 16
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Energy East Corporation
Consolidated Statements of Income - (Unaudited)
Three Months
Periods Ended March 31 1999 1998
(Thousands, except per share amounts)
Operating Revenues
Sales and services. . . . . . . . . . $654,438 $637,630
--------- ---------
Operating Expenses
Fuel used in electricity generation . 56,485 59,092
Electricity purchased . . . . . . . . 148,793 146,211
Natural gas purchased . . . . . . . . 66,042 57,137
Other operating expenses. . . . . . . 88,788 84,281
Maintenance.. . . . . . . . . . . . . 25,713 31,948
Depreciation and amortization . . . . 55,332 48,377
Other taxes . . . . . . . . . . . . . 54,061 54,940
--------- ---------
Total Operating Expenses . . . . . 495,214 481,986
--------- ---------
Operating Income. . . . . . . . . . . . 159,224 155,644
Other Income and Deductions . . . . . . (682) 1,224
Interest Charges, Net . . . . . . . . . 32,182 30,636
Preferred Stock Dividends of Subsidiary 1,030 2,269
--------- ---------
Income Before Federal Income Taxes . . 126,694 121,515
Federal Income Taxes. . . . . . . . . . 39,658 45,344
--------- ---------
Net Income. . . . . . . . . . . . . . . $87,036 $76,171
========= =========
Earnings Per Share, basic and diluted . $.71 $.57
Dividends Paid Per Share. . . . . . . . $.21 $.18
Average Shares Outstanding. . . . . . . 122,939 132,817
Per share amounts and number of average shares outstanding have been
restated to reflect the two-for-one common stock split effective
April 1, 1999.
The notes on page 6 are an integral part of the financial statements.
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Balance Sheets - (Unaudited)
March 31, Dec. 31,
1999 1998
(Thousands)
Assets
Current Assets
Cash and cash equivalents. . . . . . . . . . . . . . $949,489 $48,068
Special deposits . . . . . . . . . . . . . . . . . . 3,731 4,729
Accounts receivable, net . . . . . . . . . . . . . . 175,808 148,712
Fuel, at average cost. . . . . . . . . . . . . . . . 12,035 44,643
Materials and supplies, at average cost. . . . . . . 25,547 38,040
Prepayments. . . . . . . . . . . . . . . . . . . . . 137,435 111,082
---------- ----------
Total Current Assets. . . . . . . . . . . . . . . 1,304,045 395,274
Utility Plant, at Original Cost
Electric . . . . . . . . . . . . . . . . . . . . . . 4,862,913 5,299,604
Natural gas. . . . . . . . . . . . . . . . . . . . . 607,384 602,904
Common . . . . . . . . . . . . . . . . . . . . . . . 141,419 144,043
---------- ----------
5,611,716 6,046,551
Less accumulated depreciation. . . . . . . . . . . . 2,060,153 2,211,608
---------- ----------
Net Utility Plant in Service. . . . . . . . . . . 3,551,563 3,834,943
Construction work in progress. . . . . . . . . . . . 12,114 27,741
---------- ----------
Total Utility Plant . . . . . . . . . . . . . . . 3,563,677 3,862,684
Other Property and Investments, Net . . . . . . . . . . 132,866 129,088
Regulatory and Other Assets
Regulatory assets
Deferred income taxes, sale of generation assets. . 227,474 -
Unfunded future federal income taxes. . . . . . . . 137,925 136,404
Unamortized debt expense. . . . . . . . . . . . . . 70,308 71,530
Demand-side management program costs. . . . . . . . 61,512 64,466
Environmental remediation costs . . . . . . . . . . 59,300 60,600
Other . . . . . . . . . . . . . . . . . . . . . . . 107,346 125,604
---------- ----------
Total regulatory assets. . . . . . . . . . . . . . . 663,865 458,604
Other assets . . . . . . . . . . . . . . . . . . . . 36,354 37,687
---------- ----------
Total Regulatory and Other Assets . . . . . . . . 700,219 496,291
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . $5,700,807 $4,883,337
========== ==========
The notes on page 6 are an integral part of the financial statements.
