FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 2-7793
THE UNION LIGHT, HEAT AND POWER COMPANY
(Exact name of registrant as specified in its charter)
KENTUCKY 31-0473080
(State of incorporation) (I.R.S. Employer Identification No.)
139 EAST FOURTH ST., CINCINNATI, OHIO 45202
(Address of principal executive offices) (Zip Code)
513-381-2000
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
-------- --------
Capital Shares, Par Value $15.00 Per Share
585,333 Shares Outstanding as of April 30, 1994
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<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENT OF INCOME
Three Months Ended Twelve Months Ended
March 31 March 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric...................................................... $45,190,209 $42,849,518 $178,052,864 $164,998,865
Gas........................................................... 36,800,017 31,424,677 81,119,505 68,224,932
----------- ----------- ------------ ------------
Total operating revenues................................ 81,990,226 74,274,195 259,172,369 233,223,797
----------- ----------- ------------ ------------
OPERATING EXPENSES
Electricity purchased from parent company for resale.......... 35,554,671 33,680,783 136,163,955 130,180,008
Gas purchased................................................. 22,409,254 19,945,601 45,843,940 39,979,265
Other operation............................................... 7,620,424 7,320,612 30,695,239 30,847,581
Maintenance................................................... 1,253,587 1,253,689 6,267,079 6,176,217
Provision for depreciation.................................... 2,615,738 2,216,296 10,212,371 8,504,009
Taxes other than income taxes................................. 1,025,113 965,291 3,683,153 3,591,065
Federal income taxes.......................................... 3,720,950 2,789,050 4,546,219 118,931
State income taxes............................................ 960,505 800,720 1,295,133 74,110
Deferred income taxes--net.................................... (900,739) (993,750) 1,094,584 1,818,451
----------- ----------- ------------ ------------
Total operating expenses................................ 74,259,503 67,978,292 239,801,673 221,289,637
----------- ----------- ------------ ------------
OPERATING INCOME................................................ 7,730,723 6,295,903 19,370,696 11,934,160
----------- ----------- ------------ ------------
OTHER INCOME AND DEDUCTIONS
Allowance for other funds used during construction............ (2,088) 135,833 158,718 126,982
Other income and deductions--net.............................. 398,909 (77,299) (57,712) (26,281)
----------- ----------- ------------ ------------
Total other income and deductions....................... 396,821 58,534 101,006 100,701
----------- ----------- ------------ ------------
INCOME BEFORE INTEREST CHARGES.................................. 8,127,544 6,354,437 19,471,702 12,034,861
----------- ----------- ------------ ------------
INTEREST CHARGES
interest on long-term debt.................................... 2,016,250 2,087,344 8,136,061 7,872,709
Other interest................................................ 152,590 32,689 451,400 679,162
Amortization of debt discount, premium and other.............. 26,551 22,398 93,745 71,096
Allowance for borrowed funds used during construction--credit. (29,421) (99,609) (198,038) (384,081)
----------- ----------- ------------ ------------
Net interest charges.................................... 2,165,970 2,042,822 8,483,168 8,238,886
----------- ----------- ------------ ------------
NET INCOME...................................................... $ 5,961,574 $ 4,311,615 $ 10,988,534 $ 3,795,975
=========== =========== ============ ============
AVERAGE NUMBER OF CAPITAL SHARES OUTSTANDING.................... 585,333 585,333 585,333 518,666
EARNINGS PER CAPITAL SHARE...................................... $ 10.18 $ 7.36 $ 18.77 $ 7.32
DIVIDENDS DECLARED PER CAPITAL SHARE............................ $ -- $ -- $ 5.00 $ --
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THE UNION LIGHT, HEAT AND POWER COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- - ---------------------
Earnings per capital share increased by $2.82 and $11.45 for
the three and twelve month periods ended March 31, 1994,
respectively, over the comparable periods of 1993 due to the
implementation of a gas rate increase in April 1993, increased
gas and electric sales volumes and cost control efforts.
Electric operating revenues increased $2.3 million and
$13.1 million for the three and twelve month periods ended March
31, 1994, respectively, over the comparable periods of 1993
primarily due to increases in electric Kwh sales of 5.1% and
5.9%.
Gas operating revenues increased $5.4 million and
$12.9 million, respectively, for the three and twelve month
periods ended March 31, 1994, over the comparable periods of 1993
due to the operation of an adjustment clause reflecting increases
in the cost of gas purchased, the implementation of a rate
increase in April 1993, and increases in gas Mcf volumes sold and
transported of 6.3% and 3.3%.
