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 September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
1-11377 CINERGY CORP. 31-1385023
(A Delaware Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030
(An Ohio Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-3543 PSI ENERGY, INC. 35-0594457
(An Indiana Corporation)
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611
2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080
(A Kentucky Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
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Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No
This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.
The Union Light, Heat and Power Company meets the conditions set forth in
General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its company
specific information with the reduced disclosure format.
As of October 31, 1996, shares of Common Stock outstanding for each registrant were as listed:
Company Shares
Cinergy Corp., par value $.01 per share 157,679,129
The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086
PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701
The Union Light, Heat and Power Company, par value $15.00 per share 585,333
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TABLE OF CONTENTS
Item Page
Number Number
Glossary of Terms . . . . . . . . . . . . . . . . . . .
PART I. FINANCIAL INFORMATION
1 Financial Statements
Cinergy Corp.
Consolidated Balance Sheets . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . .
Consolidated Statements of Changes in Common
Stock Equity. . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . .
The Cincinnati Gas & Electric Company
Consolidated Balance Sheets . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . .
PSI Energy, Inc.
Consolidated Balance Sheets . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . .
The Union Light, Heat and Power Company
Balance Sheets. . . . . . . . . . . . . . . . . . . .
Statements of Income. . . . . . . . . . . . . . . . .
Statements of Cash Flows. . . . . . . . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . .
Notes to Financial Statements . . . . . . . . . . . . .
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . .
PART II. OTHER INFORMATION
1 Legal Proceedings . . . . . . . . . . . . . . . . . . .
4 Submission of Matters to a Vote of Security Holders . .
5 Other Information . . . . . . . . . . . . . . . . . . .
6 Exhibits and Reports on Form 8-K. . . . . . . . . . . .
Signatures. . . . . . . . . . . . . . . . . . . . . . .
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GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text of this combined Form
10-Q are defined below:
TERM DEFINITION_________________________
1995 Form Combined 1995 Annual Report on Form 10-K filed separately by
10-K Cinergy, as amended, CG&E, PSI, and ULH&P
AEP American Electric Power Company, Inc.
Articles Amended Articles of Incorporation
Avon Energy Avon Energy Partners Holdings, an Unlimited Liability
Company and its wholly-owned subsidiary Avon Energy
Partners PLC, a Limited Liability Company
Bankruptcy Court United States Bankruptcy Court for the Southern District of
Indiana
Bruwabel Beheer-En Belegginsmaatschappij Bruwabel B.V., a subsidiary
of Power International
CAC Citizens Action Coalition of Indiana, Inc.
CG&E The Cincinnati Gas & Electric Company (a subsidiary of
Cinergy)
Cinergy or Cinergy Corp.
Company
Cinergy U.K. Formerly M.E. Holdings, Inc., (a subsidiary of Investments)
which holds Cinergy's 50% investment in Avon Energy
Clean Coal A joint arrangement by PSI and Destec Energy, Inc. for a
Project 262-mw clean coal power generating facility located at
Wabash River Generating Station, which was placed in
service in November 1995
CWIP Construction work in progress
D&P Duff & Phelps Credit Rating Co.
DSM Demand-side management
Eagle Eagle Coal Company
Exxon Exxon Coal and Minerals Company
FASB Financial Accounting Standards Board
February 1995 An IURC order issued in February 1995
Order
FERC Federal Energy Regulatory Commission
FERC Order 888 FERC order which promotes wholesale competition through
open access non-discriminatory transmission services by
public utilities and recovery of stranded costs by public
utilities and transmitting utilities
FERC Order 889 FERC order which provides for open access same-time
information system
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GLOSSARY OF TERMS (Continued)
TERM DEFINITION_________________________
Fitch Fitch Investors Service, Inc.
Gibson Gibson Generating Station
GPU General Public Utilities Corporation
IBEW International Brotherhood of Electrical Workers
Investments Cinergy Investments, Inc. (a subsidiary of Cinergy)
IURC Indiana Utility Regulatory Commission
IUU Independent Utilities Union
KO Transmission KO Transmission Company, a subsidiary of CG&E
KPSC Kentucky Public Service Commission
kwh Kilowatt-hour
May 1992 Order A PUCO order issued in May 1992
Mcf Thousand cubic feet
Mega-NOPR FERC's notice of proposed rulemaking which resulted in FERC
Order 888 and 889
Merger Costs Merger transaction costs and costs to achieve merger savings
Merger Order The FERC's order approving the merger of CG&E and Resources
to form Cinergy
Miami Fort Miami Fort Generating Station
Midlands Midlands Electricity plc
Money Pool Cinergy system companies with surplus short-term funds,
whether from internal or external sources, provide short-
term loans to other system companies at rates that reflect
(1) the actual costs of the external borrowing and/or (2)
the costs of the internal funds which are set at the 30-
day Federal Reserve "AA" industrial commercial paper
composite rate.
Moody's Moody's Investors Service
mw Megawatt
NOPR A FERC Notice of Proposed Rulemaking
Order 636 FERC order regarding gas purchases and transportation
Power
International Power International, Inc., a subsidiary of Investments
PSI PSI Energy, Inc. (a subsidiary of Cinergy)
PSI Recycling PSI Recycling, Inc. (a subsidiary of Investments)
PUCO Public Utilities Commission of Ohio
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GLOSSARY OF TERMS (Continued)
TERM DEFINITION_________________________
PUHCA Public Utility Holding Company Act of 1935
RUS Rural Utilities Service, previously called the Rural
Electrification Administration
S&P Standard & Poor's
SEC Securities and Exchange Commission
September 1996 An IURC order issued in September 1996
Order
Statement 121 Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", issued in March
1995 by the FASB, is a new accounting standard requiring
impairment losses on long-lived assets to be recognized
when an asset's book value exceeds its expected future
cash flows
UCC The Indiana Office of the Utility Consumer Counselor
ULH&P The Union Light, Heat and Power Company (a wholly-owned
subsidiary of CG&E)
USWA United Steelworkers of America
Woodsdale Woodsdale Generating Station
WVPA Wabash Valley Power Association, Inc.
Zimmer William H. Zimmer Generating Station
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CINERGY CORP.
AND SUBSIDIARY COMPANIES
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1996 1995
(dollars in thousands)
Utility Plant - Original Cost
In service
Electric $8 741 872 $8 617 695
Gas 699 566 680 339
Common 185 339 184 694
9 626 777 9 482 728
Accumulated depreciation 3 537 840 3 367 432
6 088 937 6 115 296
Construction work in progress 164 553 135 852
Total utility plant 6 253 490 6 251 148
Current Assets
Cash and temporary cash investments 28 622 35 052
Restricted deposits 1 720 2 336
Accounts receivable less accumulated
provision for doubtful accounts of
$12,415 at September 30, 1996, and
$10,360 at December 31, 1995 105 568 371 150
Materials, supplies, and fuel - at average
cost
Fuel for use in electric production 81 654 122 409
Gas stored for current use 37 215 21 493
Other materials and supplies 86 584 85 076
Property taxes applicable to subsequent year 29 206 116 822
Prepayments and other 26 299 32 347
396 868 786 685
Other Assets
Regulatory assets
Amounts due from customers - income taxes 380 519 423 493
Post-in-service carrying costs and
deferred operating expenses 188 370 187 190
Phase-in deferred return and depreciation 96 469 100 388
Coal contract buyout costs 137 686 -
Deferred DSM costs 134 832 129 400
Deferred merger costs 96 339 56 824
Unamortized costs of reacquiring debt 71 921 73 904
Other 95 393 74 911
Investment in Avon Energy 512 747 -
Other 233 927 136 121
1 948 203 1 182 231
$8 598 561 $8 220 064
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The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
CINERGY CORP.
CAPITALIZATION AND LIABILITIES
September 30 December 31
1996 1995
(dollars in thousands)
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding shares
- 157,679,129 at September 30, 1996, and
157,670,141 at December 31, 1995 $ 1 577 $ 1 577
Paid-in capital 1 592 393 1 597 050
Retained earnings 993 039 950 216
Cumulative foreign currency translation
adjustment (584) -___
Total common stock equity 2 586 425 2 548 843
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 194 235 227 897
Subject to mandatory redemption - 160 000
Long-term Debt 2 383 827 2 530 766
Total capitalization 5 164 487 5 467 506
Current Liabilities
Long-term debt due within one year 140 400 201 900
Notes payable 817 454 165 800
Accounts payable 262 180 268 139
Litigation settlement 80 000 80 000
Accrued taxes 227 728 317 185
Accrued interest 46 269 55 995
Other 60 082 57 202
1 634 113 1 146 221
Other Liabilities
Deferred income taxes 1 120 145 1 120 900
Unamortized investment tax credits 177 959 185 726
Accrued pension and other postretirement
benefit costs 205 112 171 771
Other 296 745 127 940
1 799 961 1 606 337
$8 598 561 $8 220 064
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CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Year to
Date Twelve Months Ended
September 30
September 30 September 30
1996 1995 1996
1995 1996 1995
(in thousands,
except per share amounts)
Operating Revenues
Electric $ 724 917 $ 731 903 $2 060 471
$1 973 393 $2 699 657 $2 550 913
Gas 40 787 33 591 306 062
265 777 451 137 376 978
765 704 765 494 2 366 533
2 239 170 3 150 794 2 927 891
Operating Expenses
Fuel used in electric production 184 093 190 445 539 350
545 548 710 556 718 907
Gas purchased 17 133 13 155 150 313
130 235 226 328 189 469
Purchased and exchanged power 37 020 15 685 95 443
32 992 110 083 39 346
Other operation 129 009 131 453 423 769
371 983 572 376 550 039
Maintenance 45 903 39 851 137 709
127 834 192 055 184 931
Depreciation 70 811 68 680 211 603
210 351 281 011 286 304
Amortization of phase-in deferrals 3 399 3 409 10 198
5 682 13 607 5 682
Post-in-service deferred operating
expenses - net (930) (71) (2 637)
(2 140) (2 997) (3 500)
Income taxes 65 456 69 952 172 459
173 170 220 718 191 224
Taxes other than income taxes 63 549 64 380 196 095
192 066 259 562 251 241
615 443 596 939 1 934 302
1 787 721 2 583 299 2 413 643
Operating Income 150 261 168 555 432 231
451 449 567 495 514 248
Other Income and Expenses - Net
Allowance for equity funds used
during construction 358 (1 159) 1 206
726 2 444 153
Post-in-service carrying costs 391 602 1 228
3 183 1 231 6 205
Phase-in deferred return 2 093 2 135 6 279
6 403 8 413 8 349
Income taxes 2 677 2 366 7 963
5 950 9 371 10 425
Other - net 4 117 707 (6 815)
(2 224) (7 642) (21 306)
9 636 4 651 9 861
14 038 13 817 3 826
Income Before Interest and Other
Charges 159 897 173 206 442 092
465 487 581 312 518 074
Interest and Other Charges
Interest on long-term debt 46 522 54 154 143 678
160 654 196 935 215 645
Other interest 10 305 5 392 18 497
16 520 22 803 22 989
Allowance for borrowed funds used
during construction (1 455) (2 027) (4 235)
(6 324) (5 976) (9 191)
Preferred dividend requirements of
subsidiaries 6 495 6 770 19 941
24 084 26 710 32 742
61 867 64 289 177 881
194 934 240 472 262 185
Net Income $ 98 030 $ 108 917 $ 264 211
$ 270 553 $ 340 840 $ 255 889
Costs of reacquisition of preferred
stock of subsidiary (Note 6) (18 175) - (18 175)
- - (18 175) -___
Net Income Applicable to Common Stock $ 79 855 $ 108 917 $ 246 036
$ 270 553 $ 322 665 $ 255 889
Average Common Shares Outstanding 157 679 156 945 157 678
156 324 157 633 154 797
Earnings Per Common Share
Net Income $ .63 $.69 $ 1.68
$1.73 $ 2.17 $1.62
Costs of reacquisition of preferred
stock of subsidiary (Note 6) (.12) - (.12)
- - (.12) -__
Net Income Applicable to Common Stock $ .51 $.69 $ 1.56
$1.73 $ 2.05 $1.62
Dividends Declared Per Common Share $ .43 $.43 $ 1.29
$1.29 $ 1.72 $1.65
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
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CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(unaudited)
Cumulative
Foreign
Currency
Common Paid-in
Retained Translation Total Common
Stock Capital
Earnings Adjustment Stock Equity
(dollars in
thousands)
Quarter Ended September 30, 1996
Balance July 1, 1996 $1 577 $1 594 920 $ 981
003 $(567) $2 576 933
Net income 98
030 98 030
Dividends on common stock (see page 9 for
per share amounts) (67
802) (67 802)
Translation adjustments
(17) (17)
Costs of reacquisition of preferred stock
of subsidiary (Note 6) (18
175) (18 175)
Other ______ (2 527)
(17) _____ (2 544)
Balance September 30, 1996 $1 577 $1 592 393 $ 993
039 $(584) $2 586 425
Quarter Ended September 30, 1995
Balance July 1, 1995 $1 566 $1 570 873 $ 900
094 $ $2 472 533
Net income 108
917 108 917
Issuance of 572,455 shares of common
stock - net 6 14 597
14 603
Common stock issuance expenses (2)
(2)
Dividends on common stock (see page 9 for
per share amounts) (67
359) (67 359)
Other 2
_________ _____ 2
Balance September 30, 1995 $1 572 $1 585 470 $ 941
652 $ $2 528 694
Nine Months Ended September 30, 1996
Balance January 1, 1996 $1 577 $1 597 050 $ 950
216 $ $2 548 843
Net income 264
211 264 211
Issuance of 8,988 shares of common
stock - net 311
311
Dividends on common stock (see page 9 for
per share amounts) (203
402) (203 402)
Translation adjustments
(584) (584)
Costs of reacquisition of preferred stock
of subsidiary (Note 6) (18
175) (18 175)
Other ______ (4 968)
189 _____ (4 779)
Balance September 30, 1996 $1 577 $1 592 393 $ 993
039 $(584) $2 586 425
Nine Months Ended September 30, 1995
Balance January 1, 1995 $1 552 $1 535 658 $ 877
061 $ $2 414 271
Net income 270
553 270 553
Issuance of 1,941,748 shares of common
stock - net 20 48 734
48 754
Common stock issuance expenses (191)
(191)
Dividends on common stock (see page 9 for
per share amounts) (201
251) (201 251)
Other ______ 1 269 (4
711) _____ (3 442)
Balance September 30, 1995 $1 572 $1 585 470 $ 941
652 $ $2 528 694
Twelve Months Ended September 30, 1996
Balance October 1, 1995 $1 572 $1 585 470 $ 941
652 $ $2 528 694
Net income 340
840 340 840
Issuance of 539,343 shares of common
stock - net 5 11 920
11 925
Common stock issuance expenses (38)
(38)
Dividends on common stock (see page 9 for
per share amounts) (271
002) (271 002)
Translation adjustments
(584) (584)
Costs of reacquisition of preferred stock
of subsidiary (Note 6) (18
175) (18 175)
Other ______ (4 959)
(276) _____ (5 235)
Balance September 30, 1996 $1 577 $1 592 393 $ 993
039 $(584) $2 586 425
Twelve Months Ended September 30, 1995
Balance October 1, 1994 $1 473 $1 359 477 $ 945
679 $ $2 306 629
Net income 255
889 255 889
Issuance of 9,705,354 shares of common
stock - net 99 230 000
230 099
Common stock issuance expenses (5 298)
(5 298)
Dividends on common stock (see page 9 for
per share amounts) (255
637) (255 637)
Other 1 291 (4
279) _____ (2 988)
Balance September 30, 1995 $1 572 $1 585 470 $ 941
652 $ $2 528 694
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
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CINERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date Twelve
Months Ended
September 30
September 30
1996 1995 1996
1995
(in thousands)
Operating Activities
Net income $ 264 211 $ 270 553 $ 340 840
$ 255 889
Items providing (using) cash currently
Depreciation 211 603 210 351 281 011
286 304
Deferred income taxes and investment
tax credits - net 34 061 27 836 34 636
28 590
Allowance for equity funds used
during construction (1 206) (726) (2 444)
(153)
Regulatory assets - net (27 444) (55) (26 363)
(13 294)
Changes in current assets and
current liabilities
Restricted deposits (357) 8 (1 400)
8 633
Accounts receivable, net of
reserves on receivables sold 227 237 32 034 123 562
(1 880)
Materials, supplies, and fuel 23 525 26 217 48 522
22 677
Accounts payable (5 959) (93 413) 89 126
(28 370)
Accrued taxes and interest (8 734) 28 223 19 678
56 040
Other items - net (43 003) (15 531) (15 336)
(976)
Net cash provided by (used in)
operating activities 673 934 485 497 891 832
613 460
Financing Activities
Issuance of common stock 311 48 563 11 887
224 801
Issuance of long-term debt - 344 280 -
344 280
Funds on deposit from issuance of
long-term debt 973 (75 316) 86 276
(68 630)
Retirement of preferred stock of
subsidiaries (209 559) (93 458) (209 567)
(93 474)
Redemption of long-term debt (207 583) (298 553) (307 863)
(298 988)
Change in short-term debt 651 654 55 100 533 454
(41 514)
Dividends on common stock (203 402) (201 251) (271 002)
(255 637)
Net cash provided by (used in)
financing activities 32 394 (220 635) (156 815)
(189 162)
Investing Activities
Construction expenditures (less
allowance for equity funds used
during construction) (203 977) (231 943) (296 939)
(386 233)
Deferred DSM costs - net (5 432) (17 356) (13 349)
(34 697)
Investment in Avon Energy (503 349) - (503 349)
- -
Equity investment in Argentine
utility - - 19 799
(32)
Net cash provided by (used in)
investing activities (712 758) (249 299) (793 838)
(420 962)
Net increase (decrease) in cash and
temporary cash investments (6 430) 15 563 (58 821)
3 336
Cash and temporary cash investments at
beginning of period 35 052 71 880 87 443
84 107
Cash and temporary cash investments at
end of period $ 28 622 $ 87 443 $ 28 622
$ 87 443
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
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CINERGY CORP.
