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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2000
Commission File Number 1-8858
Unitil Corporation
(Exact name of registrant as specified in its charter)
New Hampshire 02-0381573
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 Liberty Lane West, Hampton, New Hampshire 03842
(Address of principal executive office) (Zip Code)
(603) 772-0775
(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 (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 practicable date.
Class Outstanding at August 1, 2000
Common Stock, No par value 4,723,136 Shares
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
INDEX
Part I. Financial Information Page No.
Consolidated Statements of Earnings - Three and Six
Months Ended June 30, 2000 and 1999 3
Consolidated Balance Sheets, June 30, 2000,
June 30, 1999 and December 31, 1999 4-5
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7-9
Management's Discussion and Analysis of Results of
Operations and Financial Condition 10-15
Exhibit 11 - Computation of Earnings per Average
Common Share Outstanding 16
Exhibit 99 - Selected Quarterly Financial Data 17
Part II. Other Information 18
PART 1. FINANCIAL INFORMATION
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
(000's except common shares and per share data)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Operating Revenues
Electric $38,778 $39,051 $77,736 $75,235
Gas 4,105 3,672 11,425 9,828
Other 25 38 64 45
Total Operating Revenues 42,908 42,761 89,225 85,108
Operating Expenses
Fuel and Purchased Power 26,785 26,000 52,638 48,906
Gas Purchased for Resale 2,256 2,104 6,308 5,282
Operation and Maintenance 6,023 6,333 12,192 12,270
Depreciation and
Amortization 3,021 2,914 6,061 5,849
Provisions for Taxes:
Local Property and Other 1,245 1,360 2,622 2,825
Federal and State Income 548 648 1,916 2,023
Total Operating Expenses 39,878 39,359 81,737 77,155
Operating Income 3,030 3,402 7,488 7,953
Non-Operating Expenses,Net 84 38 133 50
Income Before Interest
Expense 2,946 3,364 7,355 7,903
Interest Expense, Net 1,719 1,766 3,464 3,561
Net Income 1,227 1,598 3,891 4,342
Less Dividends on
Preferred Stock 66 67 133 135
Net Income Applicable to
Common Stock $1,161 $1,531 $3,758 $4,207
Average Common Shares
Outstanding 4,720,178 4,695,844 4,717,359 4,658,443
Basic Earnings Per Share $0.25 $0.32 $0.80 $0.90
Diluted Earnings Per Share $0.24 $0.32 $0.79 $0.90
Dividends Declared Per
Share of Common Stock $0.345 $0.345 $1.035 $1.035
(The accompanying notes are an integral part of these
statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (000's)
(UNAUDITED) (AUDITED)
June 30, December 31,
2000 1999 1999
ASSETS:
Utility Plant:
Electric $166,473 $158,872 $161,767
Gas 35,273 32,647 34,031
Common 21,150 20,994 21,541
Construction Work in Progress 3,207 3,431 2,499
Total Utility Plant 226,103 215,944 219,838
Less: Accumulated Depreciation 68,518 65,956 66,429
Net Utility Plant 157,585 149,988 153,409
Other Property and Investments 6,338 3,891 5,051
Current Assets:
Cash 3,002 1,313 2,847
Accounts Receivable - Less
Allowance for Doubtful Accounts
of $589, $496 and $598 17,274 15,380 16,630
Materials and Supplies 2,321 2,205 2,503
Prepayments 1,362 709 713
Accrued Revenue 2,402 (720) 2,262
Total Current Assets 26,361 18,887 24,955
Noncurrent Assets:
Regulatory Assets 139,799 162,937 143,470
Prepaid Pension Costs 8,789 8,789 9,119
Debt Issuance Costs 1,382 1,382 1,351
Other Noncurrent Assets 25,124 25,788 24,753
Total Noncurrent Assets 175,094 198,896 178,693
TOTAL $365,378 $371,662 $362,108
(The accompanying notes are an integral part of these
statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (Cont.) (000's)
(UNAUDITED) (AUDITED)
June 30, December 31,
2000 1999 1999
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common Stock Equity $77,973 $75,977 $78,675
Preferred Stock, Non-Redeemable,