Electricity purchased increased $1.9 million and $6.0
million for the three and twelve month periods ended March 31,
1994, respectively, over the comparable periods of 1993 primarily
due to increases in Kwh volumes purchased of 5.1% and 6.1%.
Gas purchased expense increased $2.5 million and
$5.9 million for the three and twelve month periods ended March
31, 1994, respectively, over the comparable periods of 1993 due
to increases in the average cost per Mcf purchased of 5.8% and
7.9%, and to increases in volumes purchased of 6.2% and 6.3%.
Depreciation expense increased $.4 million and $1.7 million
for the three and twelve month periods ended March 31, 1994,
respectively, over the comparable periods of 1993 due to an
increase in depreciable plant in service, and to increases in
depreciation accrual rates on gas and common plant in accordance
with a 1993 Kentucky Public Service Commission (KPSC) rate order.
Allowance for funds used during construction decreased
$.2 million for both the three and twelve month periods ended
March 31, 1994, from the comparable periods of 1993 primarily due
to lower levels of construction work in progress.
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Other income and deductions-net increased $.5 million for
the three month period ended March 31, 1994, over the comparable
period of 1993 primarily due to the transfer of Union Light's
subsidiary, Enertech Associates International, Inc., to another
subsidiary of Union Light's parent company, The Cincinnati Gas &
Electric Company (CG&E).
Other interest expense increased $.1 million for the three
month period ended March 31, 1994, over the comparable period of
1993 primarily due to an increase in the average amount of short-
term borrowings outstanding. Other interest expense decreased
$.2 million for the twelve month period ended March 31, 1994,
primarily due to a decrease in the average amount of short-term
borrowings outstanding.
Liquidity and Capital Resources
- - -------------------------------
The construction expenditures for Union Light for the first
quarter of 1994 were approximately $4.0 million and are expected
to be $20.3 million for the year 1994. Over the five years
1994-1998, construction expenditures are expected to be
$120.2 million. These estimates are under continuing review and
subject to adjustment. Construction and financing plans for the
future are dependent on, among other things, the amount and
timing of rate changes, sales volumes, changes in construction
plans, cost control efforts, market conditions, regulatory
actions and the ability to obtain financing. Short-term
indebtedness will be used to supplement internal sources of funds
for the interim financing of the construction program. The
Federal Energy Regulatory Commission (FERC) has authorized Union
Light to issue a maximum amount of short-term indebtedness of $35
million through December 31, 1994, and $13.5 million of
short-term borrowings were outstanding at March 31, 1994. Union
Light has authority to issue to CG&E up to $15 million of Capital
Stock through December 31, 1994.
The issuance of first mortgage bonds by Union Light is
limited by earnings coverage and fundable property provisions of
Union Light's First Mortgage Indenture. In addition, certain
provisions in the mortgage indenture of CG&E prohibit the sale by
Union Light of debt securities except to CG&E if, after giving
effect to the sale of such securities, the outstanding debt
securities of Union Light are in excess of 75% of the net plant
of Union Light. In accordance with the most restrictive of these
provisions, Union Light would have been permitted to issue at
March 31, 1994, at least $75 million of additional first mortgage
bonds.
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Pending Merger
- - --------------
CG&E has entered into a merger agreement with PSI Resources,
Inc. (PSI) and PSI Energy, Inc., PSI's principal subsidiary, an
Indiana electric utility (PSI Energy) with a service area
contiguous to that of CG&E. Under the merger agreement, CG&E and
PSI will become subsidiaries of a newly formed corporation named
CINergy Corp., which will be a registered holding company under
the Public Utility Holding Company Act of 1935 (PUHCA). The
merger will be accounted for as a "pooling-of-interests", and
Union Light will remain a subsidiary of CG&E.
The merger is subject to approval by the Securities and
Exchange Commission (SEC) and FERC. Shareholders of CG&E and PSI
have already approved the CINergy merger at special meetings held
in November 1993. CG&E presently anticipates that all approvals
needed for the merger will be received by the end of the third
quarter of 1994.
FERC issued conditional approval of the CINergy merger in
August 1993, but several intervenors, including The Public
Utilities Commission of Ohio (PUCO) and the KPSC, filed for
rehearing of that order. On January 12, 1994, FERC withdrew its
conditional approval of the merger and ordered the setting of
FERC-sponsored settlement procedures to be held.
