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 September 30, 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 October 31, 1994,
all of which are held by The Cincinnati Gas & Electric Company
<PAGE>
<TABLE>
<CAPTION
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENT OF INCOME
Three Months Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Electric..........................................$49,353,622 $50,340,864 $138,279,697 $133,972,785 $180,019,085 $170,542,439
Gas............................................... 6,678,459 6,457,182 53,065,290 49,624,050 79,185,405 70,750,371
----------- ----------- ------------ ------------ ------------ ------------
Total operating revenues.................... 56,032,081 56,798,046 191,344,987 183,596,835 259,204,490 241,292,810
----------- ----------- ------------ ------------ ------------ ------------
OPERATING EXPENSES
Electricity purchased from parent company for
resale.......................................... 37,289,224 38,567,916 105,396,060 102,655,259 137,030,868 129,146,523
Gas purchased..................................... 2,727,083 2,897,562 29,936,113 28,479,691 44,836,709 41,138,923
Other operation................................... 7,763,815 7,677,345 23,104,517 22,064,445 31,435,499 29,497,236
Maintenance....................................... 1,423,950 1,476,155 4,165,744 4,217,238 6,215,687 5,641,840
Provision for depreciation........................ 2,643,231 2,726,330 7,892,186 7,195,854 10,509,261 9,314,444
Taxes other than income taxes..................... 930,031 982,464 2,945,475 2,909,131 3,659,675 3,642,832
Federal income taxes.............................. (903,680) (1,575,318) 2,280,477 1,178,379 4,716,417 2,001,156
State income taxes................................ (222,302) (416,618) 610,177 385,199 1,360,326 537,990
Deferred income taxes--net........................ 1,587,509 2,086,091 1,797,554 2,127,001 672,126 3,180,656
----------- ----------- ------------ ------------ ------------ ------------
Total operating expenses.................... 53,238,861 54,421,927 178,128,303 171,212,197 240,436,568 224,101,600
----------- ----------- ------------ ------------ ------------ ------------
OPERATING INCOME.................................... 2,793,220 2,376,119 13,216,684 12,384,638 18,767,922 17,191,210
----------- ----------- ------------ ------------ ------------ ------------
OTHER INCOME AND DEDUCTIONS
Allowance for other funds used during
construction.................................... 50,225 30,064 61,322 305,417 52,544 302,695
Other income and deductions--net.................. (19,488) (196,171) 359,212 (479,838) 305,130 (425,260)
----------- ----------- ------------ ------------ ------------ ------------
Total other income and deductions........... 30,737 (166,107) 420,534 (174,421) 357,674 (122,565)
----------- ----------- ------------ ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES...................... 2,823,957 2,210,012 13,637,218 12,210,217 19,125,596 17,068,645
----------- ----------- ------------ ------------ ------------ ------------
INTEREST CHARGES
Interest on long-term debt........................ 2,016,250 2,016,250 6,048,750 6,190,938 8,064,967 8,278,281
Other interest.................................... 78,751 105,434 295,652 167,291 459,860 353,789
Amortization of debt discount, premium and other.. 23,019 22,398 72,589 67,194 94,987 90,999
Allowance for borrowed funds used during
construction--credit............................ (59,195) (39,962) (134,381) (240,487) (162,120) (299,194)
----------- ----------- ------------ ------------ ------------ ------------
Net interest charges........................ 2,058,825 2,104,120 6,282,610 6,184,936 8,457,694 8,423,875
----------- ----------- ------------ ------------ ------------ ------------
NET INCOME..........................................$ 765,132 $ 105,892 $ 7,354,608 $ 6,025,281 $ 10,667,902 $ 8,644,770
=========== =========== ============ ============ ============ ============
AVERAGE NUMBER OF CAPITAL SHARES OUTSTANDING........ 585,333 585,333 585,333 585,333 585,333 568,666
EARNINGS PER CAPITAL SHARE..........................$ 1.30 $ 0.18 $ 12.56 $ 10.29 $ 18.22 $ 15.20
DIVIDENDS DECLARED PER CAPITAL SHARE................$ -- $ -- $ -- $ -- $ 5.00 $ --
</TABLE>
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- ---------------------
Electric operating revenues increased $4.3 million and $9.5 million for
the nine and twelve month periods ended September 30, 1994, respectively,
over the comparable periods of 1993 due to increases in electric Kwh sales of
3.7% and 3.6%. For the twelve month period, the increase also resulted from
the operation of an adjustment clause reflecting increases in the cost of
electricity purchased.