Non-Cumulative 225 225 225
Preferred Stock, Redeemable,
Cumulative 3,465 3,532 3,532
Long-Term Debt,
Less Current Portion 81,864 85,064 84,966
Total Capitalization 163,527 164,798 167,398
Current Liabilities:
Long-Term Debt, Current Portion 3,199 1,183 1,191
Capitalized Leases,
Current Portion 850 866 902
Accounts Payable 13,771 13,742 16,515
Short-Term Debt 16,700 --- 10,500
Dividends Declared and Payable 1,841 1,861 220
Refundable Customer Deposits 1,282 1,297 1,302
Taxes Payable (Refundable) 152 (1,455) (1,419)
Interest Payable 1,150 1,211 1,245
Other Current Liabilities 6,550 3,458 3,042
Total Current Liabilities 45,495 22,163 33,498
Deferred Income Taxes 42,883 43,163 42,634
Noncurrent Liabilities:
Power Supply Contract
Obligations 101,763 128,651 106,184
Capitalized Leases, Less
Current Portion 3,447 4,013 3,860
Other Noncurrent Liabilities 8,263 8,874 8,534
Total Noncurrent Liabilities 113,473 141,538 118,578
TOTAL $365,378 $371,662 $362,108
(The accompanying notes are an integral part of these
statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (000'S)
(UNAUDITED)
Six Months Ended June 30,
2000 1999
Net Cash Flow from Operating Activities:
Net Income $3,891 $4,342
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Depreciation and Amortization 6,061 5,849
Deferred Taxes Provision 430 236
Amortization of Investment Tax Credit (128) (188)
Amortization of Debt Issuance Costs 30 30
Changes in Working Capital:
Accounts Receivable (644) 619
Materials and Supplies 182 757
Prepayments (1,108) 240
Accrued Revenue (140) 2,396
Accounts Payable (2,744) 2,360
Refundable Customer Deposits (20) 4
Taxes and Interest Payable 1,476 (29)
Other, Net 1,449 (4,122)
Net Cash Provided by Operating Activities 8,735 12,494
Net Cash Flows from Investing Activities:
Acquisition of Property, Plant and Equip. (9,843) (6,009)
Proceeds from Sale of Electric
Generation Assets ---- 5,288
Acquisition of Other Property and
Investments (238) (3,271)
Net Cash Used in Investing Activities (10,081) (3,992)
Cash Flows from Financing Activities:
Net Increase (Decrease) in Short-Term Debt 6,200 (20,000)
Proceeds from Issuance of Long-Term Debt --- 12,000
Repayment of Long-Term Debt (1,094) (975)
Dividends Paid (3,394) (3,324)
Issuance of Common Stock 322 1,621
Retirement of Preferred Stock (68) (86)
Repayment of Capital Lease Obligations (465) (508)
Net Cash Flows Provided by
(Used in) Financing Activities 1,501 (11,272)
Net Increase (Decrease) in Cash 155 (2,770)
Cash at Beginning of Year 2,847 4,083
Cash at June 30, $3,002 $1,313
Supplemental Cash Flow Information:
Cash Paid for:
Interest Paid $4,103 $3,449
Federal Income Taxes Paid $350 $1,912
(The accompanying notes are an integral part of these
statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1.
Dividends Declared Per Share:
Three regular quarterly common stock dividends were
declared during the six month periods ended June 30, 2000 and
1999.
Common Stock Dividend:
On June 21, 2000, the Company's Board of Directors
declared its regular quarterly dividend on the Company's Common
Stock of $0.345 per share which was payable on August 15, 2000 to
shareholders of record as of August 1, 2000.
On March 16, 2000, the Company's Board of Directors
declared its regular quarterly dividend on the Company's Common
Stock of $0.345 per share which was payable on May 15, 2000 to
shareholders of record as of May 1, 2000.
On January 19, 2000 the Company's Board of Directors
declared its regular quarterly dividend on the Company's Common
Stock of $0.345 per share which was payable February 15, 2000 to
shareholders of record as of February 1, 2000.
Note 2.
Common Stock:
During the second quarter of 2000, the Company sold 6,114
shares of Common Stock, at an average price of $26.49 per share,
in connection with its Dividend Reinvestment and Stock Purchase
Plan. Net proceeds of $161,962 were used to reduce short-term
borrowings.