Below is information concerning the consolidated results of operations for Cinergy for the quarter, nine months, and twelve months ended September 30, 1996. For information concerning the results of operations for each of the other registrants for the same quarter and nine months ended, see the discussion under the heading RESULTS OF OPERATIONS following the financial statements of each company.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales increased 2.2% for the quarter ended September 30, 1996, from the comparable period of last year primarily reflecting increased activity in Cinergy's power marketing operations which led to higher non-firm power sales for resale. Also, increased industrial sales primarily reflected growth in the primary metals sector. These increases were partially offset by a return to more normal weather for the third quarter of 1996, resulting in decreased residential and commercial sales.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the third quarter of 1996 increased 13.2% as compared to the same period in 1995. Increased residential and commercial gas sales reflected, in part, increases in the average number of customers. Higher gas transportation volumes reflected the continuing trend of industrial customers purchasing gas directly from suppliers, using transportation services provided by CG&E. The increase in transportation volumes mainly reflects demand for gas transportation services in the primary metals sector.
Operating Revenues
Electric Operating Revenues
Electric operating revenues for the quarter ended September 30, 1996, decreased $7 million (1.0%) as compared to the same period last year primarily as a result of the decreased residential and commercial kwh sales previously discussed. This decrease was almost wholly offset by increased activity in Cinergy's power marketing operations which led to higher non-firm power sales for resale as previously discussed.
An analysis of electric operating revenues is shown below:
Quarter
Ended September 30
(in millions)
Electric operating revenues - September 30, 1995 $732
Increase (Decrease) due to change in:
Price per kwh
Sales for resale
Firm power obligations (3)
Non-firm power transactions (1)
Total change in price per kwh (4)
Kwh sales
Retail (19)
Sales for resale
Firm power obligations (2)
Non-firm power transactions 17
Total change in kwh sales (4)
Other 1
Electric operating revenues - September 30, 1996 $725
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Gas Operating Revenues
Gas operating revenues increased $7 million (21.4%) in the third quarter of 1996, when compared to the same period last year. This increase was primarily a result of the operation of fuel adjustment clauses reflecting a higher average cost of gas purchased and the previously discussed changes in gas sales and transportation volumes.
Operating Expenses
Gas Purchased
Gas purchased for the quarter ended September 30, 1996, increased $4 million (30.2%) when compared to the same period last year reflecting a higher average cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power increased $21 million for the quarter ended September 30, 1996, when compared to the same period last year, primarily reflecting increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing operations.
Maintenance
The $6 million (15.2%) increase in maintenance expenses for the third quarter of 1996 as compared to the same period of 1995 is primarily due to increased maintenance on CG&E's electric production and transmission facilities.
Other Income and Expenses - Net
Other - net
Other - net increased $3 million for the three months ended September 30, 1996, from the same period of 1995 primarily due to Cinergy's equity in earnings of Avon Energy. The effects of expenses associated with CG&E's and ULH&P's sales of accounts receivables in 1996 and interest received in 1995 associated with a refund of an overpayment of Federal income taxes related to prior years partially offset this increase.
Interest and Other Charges
Interest on Long-term Debt
Interest charges on long-term debt decreased $8 million (14.1%) for the three months ended September 30, 1996, from the same period of 1995 primarily due to the redemption of $161.5 million of long-term debt by CG&E and ULH&P during the period from January 1996 through May 1996 and the redemption of $110 million by PSI during the period from August 1995 through July 1996.
Other Interest
Other interest increased $5 million (91.1%) for the third quarter of 1996, as compared to the same period last year, primarily reflecting increased interest expense on short-term borrowings used to fund Cinergy's investment in Avon Energy.
Costs of Reacquisition of Preferred Stock of Subsidiary
Costs of reacquisition of preferred stock of subsidiary represents the difference between the par value of preferred stock of CG&E tendered pursuant to Cinergy's tender offer in September of 1996 and the purchase price paid (including tender fees paid to dealer managers) by Cinergy for these shares. (See Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information.")
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales increased 8.4% for the nine months ended September 30, 1996, from the comparable period of last year primarily reflecting increased activity in Cinergy's power marketing operations which led to higher non-firm power sales for resale. The higher kwh sales levels reflected increased sales to all retail customer classes. The increase to retail sales reflects a higher average number of residential and commercial customers, while industrial sales increased primarily due to growth in the primary metals sector. These increases were partially offset by the return to more normal weather in the third quarter of 1996.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the first nine months of 1996
increased 13.9% as compared to the same period in 1995. Colder weather during
the winter heating season, cooler than normal weather early in the second
quarter of 1996, and increases in the average number of customers led to
increased gas sales to residential and commercial customers. Industrial sales
decreased as customers continued to purchase gas directly from suppliers,
using transportation services provided by CG&E. The increase in
transportation volumes mainly reflects demand for gas transportation services
in the primary metals sector.
.
Operating Revenues
Electric Operating Revenues
Compared to the same period last year, electric operating revenues for the nine months ended September 30, 1996, increased $87 million (4.4%) reflecting the increased kwh sales, as previously discussed. In addition, PSI's 4.3% retail rate increase approved in the February 1995 Order and a 1.9% increase for carrying costs on CWIP property which was approved by the IURC in March 1995 contributed to the increase. The return of approximately $13 million to PSI's customers in accordance with the February 1995 Order, which requires all retail operating income above a certain rate of return to be refunded to customers, slightly offset these increases.
An analysis of electric operating revenues is shown below:
Nine Months
Ended September 30
(in millions)
Electric operating revenues - September 30, 1995 $1 973
Increase (Decrease) due to change in:
Price per kwh
Retail (14)
Sales for resale
Firm power obligations (5)
Non-firm power transactions 3
Total change in price per kwh (16)
Kwh sales
Retail 51
Sales for resale
Firm power obligations 6
Non-firm power transactions 46
Total change in kwh sales 103
Electric operating revenues - September 30, 1996 $2 060
|
Gas Operating Revenues
Gas operating revenues increased $40 million (15.2%) in the first nine months of 1996, when compared to the same period last year. This increase was primarily a result of the previously discussed changes in gas sales and transportation volumes. Also contributing to the increase was the operation of fuel adjustment clauses reflecting a higher cost of gas purchased.
Operating Expenses
Gas Purchased
Gas purchased for the nine months ended September 30, 1996, increased $20 million (15.4%) when compared to the same period last year. This increase was attributable to an increase in volumes purchased and a higher average cost per Mcf of gas purchased as previously discussed.
Purchased and Exchanged Power
Purchased and exchanged power increased $62 million for the nine months ended September 30, 1996, when compared to the same period last year, primarily reflecting increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing operations.
Other Operation
Other operation expenses for the nine months ended September 30, 1996, increased $52 million (13.9%), as compared to the same period last year. This increase is due to a number of factors, including increased transmission expenses and higher administrative and general expenses reflecting, in part, charges of $17.4 million for early retirement and severance programs. Other factors include the recognition by PSI of postretirement benefit costs on an accrual basis, an increase in the ongoing level of DSM expenses, and the amortization of deferred postretirement benefit costs and deferred DSM costs, which are being recovered in revenues pursuant to the February 1995 Order.
Maintenance
The $10 million (7.7%) increase in maintenance expenses for the nine months ended September 30, 1996, as compared to the same period last year, is primarily attributable to increased maintenance on CG&E's electric production facilities. Maintenance on the Clean Coal Project which began commercial operation in November 1995 and increased transmission and distribution expenses also contributed to the higher level of maintenance expenses.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for Zimmer included in the May 1992 Order. In the first three years of the phase- in plan, rates charged to customers did not fully recover depreciation expense and return on investment. This deficiency was deferred and is being recovered over a seven-year period that began in May 1995.
Other Income and Expenses - Net
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $2 million (61.4%) for the nine months ended September 30, 1996, from the comparable period of 1995 as a result of PSI's discontinuing the accrual of post-in-service carrying costs on qualified environmental projects upon the inclusion in rates of the costs of the projects pursuant to the February 1995 Order.
Other - net
Other - net decreased $5 million from the same period in 1995 due to a number of factors, including the effects of interest received in 1995 on an income tax refund related to prior years and expenses associated with CG&E's and ULH&P's sales of accounts receivables in 1996, as previously mentioned. These decreases were partially offset by Cinergy's equity in the earnings of Avon Energy.
Interest and Other Charges
Interest on Long-term Debt
Interest charges on long-term debt decreased $17 million (10.6%) for the nine months ended September 30, 1996, from the same period of 1995 primarily due to the refinancing by CG&E and ULH&P of over $330 million of long-term debt during the period from March 1995 through November 1995, the redemption of $161.5 million by CG&E and ULH&P during the period from January 1996 through May 1996, and the redemption of $110 million by PSI during the period from August 1995 through July 1996.
Other Interest
Other interest increased $2 million (12.0%) for the nine months ended September 30, 1996, as compared to the same period of 1995, primarily reflecting increased interest expense on short-term borrowings used to fund Cinergy's investment in Avon Energy.
Preferred Dividend Requirements of Subsidiaries
The decrease in the preferred dividend requirement of $4 million (17.2%) for the nine months ended September 30, 1996, from the same period of 1995 was due to the early redemption in July 1995 of all 400,000 shares and 500,000 shares of CG&E's 7.44% Series and 9.15% Series $100 par value cumulative preferred stock, respectively.
Costs of Reacquisition of Preferred Stock of Subsidiary
Costs of reacquisition of preferred stock of subsidiary represents the difference between the par value of preferred stock of CG&E tendered pursuant to Cinergy's tender offer in September of 1996 and the purchase price paid (including tender fees paid to dealer managers) by Cinergy for these shares. (See Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information.")
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales increased 9.1% for the twelve months ended September 30, 1996, from the comparable period of last year partially reflecting increased activity in Cinergy's power marketing operations which led to higher non-firm power sales for resale. Also contributing to the higher kwh sales levels were increased sales to residential and commercial customers as a result of colder weather during the fourth quarter of 1995 and the first quarter of 1996, and cooler than normal weather during the second quarter of 1996. Additionally, the increase reflects a higher average number of residential and commercial customers, while industrial sales increased primarily due to growth in the primary metals sector. These increases were partially offset by the return to more normal weather in the third quarter of 1996.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the twelve months ended September 30, 1996, increased 18.8% as compared to the same period in 1995. Colder weather during the winter heating season and cooler than normal weather early in the second quarter of 1996 primarily contributed to this increase. Industrial sales decreased as customers continued to purchase gas directly from suppliers, using transportation services provided by CG&E. The increase in transportation volumes, which more than offset the decline in industrial sales, mainly reflects demand for gas transportation services in the primary metals sector.
Operating Revenues
Electric Operating Revenues
Compared to the same period last year, electric operating revenues for the twelve months ended September 30, 1996, increased $149 million (5.8%), reflecting increased kwh sales and PSI's rate increases, as previously discussed. The return of approximately $16 million to customers in accordance with the February 1995 Order, which requires all retail operating income above a certain rate of return to be refunded to customers, slightly offset these increases.
An analysis of electric operating revenues is shown below:
Twelve Months
Ended September 30
(in millions)
Electric operating revenues - September 30, 1995 $2 551
Increase (Decrease) due to change in:
Price per kwh
Retail (10)
Sales for resale
Firm power obligations (9)
Non-firm power transactions 7
Total change in price per kwh (12)
Kwh sales
Retail 100
Sales for resale
Firm power obligations 8
Non-firm power transactions 53
Total change in kwh sales 161
Electric operating revenues - September 30, 1996 $2 700
|
Gas Operating Revenues
Gas operating revenues increased $74 million (19.7%) for the twelve months ended September 30, 1996, when compared to the same period last year. This increase was primarily a result of the previously discussed changes in gas sales and transportation volumes.
Operating Expenses
Gas Purchased
Gas purchased for the twelve months ended September 30, 1996, increased $37 million (19.5%) when compared to the same period last year. This increase reflects higher volumes purchased and an increase in the average cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power increased $71 million for the twelve months ended September 30, 1996, when compared to the same period of last year, primarily reflecting increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing operations.
Amortization of Phase-in Deferrals
As previously discussed, amortization of phase-in deferrals reflect the PUCO- ordered phase-in plan for Zimmer included in the May 1992 Order.
Other Income and Expenses - Net
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $5 million (80.2%) for the twelve months ended September 30, 1996, from the comparable period of last year. This decrease is a result of PSI's discontinuing the accrual of post-in- service carrying costs on qualified environmental projects upon the inclusion in rates of the costs of the projects pursuant to the February 1995 Order. Partially offsetting the decrease is the accrual of the aforementioned costs on the Clean Coal Project which began commercial operation in November 1995.
Other - net
Other - net increased $14 million (64.1%) for the twelve months ended September 30, 1996, from the comparable period of 1995, reflecting a $10 million gain on the sale of an Argentine utility, Cinergy's equity in the earnings of Avon Energy, and charges of $14 million in the fourth quarter of 1994 for merger-related and other expenditures which cannot be recovered from customers. These items were partially offset by a number of factors, including the effects of charges associated with winding-down certain non- utility activities during 1995, interest received in 1995 on an income tax refund related to prior years, and expenses associated with CG&E's and ULH&P's sales of accounts receivables in 1996.
Interest and Other Charges
Interest on Long-term Debt
Interest charges on long-term debt decreased $19 million (8.7%) for the twelve months ended September 30, 1996, from the same period of 1995 primarily due to the refinancing of over $330 million of long-term debt by CG&E and ULH&P during the period from March 1995 through November 1995, the redemption of $161.5 million by CG&E and ULH&P during the period from January 1996 through May 1996, and the redemption of $110 million by PSI during the period from August 1995 through July 1996.