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Balance Sheets - (Unaudited)
March 31, Dec. 31,
1999 1998
Liabilities (Thousands)
Current Liabilities
Current portion of long-term debt . . . . . . . . . . $28,582 $31,077
Current portion of preferred stock of subsidiary. . . 19,309 75,000
Notes payable . . . . . . . . . . . . . . . . . . . . 252,000 78,300
Accounts payable and accrued liabilities. . . . . . . 105,034 116,582
Interest accrued. . . . . . . . . . . . . . . . . . . 35,869 19,556
Taxes accrued . . . . . . . . . . . . . . . . . . . . 323,147 587
Accumulated deferred federal income tax, net. . . . . 16,639 10,029
Other . . . . . . . . . . . . . . . . . . . . . . . . 61,542 82,143
---------- ----------
Total Current Liabilities . . . . . . . . . . . . . 842,122 413,274
Regulatory and Other Liabilities
Regulatory liabilities
Gain on sale of generation assets. . . . . . . . . . 617,484 -
Deferred income taxes. . . . . . . . . . . . . . . . 91,635 98,038
Deferred income taxes, unfunded future federal
income taxes. . . . . . . . . . . . . . . . . . . . 60,250 60,896
Other . . . . . . . . . . . . . . . . . . . . . . . 36,691 42,182
---------- ----------
Total regulatory liabilities. . . . . . . . . . . . . 806,060 201,116
Other liabilities
Deferred income taxes. . . . . . . . . . . . . . . . 708,867 765,592
Other postretirement benefits. . . . . . . . . . . . 142,667 137,681
Environmental remediation costs. . . . . . . . . . . 79,300 80,600
Other. . . . . . . . . . . . . . . . . . . . . . . . 86,208 82,028
---------- ----------
Total other liabilities . . . . . . . . . . . . . . . 1,017,042 1,065,901
Long-term debt. . . . . . . . . . . . . . . . . . . . 1,435,961 1,435,120
---------- ----------
Total Liabilities . . . . . . . . . . . . . . . . . 4,101,185 3,115,411
Commitments . . . . . . . . . . . . . . . . . . . . . . - -
Preferred Stock of Subsidiary
Preferred stock redeemable solely at the
option of subsidiary . . . . . . . . . . . . . . . 10,131 29,440
Preferred stock subject to mandatory
redemption requirements . . . . . . . . . . . . . . 25,000 25,000
Common Stock Equity
Common stock . . . . . . . . . . . . . . . . . . . . 598 631
Capital in excess of par value. . . . . . . . . . . . 879,700 1,057,904
Retained earnings . . . . . . . . . . . . . . . . . . 723,190 662,562
Treasury stock, at cost . . . . . . . . . . . . . . . (38,997) (7,611)
---------- ----------
Total Common Stock Equity . . . . . . . . . . . . . 1,564,491 1,713,486
---------- ----------
Total Liabilities and Stockholders' Equity . . . . $5,700,807 $4,883,337
========== ==========
The notes on page 6 are an integral part of the financial statements.
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Statements of Cash Flows - (Unaudited)
Three Months
Periods Ended March 31 1999 1998
(Thousands)
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . $87,036 $76,171
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization. . . . . . . . . 55,332 48,377
Federal income taxes and investment tax credits
deferred, net. . . . . . . . . . . . . . . . (224,366) (5,575)
Changes in current operating assets and liabilities
Accounts receivable . . . . . . . . . . . . . (27,096) 13,592
Prepayments. . . . . . . . . . . . . . . . . . (26,353) (20,955)
Inventory. . . . . . . . . . . . . . . . . . . 45,101 18,430
Accounts payable and accrued liabilities . . . (11,548) (8,980)
Taxes accrued. . . . . . . . . . . . . . . . . 322,560 47,486
Other, net . . . . . . . . . . . . . . . . . . . (62,480) 372
-------- -------
Net Cash Provided by Operating Activities . . 158,186 168,918
-------- -------
Investing Activities
Sale of generation assets. . . . . . . . . . . . 900,500 -
Utility plant additions. . . . . . . . . . . . . (13,572) (38,801)
Other property and investments . . . . . . . . . (4,962) (249)
-------- -------
Net Cash Provided by
(Used in) Investing Activities . . . . . . . 881,966 (39,050)
-------- -------
Financing Activities
Repurchase of common stock . . . . . . . . . . . (178,300) (114,023)
Treasury stock acquired, net . . . . . . . . . . (31,386) -
Repayments of preferred stock and
first mortgage bonds. . . . . . . . . . . . . (75,000) (30,000)
Long-term notes, net . . . . . . . . . . . . . . (1,337) (380)
Notes payable, net . . . . . . . . . . . . . . . 173,700 47,000
Dividends on common stock. . . . . . . . . . . . (26,408) (23,628)
-------- -------
Net Cash Used in Financing Activities . . . . (138,731) (121,031)
-------- -------
Net Increase in Cash and Cash Equivalents . . . . 901,421 8,837
Cash and Cash Equivalents, Beginning of Period. . 48,068 8,168
-------- -------
Cash and Cash Equivalents, End of Period. . . . . $949,489 $17,005
======== =======
Supplemental Disclosure of Cash Flows Information
Cash paid during the period
Interest, net of amounts capitalized. . . . . . $11,035 $11,473
The notes on page 6 are an integral part of the financial statements.