Note 3.
Preferred Stock:
Details on preferred stock at June 30, 2000, June 30,
1999 and December 31, 1999 are shown below:
(Amounts in Thousands)
June 30, December 31,
2000 1999 1999
Preferred Stock:
Non-Redeemable, Non-Cumulative,
6%, $100 Par Value $225 $225 $225
Redeemable, Cumulative,
$100 Par Value:
8.70% Series 215 215 215
5% Dividend Series 91 91 91
6% Dividend Series 168 168 168
8.75% Dividend Series 333 333 333
8.25% Dividend Series 385 385 385
5.125% Dividend Series 974 987 987
8% Dividend Series 1,299 1,353 1,353
Total Redeemable 3,465 3,532 3,532
Preferred Stock
Total Preferred $3,690 $3,757 $3,757
Stock
Note 4.
Long-term Debt:
Details on long-term debt at June 30, 2000, June 30, 1999
and December 31, 1999 are shown below:
(Amounts in Thousands)
June 30, December 31,
2000 1999 1999
Concord Electric Company:
First Mortgage Bonds:
Series I, 8.49%, due October 14, 2024 6,000 6,000 6,000
Series J, 6.96%, due September 1, 2028 10,000 10,000 10,000
Exeter & Hampton Electric
Company:
First Mortgage Bonds:
Series K, 8.49%, due October 14, 2024 9,000 9,000 9,000
Series L, 6.96%, due September 1, 2028 10,000 10,000 10,000
Fitchburg Gas and Electric
Light Company:
Promissory Notes:
8.55% Notes due March 31, 2004 12,000 13,000 13,000
6.75% Notes due November 30, 2023 19,000 19,000 19,000
7.37% Notes due January 15, 2029 12,000 12,000 12,000
Unitil Realty Corp.
Senior Secured Notes:
8.00% Notes Due August 1, 2017 7,063 7,247 7,157
Total 85,063 86,247 86,157
Less: Installments due within
one year 3,199 1,183 1,191
Total Long-term Debt $81,864 $85,064 $84,966
Note 5.
Contingencies:
The Company is currently undergoing an audit of its 1992 and 1993
Federal income tax returns by the Internal Revenue Service (IRS).
Although the IRS has not completed its examination of these
returns, it has proposed adjustments relating to the timing of
tax deductions taken by Unitil in those years. The Company
strongly disagrees with the IRS' position and will vigorously
contest it. If the IRS prevails with its position, the Company
may be required to pay additional taxes and interest. However,
those taxes will be recovered in future years. Although the
outcome cannot be predicted with certainty, the Company's
management does not expect it to have a material adverse impact
on the Company's results of operations.
Note 6.
In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary to
present fairly the consolidated financial position as of June 30,
2000 and 1999; and results of operations for the three and six
months ended June 30, 2000 and 1999; and consolidated statements
of cash flows for the six months ended June 30, 2000 and 1999.
Reclassifications of amounts are made periodically to previously issued
financial statements to conform with the current year presentation.
The results of operations for the six months ended June
30, 2000 and 1999 are not necessarily indicative of the results
to be expected for the full year.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
EARNINGS
Diluted earnings per average common share were $0.24
for the second quarter of 2000, a decrease of $0.08 from the
second quarter of 1999. This decrease reflects a $0.02 reduction
in earnings from Utility Operations, primarily the result of the
loss of revenues from a major customer who curtailed operations,
as well as a $0.06 reduction in earnings related to Unitil's
planned start-up costs of its e-commerce business, Usource. Also
impacting net income was an increase in depreciation and
amortization expenses and non-operating expenses offset by a
decrease in local property and other taxes and interest expense,
net.
On a year-to-date basis, diluted earnings decreased $0.11 to
$0.79 per share, compared to $0.90 per share for the first six
months of 1999. This reflects a $0.01 increase in earnings from
Utility Operations offset by a $0.12 reduction of earnings
related to Usource.