Preferred Dividend Requirements of Subsidiaries
The decrease in the preferred dividend requirement of $6 million (18.4%) for the twelve months ended September 30, 1996, from the same period of 1995 was due to the early redemption in July 1995 of all 400,000 shares and 500,000 shares of CG&E's 7.44% Series and 9.15% Series $100 par value cumulative preferred stock, respectively.
Costs of Reacquisition of Preferred Stock of Subsidiary
Costs of reacquisition of preferred stock of subsidiary represents the difference between the par value of preferred stock of CG&E tendered pursuant to Cinergy's tender offer in September of 1996 and the purchase price paid (including tender fees paid to dealer managers) by Cinergy for these shares. (See Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information.")
THE CINCINNATI GAS &
ELECTRIC COMPANY
AND SUBSIDIARY COMPANIES
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1996 1995
(dollars in thousands)
Utility Plant - Original Cost
In service
Electric $4 624 135 $4 564 711
Gas 699 566 680 339
Common 184 067 183 422
5 507 768 5 428 472
Accumulated depreciation 1 838 745 1 730 232
3 669 023 3 698 240
Construction work in progress 84 915 77 661
Total utility plant 3 753 938 3 775 901
Current Assets
Cash and temporary cash investments 16 718 6 612
Restricted deposits 1 171 1 144
Notes receivable from affiliated companies 54 480 24 715
Accounts receivable less accumulated
provision for doubtful accounts of
$12,042 at September 30, 1996, and
$9,615 at December 31, 1995 47 531 292 493
Accounts receivable from affiliated companies 5 970 17 162
Materials, supplies, and fuel - at average
cost
Fuel for use in electric production 28 636 40 395
Gas stored for current use 37 215 21 493
Other materials and supplies 53 804 55 388
Property taxes applicable to subsequent year 29 206 116 822
Prepayments and other 22 981 30 572
297 712 606 796
Other Assets
Regulatory assets
Amounts due from customers - income taxes 347 670 397 155
Post-in-service carrying costs and deferred
operating expenses 143 198 148 316
Phase-in deferred return and depreciation 96 469 100 388
Deferred DSM costs 29 628 19 158
Deferred merger costs 18 706 14 538
Unamortized costs of reacquiring debt 39 338 39 428
Other 25 483 41 025
Other 102 695 54 691
803 187 814 699
$4 854 837 $5 197 396
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The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated financial statements.
THE CINCINNATI GAS & ELECTRIC COMPANY
CAPITALIZATION AND LIABILITIES
September 30 December 31
1996 1995
(dollars in thousands)
Common Stock Equity
Common stock - $8.50 par value; authorized
shares - 120,000,000; outstanding shares -
89,663,086 at September 30, 1996, and
December 31, 1995 $ 762 136 $ 762 136
Paid-in capital 536 128 339 101
Retained earnings 264 297 427 226
Total common stock equity 1 562 561 1 528 463
Cumulative Preferred Stock
Not subject to mandatory redemption 21 145 40 000
Subject to mandatory redemption - 160 000
Long-term Debt 1 564 868 1 702 650
Total capitalization 3 148 574 3 431 113
Current Liabilities
Long-term debt due within one year 130 000 151 500
Notes payable 82 100 -
Notes payable to affiliated companies 1 500 -
Accounts payable 125 503 138 735
Accounts payable to affiliated companies 91 20 468
Accrued taxes 164 402 250 189
Accrued interest 32 611 31 299
Other 43 836 40 409
580 043 632 600
Other Liabilities
Deferred income taxes 782 084 795 385
Unamortized investment tax credits 124 307 129 372
Accrued pension and other postretirement
benefit costs 142 625 117 641
Other 77 204 91 285
1 126 220 1 133 683
$4 854 837 $5 197 396
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THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Year to
Date
September 30
September 30
1996 1995 1996
1995
(in thousands)
Operating Revenues
Electric
Non-affiliated companies $ 382 718 $ 399 472 $1 109 300
$1 070 892
Affiliated companies 7 634 1 702 27 889
16 761
Gas
Non-affiliated companies 40 787 33 591 306 062
265 777
Affiliated companies 4 - 5
- -___
431 143 434 765 1 443 256
1 353 430
Operating Expenses
Fuel used in electric production 82 449 84 101 267 007
252 638
Gas purchased 17 133 13 155 150 313
130 235
Purchased and exchanged power
Non-affiliated companies 10 355 4 228 24 021
6 924
Affiliated companies 5 821 10 866 14 576
29 587
Other operation 66 786 69 834 235 513
204 557
Maintenance 22 844 18 994 68 745
63 973
Depreciation 40 322 39 836 120 557
119 060
Amortization of phase-in deferrals 3 399 3 409 10 198
5 682
Amortization of post-in-service
deferred operating expenses 786 823 2 431
2 468
Income taxes 41 675 40 730 115 902
108 293
Taxes other than income taxes 49 820 50 358 154 733
151 345
341 390 336 334 1 163 996
1 074 762
Operating Income 89 753 98 431 279 260
278 668
Other Income and Expenses - Net
Allowance for equity funds used
during construction 358 269 1 206
1 146
Phase-in deferred return 2 093 2 135 6 279
6 403
Income taxes 819 (31) 4 299
2 796
Other - net (1 505) 4 446 (6 095)
4 851
1 765 6 819 5 689
15 196
Income Before Interest 91 518 105 250 284 949
293 864
Interest
Interest on long-term debt 30 304 36 507 93 392
107 108
Other interest 522 679 1 466
2 926
Allowance for borrowed funds used
during construction (813) (894) (2 598)
(2 774)
30 013 36 292 92 260
107 260
Net Income 61 505 68 958 192 689
186 604
Preferred Dividend Requirement (3 475) (3 475) (10 423)
(14 199)
Costs of Reacquisition of Preferred
Stock (Note 6) (18 175) - (18 175)
- -
Net Income Applicable to Common Stock $ 39 855 $ 65 483 $ 164 091
$ 172 405
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated
financial statements.
|
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
September 30
1996 1995
(in thousands)
Operating Activities
Net income $ 192 689 $ 186 604
Items providing (using) cash currently
Depreciation 120 557 119 060
Deferred income taxes and investment tax
credits - net 31 408 24 597
Allowance for equity funds used during
construction (1 206) (1 146)
Regulatory assets - net 21 626 10 260
Changes in current assets and current
liabilities
Restricted deposits (27) (3)
Accounts and notes receivable, net of
reserves on receivables sold 201 972 54 133
Materials, supplies, and fuel (2 379) 9 499
Accounts payable (33 609) (41 110)
Accrued taxes and interest 5 974 25 114
Other items - net (9 326) (30 186)
Net cash provided by (used in)
operating activities 527 679 356 822
Financing Activities
Issuance of long-term debt - 344 280
Funds on deposit from issuance of long-term debt - (84 000)
Retirement of preferred stock - (93 450)
Redemption of long-term debt (157 583) (238 498)
Change in short-term debt 83 600 12 000
Dividends on preferred stock (10 423) (14 199)
Dividends on common stock (327 020) (162 950)
Net cash provided by (used in)
financing activities (411 426) (236 817)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (95 677) (99 661)
Deferred DSM costs - net (10 470) (6 315)
Net cash provided by (used in)
investing activities (106 147) (105 976)
Net increase (decrease) in cash and
temporary cash investments 10 106 14 029
Cash and temporary cash investments at
beginning of period 6 612 52 516
Cash and temporary cash investments at
end of period $ 16 718 $ 66 545
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated
financial statements.
|
THE CINCINNATI GAS & ELECTRIC COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales for the quarter ended September 30, 1996, decreased 2.5% from the same period of 1995. A return to more normal weather for the third quarter of 1996 resulted in decreased residential and commercial sales. These decreases were partially offset by increased industrial sales reflecting growth in the primary metals sector and increased activity in Cinergy's power marketing operations which led to higher non-firm power sales for resale.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the third quarter of 1996 increased 13.2% as compared to the same period in 1995. Increased residential and commercial gas sales reflected, in part, increases in the average number of customers. Higher gas transportation volumes reflected the continuing trend of industrial customers purchasing gas directly from suppliers, using transportation services provided by CG&E. The increase in transportation volumes mainly reflects demand for gas transportation services in the primary metals sector.
Operating Revenues
Electric Operating Revenues
Electric operating revenues decreased $11 million (2.7%) for the quarter ended September 30, 1996, from the comparable period of 1995. This decrease was primarily attributable to the lower kwh sales as previously discussed.
An analysis of electric operating revenues is shown below:
Quarter
Ended September 30
(in millions)
Electric operating revenues - September 30, 1995 $401
Increase (Decrease) due to change in:
Price per kwh
Retail (5)
Sales for resale
Non-firm power transactions 6
Total change in price per kwh 1
Kwh sales
Retail (12)
Total change in kwh sales (12)
Electric operating revenues - September 30, 1996 $390
|
Gas Operating Revenues
Gas operating revenues increased $7 million (21.4%) in the third quarter of 1996, when compared to the same period last year. This increase was primarily a result of the operation of fuel adjustment clauses reflecting a higher average cost of gas purchased and the previously discussed changes in gas sales and transportation volumes.
Operating Expenses
Gas Purchased
Gas purchased for the quarter ended September 30, 1996, increased $4 million (30.2%) when compared to the same period last year reflecting a higher average cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power for the quarter ended September 30, 1996, increased $1 million (7.2%) over the comparable period of 1995 reflecting increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing operations. This increase is partially offset by decreased power purchases from PSI.
Maintenance
The $4 million (20.3%) increase in maintenance expenses for the third quarter of 1996, as compared to the same period of 1995, is primarily due to increased maintenance on electric production and transmission facilities.
Other Income and Expenses - Net
Other - net
Other - net decreased $6 million primarily as a result of the effects of expenses associated with the CG&E's and ULH&P's sales of accounts receivables in 1996 and interest received in 1995 associated with a refund of an overpayment of Federal income taxes related to prior years.
Interest
Interest on Long-term Debt
Interest charges decreased $6 million (17.0%) for the quarter ended September 30, 1996, from the same period of 1995 primarily due to the redemption of $161.5 million of long-term debt during the period from January 1996 through May 1996.
Costs of Reacquisition of Preferred Stock
Costs of reacquisition of preferred stock represents the difference between the par value of preferred stock of CG&E tendered pursuant to Cinergy's tender offer in September 1996 and the purchase price paid (including tender fees paid to dealer managers) by Cinergy for these shares. (See Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information.")
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales for the nine months ended September 30, 1996, increased 7.3% over the same period of 1995. This increase reflected higher kwh sales to all customer classes. Increased activity in Cinergy's power marketing operations led to higher non-firm power sales for resale, while an increase in the average number of residential and commercial customers and higher industrial sales, primarily reflecting growth in the primary metals sector, also contributed to the increase. These increases were partially offset by the return to more normal weather in the third quarter of 1996.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the first nine months of 1996 increased 13.9% as compared to the same period in 1995. Colder weather during the winter heating season, cooler than normal weather early in the second quarter of 1996, and increases in the average number of customers led to increased gas sales to residential and commercial customers. Industrial sales decreased as customers continued to purchase gas directly from suppliers, using transportation services provided by CG&E. The increase in transportation volumes mainly reflects demand for gas transportation services in the primary metals sector.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $49 million (4.6%) for the nine months ended September 30, 1996, over the comparable period of 1995. This increase primarily reflects the higher kwh sales discussed above.
An analysis of electric operating revenues is shown below:
Nine Months
Ended September 30
(in millions)
Electric operating revenues - September 30, 1995 $1 088
Increase (Decrease) due to change in:
Price per kwh
Retail (3)
Sales for resale
Firm power transactions (3)
Total change in price per kwh (6)
Kwh sales
Retail 40
Sales for resale
Non-firm power transactions 15
Total change in kwh sales 55
Electric operating revenues - September 30, 1996 $1 137
|
Gas Operating Revenues
Gas operating revenues increased $40 million (15.2%) in the first nine months of 1996, when compared to the same period last year. This increase was primarily a result of the previously discussed changes in gas sales and transportation volumes. Also contributing to the increase was the operation of fuel adjustment clauses reflecting a higher cost of gas purchased.
Operating Expenses
Fuel Used in Electric Production
Fuel costs, CG&E's largest operating expense, increased $14 million (5.7%) for the nine months ended September 30, 1996, when compared to the same period last year as a result of an increase in kwh generation. Gas Purchased
Gas purchased for the nine months ended September 30, 1996, increased $20 million (15.4%) when compared to the same period last year. This increase was attributable to an increase in volumes purchased and a higher average cost per Mcf of gas purchased as previously discussed.
Purchased and Exchanged Power
Purchased and exchanged power for the nine months ended September 30, 1996, increased $2 million (5.7%) over the comparable period of 1995. This increase primarily reflects increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing operations. This increase is partially offset by a decrease in purchases from PSI.
Other Operation
For the nine months ended September 30, 1996, other operation expenses increased $31 million (15.1%) due to a number of factors, including higher administrative and general expenses reflecting, in part, $16.2 million of early retirement and severance program costs and increased transmission expenses resulting from the formation of KO Transmission.
Maintenance
The $5 million (7.5%) increase in maintenance expenses for the nine months ended September 30, 1996, is primarily due to increased maintenance on electric production facilities.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for Zimmer included in the May 1992 Order. In the first three years of the phase- in plan, rates charged to customers did not fully recover depreciation expense and return on investment. This deficiency was deferred and is being recovered over a seven-year period that began in May 1995.
Other - net
Other - net decreased $11 million from the same period in 1995 due to a number of factors, including the effects of expenses associated with the sales of accounts receivables in 1996 and interest received in 1995 associated with a refund of an overpayment of Federal income taxes related to prior years, as previously mentioned.
Interest
Interest on Long-term Debt
Interest charges decreased $14 million (12.8%) for the nine months ended September 30, 1996, from the same period of 1995 primarily due to the refinancing of over $330 million of long-term debt during the period from March 1995 through November 1995 and the redemption of $161.5 million of long- term debt during the period from January 1996 through May 1996.
Preferred Dividend Requirement
The decrease in the preferred dividend requirement of $4 million (26.6%) for the nine months ended September 30, 1996, from the same period of 1995 was due to the early redemption in July 1995 of all 400,000 shares and 500,000 shares of the 7.44% Series and 9.15% Series $100 par value cumulative preferred stock, respectively.
Costs of Reacquisition of Preferred Stock
Costs of reacquisition of preferred stock represents the difference between the par value of preferred stock of CG&E tendered pursuant to Cinergy's tender offer in September of 1996 and the purchase price paid (including tender fees paid to dealer managers) by Cinergy for these shares. (See Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information.")
PSI ENERGY, INC.
AND SUBSIDIARY COMPANIES
PSI ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1996 1995
(dollars in thousands)
Electric Utility Plant - Original Cost
In service $4 117 737 $4 052 984
Accumulated depreciation 1 698 969 1 637 169
2 418 768 2 415 815
Construction work in progress 76 999 58 191
Total electric utility plant 2 495 767 2 474 006
Current Assets
Cash and temporary cash investments 14 202 15 522
Restricted deposits 549 1 187
Notes receivable from affiliated companies 1 400 -
Accounts receivable less accumulated
provision for doubtful accounts of $202
at September 30, 1996, and $468 at
December 31, 1995 53 121 73 419
Accounts receivable from affiliated companies 2 499 20 568
Materials, supplies, and fuel - at average
cost
Fuel 53 018 82 014
Other materials and supplies 32 779 29 462
Prepayments and other 2 871 1 234
160 439 223 406
Other Assets
Regulatory assets
Amounts due from customers - income taxes 32 849 26 338
Post-in-service carrying costs and
deferred operating expenses 45 172 38 874
Coal contract buyout costs 137 686 -
Deferred DSM costs 105 204 110 242
Deferred merger costs 77 633 42 286
Unamortized costs of reacquiring debt 32 583 34 476
Other 69 910 33 886
Other 128 178 92 056
629 215 378 158
$3 285 421 $3 075 570
|
The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
PSI ENERGY, INC.