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Statements of Retained Earnings - (Unaudited)
Three Months
Periods Ended March 31 1999 1998
(Thousands)
Balance, beginning of period. . . . . . . . . $662,562 $568,844
Add net income. . . . . . . . . . . . . . . . 87,036 76,171
Deduct dividends on common stock. . . . . . . 26,408 23,628
-------- --------
Balance, end of period. . . . . . . . . . . . $723,190 $621,387
======== ========
The notes on page 6 are an integral part of the financial statements.
Item 1. Financial Statements (Cont'd)
Note 1. Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements
reflect all adjustments which are necessary, in the opinion of
management, for a fair presentation of our consolidated results for
the interim periods. All such adjustments are of a normal
recurring nature. The unaudited consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes contained in our annual report for the year
ended December 31, 1998. Due to the seasonal nature of our
operations, financial results for interim periods are not neces-
sarily indicative of trends for a 12-month period.
Note 2. Common Stock Split
In January 1999 we declared a two-for-one stock split on
common stock outstanding. Shareholders of record at the close of
business on March 12, 1999, were entitled to the shares effective
April 1, 1999. All references to shares outstanding and per share
information reflect the stock split.
Note 3. Segment Information
Selected financial information for each of our business
segments is presented in the following table. "Energy
Distribution" consists of our electricity distribution,
transmission and generation operations in New York and Pennsylvania
and our natural gas distribution, transportation and storage
operations in New York. "Other" includes our energy services
businesses, natural gas and propane air distribution operations
outside of New York, corporate assets and intersegment
eliminations.
Energy
Three Months Ended Distribution Other Total
March 31, 1999
Operating Revenues $637,035 $17,403 $654,438
Net Income (Loss) $90,175 $(3,139) $87,036
March 31, 1998
Operating Revenues $627,232 $10,398 $637,630
Net Income (Loss) $77,745 $(1,574) $76,171
Identifiable Assets
March 31, 1999 $5,613,911 $86,896 $5,700,807
December 31, 1998 $4,807,657 $75,680 $4,883,337
Note 4. Reclassifications
Certain amounts have been reclassified on the consolidated
financial statements to conform with the 1999 presentation.
Item 2. Management's discussion and analysis of financial
condition and results of operations
(a) Liquidity and Capital Resources
Electric Business
Sale of our Coal-fired Generation Assets: We placed our seven
coal-fired stations and associated assets and liabilities up for
auction in 1998. We accepted offers totaling $1.85 billion from
The AES Corporation and Edison Mission Energy in August 1998 for
those generation assets. We completed the sale of our Homer City
generation assets to Mission Energy in March 1999, and the sale of
our remaining coal-fired generation assets to AES in May 1999.
All proceeds, net of taxes and transaction costs, in excess of
the net book value of the generation assets, less funded deferred
taxes, will be used to write down our 18% investment in Nine Mile
Point 2. This treatment is in accordance with our restructuring
plan approved by the Public Service Commission of the State of New
York in January 1998. The net cash received from the sales will be
used to implement our strategy of selectively growing our energy
distribution business in the Northeast and continued common stock
repurchases.
Now that the sale of our coal-fired generation assets has been
completed, our power requirements will be satisfied through
generation from our nuclear and hydroelectric stations and by
purchases from third parties. We have assumed the risk of market
prices that are sometimes volatile, since we have capped the prices
we can charge customers.
We use electricity contracts to manage our exposure to
fluctuations in the cost of electricity. These contracts allow us
to fix margins on the majority of our retail and wholesale sales of
electricity. The cost or benefit of electricity contracts is
included in the cost of electricity purchased when the electricity
is sold.
Nine Mile Point nuclear generating unit No. 2: We are actively
pursuing the sale of our interest in Nine Mile Point 2. In January
Niagara Mohawk Power Corporation, the operator and 41% owner of
Nine Mile Point 2, announced its intention to pursue the sale of
its interest in Nine Mile Point 2. Together we are in active
discussions concerning the sale with a third party who completed
due diligence at the site earlier this year. We will petition for
all necessary regulatory approvals if an agreement is reached to
sell Nine Mile Point 2.