Gas operating revenues increased $3.4 million and $8.4 million for the
nine and twelve month periods ended September 30, 1994, respectively, 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 2.5% and 4.2%.
Electricity purchased decreased $1.3 million for the three month period
ended September 30, 1994, from the comparable period of 1993 due to a 4.0%
decrease in the average cost per Kwh purchased. Electricity purchased
increased $2.7 million and $7.9 million for the nine and twelve month periods
ended September 30, 1994, respectively, over the comparable periods of 1993
due to increases in Kwh volumes purchased of 3.8% and 3.6%. The twelve month
period also reflects an increase in the average cost per Kwh purchased of
2.4%.
Gas purchased expense increased $1.5 million and $3.7 million for the
nine and twelve month periods ended September 30, 1994, respectively, over
the comparable periods of 1993 due to increases in the average cost per Mcf
purchased of 2.5% and 4.5%, and to increases in volumes purchased of 2.6% and
4.3%.
Other operation expense increased $1.0 million and $1.9 million for the
nine and twelve month periods ended September 30, 1994, respectively, over
the comparable periods of 1993 due to a number of factors, including
increased electric distribution expenses, increased gas production expenses,
increased wages, and increased demand side management costs. In addition,
the adoption of an accounting standard involving postretirement benefits
contributed to the increase for the twelve month period.
Depreciation expense increased $.7 million and $1.2 million for the
nine and twelve month periods ended September 30, 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 $.4 million for
the nine and twelve month periods ended September 30, 1994, from the
comparable periods of 1993 primarily due to lower levels of construction work
in progress.
Other income and deductions-net increased $.8 million and $.7 million
for the nine and twelve month periods ended September 30, 1994, respectively,
over the comparable periods 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), in January 1994.
Merger Consummation
- -------------------
On October 24, 1994, pursuant to an Amended and Restated Agreement and
Plan of Reorganization dated as of December 11, 1992, as subsequently amended
and restated, PSI Resources, Inc. (Resources), an Indiana corporation, merged
with and into CINergy Corp. (CINergy), a Delaware corporation and registered
holding company under the Public Utility Holding Company Act of 1935, and a
subsidiary of CINergy merged with and into CG&E, an Ohio corporation
(collectively, the "Merger") in a transaction accounted for as a pooling of
interests. Following the Merger, CG&E and PSI Energy, Inc. (Energy), an
Indiana corporation, became subsidiaries of CINergy, with Union Light
remaining a subsidiary of CG&E. Prior to the Merger, Energy was a wholly
owned subsidiary of Resources.
In its order approving the Merger dated October 21, 1994, the
Securities and Exchange Commission (SEC) decided to reserve judgment for up
to three years on whether CINergy can retain its gas operations, including
those of Union Light, and the non-utility businesses of CG&E and Energy. At
the end of the three-year period, CINergy must file with the SEC seeking a
decision on the gas divestiture and non-utility business issues, if these
issues do not become moot before that time.
In connection with the merger, CG&E and Union Light made, in addition
to other commitments, an offer to the KPSC that Union Light would "hold
harmless" retail electric customers through January 1, 2003, and would agree
to an electric rate moratorium commencing after Union Light's next retail
rate case and extending to January 1, 2000. On May 13, 1994, the KPSC issued
an order approving the merger, subject to the condition that CG&E and Union
Light must agree that, for 12 months from consummation of the merger, no
filings will be made to adjust CG&E's base purchase power rate and Union
Light's base electric rates. CINergy, CG&E and Union Light subsequently
submitted letters to the KPSC accepting the commitments and condition set
forth in its May 13, 1994 order approving the merger.