CAPITALIZATION AND LIABILITIES
September 30 December 31
1996 1995
(dollars in thousands)
Common Stock Equity
Common stock - without par value; $.01
stated value; authorized shares -
60,000,000; outstanding shares -
53,913,701 at September 30, 1996, and
December 31, 1995 $ 539 $ 539
Paid-in capital 402 945 403 253
Accumulated earnings subsequent to November
30, 1986, quasi-reorganization 627 354 625 275
Total common stock equity 1 030 838 1 029 067
Cumulative Preferred Stock
Not subject to mandatory redemption 173 090 187 897
Long-term Debt 818 959 828 116
Total capitalization 2 022 887 2 045 080
Current Liabilities
Long-term debt due within one year 10 400 50 400
Notes payable 209 354 165 800
Notes payable to affiliated companies 52 677 32 731
Accounts payable 128 455 116 817
Accounts payable to affiliated companies 5 420 -
Litigation settlement 80 000 80 000
Accrued taxes 65 419 65 851
Accrued interest 12 661 24 696
Other 16 246 16 000
580 632 552 295
Other Liabilities
Deferred income taxes 347 227 331 876
Unamortized investment tax credits 53 652 56 354
Accrued pension and other postretirement
benefit costs 62 487 54 130
Other 218 536 35 835
681 902 478 195
$3 285 421 $3 075 570
|
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Year
to Date
September 30
September 30
1996 1995 1996
1995
(in thousands)
Operating Revenues
Non-affiliated companies $342 199 $332 431 $951 171
$902 501
Affiliated companies 5 856 10 866 14 691
29 587
348 055 343 297 965 862
932 088
Operating Expenses
Fuel 101 644 106 344 272 343
292 910
Purchased and exchanged power
Non-affiliated companies 26 665 11 457 71 422
26 068
Affiliated companies 7 669 1 702 28 004
16 761
Other operation 62 434 61 595 188 443
167 354
Maintenance 23 059 20 857 68 964
63 861
Depreciation 30 489 28 844 91 046
91 291
Post-in-service deferred operating
expenses - net (1 716) (894) (5 068)
(4 608)
Income taxes 23 445 29 222 55 597
64 877
Taxes other than income taxes 13 729 14 022 41 361
40 721
287 418 273 149 812 112
759 235
Operating Income 60 637 70 148 153 750
172 853
Other Income and Expenses - Net
Allowance for equity funds used during
construction - (1 428) -
(420)
Post-in-service carrying costs 391 602 1 228
3 183
Income taxes (2 438) 705 (3 332)
751
Other - net 3 280 545 1 420
(1 751)
1 233 424 (684)
1 763
Income Before Interest 61 870 70 572 153 066
174 616
Interest
Interest on long-term debt 16 218 17 647 50 286
53 546
Other interest 3 790 4 162 10 386
12 035
Allowance for borrowed funds used during
construction (642) (1 133) (1 637)
(3 550)
19 366 20 676 59 035
62 031
Net Income 42 504 49 896 94 031
112 585
Preferred Dividend Requirement (3 020) (3 295) (9 518)
(9 885)
Net Income Applicable to Common Stock $ 39 484 $ 46 601 $ 84 513
$102 700
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
|
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
September 30
1996 1995
(in thousands)
Operating Activities
Net income $ 94 031 $ 112 585
Items providing (using) cash currently:
Depreciation 91 046 91 291
Deferred income taxes and investment tax
credits - net 5 145 5 342
Allowance for equity funds used during
construction - 420
Regulatory assets - net (49 070) (10 315)
Changes in current assets and current
liabilities
Restricted deposits (335) 16
Accounts and notes receivable, net
of reserves on receivables sold 23 039 (35 442)
Materials, supplies, and fuel 25 679 16 310
Accounts payable 17 058 (50 642)
Accrued taxes and interest (12 467) 4 490
Other items - net (810) 12 150
Net cash provided by (used in)
operating activities 193 316 146 205
Financing Activities
Funds on deposit from issuance of long-term debt 973 8 684
Retirement of preferred stock (15 114) (8)
Redemption of long-term debt (50 000) (60 055)
Change in short-term debt 63 500 42 927
Dividends on preferred stock (9 609) (9 885)
Dividends on common stock (82 363) -
Capital contribution from parent company - 12 721
Net cash provided by (used in)
financing activities (92 613) (5 616)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (107 061) (132 282)
Deferred DSM costs - net 5 038 (11 041)
Net cash provided by (used in)
investing activities (102 023) (143 323)
Net increase (decrease) in cash and
temporary cash investments (1 320) (2 734)
Cash and temporary cash investments at
beginning of period 15 522 6 341
Cash and temporary cash investments at
end of period $ 14 202 $ 3 607
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
|
PSI ENERGY, INC.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales for the third quarter of 1996 decreased 1.9% as a return to more normal weather resulted in a decline in residential and commercial kwh sales, when compared to the same period last year. Partially offsetting the decrease was increased activity in Cinergy's power marketing operations which led to higher non-firm power sales for resale. An increase in industrial sales primarily reflects growth in the transportation equipment, bituminous coal mining and primary metals sectors.
Operating Revenues
Total operating revenues increased $5 million (1.4%) for the quarter ended September 30, 1996, when compared to the same period last year, reflecting, in part, the increased activity in Cinergy's power marketing operations previously discussed. Partially offsetting this increase was the previously mentioned decline in residential and commercial sales.
An analysis of operating revenues is shown below:
Quarter
Ended September 30
(in millions)
Operating revenues - September 30, 1995 $343
Increase (Decrease) due to change in:
Price per kwh
Retail 5
Sales for resale
Firm power obligations (3)
Non-firm power transactions 10
Total change in price per kwh 12
Kwh sales
Retail (7)
Sales for resale
Firm power obligations (2)
Non-firm power transactions 1
Total change in kwh sales (8)
Other 1
Operating revenues - September 30, 1996 $348
Operating Expenses
|
Fuel
Fuel costs, PSI's largest operating expense, decreased $4 million (4.4%) for the third quarter of 1996 as compared to the same period last year.
An analysis of fuel costs is shown below:
Quarter
Ended September 30
(in millions)
Fuel expense - September 30, 1995 $106
Increase (Decrease) due to change in:
Price of fuel 9
Kwh generation (13)
Fuel expense - September 30, 1996 $102
|
Purchased and Exchanged Power
For the quarter ended September 30, 1996, purchased and exchanged power increased $21 million, as compared to the same period last year, due, in part, to increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing operations and increased purchases from CG&E as a result of the coordination of PSI's and CG&E's electric dispatch systems.
Maintenance
The $2 million (10.6%) increase in maintenance expenses for the third quarter of 1996, as compared to the same period of 1995, is due, in part, to maintenance on the Clean Coal Project which began commercial operation in November 1995.
Depreciation
Depreciation expense increased $2 million (5.7%) for the quarter ended September 30, 1996, as compared to the third quarter of last year. This increase primarily reflects additions to utility plant in service.
Post-in-service Deferred Operating Expenses - Net
Post-in-service deferred operating expenses - net reflects the deferral of depreciation on certain major projects, primarily environmental in nature, from the in-service date until the related projects are reflected in retail rates, net of amortization of these deferrals as they are recovered.
Other Income and Expenses - Net
Other - net
The increase of $3 million for other - net for the quarter ended September 30, 1996, as compared to the same period of 1995, is primarily attributable to amounts allowed by the IURC in its September 1996 Order which were not previously recorded.
Interest
Interest on Long-term Debt
Interest on long-term debt decreased $1 million (8.1%) for the third quarter of 1996, as compared to the third quarter of 1995, primarily due to the redemption of $110 million of long-term debt during the period from August 1995 through July 1996.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Kwh Sales
For the nine months ended September 30, 1996, kwh sales increased 8.8% when compared to the same period last year due, in large part, to increased activity in Cinergy's power marketing operations which led to higher non-firm power sales for resale. Also contributing to the total kwh sales levels were increased sales to all retail customer classes resulting from an increase in the average number of residential and commercial customers while increased industrial sales reflects growth in the food products, primary metals, and transportation equipment sectors. These increases were partially offset by the return to more normal weather in the third quarter of 1996.
Operating Revenues
Total operating revenues increased $34 million (3.6%) for the nine months ended September 30, 1996, when compared to the same period last year. This increase primarily reflects the increase in kwh sales previously discussed. Also contributing to the increase was a 4.3% retail rate increase approved in the February 1995 Order and a 1.9% rate increase for carrying costs on CWIP property which was approved by the IURC in March 1995. Partially offsetting these increases was the return of approximately $13 million to customers in accordance with the February 1995 Order which requires all retail operating income above a certain rate of return to be refunded to customers.
An analysis of operating revenues is shown below:
Nine Months
Ended September 30
(in millions)
Operating revenues - September 30, 1995 $932
Increase (Decrease) due to change in:
Price per kwh
Retail (14)
Sales for resale
Firm power obligations (4)
Non-firm power transactions 3
Total change in price per kwh (15)
Kwh sales
Retail 14
Sales for resale
Firm power obligations 6
Non-firm power transactions 29
Total change in kwh sales 49
Operating revenues - September 30, 1996 $966
Operating Expenses
|
Fuel
Fuel costs for the nine months ended September 30, 1996, decreased $21 million (7.0%) when compared to the same period last year.
An analysis of fuel costs is shown below:
Nine Months Ended September 30
(in millions)
Fuel expense - September 30, 1995 $293 Increase (Decrease) due to change in: Price of fuel (9) Kwh generation (12) Fuel expense - September 30, 1996 $272 |
Purchased and Exchanged Power
For the nine months ended September 30, 1996, purchased and exchanged power increased $57 million, as compared to the same period last year, due, in part, to increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing operations and increased purchases from CG&E as a result of the coordination of PSI's and CG&E's electric dispatch systems.
Other Operation
Other operation expenses increased $21 million (12.6%) for the nine months ended September 30, 1996, as compared to the same period last year. This increase was due to a number of factors, including the recognition of postretirement benefit costs on an accrual basis, an increase in the ongoing level of DSM expenses, and the amortization of deferred postretirement benefit costs and deferred DSM costs, all of which are being recovered in revenues pursuant to the February 1995 Order. Increased transmission expenses also contributed to the higher level of other operation expenses.
Maintenance
Maintenance expenses for the first nine months of 1996, as compared to the same period last year, increased $5 million (8.0%) partially as a result of maintenance on the Clean Coal Project which began commercial operation in November 1995. Increased transmission and distribution expenses also contributed to the higher level of maintenance expenses.
Other Income and Expenses - Net
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $2 million (61.4%) for the nine months ended September 30, 1996, from the comparable period of 1995 as a result of discontinuing the accrual of post-in-service carrying costs on qualified environmental projects upon the inclusion in rates of the costs of the projects pursuant to the February 1995 Order.
Other - net
The increase of $3 million for other - net for the nine months ended September 30, 1996, as compared to the same period of 1995, is primarily attributable to amounts allowed by the IURC in its September 1996 Order which were not previously recorded.
Interest
Interest on Long-term Debt
Interest on long-term debt decreased $3 million (6.1%) for the nine months ended September 30, 1996, as compared to the same period of 1995, due in part to the redemption of $110 million of long-term debt during the period from August 1995 through July 1996.
THE UNION LIGHT, HEAT AND POWER COMPANY
THE UNION LIGHT, HEAT & POWER COMPANY
BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1996 1995
(dollars in thousands)
Utility Plant - original cost
In service
Electric $193 903 $188 508
Gas 146 286 140 604
Common 19 026 19 068
359 215 348 180
Accumulated depreciation 120 500 112 812
238 715 235 368
Construction work in progress 7 936 7 863
Total utility plant 246 651 243 231
Current Assets
Cash and temporary cash investments 2 787 1 750
Notes receivable from affiliated companies 1 501 -
Accounts receivable less accumulated
provision for doubtful accounts of
$1,623 at September 30, 1996, and $1,140
at December 31, 1995 3 466 37 895
Accounts receivable from affiliated
companies 14 -
Materials, supplies, and fuel - at average
cost
Gas stored for current use 6 887 4 513
Other materials and supplies 1 462 1 215
Property taxes applicable to subsequent year 587 2 350
Prepayments and other 499 485
17 203 48 208
Other Assets
Regulatory assets
Deferred merger costs 1 785 1 785
Unamortized costs of reacquiring debt 3 803 2 526
Other 2 468 2 548
Other 6 439 1 499
14 495 8 358
$278 349 $299 797
|
The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements.
THE UNION LIGHT, HEAT & POWER COMPANY
CAPITALIZATION AND LIABILITIES
September 30 December 31
1996 1995
(dollars in thousands)
Common Stock Equity
Common stock - $15.00 par value;
authorized shares - 1,000,000;
outstanding shares - 585,333 at
September 30, 1996, and December 31,
1995 $ 8 780 $ 8 780
Paid-in capital 18 839 18 839
Retained earnings 94 621 82 863
Total common stock equity 122 240 110 482
Long-term Debt 44 604 54 377
Total capitalization 166 844 164 859
Current Liabilities
Long-term debt due within one year - 15 000
Notes payable to affiliated companies 21 593 23 043
Accounts payable 5 120 11 057
Accounts payable to affiliated companies 16 139 21 665
Accrued taxes 2 311 1 993
Accrued interest 940 1 549
Other 6 159 5 505
52 262 79 812
Other Liabilities
Deferred income taxes 31 247 23 728
Unamortized investment tax credits 4 867 5 079
Accrued pension and other postretirement
benefit costs 12 915 12 202
Income taxes refundable through rates 5 017 4 717
Other 5 197 9 400
59 243 55 126
$278 349 $299 797
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THE UNION LIGHT, HEAT & POWER COMPANY
STATEMENTS OF INCOME
(unaudited)
Quarter Ended Year
to Date
September 30
September 30
1996 1995 1996
1995
(in thousands)
Operating Revenues
Electric $ 52 704 $ 57 171 $147 970
$144 553
Gas 5 660 5 995 50 794
45 870
58 364 63 166 198 764
190 423
Operating Expenses
Electricity purchased from parent
company for resale 39 850 42 124 109 337
109 099
Gas purchased 2 129 2 168 26 252
23 884
Other operation 7 268 7 428 23 664
22 481
Maintenance 1 093 903 3 445
3 040
Depreciation 3 013 2 907 8 887
8 553
Income taxes 1 067 1 612 7 824
5 573
Taxes other than income taxes 986 986 3 092
2 965
55 406 58 128 182 501
175 595
Operating Income 2 958 5 038 16 263
14 828
Other Income and Expense - Net
Allowance for equity funds used during
construction 42 22 21
78
Income taxes 4 (10) 31
(48)
Other - net (436) (8) (1 079)
59
(390) 4 (1 027)
89
Income Before Interest 2 568 5 042 15 236
14 917
Interest
Interest on long - term debt 881 1 721 3 135
5 674
Other interest 167 157 433
376
Allowance for borrowed funds used during
construction (26) (24) (90)
(120)
1 022 1 854 3 478
5 930
Net Income $ 1 546 $ 3 188 $ 11 758
$ 8 987
The accompanying notes as they relate to The Union Light, Heat and Power
Company are an integral part of these financial
statements.