On March 4, 1994, CG&E reached a settlement agreement with
the PUCO and the Ohio Office of Consumers' Counsel on merger
issues identified by FERC. On March 2, PSI Energy and Indiana's
consumer representatives had reached a similar agreement. Both
settlement agreements have been filed with FERC. These documents
address, among other things, the coordination of state and
federal regulation and the commitment that neither CG&E nor PSI
electric base rates, nor CG&E's gas base rates, will rise because
of the merger, except to reflect any effects that may result from
the divestiture of CG&E's gas operations if ordered by the SEC in
accordance with the requirements of PUHCA discussed below.
CG&E also filed with FERC a unilateral offer of settlement
addressing all issues raised in the KPSC's application for
rehearing with FERC. The settlement offer commits Union Light,
among other things, to "hold harmless" its retail gas customers
from the effects of the merger on Union Light's retail gas base
rates that become effective on or after the date of the merger
and prior to January 1, 2003. However, Union Light's offer will
not apply to any effects that may result from the divestiture of
Union Light's gas operations, discussed below. Although it is
the belief of CG&E and PSI that no
<PAGE>
state utility commissions have jurisdiction over approval of the
proposed merger, an application was filed with the KPSC to comply
with the Staff of the KPSC's position that the KPSC's
authorization is required for the indirect acquisition of control
of Union Light by CINergy. A hearing on the KPSC application was
held on May 10, 1994. In testimony filed in the hearing, CG&E
and Union Light made, in addition to other commitments, an offer
to the KPSC that Union Light would also "hold harmless" retail
electric customers and would agree to an electric rate moratorium
commencing after Union Light's next retail rate case and
extending to January 1, 2000. An order on the application is
expected in mid-May.
The 30-day period for commenting on settlements and
agreements filed with FERC ended on April 21. During that
period, the FERC trial staff filed comments with the commission
recommending that FERC approve the settlements. However, the
merger is still being opposed by various other parties. If the
settlement agreements are not acceptable, FERC could set issues
for hearing. If a hearing is held by FERC, consummation of the
merger would likely be extended beyond the third quarter of 1994.
PUHCA imposes restrictions on the operations of registered
holding company systems. Among these are requirements that
securities issuances, sales and acquisitions of utility assets or
of securities of utility companies and acquisitions of interests
in any other business be approved by the SEC. PUHCA also limits
the ability of registered holding companies to engage in
non-utility ventures and regulates the rendering of services by
holding company affiliates to the system s utilities. PUHCA has
been interpreted to preclude the ownership of both electric and
gas utility systems. As a result, the SEC may require
divestiture of CG&E s and Union Light's gas properties within a
reasonable time after the merger. CG&E and Union Light believe
good arguments exist to allow retention of the gas assets and
will request that the Companies be allowed to do so.
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<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENT OF CASH FLOWS
Three Months Ended Twelve Months Ended
March 31 March 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Cash Flows From Operations:
Net Income.......................................... $ 5,961,574 $ 4,311,615 $ 10,988,534 $ 3,795,975
Adjustments to reconcile net income to net cash:
Deferred gas and electric fuel costs -- net....... 2,267,324 3,566,505 (1,343,817) (797,514)
Depreciation...................................... 2,615,738 2,216,296 10,212,371 8,504,009
Allowance for other funds used during
construction.................................... 2,088 (135,833) (158,718) (126,982)
Deferred income taxes and investment tax
credits -- net.................................. (900,739) (993,750) 1,091,487 1,821,548
Other -- net...................................... (265,715) 925,080 2,184,247 2,957,510
Change in current assets and liabilities:
Receivables and unbilled revenues............... (1,597,859) (4,136,139) (3,320,475) (9,514,040)
Materials and supplies.......................... 4,629,934 3,070,523 (23,567) (611,625)
Other current assets............................ 163,821 147,527 635,750 (617,650)
Accounts payable and other current liabilities.. 2,071,236 (472,644) 939,647 4,286,661
------------ ------------ ------------ ------------
Total adjustments........................... 8,985,828 4,187,565 10,216,925 5,901,917
------------ ------------ ------------ ------------
Net cash provided by operations............. 14,947,402 8,499,180 21,205,459 9,697,892
------------ ------------ ------------ ------------
Cash Flows From Investing:
Construction expenditures (less allowance for other
funds used during construction)................... (4,036,242) (5,260,558) (22,903,266) (23,060,590)
Gain on disposition of assets....................... 43,388 40,284 989,067 1,242,436
------------ ------------ ------------ ------------
Net cash used in investing activities....... (3,992,854) (5,220,274) (21,914,199) (21,818,154)