Sales (000's)
Three Months Ended Six Months Ended
kWh Sales 06/30/00 06/30/99 Change 06/30/00 06/30/99 Change
Residential 129,111 124,464 3.7% 292,947 279,137 4.9%
Commercial/ 244,132 253,724 -3.8% 499,767 513,257 -2.6%
Industrial
Total kWh Sales 373,243 378,188 -1.3% 792,714 792,394 0.0%
Firm Therm Sales
Residential 2,413 2,235 8.0% 7,939 7,629 4.1%
Commercial/
Industrial 2,288 2,074 10.3% 7,499 6,920 8.4%
Total Firms
Therm Sales 4,701 4,309 9.1% 15,438 14,549 6.1%
Segment
Information
($000's) Three Months Ended-6/30/00 Six Months Ended-6/30/00
Utility Utility
Operations Usource Total Operations Usource Total
Revenues 42,891 17 42,908 89,176 49 89,225
Segment Profit 1,556 (395) 1,161 4,445 (687) 3,758
Three Months Ended-6/30/99 Six Months Ended-6/30/99
Utility Utility
Operations Usource Total Operations Usource Total
Revenues 42,755 6 42,761 85,102 6 85,108
Segment Profit 1,633 (102) 1,531 4,324 (117) 4,207
Total electric kWh sales volume decreased 1.3% in the
second quarter and was even on a year-to-date basis. Exclusive of
the major customer discussed below, kWh sales increased 1.9% and
3.4% for the three- and six-month periods. Increased Residential
sales of 3.7% in the second quarter and 4.9% for the six months
ended June 30, were a result of strong customer growth and
slightly colder weather in the first half of the year 2000.
Commercial and Industrial sales decreased 3.8% and 2.6% for the
three- and six-month periods. This was the result of a major
customer curtailing operations at a paper manufacturing facility
during 1999. A new owner has recently purchased this facility,
and has announced plans to retool and resume operations during
2001. Exclusive of this major customer, Commercial and Industrial
sales increased by 1.0% in the second quarter and 2.5% on a year-
to-date basis.
Electric revenues decreased 0.7% in the second quarter and
increased 3.3% for the six month period of 2000 as compared to
1999. The change in electric revenues was a result of variances
in unit sales, as discussed above, and an increase in fuel prices
compared to the prior year.
Total Firm Therm gas sales increased 9.1% and 6.1% in the
three- and six-month periods, respectively. This increase
reflects continued growth as a result of the strong regional
economy in our service territories and a colder winter heating
season compared to the prior year. Gas revenues increased over
the prior year by 11.8% in the second quarter and 16.2% on a year-
to-date basis. The increase in revenues was a result of higher
unit sales as well as increased gas supply prices.
During the first six months of 2000, Fuel and Purchased
Power and Gas Purchased for Resale increased over the prior year,
because of changes in sales volume and higher unit costs. Both
electric and gas supply costs are collected from customers
through periodic cost recovery mechanisms and therefore, changes
in these costs do not affect the Company's net income.
For the first six months ended June 30, 2000, Operation and
Maintenance (O&M) expenses decreased slightly, reflecting lower
O&M costs for Utility Operations offset by higher O&M costs
related to the development of Usource. The 3.6% increase in
Depreciation and Amortization expenses during the same period was
due to the accelerated write-off of electric generating assets as
a result of electric utility industry restructuring in
Massachusetts, as well as additional amortization related to
Usource. Local Property and Other taxes decreased 7.2%, related
to divestiture of generating assets and the impact of state and
local property tax changes in New Hampshire. Interest expense,
net, was 2.7% lower in the first six months of 2000, reflecting
higher interest income on deferred recovery of costs related to
industry restructuring in Massachusetts.
In April 2000, Unitil formed Usource L.L.C. to operate its
Internet-based brokering and related energy products and services
business. In early June, Usourceonline.com was launched in a
test market in Philadelphia. Usource is currently in the process
of expanding its market reach to new geographic territories and
deploying its website technology to other customers through
strategic business alliances. Usource continues to add large
industrial customers and major business-to-business buying groups
to its portfolio.
Diluted earnings per average common share for the 12 months
ended June 30, 2000 and 1999, were $1.63 and $1.79, respectively.
This decrease reflects a $0.04 increase in earnings related to
Utility Operations offset by a $0.20 reduction in related to
Usource.
REGULATORY MATTERS
Electric and gas industry restructuring and the process for
separating the "competitive" retail sale of the electric and gas
energy from the "regulated" delivery of that energy over a
utility's transmission and distribution system has been the
predominant focus of the Company's regulatory initiatives and
activities in both Massachusetts and New Hampshire.