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THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
Year to
Date
September 30
1996
1995
(in
thousands)
Operating Activities
Net income $ 11 758
$ 8 987
Items providing (using) cash currently
Depreciation 8 887
8 553
Deferred income taxes and investment tax
credits - net 7 607
1 147
Allowance for equity funds used during
construction (21)
(78)
Regulatory assets 80
128
Changes in current assets and current liabilities
Accounts and notes receivable, net of reserves on
receivables sold 29 590
5 066
Materials, supplies, and fuel (2 621)
608
Accounts payable (11 463)
248
Accrued taxes and interest 1 446
(1 515)
Other items - net (3 866)
1 969
Net cash provided by (used in)
operating activities 41 397
25 113
Financing Activities
Issuance of long-term debt -
14 704
Redemption of long-term debt (26 083)
(37 036)
Change in short-term debt (1 450)
12 000
Net cash provided by (used in)
financing activities (27 533)
(10 332)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (12 827)
(14 350)
Net cash provided by (used in)
investing activities (12 827)
(14 350)
Net increase (decrease) in cash and
temporary cash investment 1 037
431
Cash and temporary cash investments at
beginning of period 1 750
1 071
Cash and temporary cash investments at
end of period $ 2 787
$ 1 502
The accompanying notes as they relate to The Union Light, Heat and Power
Company are an integral part of these financial
statements.
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THE UNION LIGHT, HEAT AND POWER COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales for the quarter ended September 30, 1996, decreased 6.4% from the comparable period of 1995. A return to more normal weather in the third quarter of 1996 resulted in a decline in residential and commercial sales. An increase in the average number of residential and commercial customers partially offset the decline in sales.
Operating Revenues
Electric Operating Revenues
Electric operating revenues decreased $4.5 million (7.8%) for the quarter ended September 30, 1996, from the comparable period of 1995. This decrease primarily reflects the previously discussed decline in kwh sales. Also, on July 3, 1996, the KPSC issued an order authorizing a decrease in electric rates of approximately $1.8 million annually to reflect a reduction in the cost of electricity purchased from CG&E.
Gas Operating Revenues
An increasing trend of industrial customers purchasing gas directly from producers and utilizing ULH&P facilities to transport the gas continues to put downward pressure on gas operating revenues. When ULH&P sells gas, the sales price reflects the cost of gas purchased by ULH&P to support the sale plus the costs to deliver the gas. When gas is transported, ULH&P does not incur any purchased gas costs but delivers gas the customer has purchased from other sources. Since providing transportation services does not necessitate recovery of gas purchased costs, the revenue per Mcf transported is less than the revenue per Mcf sold. As a result, a higher relative volume of gas transported to gas sold translates into lower gas operating revenues.
Gas operating revenues declined $.3 million (5.6%) in the third quarter of 1996, when compared to the same period of last year. This decrease was the result of the aforementioned trend toward increased transportation services. This decrease was slightly offset by the operation of adjustment clauses reflecting a higher average cost of gas purchased.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased expense, ULH&P's largest operating expense, decreased $2.3 million (5.4.%) for the quarter ended September 30, 1996, as compared to the same period last year. This decrease reflects the aforementioned reduction in the cost of electricity purchased from CG&E.
Maintenance
The $.2 million (21.0%) increase in maintenance expenses for the third quarter of 1996, as compared to the same period of 1995, is primarily due to increased maintenance expenses associated with gas and electric distribution facilities.
Other Income and Expenses - Net
Other - net
The change of $.4 million for other - net for the quarter ended September 30, 1996, as compared to the same period of 1995, is primarily attributable to expenses associated with the sales of accounts receivables in 1996.
Interest
Interest on Long-term Debt
Interest charges decreased $.8 million (48.8%) for the quarter ended September 30, 1996, as compared to the same period of 1995, primarily due to the redemption of $25 million of long-term debt from January 1996 to May 1996.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales for the nine months ended September 30, 1996, increased 5.3% as compared to the same period of 1995. This increase was due to higher kwh sales to all customer classes. Residential and commercial sales reflected an increase in the average number of customers. Industrial sales increased due to growth in the food products sector. These increases were partially offset by the return to more normal weather in the third quarter of 1996.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the nine months ended September 30, 1996, increased 13.8% as compared to the same period in 1995. Colder weather during the winter heating season, cooler than normal weather early in the second quarter of 1996, and increases in the average number of customers led to increases in gas sales to residential and commercial customers. Industrial sales decreased as customers continued to purchase gas directly from suppliers using transportation services provided by ULH&P. The increase in transportation volumes, which more than offset the decline in industrial sales, was primarily a result of growth in the primary metals sector.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $3.4 million (2.4%) for the nine months ended September 30, 1996, over the comparable period of 1995. This increase primarily reflects the previously discussed increase in kwh sales. Partially offsetting this increase is a lower average cost of electricity purchased due, in part, to the aforementioned reduction in the cost of electricity purchased from CG&E retroactive to July 3, 1995.
Gas Operating Revenues
Gas operating revenues increased $4.9 million (10.7%) for the first nine months of 1996 when compared to the same period of last year. This increase was primarily a result of the previously discussed changes in gas sales volumes.
Operating Expenses
Gas Purchased
Gas purchased increased $2.4 million (9.9%) for the nine months ended September 30, 1996, as compared to the prior year. This increase reflects higher volumes purchased.
Other Operation
The increase in other operation expenses of $1.2 million (5.3%) for the nine months ended September 30, 1996, from the same period of 1995 is due to a number of factors, including increased gas distribution expenses and higher administrative and general expenses.
Maintenance
Maintenance expenses for the nine months ended September 30, 1996, increased $.4 million (13.3%) when compared to the nine months ended September 30, 1995. This increase was due, in part, to higher expenses associated with gas distribution facilities.
Other Income and Expenses - Net
Other - net
The change of $1.1 million for other - net for the nine months ended September 30, 1996, as compared to the same period of 1995, is primarily attributable to expenses associated with the sales of accounts receivables in 1996.
Interest
Interest on Long-term Debt
Interest charges decreased $2.5 million (44.7%) for the nine months ended September 30, 1996, from the same period of 1995, primarily due to the redemption of $25 million during the period from January 1996 to May 1996.
NOTES TO FINANCIAL STATEMENTS
Cinergy, CG&E, PSI, and ULH&P
1. These Financial Statements reflect all adjustments (which include only
normal, recurring adjustments) necessary in the opinion of the
registrants for a fair presentation of the interim results. These
statements should be read in conjunction with the Financial Statements
and the notes thereto included in the combined 1995 Form 10-K of the
registrants. Certain amounts in the 1995 Financial Statements have been
reclassified to conform to the 1996 presentation.
Cinergy, CG&E, and ULH&P
2. In May 1996, ULH&P redeemed the entire $10 million principal amount of
its 9 1/2% Series First Mortgage Bonds due December 1, 2008, at the
redemption price of 104.35%.
Cinergy and PSI
PSI redeemed $50 million principal amount of its 9 3/4% Series First
Mortgage Bonds on the maturity date of August 1, 1996.
Cinergy and PSI
A portion of PSI's 7.44% Series Cumulative Preferred Stock (591,000
shares representing 15%), totaling $15 million, was reacquired by PSI at
per share prices of $25.50 and $25.65 in May 1996.
Cinergy and PSI
3. On September 12, 1996, PSI's shelf registration for $250 million of debt
securities was made effective by the SEC.
On November 7, 1996, the City of Princeton, Indiana loaned the proceeds from the sale of its $24,600,000 Pollution Control Revenue Refunding Bonds, 1996 Series to PSI. The purpose of the sale is to refund the $19,600,000 City of Princeton, Indiana Pollution Control Revenue Bonds, 1973 Series and the $5,000,000 City of Princeton, Indiana Pollution Control Revenue Bonds, 1979 Series which were originally issued to finance PSI's costs of acquiring and constructing certain pollution control facilities at Gibson. These refunded bonds will be redeemed on December 16, 1996 at a price of 100% of the principal amount thereof, plus accrued interest to the redemption date.
The 1996 Series bonds bear interest at a variable rate and will mature March 1, 2019, subject to redemption prior to maturity, including a mandatory sinking fund redemption of $19,600,000 aggregate principal amount on January 1, 2014. Pursuant to the loan agreement between PSI and Princeton, PSI will make loan payments sufficient to pay when due the principal of and interest on the 1996 Series bonds.
Cinergy and PSI
4. As discussed in Cinergy's and PSI's 1995 Form 10-K, RUS requested a
rehearing on the affirmation by the Seventh Circuit Court of Appeals of
WVPA's plan of reorganization which had been approved by the United
States Bankruptcy Court for the Southern District of Indiana and upheld
by the United States District Court for the Southern District of Indiana.
In April 1996, the Seventh Circuit Court of Appeals denied RUS' request
for rehearing. RUS' request that the United States Supreme Court accept
the appeal of this decision was denied November 4, 1996. There is a
short period for reconsideration of the denial. PSI cannot predict
whether RUS will request reconsideration of the denial or the outcome of
any such request. If the United States Supreme Court denies
reconsideration, or no reconsideration is requested by RUS, then Cinergy
and WVPA will commence implementation of the settlement agreement upon
final certification of the plan of reorganization by the Bankruptcy
Court.
Cinergy, CG&E, PSI, and ULH&P
5. In March 1995, the FASB issued Statement 121, which became effective in
January 1996 for Cinergy and its subsidiaries. Statement 121, which
addresses the identification and measurement of asset impairments for all
enterprises, is particularly relevant for electric utilities as a result
of the potential for deregulation of the generation segment of the
business. Statement 121 requires recognition of impairment losses on
long-lived assets when book values exceed expected future cash flows.
Based on the regulatory environment in which Cinergy's utility
subsidiaries currently operate, compliance with the provisions of
Statement 121 has not had nor is it expected to have an adverse effect on
their financial condition or results of operations. However, this
conclusion may change in the future as competitive pressures and
potential restructuring influence the electric utility industry.
Cinergy and CG&E
6. An amendment to the Articles of CG&E was adopted at a special meeting of
shareholders of CG&E, held on September 18, 1996. The amendment removes
a provision of the Articles that limits CG&E's ability to issue unsecured
debt, including short-term debt. Concurrently with the solicitation of
proxies for the special meeting, Cinergy commenced an offer to purchase,
for cash, any and all outstanding shares of preferred stock of CG&E. The
tender offer, which commenced August 20, 1996, and expired September 18,
1996, was conditioned upon, among other things, the proposed amendment
being approved and adopted at the special meeting. Approximately 90%
(1,788,544 of 2,000,000 shares) of the outstanding shares of preferred
stock of CG&E was tendered pursuant to Cinergy's offer. The source of
funds for Cinergy's purchase of the tendered shares was a special cash
dividend paid by CG&E to Cinergy on September 24, 1996. Cinergy made a
capital contribution to CG&E of all the shares it acquired and CG&E
canceled these shares. The difference between the par value of the
preferred stock tendered and the purchase price paid (including tender
fees paid to dealer managers) by Cinergy totaled $18.2 million, which is
reflected in "Costs of Reacquisition of Preferred Stock of Subsidiaries"
in the Consolidated Statements of Income.
The shares tendered and purchase price paid by Cinergy for each series of preferred stock are as follows:
Series Shares Price Per
(Par value $100 per share) Tendered Share__
4% Series Cumulative Preferred Stock 100,165 $ 64.00
4.75% Series Cumulative Preferred Stock 88,379 $ 80.00
7.875% Series Cumulative Preferred Stock 800,000 $116.00
7.375% Series Cumulative Preferred Stock 800,000 $110.00
1,788,544
|
As a result of the tender offer and the subsequent cancellation of shares by CG&E, CG&E currently has a total of 211,456 shares of preferred stock outstanding, consisting of 169,835 shares of the 4% Series and 41,621 Shares of the 4.75% Series. The 4.75% Series no longer meets certain listing requirements of the New York Stock Exchange and has been delisted. (See "Part II - Other Information" - "Item 4. Submission of Matters to a Vote of Security Holders.")
Cinergy, CG&E, PSI, and ULH&P
7. During 1996, Cinergy completed voluntary workforce reduction programs.
Under these programs, 418 Cinergy exempt and non-bargaining unit
employees and 201 PSI bargaining unit employees elected to terminate
their employment with Cinergy. These elections resulted in a pre-tax
cost for the non-bargaining unit program of approximately $38.2 million
(allocated $19.1 million to CG&E and its subsidiaries, including ULH&P,
and $19.1 million to PSI) and a pre-tax cost for the PSI bargaining unit
program of approximately $14 million. Consistent with the merger savings
sharing mechanisms previously approved by regulators, Cinergy has
classified these costs as costs to achieve merger savings which resulted
in approximately $14.6 million (pre-tax), allocable to Ohio electric
jurisdictional customers, being charged to earnings in the second quarter
of 1996. The remaining costs have been deferred for future recovery
through rates as an offset against merger savings. A significant portion
of these benefits is eligible for funding from qualified retirement plan
assets.
Additionally, voluntary workforce reduction programs similar to the programs described above have been announced for bargaining unit employees of CG&E and its subsidiaries, including ULH&P. Under these programs, there are 232 bargaining unit employees who meet certain age and service requirements that are eligible for enhanced retirement benefits. Eligible employees who do not meet age and service requirements will receive severance benefits upon resignation from their employment. Program costs will not be known until after the participation election periods end in December 1996. The costs will be treated as costs to achieve merger savings, with the majority being charged to fourth quarter earnings and the remaining portion being deferred for future recovery.
Cinergy and PSI
8. On September 27, 1996, the IURC approved an overall average retail
electric rate increase for PSI of 7.6% ($75.7 million annually). PSI had
requested a retail rate increase of 10.5% ($104.8 million annually).
Among other things, the IURC authorized a return on equity of 11.0%
(before the 100 basis points additional common equity return allowed as a
merger savings sharing mechanism) with an 8.21% overall rate of return on
net original cost rate base, and the inclusion in rates of the Clean Coal
Project, an ongoing level of DSM costs of $23 million, and a scrubber at
Gibson. Consideration of the Company's requested increase in the ongoing
level of DSM costs to $39 million was deferred to a separate currently
pending proceeding specifically established to review PSI's current and
proposed DSM programs. On October 17, 1996, the UCC and CAC filed with
the IURC a Joint Petition for Reconsideration and Rehearing of the IURC's
September 1996 Order. PSI has filed a response in opposition to the
requested rehearing and reconsideration. PSI cannot predict what action
the IURC may take with respect to the requested rehearing and
reconsideration.
Cinergy and CG&E
9. In October 1996, the PUCO concluded hearings on CG&E's gas rate increase
request of 7.8% ($26.7 million annually). The increase is being
requested, in part, to recover capital investments made since CG&E's last
gas rate increase in 1993. In July 1996, the Staff of the PUCO issued
its Report of Investigation on the rate request recommending that CG&E
receive an annual increase in gas revenues ranging from $3.5 million to
$6.3 million. The differences between the Staff's recommendation and
CG&E's request are primarily attributable to a decrease in working
capital allowance, a lower rate of return, and the disallowance of
certain capitalized information systems development costs and deferred
merger costs. An order in the rate proceeding is anticipated by the end
of the first quarter of 1997; however, Cinergy cannot predict what action
the PUCO may take with respect to the proposed rate increase.
Cinergy and CG&E
10. On November 1, 1996, CG&E entered into a sale-leaseback agreement for
certain equipment at Woodsdale. The lease is a capital lease with an
initial lease term of five years. At the end of the initial lease term,
the lease may be renewed at mutually agreed upon terms or the equipment
may be repurchased by CG&E at the original sale amount. The monthly
lease payment, comprised of interest only, will be based on the
applicable LIBOR rate plus .30% and, therefore, the capital lease
obligation will not be amortized over the initial lease term. The
property under the capital lease will continue to be depreciated at the
same rate as if the property were still owned by CG&E. CG&E will record a
capital lease obligation of $21.6 million.
Cinergy
11. Avon Energy, a 50/50 joint venture between Cinergy and GPU, completed
its acquisition of all of the outstanding common stock of Midlands during
the third quarter of 1996. The total consideration paid by Avon Energy
was approximately $2.6 billion. The funds for the acquisition were
obtained from Cinergy's and GPU's investment in Avon Energy of
approximately $500 million each, with the remainder being obtained by
Avon Energy through the issuance of non-recourse debt. Cinergy has used
debt to fund its entire investment in Avon Energy. Based on a
preliminary allocation of the purchase price, Avon Energy has recorded
goodwill of approximately $1.9 billion in connection with this
acquisition.