------------ ------------ ------------ ------------
Cash Flows From Financing:
Capital stock proceeds.............................. -- -- -- 15,000,000
Long-term debt proceeds............................. -- -- -- 19,670,800
Retirement of long-term debt........................ -- -- (6,500,000) --
Net short-term borrowings........................... (11,500,000) (2,500,000) 9,500,000 (21,500,000)
Dividends paid on capital shares.................... -- -- (2,926,665) --
------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities...................... (11,500,000) (2,500,000) 73,335 13,170,800
------------ ------------ ------------ ------------
Net increase (decrease) in cash and
temporary cash investments................ (545,452) 778,906 (635,405) 1,050,538
Cash and temporary cash investments -- beginning
of period........................................... 2,477,343 1,788,390 2,567,296 1,516,758
------------ ------------ ------------ ------------
Cash and temporary cash investments -- end of period.. $ 1,931,891 $ 2,567,296 $ 1,931,891 $ 2,567,296
============ ============ ============ ============
Supplemental Disclosure Of Cash Flow Information:
Cash paid during the period for:
Interest (net of allowance for borrowed funds
used during construction)......................... $ 1,695,318 $ 1,684,664 $ 8,414,712 $ 7,969,519
Income taxes........................................ $ 456,349 $ (150,000) $ 4,607,499 $ (591,387)
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<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEET
March 31 December 31
1994 1993
<S> <C> <C>
ASSETS
UTILITY PLANT...................................... $328,093,365 $324,663,510
Less--Accumulated provisions for depreciation... 98,263,281 96,164,955
------------ ------------
229,830,084 228,498,555
------------ ------------
CURRENT ASSETS
Cash............................................ 1,931,891 2,477,343
Accounts receivable--net........................ 32,765,332 25,564,221
Accrued unbilled revenues....................... 11,525,468 17,128,720
Materials and supplies.......................... 4,034,447 8,664,381
Prepayments..................................... 539,422 703,243
------------ ------------
50,796,560 54,537,908
------------ ------------
DEFERRED DEBITS AND OTHER.......................... 3,326,429 3,008,226
------------ ------------
$283,953,073 $286,044,689
============ ============
LIABILITIES
CAPITALIZATION
Shareholder's equity............................ $102,907,870 $ 96,946,296
Long-term debt.................................. 89,188,478 89,171,831
------------ ------------
192,096,348 186,118,127
------------ ------------
CURRENT LIABILITIES
Notes payable................................... 13,500,000 25,000,000
Accounts payable................................ 5,307,415 6,914,373
Accounts payable to associated companies--net... 14,263,982 17,118,008
Accrued taxes................................... 4,178,011 (434,538)
Accrued interest on debt........................ 2,570,384 2,126,283
Other........................................... 5,107,654 3,632,084
------------ ------------
44,927,446 54,356,210
------------ ------------
DEFERRED CREDITS AND OTHER
Deferred income taxes........................... 20,361,893 20,486,616
Investment tax credits.......................... 5,579,652 5,651,190
Income taxes refundable through rates........... 3,987,550 4,692,028
Other........................................... 17,000,184 14,740,518
------------ ------------
46,929,279 45,570,352
------------ ------------
$283,953,073 $286,044,689
============ ============
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THE UNION LIGHT, HEAT AND POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
The accompanying information reflects, in the opinion of the
management of the Company, all adjustments necessary to present
fairly the results for the interim periods. All such adjustments
are of a normal recurring nature. Reference should be made to
the Company's Form 10-K for the year 1993 for additional footnote
disclosure, including a summary of significant accounting
policies.
PART II. OTHER INFORMATION
Item 5. Other Information.
- - ------- -----------------
Employee Relations
- - ------------------
A new three-year contract has been negotiated with the
International Brotherhood of Electrical Workers representing
approximately 90 employees. In addition to benefit improvements,
the contract provides for wage increases of 3.5% in 1994 and
3.25% in 1995 and 1996.
A wage reopener provision for the third and final year of
the existing contract with the Independent Utilities Union, which
represents approximately 80 clerical and technical employees, is
currently being negotiated.
A collective bargaining agreement with the United
Steelworkers of America, representing about 110 employees in gas
operations, expires on May 15, 1994, and presently is being
negotiated.
Item 6. Exhibits and Reports on Form 8-K.
- - ------- ---------------------------------
(b) No reports on Form 8-K were filed during the three
months ended March 31, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
THE UNION LIGHT, HEAT AND POWER COMPANY
---------------------------------------
(Registrant)
Date: May 11, 1994 Daniel R. Herche
---------------------------------------
Daniel R. Herche, Controller
(Duly Authorized Officer
and Chief Accounting Officer)
(Signature)