Since March 1, 1998 all electric consumers in Massachusetts
served by investor-owned utilities have had the ability to choose
their electric energy supplier. FG&E, the Company's Massachusetts
utility operating subsidiary, began implementation of its
comprehensive electric restructuring plan that includes the
divestiture of its entire regulated power supply business.
In New Hampshire, CECo and E&H, our electric utility
operating subsidiaries, and Unitil Power Corp., our wholesale
power company, continue to prepare for the transition that will
move them into this new market structure pending resolution of
key restructuring policies and issues that have slowed the
restructuring process in the state.
Massachusetts gas industry restructuring plans continue to
be a major focus of our regulatory activities as well. Since
1997, FG&E has worked in collaboration with the other
Massachusetts Local Distribution Companies (LDCs) and various
other stakeholders to develop and implement the infrastructure to
offer gas customers choice of their competitive gas energy
supplier and to complete the restructuring of gas service
provided by LDCs. FG&E has filed with the Massachusetts
Department of Telecommunications and Energy (MDTE) new gas
tariffs to implement natural gas unbundling in accordance with
Model Terms and Conditions resulting from these collaborative
efforts. The MDTE has issued an order suspending implementation
of approved tariffs and final regulations until September 1,
2000.
Massachusetts (Electric)- On January 15, 1999, the MDTE
approved FG&E's restructuring plan with certain modifications.
The Plan provides customers with: a) the ability to choose an
energy supplier; b) an option to purchase Standard Offer Service
provided by FG&E at regulated rates for up to seven years; and c)
a cumulative 15% rate reduction. The Order also approved FG&E's
power supply divestiture plan for its interest in three
generating units and four long-term power supply contracts. The
Company has been afforded full recovery of any transition costs
through a non-bypassable retail Transition Charge.
Pursuant to the Plan, on October 30, 1998, FG&E filed a
proposed contract with Constellation Power Services Inc. for
provision of Standard Offer Service. Service under the
FG&E/Constellation contract commenced on March 1, 1999, and is
scheduled to continue through February 28, 2005. This contract is
the result of the first successful Standard Offer auction
conducted in Massachusetts.
A contract for the sale of FG&E's interest in the New Haven
Harbor plant was approved by the MDTE on March 31, 1999 and the
sale of the unit closed on April 14, 1999. A contract for the
sale of the entire output from FG&E's remaining generating assets
and purchased power contracts was approved by the MDTE on
December 28, 1999, and went into effect February 1, 2000.
FG&E filed an electric rate decrease effective September 1,
1999, as provided for by the 1997 Massachusetts Electric
Restructuring Act (the Act). The Act mandated a 10% rate
reduction in March 1998, to be followed by an additional,
inflation-adjusted 5% rate reduction by September 1, 1999. The
net rate decrease of 1.3% reflects FG&E's divestiture of its
generation assets and purchased power portfolio.
On December 22, 1999, FG&E filed with the MDTE new rates for
effect January 1, 2000. The revised rates maintain the required
inflation-adjusted 15% rate discount. The MDTE approved the rates
on January 5, 2000, subject to reconciliation pursuant to an
investigation, resulting in an upward inflation adjustment of
2.5% relative to September 1999 rates.
On February 2, 2000 the MDTE initiated a proceeding to
examine FG&E's reconciliation filing and the consistency of the
proposed charges and adjustments with the methods approved in
FG&E's restructuring plan. The MDTE held four days of hearings in
May, 2000 and the Company presented testimony in support of its
filing. As part of his review of FG&E's filing, the
Massachusett's Attorney General also filed testimony challenging
FG&E's recovery of certain transition costs and other cost
reconciliation calculations in this docket. While FG&E is
confident in the reasonableness of its reconciliation filings, it
cannot be certain of the MDTE's ultimate determination of
transition cost recovery and requested approvals.
As a result of restructuring and divestiture of FG&E's
generation and purchased power portfolio, FG&E has accelerated
the write-off of its electric generation assets and on FG&E's
abandoned investment in Seabrook Station. An MDTE Order
established the return to be earned on the unamortized balance of
FG&E's generation plant. The new return reduces FG&E's earnings
on its generation assets. As this portfolio is amortized over the
next 10 years, earnings from this segment of FG&E's utility
business will continue to decline and ultimately cease.