Cinergy accounts for its investment in Avon Energy under the equity method. Avon Energy's results for the quarter ended September 30, 1996, include 100% of Midlands' results for the quarter as substantially all of the Midlands' stock had been acquired by Avon Energy as of the beginning of the quarter. Cinergy's equity in Avon Energy's earnings is 50%, the same as its ownership share.
The pro forma financial information presented below assumes 100% of Midlands was acquired on the first day of each respective period. The pro forma adjustments include recognition of equity in the estimated earnings of Avon Energy, an adjustment for interest expense on debt associated with Cinergy's investment in Avon Energy, and related income taxes. The estimated earnings of Avon Energy include the historical earnings of Midlands prior to its acquisition by Avon Energy, adjusted for the estimated effect of purchase accounting (including the amortization of goodwill) and conversion to United States generally accepted accounting principles, interest expense on debt issued by Avon Energy associated with the acquisition, and related income taxes. Sales of electricity are affected by seasonal weather patterns and, therefore, the results of Avon Energy/Midlands will not be distributed evenly during the year. (Equity in earnings of Avon Energy has been converted using the average exchange rates for the nine month and twelve month periods of $1.549/, and $1.556/, respectively.)
Nine Months Ended Twelve Months Ended
September 30, 1996 September 30, 1996
Net Earnings Net Earnings
Income Per Share* Income Per Share*
(millions) (millions)
(unaudited)
Cinergy $264 $1.56 (1) $341 $2.05 (1)
Pro forma adjustments:
Equity in Earnings
of Avon Energy 31 54
Interest expense (14) (23)
Income taxes (6) (11)
Pro forma result $275 $1.63 $361 $2.18
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* Based on the average number of common shares outstanding for the period.
(1) Earnings per share after a charge of $.12 per share for the cost of reacquiring preferred stock of CG&E through a tender offer.
Cinergy and PSI
12. On August 7, 1996, PSI entered into a coal supply agreement with Eagle
for the supply of approximately 3 million tons of coal per year. The
agreement (which runs through
December 31, 2000) provides for the payment by PSI of a buy-out fee of
$179 million (including interest). This represents the fee paid by Eagle
to Exxon to buy out the coal supply agreement between PSI and Exxon.
Pursuant to the terms of the agreements, the price of coal paid by PSI
will include a monthly buy-out charge which will be paid to Eagle through
December 2000.
As a result of the new coal supply agreement with Eagle, on the same
day, PSI and the UCC entered into a settlement agreement which provides,
in part, for PSI to recover the retail electric portion of the buy-out
fee through the quarterly fuel adjustment clause, with carrying costs on
unrecovered amounts, through December 2002. PSI and the UCC have filed a
joint petition with the IURC for approval of this settlement agreement.
In, addition, PSI filed a petition with the FERC for waiver of fuel adjustment
clause
regulations. PSI cannot predict what actions the IURC or the FERC may
take with respect to these petitions.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Recent Developments
Cinergy
Joint Venture In May 1996, Cinergy, GPU, and Midlands announced the terms of
a recommended cash offer for Midlands to be made by Avon Energy. Cinergy and
GPU each own 50% of Avon Energy. Midlands, one of 12 regional electric
companies in the United Kingdom, is headquartered in Birmingham, England.
Midlands' principal business is the distribution of electricity to
approximately 2.2 million customers. Avon Energy commenced the offer to
acquire all of the shares of Midlands on the terms and subject to conditions
set out in an offering document. On June 6, 1996, Cinergy and GPU announced
that Avon Energy declared the cash offer wholly unconditional in all respects
and thereby was committed to purchase all outstanding shares of Midlands.
During the third quarter of 1996, Avon Energy completed the acquisition of all
outstanding shares of Midlands. The total acquisition price of Midlands is
approximately (Pound Sterling) 1.7 billion (or approximately $2.6 billion -
U.S.). For further information, reference is made to Cinergy's Current
Reports on Form 8-K dated May 7, 1996, and June 6, 1996, as amended.
See Note 11 of the "Notes to Financial Statements" in "Part I. Financial Information" for pro forma financial information relating to the acquisition of Midlands.
Cinergy, CG&E, PSI, and ULH&P
Securities Ratings Following the announcement of the potential acquisition of
Midlands, major credit rating agencies, D&P, Fitch, and S&P, affirmed the
current ratings of Cinergy's operating subsidiaries, after their consideration
of the effects of the potential acquisition. The other major credit rating
agency, Moody's, placed the credit ratings of Cinergy's operating
subsidiaries, CG&E, PSI, and ULH&P, under review for possible downgrade.
Moody's indicated that its review will focus on the likelihood of the
transaction being completed and will assess the operating strategies of the
combined companies and the anticipated benefits of the transaction. It will
also focus on the financial impact the transaction will have on Cinergy and
its operating subsidiaries, including the credit implications. Cinergy cannot
predict the outcome of this review.
On September 27, 1996, Fitch raised its ratings of PSI's first mortgage bonds, secured medium-term notes, and secured pollution control revenue bonds to A from A- and PSI's unsecured pollution control notes to A- from BBB+. Additionally, the preferred stock ratings were reaffirmed at BBB+. Fitch stated that these ratings reflect PSI's competitive profile, which is based upon various factors that has prepared it to compete effectively in an unregulated electric marketplace.
Cinergy, CG&E, PSI, and ULH&P
Competitive Pressures As discussed in the 1995 Form 10-K, the primary factor
influencing the future profitability of Cinergy is the changing competitive
environment for energy services, including the impact of emerging
technologies, and the related commoditization of electric power markets.
Changes in the industry include increased competition in wholesale power
markets and ongoing pressure for "customer choice" by large industrial
customers, and ultimately, by all retail customers. Cinergy supports
increased competition in the electric utility industry and has chosen to take
a leadership role in state and Federal debates on industry reform.
As the electric utility industry moves toward a competitive environment,
Cinergy is reassessing its corporate structure, including the issue of whether
to remain vertically integrated. As a first step toward "unbundling" the
business for a competitive environment, Cinergy has reorganized into strategic
business units. This functional reorganization separated Cinergy's utility
businesses into an energy services business unit, an energy delivery business
unit, and an energy commodities business unit. Cinergy continues to analyze
what benefits, if any, may exist in the future for its various stakeholders of
separating the business units into different corporations.
Cinergy, CG&E, PSI, and ULH&P
Contract Negotiations As previously reported, members of IBEW Local No. 1393
ratified a new labor agreement with PSI effective May 24, 1996, and expiring
April 30, 1999. Additionally, members of IBEW Local No. 1347, USWA Local Nos.
12049 and 14214, and the IUU approved new contracts with CG&E expiring April
1, 2001, May 15, 2002, and April 1, 2001, respectively.
Regulatory Matters
Cinergy, CG&E, PSI, and ULH&P
FERC Orders 888 and 889 In April 1996, the FERC issued final orders relating
to its previously issued mega-NOPR. The unanimously-passed final rules, which
contain essentially the same provisions as the mega-NOPR, provide for
mandatory filing of open access/comparability transmission tariffs, provide
for functional unbundling of all services, require utilities to use the filed
tariffs for their own bulk power transactions, establish an electronic
bulletin board for transmission availability and pricing information, and
establish a contract-based approach to recovering any potential stranded costs
as a result of customer choice at the wholesale level. The FERC expects the
rules to "accelerate competition and bring lower prices and more choices to
energy customers." The final rules became effective in July 1996. CG&E, PSI,
and ULH&P have made compliance filings with the FERC and are now operating
under open access/comparability tariffs.
Concurrent with the issuance of the final orders, the FERC also issued a
related NOPR which establishes a new system for utilities to use in reserving
capacity on their own and others' transmission systems. Cinergy has filed
formal comments with the FERC which, generally, support several of the broad
policy goals
of the NOPR but raise implementation and prioritization issues. The FERC
proposed in the NOPR that a capacity reservation tariff replace open access
tariffs by December 31, 1997.
Cinergy and CG&E
Legislation On June 18, 1996, House Bill 476 (HB 476) was signed into law by
the Governor of Ohio. HB 476 addresses regulatory reform of the natural gas
industry at the state level and thus, is an extension of Order 636 for local
distribution companies. The Ohio law, among other things, provides that
natural gas commodity sales services may be exempted from PUCO regulation and
that the PUCO allow alternative ratemaking methodologies in connection with
other regulated services. The PUCO has initiated a rulemaking proceeding to
promulgate administrative rules necessary to implement the law.
Cinergy and PSI
PSI's Retail Rate Proceeding See Note 8 of the "Notes to Financial
Statements" in "Part I. Financial Information."
Cinergy and CG&E
CG&E's Gas Rate Proceeding See Note 9 of the "Notes to Financial Statements"
in "Part I. Financial Information."
Accounting Issues
Cinergy, CG&E, PSI, and ULH&P
New Accounting Standard See Note 5 of the "Notes to Financial Statements" in
"Part I. Financial Information."
CAPITAL REQUIREMENTS
Cinergy and CG&E
Preferred Stock Tender Offer See Note 6 of the "Notes to Financial
Statements" in "Part I. Financial Information."
Other Commitments
Cinergy and PSI
WVPA Litigation See Note 4 of the "Notes to Financial Statements" in "Part I.
Financial Information."
Cinergy, CG&E, PSI, and ULH&P
1996 Voluntary Workforce Reduction Programs See Note 7 of the "Notes to
Financial Statements" in "Part I. Financial Information."
CAPITAL RESOURCES
Cinergy, CG&E, PSI, and ULH&P
Long-term Debt and Preferred Stock For information regarding recent
securities redemptions, see Notes 2, 3, and 6 of the "Notes to Financial
Statements" in "Part I. Financial Information."
Cinergy, CG&E, PSI, and ULH&P
Short-term Debt The operating subsidiary companies of Cinergy have the
following short-term debt authorizations and lines of credit:
Committed Unused
Authorized Lines__ Lines
(in millions)
Cinergy & Subsidiaries $838 $280 $64
CG&E & Subsidiaries 435 80 11
PSI 400 200 53
ULH&P 35 - -
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Additionally, Cinergy has established a $600 million credit facility, which expires in May 2001, of which $96 million remained unused as of November 11, 1996. This new credit facility was established, in part, to fund the acquisition of Midlands through Avon Energy ($500 million has been designated for this purpose) with the remaining portion available for general corporate purposes. The prior $100 million credit facility, which would have expired in September 1997, has been terminated.
In addition, Cinergy U.K. entered into a $40 million non-recourse credit agreement, of which $27 million is outstanding as of November 11, 1996. This new credit agreement was also used to fund the acquisition of Midlands.
Cinergy has borrowed approximately $500 million under the two agreements to fund its equity investment in Avon Energy.
Cinergy, CG&E, PSI, and ULH&P
Sales of Accounts Receivables As discussed in each registrant's 1995 Form 10-
K, in January 1996, CG&E, PSI, and ULH&P entered into an agreement to sell, on
a revolving basis, undivided percentage interests in certain of their accounts
receivables. Under the agreement, the companies have the authority to sell up
to an aggregate maximum of $350 million of which $257 million has been sold as
of October 31, 1996.
RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
Reference is made to "ITEM 1. FINANCIAL STATEMENTS" in "PART I. FINANCIAL
INFORMATION."
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Cinergy, CG&E, and PSI
Merger Litigation The United States Court of Appeals for the District of
Columbia Circuit will hear oral arguments in connection with AEP's petition
for review of the FERC's Merger Order. AEP has objected to the Merger Order
alleging that the post-merger operations of Cinergy would require the use of
AEP's transmission facilities on a continuous basis without compensation. AEP
contends that the FERC, in issuing the Merger Order, did not adequately
evaluate the impact on AEP or whether the need to use AEP's transmission
facilities would interfere with Cinergy achieving merger benefits. In
addition, AEP claims that the FERC failed to evaluate the extent to which the
merged facilities' operations would be consistent with the integrated public
utility concept of the PUHCA. CG&E and PSI have intervened in this action.
At this time, Cinergy, CG&E, and PSI cannot predict the outcome of the appeal.
Additionally, see Notes 4, 8, 9, and 12 of the "Notes to Financial Statements" in "Part I. Financial Information."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
CG&E
(a) A special meeting of shareholders of CG&E was held September 18, 1996
in Cincinnati, Ohio.
(c) An amendment to CG&E's Articles was approved. The amendment removes a provision of the Articles that limited the amount of unsecured debt, including short-term debt, that could be incurred by CG&E. There were 89,663,086 common shares that voted for the amendment. There were 1,800,315 affirmative votes of preferred stock, 35,677 negative votes, and 21,077 abstentions. A two-thirds affirmative vote of both common and preferred shares, each voting as a separate class, was required to approve the amendment.
ITEM 5. OTHER INFORMATION
Cinergy
On June 25, 1996, Power International sold its ownership interest in Bruwabel
and its subsidiaries, including Power Development s.r.o. which owns the
Vytopna Kromeriz Heating Plant. Power International (formerly Enertech
Associates International, Inc.) had acquired Bruwabel and its subsidiaries in
July 1994 for the purpose of pursuing design, engineering, and development
work involving energy privatization projects, primarily in the Czech Republic.
Cinergy, CG&E, and ULH&P
KO Transmission acquired a 32.67% interest in a 90-mile interstate natural gas
pipeline and began flowing gas June 1, 1996, from southeast Kentucky northward
to the service territories of CG&E and ULH&P.
Cinergy, CG&E, and PSI
In August 1996, Cinergy sold its ownership interests in PSI Recycling which
recycled metal from CG&E and paper, metal, and other materials from PSI.
Cinergy and CG&E
In October 1996, Cinergy sold certain electric generating equipment for
removal from Miami Fort.
Cinergy, CG&E, PSI, and ULH&P
Additionally, refer to the "Recent Developments" and "Regulatory Matters"
sections in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in "Part I. Financial Information" for
information concerning new contracts between CG&E (including ULH&P), PSI
and certain of the union organizations, Cinergy's Joint Venture, the status
of the CG&E gas rate proceeding, and the Company's functional
restructuring.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit
Designation Nature of Exhibit
CG&E
3-a Amended Articles of Incorporation of CG&E
effective October 23, 1996.
PSI
3-b By-laws of PSI, as amended on October 22, 1996.
Cinergy and PSI
4-a Loan Agreement between PSI and the City of
Princeton, Indiana dated November 7, 1996.
Cinergy
10-a Amendment to Cinergy's Stock Option Plan, adopted
on October 22, 1996.
10-b Amendment to Cinergy's Performance Shares Plan,
adopted on October 22, 1996.
10-c Amendment to Cinergy's 1996 Long-Term Incentive
Compensation Plan adopted on October 22, 1996.
10-d Amendment to Cinergy's Employee Stock Purchase
and Savings Plan, adopted on October 22, 1996.
10-e Amendment to Cinergy's Directors' Deferred
Compensation Plan, adopted on October 22, 1996.
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Cinergy, CG&E, PSI, and ULH&P
27 Financial Data Schedules (included in
electronic submission only).
Cinergy
(b) No reports on Form 8-K were filed during the quarter.
SIGNATURES
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although Cinergy, CG&E, PSI, and ULH&P believe that the disclosures are adequate to make the information presented not misleading. In the opinion of Cinergy, CG&E, PSI, and ULH&P, these statements reflect all adjustments (which include only normal, recurring adjustments) necessary to reflect the results of operations for the respective periods. The unaudited statements are subject to such adjustments as the annual audit by independent public accountants may disclose to be necessary.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed by an officer and the chief accounting officer on their behalf by the undersigned thereunto duly authorized.
CINERGY CORP.
THE CINCINNATI GAS & ELECTRIC COMPANY
PSI ENERGY, INC.