Natural Gas Business
Role of Local Distribution Companies: On November 3, 1998, the PSC
issued a "Policy Statement Concerning the Future of the Natural Gas
Industry in New York State and Order Terminating Capacity
Assignment." The policy statement includes the PSC's vision for
furthering competition in the natural gas industry in New York
State. The PSC believes the most effective way to establish a
competitive gas market is for natural gas utilities to exit the
merchant function over a three to seven year period. The PSC also
established guidelines and began several proceedings related to
implementing its policy statement. We are participating in each of
the proceedings and continue to believe the competitive marketplace
should decide who will be the suppliers of natural gas.
The PSC's Order requires local distribution companies,
effective April 1, 1999, to cease assigning certain capacity costs
to customers who switch from distribution service to transportation
service. The local distribution companies will be provided a
reasonable opportunity to recover any capacity costs that may be
stranded. We made a compliance filing with the PSC in January 1999
to implement this requirement. The filing provided, among other
things, for the full recovery of stranded capacity costs. In March
1999 the PSC approved the filing, with certain modifications,
allowing for the full recovery of stranded capacity costs.
Other Operations
CMP Natural Gas LLC: We began constructing a natural gas
distribution system in Windham, Maine earlier this year. Windham
is the first of 35 cities and towns we plan to serve in Maine and
the first to draw natural gas from a recently completed interstate
transmission pipeline. We expect to be delivering natural gas to
homes and businesses in parts of Windham later this month.
Other Matters
Year 2000 Readiness Disclosure
Many of our computer systems, which include mainframe systems
and special-purpose systems, refer to years in terms of their final
two digits only. Such systems may interpret the year 2000 as the
year 1900. If not corrected, those systems could cause us to,
among other things, experience energy delivery problems, report
inaccurate data or issue inaccurate bills.
We are working diligently to address this problem by reviewing
all of our mainframe and special-purpose systems; identifying
potentially affected software, hardware, and date-sensitive
components, often referred to as embedded chips, of various
equipment; determining and taking appropriate corrective action;
and, when appropriate, testing our systems.
Our mainframe systems consist of the hardware and software
components of New York State Electric & Gas Corporation's
information technology systems. We believe we have identified,
taken appropriate corrective action and tested all of our mainframe
systems. We believe those systems are now able to process year
2000 and beyond transactions.
Our special-purpose systems consist of our non-information
technology systems and the information technology systems of our
subsidiaries other than NYSEG. We have identified approximately
6,000 items in our special-purpose systems that may be affected by
the Year 2000 problem. Items identified include software, hardware
and embedded chips in systems such as those that control the
acquisition and the delivery of electricity and natural gas to
customers and those in our communication systems. We believe we
have fixed, eliminated, replaced or found no problem with over 96%
of the special-purpose items we have identified, including those in
our electricity and natural gas delivery systems. We are
determining and taking appropriate corrective action for the
remaining identified items. Additional items, however, continue to
be identified as we proceed with the review of our special-purpose
systems. We expect to have reviewed, identified and determined and
taken the appropriate corrective action on all of our special-
purpose systems by the end of the second quarter of 1999.
Even though we believe we will have taken corrective action
with respect to our own Year 2000 issues, the Year 2000 issue could
adversely affect us if there are items in our mainframe or special-
purpose systems that may be affected by the Year 2000 problem and
that we have not identified in our review of those systems. The
Year 2000 issue could also adversely affect us if third parties
such as suppliers, customers, neighboring or interconnected
utilities and other entities fail to correct any of their Year 2000
problems. We have contacted key third parties to determine the
status of their Year 2000 readiness programs. Many have responded
satisfactorily, some have not responded satisfactorily and some
have not responded at all. We are developing contingency plans,
some of which are discussed below, for reasonably likely worst case
scenarios based upon an assumption that we and those third parties
will not be Year 2000 compliant.
Our Year 2000 program is progressing on schedule and we
believe we are taking all necessary steps to address this issue
successfully. Through March 31, 1999, we have spent approximately
$11.5 million and expect to spend an additional $0.8 million on
Year 2000 readiness. We believe this amount is adequate to address
our Year 2000 issues. These amounts are being expensed as incurred
and are being financed entirely with internally generated funds.
Addressing the Year 2000 issue has not caused us to delay any
significant information system projects.