Currently, Unitil's earnings from this business segment represent
approximately 10% of total consolidated earnings.
Massachusetts (Gas)- In mid-1997, the MDTE directed all
Massachusetts natural gas LDCs to form a collaborative with other
stakeholders to develop common principles and appropriate
regulations for the unbundling of gas service, and directed FG&E
and four other LDCs to file unbundled gas rates for its review.
FG&E's unbundled gas rates were filed with, and approved by, the
MDTE and implemented in November 1998.
On February 1, 1999, the MDTE issued an order in which it
determined that the LDCs would continue to have an obligation to
provide gas supply and delivery services for another five years,
with a review after three years. This order also set forth the
MDTE's decision regarding release by LDCs of their pipeline
capacity contracts to competitive marketers. In March 1999, the
LDCs and other stakeholders filed a settlement with the MDTE
which set forth rules for implementing an interim firm
transportation service through October 31, 2000. The MDTE
approved the settlement on April 2, 1999. FG&E has made separate
compliance filings that were approved by the MDTE to implement
its interim firm gas transportation service for its largest
general service customers and to complement this service with a
firm gas peaking service. The interim service will ultimately be
superseded by the permanent transportation service, which was
suspended for implementation until September 1, 2000 pending
further MDTE review.
On November 3, 1999 the Massachusetts LDCs filed Model Terms
and Conditions for Gas Service, including provisions for capacity
assignment, peaking service and default service. In accordance
with the MDTE's approval of these Model Terms and Conditions in
January 2000, FG&E filed Company-specific tariffs that implement
natural gas unbundling. The MDTE has also opened a rulemaking
proceeding on proposed regulations that would govern the
unbundling of services related to the provision of natural gas.
The MDTE has issued an order suspending implementation of
approved tariffs and final regulations until September 1, 2000.
New Hampshire - On February 28, 1997, the New Hampshire
Public Utilities Commission (NHPUC) issued its Final Plan for New
Hampshire electric utilities to transition to a competitive
electric market in the state ("Final Plan"). The Final Plan
linked the interim recovery of stranded cost by the State's
utilities to a comparison of their existing rates with the
regional average utility rates. CECo's and E&H's rates are below
the regional average; thus, the NHPUC found that CECo and E&H
were entitled to full interim stranded cost recovery, as defined
by the NHPUC. However, the NHPUC also made certain legal rulings,
which could affect CECo's and E&H's long-term ability to recover
all of their stranded costs.
Northeast Utilities' affiliate, Public Service Company of
New Hampshire, filed suit in U.S. District Court for protection
from the Final Plan and related orders and was granted an
indefinite stay. In June 1997, Unitil, and other utilities in New
Hampshire, intervened as plaintiffs in the federal court
proceeding. In June 1998, the federal court clarified that the
injunctions issued by the court in 1997 had effectively frozen
the NHPUC's efforts to implement restructuring. This amended
injunction was challenged by the NHPUC, but affirmed by the First
Circuit Court of Appeals in December 1998. Unitil continues to be
a plaintiff-intervenor in federal district court and cross
motions for summary judgment by all parties are now under review
by the court.
Unitil has continued to work actively to explore Settlement
opportunities and to seek a fair and reasonable resolution of key
restructuring policies and issues in New Hampshire. The Company
is also monitoring the regulatory and legislative proceedings
dealing with electric restructuring for other utilities in New
Hampshire.
Rate Proceedings -The last formal regulatory filings to
increase base electric rates for Unitil's three retail operating
subsidiaries occurred in 1985 for CECo, 1984 for FG&E, and 1981
for E&H. A majority of the Company's operating revenues are
collected under various periodic rate adjustment mechanisms
including fuel, purchased power, cost of gas, energy efficiency,
and restructuring-related cost recovery mechanisms. Industry
restructuring will continue to change the methods of how certain
costs are recovered through the Company's regulated rates and
tariffs.
