NSTAR/MA - 10-Q Quarterly Report

NSTAR
Form 10-Q - Quarterly Period Ended September 30, 2003

Table of Contents

Part I. Financial Information:				Page No.
	Item 1.	Financial Statements

			Condensed Consolidated Statements of Income	2

			Condensed Consolidated Statements of Comprehensive Income	3

			Condensed Consolidated Statements of Retained Earnings	3

			Condensed Consolidated Balance Sheets	4 - 5

			Condensed Consolidated Statements of Cash Flows	6

			Notes to Condensed Consolidated Financial Statements	7 - 15

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16 - 30

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		30

	Item 4.	Controls and Procedures		31

Part II. Other Information:

	Item 1.	Legal Proceedings		31

	Item 6.	Exhibits and Reports on Form 8-K		32

	Signature			33






Important Shareholder Information

NSTAR files its Forms 10-K, 10-Q and 8-K reports, proxy statements and other information with the Securities and Exchange Commission (SEC). You may access materials NSTAR has filed with the SEC on the SEC’s website at www.sec.gov. In addition, certain of NSTAR’s SEC filings can be accessed free of charge on NSTAR’s website at www.nstaronline.com. Copies of NSTAR’s filings may also be obtained by writing or calling NSTAR’s Investor Relations Department at the address or phone number on the cover of this Form 10-Q.

Table of Contents

Part I. Financial Information
Item 1. Financial Statements

NSTAR
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except earnings per share)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2003			2002			2003			2002

Operating revenues	$	817,791		$	743,284		$	2,229,256		$	2,041,782


Operating expenses:
Purchased power and cost of gas sold		450,189			375,653			1,233,797			1,071,311
Operations and maintenance		122,512			108,086			337,306			322,975
Depreciation and amortization		56,674			56,534			176,277			174,042
Demand side management and renewable
energy programs		17,805			17,910			50,079			49,782
Property and other taxes		24,063			22,303			73,197			73,504
Income taxes		43,373			45,657			95,812			87,251


Total operating expenses		714,616			626,143			1,966,468			1,778,865


Operating income		103,175			117,141			262,788			262,917


Other income (deductions):
Write-down of RCN investment, net		-			-			-			(27,601	)
Other income, net		1,094			3,980			8,764			12,041
Other deductions, net		(57	)		(719	)		(1,245	)		(1,358	)

Total other income (deductions), net		1,037			3,261			7,519			(16,918	)


Interest charges:
Long-term debt		29,890			27,791			91,226			83,829
Transition property securitization		8,131			9,229			25,036			28,359
Short-term debt and other interest		3,753			10,155			11,282			20,540
Allowance for borrowed funds used during
construction (AFUDC)/capitalized interest		(1,714	)		(490	)		(3,861	)		(930	)

Total interest charges		40,060			46,685			123,683			131,798


Net income		64,152			73,717			146,624			114,201
Preferred stock dividends of subsidiary		490			490			1,470			1,470

Earnings available for common shareholders	$	63,662		$	73,227		$	145,154		$	112,731



Weighted average common shares outstanding:
Basic		53,033			53,033			53,033			53,033



Diluted		53,436			53,310			53,383			53,293




Earnings per common share:
Basic	$	1.20		$	1.38		$	2.74		$	2.13



Diluted	$	1.19		$	1.37		$	2.72		$	2.12




Dividends declared per common share	$	0.54		$	0.53		$	1.62		$	1.59

The accompanying notes are an integral part of the condensed consolidated financial statements.
Table of Contents

NSTAR
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2003			2002			2003		2002


Net income	$	64,152		$	73,717		$	146,624	$	114,201

Other comprehensive income, net:
Unrealized (loss) gain on investments		(1,624	)		(10,423	)		15,193		(18,285	)
Reclassification adjustment for (gain) loss included
in net income		-			(887	)		-		5,602
Deferred income taxes		-			468			-		948

Comprehensive income	$	62,528		$	62,875		$	161,817	$	102,466

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NSTAR
Condensed Consolidated Statements of Retained Earnings
(Unaudited)
(in thousands)

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2003		2002		2003		2002


Balance at the beginning of the period	$	407,103	$	317,426	$	382,886	$	334,138
Add:
Net income		64,152		73,717		146,624		114,201

Subtotal		471,255		391,143		529,510		448,339

Deduct:
Dividends declared:
Common shares		28,674		28,106		85,949		84,322
Preferred stock		490		490		1,470		1,470

Subtotal		29,164		28,596		87,419		85,792

Balance at the end of the period	$	442,091	$	362,547	$	442,091	$	362,547

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NSTAR
Condensed Consolidated Balance Sheets
(in thousands)

				(Unaudited)
				September 30,			December 31,
				2003			2002

Assets

Utility plant in service, at original cost				$		4,207,523		$		4,090,843
	Less: accumulated depreciation					1,364,550				1,309,270

						2,842,973				2,781,573
Construction work in progress						95,865				66,047

	Net utility plant					2,938,838					2,847,620

Non-utility property, net						153,368					129,918

Goodwill						442,185					451,374
Equity and other investments						84,306					70,289

Current assets:
	Cash and cash equivalents					21,658					53,438
	Restricted cash					25,249					33,899
	Accounts receivable, net and accrued unbilled revenues					356,609					345,848
	Inventory, at average cost					87,580					58,555
	Other					15,439					14,886

			Total current assets			506,535					506,626


Deferred debits:
		Regulatory assets - other				735,824					802,200
		Regulatory assets - power contracts				698,232					773,922
		Regulatory assets - pension costs				440,001					425,755
		Other				92,193					96,574

		Total deferred debits				1,966,250					2,098,451


Total assets					$	6,091,482			$		6,104,278

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NSTAR
Condensed Consolidated Balance Sheets
(in thousands)

			(Unaudited)
		September 30,		December 31,
			2003		2002

Capitalization and Liabilities

Common equity:
	Common shares, par value $1 per share
	(100,000,000 shares authorized;
53,032,546 shares issued and outstanding)		$	53,033	$	53,033
	Premium on common shares		865,859		870,877
	Retained earnings		442,091		382,886
	Accumulated other comprehensive income (loss)		7,702		(7,491	)

	Total common equity

[X]		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended September 30, 2003
		or
[ ]		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from to


Massachusetts		04-3466300

(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)
800 Boylston Street, Boston, Massachusetts		02199

(Address of principal executive offices)		(Zip code)

Commission File Number:	1-14768