As part of our normal business practice we have plans in place
for use during emergencies, some of which could arise from Year
2000 problems. We are completing contingency plans to specifically
address reasonably likely worst case scenarios that could arise as
a result of the Year 2000 problem.
The contingency plans will address, among other scenarios, the
interruption or failure of normal business activities or operations
such as a partial electrical and/or natural gas system shutdown.
If the interruption or failure is due to embedded chips in
equipment such as automatic control devices, our contingency plan
is to implement the normal system restoration procedures that we
utilize during emergencies. If the interruption or failure is due
to telecommunications not being available, we plan to use
alternative communication devices such as satellite phones.
Another scenario is the failure of our customer information system.
Should that occur, we plan to rely on customer information
previously stored and make the appropriate adjustment to each
customer's next bill after the system is restored.
We are dependent on others for our supply of natural gas. In
the event a supplier is not able to meet our needs, we plan to
purchase the needed amount of natural gas from one of many other
suppliers on the same transmission line. Since the sale of our
coal-fired generation assets has been completed, we will be buying
instead of producing the majority of the electricity our customers
need. If the electricity available in our region is not adequate
for all of the customers on our system, we plan to operate at lower
levels of power as outlined in our established emergency
procedures. Should our mainframe hardware be disabled, we have a
backup mainframe system that is capable of operating all of our
business systems. We expect to have all of our contingency plans
ready and tested by mid-1999.
The PSC issued an Order on October 30, 1998, adopting a July 1,
1999, deadline for New York utilities to complete their Year 2000
readiness programs for "mission critical" systems and for contingency
plans. Mission critical systems include those systems that control
the acquisition and the delivery of electricity and natural gas to
customers, emergency management systems and certain electric
generation plants. We believe that our Year 2000 readiness program
for mission critical systems and for contingency plans will be
completed by the PSC's July 1, 1999, deadline. The PSC requires the
filing of status reports with it regarding certain Year 2000 issues.
Investing Activities
Capital spending for the first three months of 1999 was $19
million, primarily for extension of service and necessary
improvements to existing facilities. We estimate our capital
spending for 1999 will be about $140 million, and it is expected to
be paid for entirely with internally generated funds.
Financing Activities
On February 1, 1999, we redeemed, at par, $25 million of 7.40%
preferred stock and $50 million of adjustable rate preferred stock.
On April 1, 1999, we purchased, at a discount, shares of the
following series of preferred stock: $7.2 million of 3.75%, $2.8
million of 4 1/2% (Series 1949), $1.4 million of 4.15%, $4.8 million
of 4.40%, and $3.1 million of 4.15% (Series 1954).
On April 1, 1999, the holders of a majority of the votes of
shares of NYSEG's serial preferred stock consented to increase the
amount of unsecured debt NYSEG may issue by up to an additional $1.2
billion.
We repurchased 7.8 million shares of our common stock during the
first quarter of 1999.
Forward-looking Statements
This Form 10-Q contains certain forward-looking statements that
are based upon management s current expectations and information that
is currently available. The Private Securities Litigation Reform Act
of 1995 provides a safe harbor for forward-looking statements in
certain circumstances. Whenever used in this report, the words
"estimate," "expect," "believe," or similar expressions are intended
to identify such forward-looking statements.
In addition to the assumptions and other factors referred to
specifically in connection with such statements, factors that could
cause actual results to differ materially from those contemplated in
any forward-looking statements include, among others, the risk that
more Year 2000 problems may be found as we continue the review of our
systems; the risk that our progress in addressing Year 2000 problems
may not proceed as we expect; the fact that despite all of our
efforts, there can be no assurances that all of our Year 2000 issues
can or will be remedied; the fact that there can be no assurances
that all Year 2000 issues that could affect us can or will be totally
eliminated by our suppliers, customers, neighboring or interconnected
utilities and other entities; and the fact that our assessment of the
effects of Year 2000 issues are based, in part, upon information
received from our suppliers, customers, neighboring or interconnected
utilities and other entities, our reasonable reliance upon this
information and the risk that inaccurate or incomplete information
may have been supplied to us.