On May 15, 1998, FG&E filed a gas base rate case with the
MDTE. The last base rate case had been in 1984. After evidentiary
hearings, the MDTE issued an Order allowing FG&E to establish new
rates, effective November 30, 1998, that would produce an annual
increase of approximately $1.0 million in gas revenues. As part
of the proceeding, the Massachusetts Attorney General alleged
that FG&E had double-collected fuel inventory finance charges,
and requested that the MDTE require FG&E to refund approximately
$1.6 million in double collections since 1987. The Company
believes that the Attorney General's claim is without merit and
that a refund was not justified or warranted. The MDTE rejected
the Attorney General's request and stated its intent to open a
separate proceeding to investigate the Attorney General's claim.
On November 1, 1999, the MDTE issued an Order of Notice
initiating an investigation of this matter. This proceeding is
underway and is expected to be concluded in the fourth quarter of
2000.
On October 29, 1999, the MDTE initiated a proceeding
designed to result in the eventual implementation of Performance
Based Rate making (PBR) for all electric and gas distribution
utilities in Massachusetts. PBR is a method of setting regulated
distribution rates that provide incentives for utilities to
control costs while maintaining a high level of service quality.
Under PBR, a company's earnings are tied to performance targets,
and penalties can be imposed for deterioration of service
quality. On December 29, 1999, FG&E filed a petition with the
MDTE for authority to defer for later recovery costs associated
with its preparation of a PBR filing for its gas division and its
participation in the MDTE-initiated generic gas and electric PBR
proceedings. This petition is pending. The Company is currently
evaluating the impact, if any, that PBR would have on the
Company's ability to continue applying the standards of Statement
of Financial Accounting Standards No.71 "Accounting for the
Effects of Certain Types of Regulation."
On December 31, 1999, the Massachusetts Attorney General
initiated a Complaint against FG&E. The Attorney General
requested that the MDTE launch an investigation of the
distribution rates, rate of return, and depreciation accrual
rates for FG&E's electric operations in calendar year 1999. To
date, the MDTE has taken no action on the Attorney General's
complaint.
Millstone Unit No. 3 - FG&E has a 0.217% nonoperating
ownership in the Millstone Unit No. 3 (Millstone 3) nuclear
generating unit which supplies it with 2.49 megawatts (MW) of
electric capacity. In January 1996, the Nuclear Regulatory
Commission (NRC) placed Millstone 3 on its Watch List, which
calls for increased NRC inspection attention. In March 1996, as a
result of engineering evaluations, Millstone 3 was taken out of
service. The NRC authorized the restart of Millstone 3 in June
1998.
During the period that Millstone 3 was out of service, FG&E
continued to incur its proportionate share of the unit's ongoing
Operations and Maintenance (O&M) costs, and may incur additional
O&M costs and capital expenditures to meet NRC requirements.
FG&E also incurred costs to replace the power that was expected
to be generated by the unit. During the outage, FG&E incurred
approximately $1.2 million in replacement power costs, and
recovered those costs through its electric fuel charge, which is
subject to review and reconciliation by the MDTE. Under existing
MDTE precedent, FG&E's replacement power costs of $1.2 million
could be subject to disallowance in rates.
In August 1997, FG&E, in concert with other nonoperating joint
owners, filed a demand for arbitration in Connecticut and a
lawsuit in Massachusetts, in an effort to recover costs
associated with the extended unplanned shutdown. Several
preliminary rulings have been issued in the arbitration and legal
cases, and both cases are continuing. On March 22, 2000, FG&E
entered into a settlement agreement with the defendants under
which FG&E will dismiss its lawsuit and arbitration claims. The
settlement is generally similar to earlier settlements with the
defendants and three joint owners that own, in the aggregate,
approximately 19 percent of the unit. The settlement provides for
FG&E to receive an initial payment of $600,000 and other amounts
contingent upon future events and would result in FG&E's entire
interest in the unit being included in the auction of the
majority interest, and certain of the minority interests, in
Millstone 3 which is expected to be completed by 2001. Upon
completion of the sale of Millstone 3, FG&E will be relieved of
all residual liabilities, including decommissioning liabilities,
associated with Millstone 3. FG&E expects to flow the net
proceeds of the settlement to its customers.
CAPITAL REQUIREMENTS
Capital expenditures on plant and equipment for the six months
ended June 30, 2000 were approximately $9.8 million. This
compares to $6.0 million during the same period last year.