THE UNION LIGHT, HEAT AND POWER COMPANY
Registrants
Date: November 12, 1996 J. Wayne Leonard _________ Duly Authorized Officer
Date: November 12, 1996 Charles J. Winger __ Chief Accounting Officer
Amended
Articles of Incorporation
of
THE CINCINNATI GAS & ELECTRIC COMPANY
Effective
October 23, 1996
AMENDED ARTICLES OF INCORPORATION
of
THE CINCINNATI GAS & ELECTRIC COMPANY
The Cincinnati Gas & Electric Company, a corporation for profit, heretofore organized in the year 1837 and now existing under the laws of the State of Ohio, adopts, makes and files these Amended Articles of Incorporation to supersede and take the place of its heretofore existing Amended Articles of Incorporation and all previously adopted Amendments thereto:
ARTICLE FIRST
The name of the corporation shall be The Cincinnati Gas & Electric Company (hereinafter referred to as the "Company").
ARTICLE SECOND
The place in the State of Ohio where the principal office of the Company is located is the City of Cincinnati and the County of Hamilton.
ARTICLE THIRD
The purpose for which the Company is formed is to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98 of the Ohio Revised Code.
ARTICLE FOURTH
The maximum number of shares which the Company is authorized to have outstanding is 126,000,000 shares of which 6,000,000 shares of the par value of $100 each and of the aggregate par value of $600,000,000 are to be Cumulative Preferred Stock, and 120,000,000 shares of the par value of $8.50 each and of the aggregate par value of $1,020,000,000 are to be Common Stock.
The Common Stock and Cumulative Preferred Stock shall have the following respective designations, preferences, dividend rights, voting powers, redemption rights, conversion rights, restrictions on issuance of shares and other relative, participating, optional or other special rights and preferences, and qualifications, limitations or restrictions thereon, and are created on the following terms, respectively:
COMMON STOCK
The shares of Common Stock may be issued at any time or from time to time for such amount of consideration as may be fixed by the Board of Directors. The holders of Common Stock shall not be entitled to subscribe for or purchase or receive any part of any new or additional issue of, or any warrant, option or other right for the purchase of, stock of any class or securities convertible into stock of any class whether now or hereafter authorized and whether issued for cash, property, by way of dividends or otherwise, except as authorized by the Board of Directors.
CUMULATIVE PREFERRED STOCK
Clause l. Except as otherwise provided by this Article Fourth or by the resolution or resolutions of the Board of Directors providing for the issue of any series of Cumulative Preferred Stock, the Cumulative Preferred Stock may be issued at any time or from time to time in any amount, not exceeding in the aggregate, including all shares of any and all series thereof theretofore issued, the total number of shares of Cumulative Preferred Stock hereinabove authorized, as Cumulative Preferred Stock of one or more series, as hereinafter provided, and for such lawful consideration as shall be fixed from time to time by the Board of Directors. All shares of any one series of Cumulative Preferred Stock shall be alike in every particular, each series thereof shall be distinctively designated by letter or descriptive words, and all series of Cumulative Preferred Stock shall rank equally and be identical in all respects except as permitted by the provisions of Clause 2 of this Article Fourth.
Clause 2. Authority is hereby expressly granted to the Board of Directors from time to time to adopt amendments to these Articles providing for the issue in one or more series of any unissued or treasury shares of the Cumulative Preferred Stock, and to fix, by the amendment creating each such series of the Cumulative Preferred Stock, the designation and number of shares, dividend rate, dividend payment dates (for any series issued subsequent to April 22, 1981), redemption rights and price, sinking fund requirements, conversion rights and restrictions on issuance of shares, of such series, to the full extent now or hereafter permitted by the laws of the State of Ohio and notwithstanding the provisions of any other Article of these Amended Articles of the Company, in respect of the matters set forth in the following subdivisions (a) to (g), inclusive:
(a) The designation and number of shares of such series;
(b) The dividend rate of such series;
(c) The dividend payment dates of such series (for any series issued subsequent to April 22, 1981);
(d) The price or prices at which shares of such series may be redeemed, provided that such price shall not be less than $100 a share and not more than $115 a share, plus an amount equal to all accrued dividends thereon to the date fixed for redemption;
(e) The amount of the sinking fund, if any, to be applied to the purchase or redemption of shares of such series and the manner of its application;
(f) Whether or not the shares of such series shall be made convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same class of stock of the Company, and if made so convertible or exchangeable, the conversion price or prices, or the rates of exchange, and the adjustments, if any, at which such conversion or exchange may be made; and
(g) Whether or not the issue of any additional shares of such series or any future series in addition to such series shall be subject to any restrictions and, if so, the nature of such restrictions.
Clause 3. Before any dividends shall be declared or paid upon or set apart for, or distribution made on, the Common Stock and before any sum shall be paid or set apart for the purchase or redemption of Cumulative Preferred Stock of any series or for the purchase of the Common Stock, the holders of Cumulative Preferred Stock of each series shall be entitled to receive, if and when declared by the Board of Directors, dividends at the annual rate fixed for such series in accordance with the provisions of this Article Fourth, and no more, from October 1, 1945, or if the first issue of any shares of a series is made subsequent to December 31, 1945 but prior to April 23, 1981, from the dividend payment date of, or next preceding the date of, issue thereof, payable on January 1, April 1, July 1 and October 1 of each year; provided, however, if the first issue of any shares of a series is made subsequent to April 22, 1981, from the dividend payment date of, or next preceding the date of, issue thereof, payable on quarterly payment dates as fixed by the Board of Directors. Dividends shall be cumulative so that if for any dividend period or periods dividends on the outstanding Cumulative Preferred Stock of any series, at the rates fixed for such series, shall not have been paid, such dividends shall be paid, or declared and set apart for payment, before any dividends shall be declared or paid upon or set apart for, or any distribution made on, the Common Stock and before any sum shall be paid or set apart for the purchase or redemption of Cumulative Preferred Stock of any series or for the purchase of Common Stock. Deferred dividends shall not bear interest. Dividends on all Cumulative Preferred Stock of the same series shall be cumulative from the same date and in the event of the issue of additional Cumulative Preferred Stock of any series all dividends paid on Cumulative Preferred Stock of such series on the date of or on a date prior to the issue of such additional Cumulative Preferred Stock and all dividends declared and payable to holders of record of Cumulative Preferred Stock of such series on a date prior to such additional issue shall be deemed to have been paid on the additional stock so issued. If at any time Cumulative Preferred Stock of more than one series shall be outstanding, any dividends declared upon the Cumulative Preferred Stock in an amount less than the full amount payable on all Cumulative Preferred Stock outstanding shall be declared pro rata so that the amounts of dividends declared on each share of the Cumulative Preferred Stock of different series shall in all cases bear to each other the same proportions that the respective dividend rates of such respective series bear to each other.
Clause 4. Upon at least thirty days previous notice given by mail to record holders of Cumulative Preferred Stock to be redeemed at their respective addresses as they appear on the books of the Company and by publication in a newspaper of general circulation in the City of Cincinnati, Ohio, and in a newspaper of general circulation in the Borough of Manhattan, City and State of New York, the Company, at its election, by action of its Board of Directors may redeem the whole of the Cumulative Preferred Stock or any series thereof or any part of any series thereof by lot or pro rata, at any time or from time to time and at the prices fixed for the redemption of such shares in accordance with the provisions of this Article Fourth (the price so fixed for any series being herein called the redemption price of such series). If the Company shall determine to redeem by lot less than all the shares of any series of Cumulative Preferred Stock, the selection by lot of the shares of such series so to be redeemed shall be conducted by an independent bank or trust company. From and after the date fixed in such notice as the date of redemption, unless default shall be made by the Company in providing moneys at the time and place specified for the payment of the redemption price pursuant to such notice, or, if the Company shall so elect, from and after a date, which shall be prior to the date fixed as the date of redemption, on which the Company shall provide moneys for the payment of the redemption price by depositing the amount thereof in trust for the account of the holders of the Cumulative Preferred Stock called for redemption with a bank or trust company doing business in the Borough of Manhattan, in the City and State of New York, or in the City of Cincinnati, Ohio, and having capital and surplus of at least $5,000,000, pursuant to notice of such election included in the notice of redemption specifying the date on which such deposit will be made, all dividends on the Cumulative Preferred Stock called for redemption shall cease to accrue and all rights of the holders thereof as shareholders of the Company, except the right to receive the redemption price upon presentation and surrender of the respective certificates for the Cumulative Preferred Stock called for redemption, shall cease and determine. The Company may, from time to time, purchase the whole of the Cumulative Preferred Stock or any series thereof, or any part of any series thereof, upon the best terms reasonably obtainable, but in no event at a price greater than the redemption price in effect at the date of such purchase of the shares so purchased. Such redemption or purchase may, however, be effected only if full cumulative dividends upon all shares of the Cumulative Preferred Stock of all series then outstanding and not then to be redeemed or purchased shall have been declared and payment provided for. Cumulative Preferred Stock of any series redeemed or purchased may in the discretion of the Board of Directors be reissued, at any time or from time to time, as stock of the same or of a different series, or may be canceled and not reissued.
Clause 5. After full cumulative dividends as aforesaid upon the Cumulative Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of or provision for full dividends on the Cumulative Preferred Stock of all series then outstanding for the current dividend period, then and not otherwise dividends may be declared upon the Common Stock at such rate as the Board of Directors may determine and no holders of shares of any series of the Cumulative Preferred Stock, as such, shall be entitled to share therein.
Clause 6-A. So long as any shares of the Cumulative Preferred Stock of any series shall be outstanding, the Company shall not, without the consent in writing of the holders of record of at least a majority of the total number of shares of the Cumulative Preferred Stock of all series then outstanding or the consent (given by vote at a meeting called for that purpose in the manner prescribed by the Regulations of the Company) of the holders of record of at least a majority of the total number of shares of the Cumulative Preferred Stock of all series then outstanding:
(a) Increase the authorized number of shares of the Cumulative Preferred Stock; or
(b) Consolidate or merge with or into any other corporation or corporations, unless such consolidation or merger, or the issuance or assumption of all securities to be issued or assumed in connection with such consolidation or merger, shall have been ordered, approved or permitted by the Securities and Exchange Commission or by any successor commission or other regulatory authority of the United States of America having jurisdiction over such consolidation or merger or the issuance or assumption of securities in connection therewith; provided that the provisions of this subdivision (b) shall not apply to (i) a consolidation of the Company with, or a merger into the Company of, any subsidiary all the outstanding shares of stock of which at the time shall be owned by the Company, or (ii) the purchase or other acquisition by the Company of the franchises or assets of another corporation, or (iii) any transaction which does not involve a consolidation or merger under the laws of the State of Ohio.
Clause 6-B. So long as any shares of the Cumulative Preferred Stock of any series shall be outstanding, the Company shall not, without the consent in writing of the holders of record of at least two-thirds of the total number of shares of the Cumulative Preferred Stock of all series then outstanding or the consent (given by vote at a meeting called for that purpose in the manner prescribed by the Regulations of the Company) of the holders of record of at least two-thirds of the total number of shares of the Cumulative Preferred Stock of all series then outstanding:
(a) Create or authorize any kind of stock ranking prior to the Cumulative Preferred Stock with respect to the payment of dividends or upon the dissolution, liquidation or winding up of the Company, whether voluntary or involuntary, or create or authorize any obligation or security convertible into shares of any such kind of stock; or
(b) Amend, alter, change or repeal any of the express terms of the Cumulative Preferred Stock so as to affect the holders thereof adversely; or
(c) Sell all or substantially all its assets, or sell all or substantially all its electric properties; or
(d) Issue any additional shares of any series of the Cumulative Preferred Stock, other than a maximum of 270,000 shares of the first series, or any shares ranking on a parity with it, unless the consolidated income of the Company and its subsidiaries (determined as hereinafter provided) for any twelve consecutive calendar months within the fifteen calendar months immediately preceding the month within which the issuance of such additional shares shall be authorized by the Board of Directors of the Company shall have been in the aggregate not less than one and one-half times the sum, on a consolidated basis, of the interest requirements (adjusted by provision for amortization of debt discount and expense or of premium on debt, as the case may be) for one year on all the indebtedness of the Company and its subsidiaries outstanding at the date of such proposed issue and the full dividend requirements for one year on all shares of preferred stock of the subsidiaries of the Company outstanding at the date of such proposed issue and the full dividend requirements for one year on all outstanding shares (including those then proposed to be issued but excluding any shares proposed to be retired in connection with such issue) of the Cumulative Preferred Stock and all other stock, if any, ranking prior to or on a parity with the Cumulative Preferred Stock with respect to the payment of dividends or the distribution of assets upon the dissolution, liquidation or winding up of the Company, whether voluntary or involuntary.
"Consolidated income" for any period for the purposes of
this subdivision (d) of Clause 6-B shall be computed by adding to the
consolidated net income of the Company and its subsidiaries for said period,
determined in accordance with generally accepted accounting principles and
practices, as adjusted by action of the Board of Directors of the Company as
hereinafter provided, the amount deducted for interest (adjusted as above
provided) in determining such net income. In determining such consolidated net
income for any period, there shall be deducted, in addition to other items of
expense, the amount charged to income for said period on the books of the
Company and its subsidiaries for taxes and depreciation expense. In the
determination of consolidated net income for the purposes of this subdivision
(d), the Board of Directors of the Company may, in the exercise of due
discretion, make adjustments by way of increase or decrease in such
consolidated net income to give effect to changes therein resulting from any
acquisition of properties or to any redemption, acquisition, purchase, sale or
exchange of securities by the Company or its subsidiaries either prior to the
issuance of any shares of Cumulative Preferred Stock then to be issued or in
connection therewith.
The term "subsidiary" as used in this subdivision (d) of Clause 6-B shall mean any corporation more than 50% of the voting stock (stock at the time entitling the holders thereof to elect a majority of the Board of Directors of such corporation) of which at the time is owned or controlled, directly or indirectly, by the Company or by one or more subsidiaries of the Company, or by the Company and by one or more subsidiaries of the Company.
The term "preferred stock" of a subsidiary as used in this subdivision (d) of Clause 6-B shall mean any stock of such subsidiary entitled to a preference as to dividends or as to assets upon any liquidation or dissolution of such subsidiary over any other stock of such subsidiary.
Clause 6-C. So long as any shares of the Cumulative Preferred Stock of any series shall be outstanding, the Company shall not, without the consent in writing of the holders of record of at least two-thirds of the total number of shares of all series of the Cumulative Preferred Stock which may be affected adversely or the consent (given by vote at a meeting called for that purpose in the manner prescribed by the Regulations of the Company) of the holders of record of at least two-thirds of the total number of shares of all series of the Cumulative Preferred Stock which may be affected adversely, amend, alter, change or repeal any of the express terms of one or more series of the Cumulative Preferred Stock so as to affect such series adversely.
Clause 7. Except as and to the extent otherwise provided in this Article Fourth, the Cumulative Preferred Stock shall not entitle any holder thereof to vote at any meeting of shareholders or election of the Company, or otherwise to participate in any action taken by the Company or the shareholders thereof; provided, however, that whenever dividends payable on the Cumulative Preferred Stock shall be in default in an aggregate amount equivalent to four full quarterly dividends on all shares of such Cumulative Preferred Stock then outstanding, and until all such dividends then in default shall have been paid or declared and set apart for payment, the holders of the Cumulative Preferred Stock of all series, voting separately as a class and regardless of series, shall be entitled to elect a majority of the Board of Directors, as then constituted, of the Company, and the holders of any other class or classes of stock of the Company entitled to vote for the election of directors shall be entitled, voting separately as a class, to elect the remainder of the Board of Directors, as then constituted, of the Company. The right of the holders of the Cumulative Preferred Stock voting separately as a class to elect members of the Board of Directors of the Company as aforesaid shall continue until such time as all dividends accumulated on the Cumulative Preferred Stock shall have been paid in full, or declared and set apart for payment (and such dividends shall be paid, or declared and set apart for payment, out of assets available therefor as soon as is reasonably practicable), at which time the right of the holders of the Cumulative Preferred Stock voting separately as a class to elect members of the Board of Directors as aforesaid and the right of the holders of any other class or classes of stock of the Company entitled to vote for the election of directors voting separately as a class to elect the remainder of the Board of Directors as aforesaid shall terminate, subject to revesting in the event of each and every subsequent default of the character above mentioned.