Liquidity and Capital Resources
- -------------------------------
The construction expenditures for Union Light for the first nine months
of 1994 were approximately $13.6 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 has authorized Union Light to issue a maximum amount of
short-term indebtedness of $35 million through December 31, 1996, and
$12.5 million of short-term borrowings were outstanding at September 30,
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 September 30,
1994, at least $70 million of additional first mortgage bonds.
Voluntary Workforce Reduction
- -----------------------------
CG&E and its subsidiaries recently completed a voluntary early
retirement program (VERP) for eligible management, supervisory,
administrative and professional employees. Of the approximately 160
employees who were eligible to participate in the program, 115 employees
accepted the offer. Union Light has deferred approximately $1.8 million of
VERP costs for future recovery through rates.
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENT OF CASH FLOWS
Nine Months Ended Twelve Months Ended
September 30 September 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Cash Flows From Operations:
Net Income.......................................... $ 7,354,608 $ 6,025,281 $ 10,667,902 $ 8,644,770
Adjustments to reconcile net income to net cash:
Deferred gas and electric fuel costs -- net....... (1,876,242) (427,460) (1,493,418) (1,574,397)
Depreciation...................................... 7,892,186 7,195,854 10,509,261 9,314,444
Allowance for other funds used during
construction.................................... (61,322) (305,417) (52,544) (302,695)
Deferred income taxes and investment tax
credits -- net.................................. 1,797,554 2,127,001 669,029 3,183,753
Other -- net...................................... 2,372,398 1,096,750 4,650,690 1,745,750
Change in current assets and liabilities:
Receivables and unbilled revenues............... 12,367,252 4,409,794 2,098,703 (2,264,030)
Materials and supplies.......................... 436,392 (1,504,399) 357,813 (1,636,837)
Other current assets............................ (135,132) 419,021 65,303 (43,381)
Accounts payable and other current liabilities.. (5,387,896) (6,435,672) (556,457) 67,137
------------ ------------ ------------ ------------
Total adjustments........................... 17,405,190 6,575,472 16,248,380 8,489,744
------------ ------------ ------------ ------------
Net cash provided by operations............. 24,759,798 12,600,753 26,916,282 17,134,514
------------ ------------ ------------ ------------
Cash Flows From Investing:
Construction expenditures (less allowance for other
funds used during construction)................... (13,564,300) (19,037,207) (18,654,675) (24,416,745)
Gain on disposition of assets....................... 162,807 897,690 251,080 959,719
------------ ------------ ------------ ------------
Net cash used in investing activities....... (13,401,493) (18,139,517) (18,403,595) (23,457,026)
------------ ------------ ------------ ------------
Cash Flows From Financing:
Capital stock proceeds.............................. -- -- -- 15,000,000
Retirement of long-term debt........................ (6,500,000) (6,500,000)
Net short-term borrowings........................... (12,500,000) 12,000,000 (6,000,000) (2,500,000)
Dividends paid on capital shares.................... -- -- (2,926,665) --
------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities...................... (12,500,000) 5,500,000 (8,926,665) 6,000,000
------------ ------------ ------------ ------------
Net increase (decrease) in cash and
temporary cash investments................ (1,141,695) (38,764) (413,978) (322,512)
Cash and temporary cash investments -- beginning
of period........................................... 2,477,343 1,788,390 1,749,626 2,072,138
------------ ------------ ------------ ------------
Cash and temporary cash investments -- end of period.. $ 1,335,648 $ 1,749,626 $ 1,335,648 $ 1,749,626
============ ============ ============ ============
Supplemental Disclosure Of Cash Flow Information:
Cash paid during the period for:
Interest (net of allowance for borrowed funds