Capital expenditures for plant and equipment for the year 2000
are estimated to be approximately $19.0 million as compared to
$15.4 million for 1999. This projection reflects capital
expenditures for utility system expansions, replacements and
other improvements.
LEGAL PROCEEDINGS
The Company is involved in legal and administrative proceedings
and claims of various types which arise in the ordinary course of
business. In the opinion of the Company's management, based upon
information furnished by counsel and others, the ultimate
resolution of these claims will not have a material impact on the
Company's financial position.
FORWARD-LOOKING INFORMATION
This report contains forward-looking statements which are subject
to the inherent uncertainties in predicting future results and
conditions. Certain factors that could cause the actual results
to differ materially from those projected in these forward-
looking statements include, but are not limited to; variations in
weather, changes in the regulatory environment, customers'
preferences on energy sources, general economic conditions,
increased competition and other uncertainties, all of which are
difficult to predict, and many of which are beyond the control of
the Company.
PART I. EXHIBIT 11.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING
(UNAUDITED)
(Amounts in Thousands, except Shares and Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
BASIC EARNINGS PER 2000 1999 2000 1999
SHARE
Net Income $1,227 $1,598 $3,891 $4,342
Less: Dividend
Requirement
on Preferred Stock 66 67 133 135
Net Income Applicable
to Common Stock $1,161 $1,531 $3,758 $4,207
Average Number of
Common Shares
Outstanding 4,720,178 4,695,844 4,717,359 4,658,443
Basic Earnings Per
Common Share $0.25 $0.32 $0.80 $0.90
Three Months Ended Six Months Ended
June 30, June 30,
DILUTED EARNINGS PER 2000 1999 2000 1999
SHARE
Net Income $1,227 $1,598 $3,891 $4,342
Less: Dividend
Requirement
on Preferred Stock 66 67 133 135
Net Income Applicable
to Common Stock $1,161 $1,531 $3,758 $4,207
Average Number of
Common Shares
Outstanding 4,747,776 4,703,965 4,746,232 4,667,028
Diluted Earnings per
Common Share $0.24 $0.32 $0.79 $0.90
PART I. EXHIBIT 99.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
SELECTED QUARTERLY FINANCIAL DATA
(000's except for per share data)
(UNAUDITED)
Three Months Ended Three Months Ended
September 30, December 31,
1999 1998 1999 1998
Total Operating Total Operating
Revenues $42,738 $40,315 Revenues $44,527 $40,828
Operating Income $3,392 $3,397 Operating Income $4,063 $4,181
Net Income $1,709 $1,717 Net Income $2,387 $2,432
Basic Earnings Basic Earnings
per Share $0.35 $0.37 per Share $0.49 $0.52
Diluted Earnings Diluted Earnings
per Share $0.35 $0.36 per Share $0.49 $0.50
Dividends Paid Dividends Paid
per Common Share $0.345 0.34 per Common Share $0.345 $0.34
Three Months Ended Three Months Ended
March 31, June 30,
2000 1999 2000 1999
Total Operating Total Operating
Revenues $46,317 $42,347 Revenues $42,908 $42,761
Operating Income $4,458 $4,551 Operating Income $3,030 $3,402
Net Income $2,664 $2,744 Net Income $1,227 $1,598
Basic Earnings Basic Earnings
per Share $0.55 $0.58 per Share $0.25 $0.32
Diluted Earnings Diluted Earnings
per Share $0.55 $0.58 per Share $0.24 $0.32
Dividends Paid Dividends Paid
per Common Share $0.345 $0.34 per Common Share $0.345 $0.345
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Description of Exhibit Reference
11 Computation in Support of
Earnings Per Average Common Share Filed herewith
99 Selected Quarterly Financial Data Filed herewith
(b) Reports on Form 8-K
During the quarter ended June 30, 2000, the Company did not
file any reports on Form 8-K.
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.
UNITIL CORPORATION
(Registrant)
Date: August 11, 2000 /s/ Anthony J. Baratta, Jr.
Anthony J. Baratta, Jr.
Chief Financial Officer
Date: August 11,2000
/s/ Mark H. Collin
Mark H. Collin
Treasurer