NSTAR/MA - 10-Q Quarterly Report

NSTAR
Form 10-Q - Quarterly Period Ended June 30, 2004

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 - 16

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16 - 32

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		32

	Item 4.	Controls and Procedures		32

Part II. Other Information:

	Item 1.	Legal Proceedings		33

	Item 2.	Changes in Securities and Use of Proceeds		33

	Item 6.	Exhibits and Reports on Form 8-K		34

Signature				35



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, NSTAR’s Board of Trustees has various committees, including an Audit, Finance and Risk Management Committee, an Executive Personnel Committee, a Board Governance and Nominating Committee and an Executive Committee. In 2003, the Board adopted the NSTAR Board of Trustees Corporate Guidelines on Significant Corporate Governance Issues, a Code of Ethics for the Principal Executive Officer, General Counsel, and Senior Financial Officers, and a Code of Ethics and Business Conduct for Directors, Officers and Employees. NSTAR’s SEC filings and Corporate Governance documents, including charters, guidelines and codes, and any amendments to such codes which are applicable to NSTAR’s executive officers, senior financial officers or trustees can be accessed free of charge on NSTAR’s website at www.nstaronline.com. Copies of NSTAR’s SEC 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 and dividends declared per share data)

	Three Months Ended							Six Months Ended
		June 30,						June 30,
		2004			2003			2004			2003


Operating revenues	$	649,787		$	647,029		$	1,459,695		$	1,409,961


Operating expenses:
Purchased power and cost of gas sold		346,721			349,275			817,791			783,855
Operations and maintenance		103,156			104,958			209,651			214,794
Depreciation and amortization		61,057			57,459			126,596			119,603
Demand side management and renewable energy programs		15,598			15,404			33,068			32,274
Property and other taxes		25,016			22,755			53,773			49,134
Income taxes		24,832			23,917			57,902			52,439

Total operating expenses		576,380			573,768			1,298,781			1,252,099


Operating income		73,407			73,261			160,914			157,862


Other income (deductions):
Other income, net		3,211			6,614			4,174			7,670
Other deductions, net		(273	)		(571	)		(417	)		(1,188	)

Total other income, net		2,938			6,043			3,757			6,482


Interest charges:
Long-term debt		29,352			29,557			58,289			61,336
Transition property securitization		7,174			8,221			14,757			16,905
Short-term debt and other		2,100			2,741			4,028			5,778
Allowance for borrowed funds used during
construction (AFUDC)/capitalized interest		(296	)		(859	)		(624	)		(2,147	)

Total interest charges		38,330			39,660			76,450			81,872


Preferred stock dividends of subsidiary		490			490			980			980

Net income	$	37,525		$	39,154		$	87,241		$	81,492




Weighted average common shares outstanding:
Basic		53,085			53,033			53,059			53,033



Diluted		53,583			53,404			53,533			53,358




Earnings per common share:
Basic	$	0.71		$	0.74		$	1.64		$	1.54



Diluted	$	0.70		$	0.73		$	1.63		$	1.53




Dividends declared per common share	$	0.555		$	0.54		$	1.11		$	1.08

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					Six Months Ended
		June 30,				June 30,
		2004		2003		2004		2003


Net income	$	37,525	$	39,154	$	87,241	$	81,492

Other comprehensive income, net:
Unrealized gain on investments		-		14,612		-		16,816

Comprehensive income	$	37,525	$	53,766	$	87,241	$	98,308

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					Six Months Ended
		June 30,				June 30,
		2004		2003		2004		2003


Balance at the beginning of the period	$	469,397	$	396,586	$	449,114	$	382,886
Add:
Net income		37,525		39,154		87,241		81,492

Subtotal		506,922		435,740		536,355		464,378
Deduct:
Dividends declared:
Common shares		29,481		28,637		58,914		57,275

Balance at the end of the period	$	477,441	$	407,103	$	477,441	$	407,103

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

Table of Contents

NSTAR
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)


						June 30,				December 31,
						2004				2003

Assets

Utility plant in service, at original cost				$		4,290,476	$		4,254,848
	Less: accumulated depreciation					1,071,892			1,109,248

						3,218,584			3,145,600
Construction work in progress						84,843			70,500

	Net utility plant					3,303,427				3,216,100

Non-utility property, net						156,151				160,556

Goodwill						432,996				439,122

Equity and other investments						72,178				68,888

Current assets:
	Cash and cash equivalents					27,818				16,526
	Restricted cash					10,233				13,144
	Accounts receivable, net and accrued unbilled revenues					361,591				352,374
	Inventory, at average cost					67,466				79,743
	Other					65,466				39,172

			Total current assets			532,574				500,959


Deferred debits:
		Regulatory assets - power contracts				695,514				799,087
		Regulatory assets - retiree benefit costs				341,774				340,111
		Regulatory assets - other				720,281				715,849
		Other				79,106				79,988

		Total deferred debits				1,836,675				1,935,035


Total assets					$	6,334,001		$		6,320,660

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

Table of Contents

NSTAR
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)


		June 30,			December 31,
		2004			2003

Capitalization and Liabilities

Common equity:
Common shares, par value $1 per share,
100,000,000 shares authorized; issued and outstanding
53,118,873 shares in 2004 and 53,032,546 shares in 2003	$	53,119		$	53,033
Premium on common shares		864,397			866,221
Retained earnings		477,441			449,114
Accumulated other comprehensive loss		(6,776	)		(6,776	)

Total common equity		1,388,181			1,361,592


Cumulative non-mandatory redeemable preferred
stock of subsidiary		43,000			43,000



Long-term debt		1,901,305			1,605,381
Transition property securitization		342,500			377,150

Total long-term debt		2,243,805			1,982,531

Total capitalization		3,674,986			3,387,123


Current liabilities:
Long-term debt		9,900			189,956
Transition property securitization		39,410			40,077
Notes payable		159,600			239,100
Accounts payable		208,253			224,987
Accrued expenses		277,968			231,838
Deferred income taxes		36,890			13,961

Total current liabilities		732,021			939,919



Deferred credits:
Accumulated deferred income taxes and unamortized
investment tax credits		785,187			765,507
Power contracts		695,514			799,087
Pension liability		35,302			46,659
Regulatory liability - cost of removal		255,312			223,074
Other		155,679			159,291

Total deferred credits		1,926,994			1,993,618

[X]		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended June 30, 2004
		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