used during construction)......................... $ 5,772,501 $ 5,821,256 $ 8,355,303 $ 8,375,391
Income taxes........................................ $ 2,364,336 $ 2,531,150 $ 3,834,336 $ 2,982,464
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEET
September 30 December 31
1994 1993
<S> <C> <C>
ASSETS
UTILITY PLANT...................................... $335,393,567 $324,663,510
Less--Accumulated provisions for depreciation... 101,811,084 96,164,955
------------ ------------
233,582,483 228,498,555
------------ ------------
CURRENT ASSETS
Cash............................................ 1,335,648 2,477,343
Accounts receivable--net........................ 22,755,428 25,564,221
Accrued unbilled revenues....................... 7,570,261 17,128,720
Materials and supplies.......................... 8,227,989 8,664,381
Prepayments..................................... 838,375 703,243
------------ ------------
40,727,701 54,537,908
------------ ------------
DEFERRED DEBITS AND OTHER.......................... 5,009,254 3,008,226
------------ ------------
$279,319,438 $286,044,689
============ ============
LIABILITIES
CAPITALIZATION
Shareholder's equity............................ $104,300,904 $96,946,296
Long-term debt.................................. 89,221,772 89,171,831
------------ ------------
193,522,676 186,118,127
------------ ------------
CURRENT LIABILITIES
Notes payable................................... 12,500,000 25,000,000
Accounts payable................................ 3,095,616 6,914,373
Accounts payable to associated companies--net... 13,502,551 17,118,008
Accrued taxes................................... 864,160 (434,538)
Accrued interest on debt........................ 2,563,803 2,126,283
Other........................................... 3,942,184 3,632,084
------------ ------------
36,468,314 54,356,210
------------ ------------
DEFERRED CREDITS AND OTHER
Deferred income taxes........................... 22,991,239 20,486,616
Investment tax credits.......................... 5,436,576 5,651,190
Income taxes refundable through rates........... 4,199,573 4,692,028
Other........................................... 16,701,060 14,740,518
------------ ------------
49,328,448 45,570,352
------------ ------------
$279,319,438 $286,044,689
============ ============
</TABLE>
<PAGE>
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.
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" herein for information regarding CG&E's
merger with PSI Resources, Inc. and a voluntary early retirement program.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibits:
27 - Financial Data Schedule
(b) Reports on Form 8-K filed:
Date of Report Items Reported
-------------- --------------
October 24, 1994 Item 5. Other Events
Item 7. Financial Statements
and Exhibits
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: November 9, 1994 Daniel R. Herche
---------------------------------------
Daniel R. Herche, Controller
(Duly Authorized Officer
and Chief Accounting Officer)
(Signature)
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF THE UNION LIGHT, HEAT AND POWER
COMPANY INCLUDED IN ITS FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER
30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 233,582,483
<OTHER-PROPERTY-AND-INVEST> 3,706
<TOTAL-CURRENT-ASSETS> 40,727,701
<TOTAL-DEFERRED-CHARGES> 5,005,548
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 279,319,438
<COMMON> 8,779,995
<CAPITAL-SURPLUS-PAID-IN> 18,838,946
<RETAINED-EARNINGS> 76,681,963
<TOTAL-COMMON-STOCKHOLDERS-EQ> 104,300,904
0
0
<LONG-TERM-DEBT-NET> 89,221,772
<SHORT-TERM-NOTES> 12,500,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 73,296,762
<TOT-CAPITALIZATION-AND-LIAB> 279,319,438
<GROSS-OPERATING-REVENUE> 191,344,987
<INCOME-TAX-EXPENSE> 4,688,208
<OTHER-OPERATING-EXPENSES> 173,440,095
<TOTAL-OPERATING-EXPENSES> 178,128,303
<OPERATING-INCOME-LOSS> 13,216,684
<OTHER-INCOME-NET> 420,534
<INCOME-BEFORE-INTEREST-EXPEN> 13,637,218
<TOTAL-INTEREST-EXPENSE> 6,282,610
<NET-INCOME> 7,354,608
0
<EARNINGS-AVAILABLE-FOR-COMM> 7,354,608
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 8,065,000
<CASH-FLOW-OPERATIONS> 24,759,798
<EPS-PRIMARY> 12.56
<EPS-DILUTED> 12.56