The aforesaid rights of the holders of the Cumulative Preferred Stock and of any other class or classes of stock of the Company to vote separately for the election of members of the Board of Directors may be exercised at any annual meeting of shareholders of the Company or, within the limitations hereinafter provided, at a special meeting of shareholders of the Company held for the purpose of electing directors.
At such time when the right of the holders of the Cumulative Preferred Stock to elect a majority of the Board of Directors shall have become vested as aforesaid, a special meeting of shareholders of the Company may be called and held for the purpose of electing directors in the following manner (unless under the provisions of the Regulations of the Company, as then in effect, an annual meeting of shareholders of the Company is to be held within 60 days after the vesting in the holders of the Cumulative Preferred Stock of the right to elect members of the Board of Directors or unless, subsequent to such vesting, a meeting of shareholders of the Company has been held at which holders of the Cumulative Preferred Stock were entitled to elect members of the Board of Directors).
Upon the written request of any holder of record of the Cumulative Preferred Stock then outstanding, regardless of series, addressed to the Secretary of the Company, the Secretary or an Assistant Secretary of the Company shall call a special meeting of the shareholders entitled to vote for the election of directors, for the purpose of electing a majority of the Board of Directors by the vote of the holders of the Cumulative Preferred Stock, and the remainder of the Board of Directors by the vote of the holders of such other class or classes of stock as may then be entitled to vote for the election of directors, voting separately as hereinbefore provided. Such meeting shall be held within 50 days after personal service of such written request upon the Secretary of the Company, or within 50 days after mailing the same within the United States of America by registered mail addressed to the Secretary of the Company at its principal office. If such meeting shall not be called within 20 days of such personal service or mailing, then any holder of record of the Cumulative Preferred Stock then outstanding, regardless of series, may designate in writing himself or any other holder of record of the Cumulative Preferred Stock to call such special meeting at the expense of the Company, and such meeting may be called by such person so designated upon the notice required for special meetings of shareholders and shall be held at the place for the holding of annual meetings of shareholders of the Company. Any holder of the Cumulative Preferred Stock so designated shall have access to the stock books of the Company for the purpose of causing said meeting to be called as aforesaid.
At any annual or special meeting held for the purpose of electing directors when the holders of the Cumulative Preferred Stock shall be entitled to elect members of the Board of Directors as aforesaid, the presence in person or by proxy of the holders of a majority of the total number of outstanding shares of the class or classes of stock of the Company other than the Cumulative Preferred Stock entitled to elect directors as aforesaid shall be required to constitute a quorum of such class or classes for the election of directors by such class or classes, and the presence in person or by proxy of the holders of a majority of the total number of outstanding shares of the Cumulative Preferred Stock shall be required to constitute a quorum of such class for the election of directors by such class; provided, however, that a majority of those holders of the stock of either such class or classes who are present in person or by proxy shall have power to adjourn such meeting for the election of directors by such class from time to time without notice other than announcement at the meeting.
Upon the election of a majority of the Board of Directors by the holders of the Cumulative Preferred Stock, the term of office of all directors then in office shall terminate; and no delay or failure by the holders of other classes of stock in electing the remainder of the Board of Directors shall invalidate the election of a majority thereof by the holders of the Cumulative Preferred Stock.
Upon any termination of the right of the holders of the Cumulative Preferred Stock to elect members of the Board of Directors as aforesaid, the term of office of the directors then in office shall terminate upon the election of a majority of the Board of Directors, as then constituted, at a meeting of the holders of the class or classes of stock of the Company then entitled to vote for directors, which meeting may be held at any time after such termination of such right, and shall be called upon the request of holders of record of such class or classes of stock then entitled to vote for directors, in like manner and subject to similar conditions as hereinbefore in this Clause 7 provided with respect to the call of a special meeting of shareholders for the election of directors by the holders of the Cumulative Preferred Stock.
In case of any vacancy in the office of a director occurring among the directors elected by the holders of the Cumulative Preferred Stock as aforesaid, or of a successor to any such director, the remaining directors so elected may elect, by affirmative vote of a majority thereof, or the remaining director so elected if there be but one, a successor or successors to hold office for the unexpired term of the director or directors whose place or places shall be vacant, and such successor or successors shall be deemed to have been elected by the holders of the Cumulative Preferred Stock as aforesaid. Likewise, in case of any vacancy in the office of a director occurring (at a time when the holders of the Cumulative Preferred Stock shall be entitled to elect members of the Board of Directors as aforesaid) among the directors elected by the holders of the class or classes of stock of the Company other than the Cumulative Preferred Stock, or of a successor to any such director, the remaining directors so elected may elect, by affirmative vote of a majority thereof, or the remaining director so elected if there be but one, a successor or successors to hold office for the unexpired term of the director or directors whose place or places shall be vacant, and such successor or successors shall be deemed to have been elected by such holders of the class or classes of stock of the Company other than the Cumulative Preferred Stock.
Except as herein otherwise expressly provided and except when some mandatory provision of law shall be controlling, whenever shares of two or more series of the Cumulative Preferred Stock shall be outstanding, no particular series of the Cumulative Preferred Stock shall be entitled to vote as a separate series on any matter and all shares of the Cumulative Preferred Stock of all series shall be deemed to constitute but one class for any purpose for which a vote of the shareholders of the Company by classes may now or hereafter be required.
Clause 8. Upon any dissolution, liquidation, winding up or reduction of the capital stock of the Company resulting in a distribution of assets to its shareholders, holders of Cumulative Preferred Stock of each series then outstanding, before any distribution of assets shall be made to the holders of Common Stock, shall be entitled to receive (a) in the event of any involuntary dissolution, liquidation or winding up of the Company, $100 a share together with an amount equal to all accrued dividends thereon, and (b) in the event of any voluntary dissolution, liquidation or winding up of the Company or in the event of a reduction of the capital stock of the Company resulting in a distribution of assets to its shareholders, an amount equal to the redemption price then in effect of the Cumulative Preferred Stock of such series. If upon any such dissolution, liquidation or winding up of the Company or reduction of its capital stock, the assets so to be distributed among the holders of the Cumulative Preferred Stock shall be insufficient to permit the payment to such holders of the full preferential amounts aforesaid, then the entire assets of the Company shall be distributed ratably among the holders of the Cumulative Preferred Stock in proportion to the full preferential amounts to which they are respectively entitled as aforesaid. After payment to the holders of the Cumulative Preferred Stock of the full preferential amounts hereinbefore provided for, the holders of the Cumulative Preferred Stock, as such, shall have no right or claim to any of the remaining assets of the Company and the remaining assets to be distributed, if any, shall be distributed to the holders of the Common Stock.
Clause 9. The holders of the Cumulative Preferred Stock shall have no right whatever to subscribe for or purchase or receive any part of any new or additional issue of stock of any class or securities convertible into stock of any class whether now or hereafter authorized and whether issued for cash, property or by way of dividends.
Clause 10. The term "accrued dividends", whenever used herein with respect to the Cumulative Preferred Stock of any series shall be deemed to mean that amount which would have been paid as dividends on the Cumulative Preferred Stock of such series to date had full dividends been paid thereon at the rate fixed for such series in accordance with the provisions of this Article Fourth, less in each case the amount of all dividends paid upon the shares of such series and the dividends deemed to have been paid as provided in Clause 3 hereof.
Clause 11. So long as any shares of the first series of Cumulative Preferred Stock shall be outstanding, the Company shall not, at any time after December 31, 1949, declare any dividend on any of its Common Stock, except dividends payable in shares of Common Stock of the Company, or purchase any shares of its Common Stock, or make any distribution of cash or property among its holders of Common Stock, by the reduction of its capital stock or otherwise, unless, after giving effect to such dividend, purchase or distribution, the aggregate of all such dividends and all amounts applied to such purchases or so distributed subsequent to December 31, 1949, shall not exceed 75% of the net income of the Company subsequent to December 31, 1949, if, at the time of the declaration of such dividend or the making of such purchase or distribution, the aggregate of the par value of, or stated capital represented by, the outstanding shares of Common Stock of the Company and of the surplus of the Company shall be less than an amount equal to 25% of the total capitalization and surplus of the Company.
For the purposes of this Clause 11, the following terms shall have the following meanings:
(a) The term "net income of the Company" shall mean the gross earnings of the Company from all sources less all proper deductions for operating expenses, taxes (including income, excess profits and other taxes based on or measured by income or undistributed earnings or income), interest charges and other appropriate items, including provision for maintenance, retirements, depreciation and obsolescence in an amount not less than 15% of the amount of the operating revenues of the Company, and less all dividends paid or accrued on the Cumulative Preferred Stock of the Company which are applicable to the period subsequent to December 31, 1949, and otherwise determined in accordance with sound accounting practice. The term "operating revenues of the Company", as used in this paragraph, shall mean and include all operating revenues derived by the Company from the operation of its plants and properties remaining after deducting therefrom an amount equal to the aggregate cost to the Company of electricity, gas (natural, artificial or mixed), steam or water purchased and rentals paid for the use of property owned by others and leased to or operated by the Company and the maintenance of which and depreciation on which are borne by the owners.
(b) The term "total capitalization" shall mean the aggregate of the principal amount of all indebtedness of the Company outstanding in the hands of the public maturing more than twelve months after the date of issue or assumption thereof, plus the par value of, or stated capital represented by, the outstanding shares of all classes of stock of the Company.
(c) The term "surplus of the Company" shall include capital surplus, earned surplus and any other surplus of the Company.
VARIABLE TERMS OF EXISTING SERIES
OF CUMULATIVE PREFERRED STOCK
Clause 12. There has been previously created and issued by resolution of the Board of Directors adopted October 25, 1945, an outstanding first series of the Cumulative Preferred Stock authorized by this Article Fourth, consisting of 270,000 shares designated "Cumulative Preferred Stock, 4% Series", the shares of such series having the express terms and provisions stated in such Article Fourth and as provided in paragraphs (a) to (f), inclusive, of such resolution, to wit:
(a) The designation of such series shall be "Cumulative Preferred Stock, 4% Series", and such series shall consist of 270,000 shares;
(b) The dividend rate of such series shall be 4% a share per year;
(c) The prices at which the shares of such series may be redeemed shall be $111 a share if the date fixed for redemption is prior to October 1, 1950; $109.50 a share if the date fixed for redemption is October 1, 1950, or thereafter and prior to October 1, 1955; and $108 a share if the date fixed for redemption is on or after October 1, 1955; in each case plus an amount equal to all dividends accrued thereon to the date fixed for redemption;
(d) The shares of such series shall not be entitled to the benefit of any sinking fund to be applied to the purchase or redemption of shares of such series;
(e) The shares of such series shall not be convertible into or exchangeable for shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Company; and
(f) The issue of any additional shares of such series or any future series shall not, by reason of this Clause 12 of Article Fourth, be subject to any restrictions in addition to the restrictions set forth in these Amended Articles of the Company.
Clause 13. There has been previously created and issued by resolution of the Board of Directors adopted March 10, 1958, an outstanding second series of the Cumulative Preferred Stock authorized by this Article Fourth, consisting of 130,000 shares designated "Cumulative Preferred Stock, 4 3/4% Series", the shares of such series having the express terms and provisions stated in such Article Fourth and as provided in paragraphs (a) to (f), inclusive, of such resolution, to wit:
(a) The designation of such series shall be "Cumulative Preferred Stock, 4 3/4% Series", and such series shall consist of 130,000 shares;
(b) The dividend rate of such series shall be 4 3/4% a share per year;
(c) The prices at which the shares of such series may be redeemed shall be $106 a share if the date fixed for redemption is prior to April 1, 1963; $104 a share if the date fixed for redemption is April 1, 1963, or thereafter and prior to April 1, 1968; $102 a share if the date fixed for redemption is April 1, 1968, or thereafter and prior to April 1, 1973; and $101 a share if the date fixed for redemption is on or after April 1, 1973; in each case plus an amount equal to all dividends accrued thereon to the date fixed for redemption; provided, however, the Company shall not on or prior to April 1, 1963 exercise its option to redeem any shares of the Cumulative Preferred Stock, 4 3/4% Series, as a part of or in anticipation of any refunding operation by the application, directly or indirectly, of borrowed funds or the proceeds of issue of any stock ranking prior to or on a parity with the Cumulative Preferred Stock if such borrowed funds have an interest rate or interest cost (calculated in accordance with accepted financial practice), or such shares have a dividend rate or cost, to the Company so calculated, less than the dividend rate per annum of the Cumulative Preferred Stock, 4 3/4% Series;
(d) The shares of such series shall not be entitled to the benefit of any sinking fund to be applied to the purchase or redemption of shares of such series;
(e) The shares of such series shall not be convertible into or exchangeable for shares of any other class or classes or of any other series of the same class of stock of the Company; and
(f) The issue of any additional shares of such series or any future series shall not, by reason of this Clause l3 of Article Fourth, be subject to any restrictions in addition to the restrictions set forth in these Amended Articles of the Company.
ARTICLE FIFTH
These Amended Articles of Incorporation supersede and take the place of the existing Amended Articles of Incorporation, as amended.
| ARTICLE UT |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| FISCAL YEAR END | DEC 31 1996 |
| PERIOD START | JAN 01 1996 |
| PERIOD END | SEP 30 1996 |
| PERIOD TYPE | 9 MOS |
| BOOK VALUE | PER BOOK |
| TOTAL NET UTILITY PLANT | 3,753,938 |
| OTHER PROPERTY AND INVEST | 0 |
| TOTAL CURRENT ASSETS | 297,712 |
| TOTAL DEFERRED CHARGES | 700,492 |
| OTHER ASSETS | 102,695 |
| TOTAL ASSETS | 4,854,837 |
| COMMON | 762,136 |
| CAPITAL SURPLUS PAID IN | 536,128 |
| RETAINED EARNINGS | 264,297 |
| TOTAL COMMON STOCKHOLDERS EQ | 1,562,561 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 21,145 |
| LONG TERM DEBT NET | 1,564,868 |
| SHORT TERM NOTES | 83,600 |
| LONG TERM NOTES PAYABLE | 0 |
| COMMERCIAL PAPER OBLIGATIONS | 0 |
| LONG TERM DEBT CURRENT PORT | 130,000 |
| PREFERRED STOCK CURRENT | 0 |
| CAPITAL LEASE OBLIGATIONS | 0 |
| LEASES CURRENT | 0 |
| OTHER ITEMS CAPITAL AND LIAB | 1,492,663 |
| TOT CAPITALIZATION AND LIAB | 4,854,837 |
| GROSS OPERATING REVENUE | 1,443,256 |
| INCOME TAX EXPENSE | 115,902 |
| OTHER OPERATING EXPENSES | 1,048,094 |
| TOTAL OPERATING EXPENSES | 1,163,996 |
| OPERATING INCOME LOSS | 279,260 |
| OTHER INCOME NET | 5,689 |
| INCOME BEFORE INTEREST EXPEN | 284,949 |
| TOTAL INTEREST EXPENSE | 92,260 |
| NET INCOME | 192,689 |
| PREFERRED STOCK DIVIDENDS | 10,423 |
| EARNINGS AVAILABLE FOR COMM | 164,091 |
| COMMON STOCK DIVIDENDS | 327,020 |
| TOTAL INTEREST ON BONDS | 93,392 |
| CASH FLOW OPERATIONS | 527,679 |
| EPS PRIMARY | 0.00 |
| EPS DILUTED | 0.00 |