Some additional factors that could cause actual results to
differ materially from those contemplated in any forward-looking
statements include, among others, the deregulation and unbundling of
energy services; our ability to compete in the rapidly changing and
increasingly competitive electricity and natural gas utility markets;
our ability to control nonutility generator and other costs; changes
in fuel supply or cost and the success of our strategies to satisfy
our power requirements now that all of our coal-fired generation
assets have been sold; our ability to expand our products and
services, including our energy distribution network in the Northeast;
the ability to obtain adequate and timely rate relief; nuclear or
environmental incidents; legal or administrative proceedings; changes
in the cost or availability of capital; growth in the areas in which
we are doing business; weather variations affecting customer energy
usage; and other considerations that may be disclosed from time to
time in our publicly disseminated documents and filings. We
undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
(b) Results of Operations
Three Months Ended March 31,
1999 1998 Change
(Thousands, except per share amounts)
Total Operating Revenues $654,438 $637,630 3%
Operating Income $159,224 $155,644 2%
Net Income $87,036 $76,171 14%
Average Shares Outstanding 122,939 132,817 (7%)
Earnings Per Share,
basic and diluted $.71 $.57 25%
Dividends Paid Per Share $.21 $.18 17%
Our earnings per share for the first quarter of 1999 improved
due to higher retail electricity and natural gas deliveries--caused
by milder-than-normal weather last year--and fewer shares of common
stock outstanding due to our share repurchase program. The increase
was partially offset by price reductions we are providing our
customers to promote competition.
Operating Results by Business Segment
Energy Distribution Three Months Ended March 31,
1999 1998 Change
(Thousands)
Retail Deliveries-
Megawatt-hours 3,624 3,390 7%
Dekatherms 24,887 21,279 17%
Operating Revenues $637,035 $627,232 2%
Operating Expenses $474,378 $470,090 1%
Operating Income $162,657 $157,142 4%
Higher retail electricity and natural gas deliveries, caused by
milder-than-normal weather last year, added $43 million to operating
revenues. That increase was partially offset by a $20 million
decrease due to lower wholesale electricity deliveries and a $14
million decrease due to lower retail electricity and natural gas
prices.
The increase in operating expenses was primarily due to a $19
million increase in electricity purchased for retail deliveries,
partially offset by a $17 million decrease in electricity purchased
for wholesale deliveries. A higher volume of natural gas purchases
was offset by lower purchased gas costs.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Our Annual Meeting of stockholders was held on April 23, 1999.
The following matters were voted upon:
(a) The election of two directors:
Nominees Votes For Votes Withheld
Alison P. Casarett 52,021,195 726,706
John M. Keeler 51,796,033 951,868
(b) Approval of an amendment to the Certificate of
Incorporation to authorize 100,000,000 additional shares
of Common Stock:
Shares For: 49,024,851
Shares Against: 3,177,950
Shares Abstain: 545,101
(c) Approval of an amendment to the Certificate of
Incorporation and By-Laws to lower the supermajority vote
requirement from three-fourths to two-thirds in order to
amend certain By-Law provisions:
Shares For: 43,053,619
Shares Against: 2,302,027
Shares Abstain: 782,943
Broker "Non-Voted": 6,609,313
(d) Approval of an amendment to the Certificate of
Incorporation to institute cumulative voting in the
election of directors:
Shares For: 39,257,600
Shares Against: 6,025,044
Shares Abstain: 855,944
Broker "Non-Voted": 6,609,314
(e) A stockholder proposal relating to a percentage reduction
in director remuneration based on a dividend reduction was
defeated:
Shares For: 3,626,643
Shares Against: 41,092,833
Shares Abstain: 1,419,112
Broker "Non-Voted": 6,609,314
Item 5. Other Information
On April 23, 1999, we reached a definitive merger agreement with
Connecticut Energy Corporation (CNE) under which CNE will become a
wholly-owned subsidiary of Energy East. The transaction is valued
at $617 million, including the assumption of debt. Shareholders of
CNE will receive $42 per share, 50% payable in stock and 50% in cash.
Shareholders will be able to specify the percentage of the
consideration they wish to receive in stock and in cash, subject to
proration. The combination will be accounted for using the purchase
method of accounting.
The merger is subject to, among other things, the approval of
CNE shareholders, the Connecticut Department of Public Utility
Control and the Securities and Exchange Commission. We expect the
transaction to close in the next 12 months.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
Signature
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.
ENERGY EAST CORPORATION
(Registrant)
By /s/ Wesley W. von Schack
Wesley W. von Schack
Chairman and Chief Financial Officer
Date: May 14, 1999
EXHIBIT INDEX
(a) The following exhibits are delivered with this report:
Exhibit No.
3-3 - Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the Secretary of
State of the State of New York on April 26, 1999.
3-4 - By-Laws of the Company as amended April 23, 1999.
27 - Financial Data Schedule.