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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended.................June 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 file number...................................1-3268
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 14-0555980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
284 SOUTH AVENUE, POUGHKEEPSIE NEW YORK 12601-4879
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (914) 452-2000
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
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date. Common stock, par value $5.00 per share; 17,554,987 shares
outstanding as of July 31, 1996.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Consolidated Financial Statements
Consolidated Statement of Income -
Three Months Ended June 30, 1996 and 1995 1-2
Consolidated Statement of Income -
Six Months Ended June 30, 1996 and 1995 3-4
Consolidated Balance Sheet - June 30, 1996
and December 31, 1995 5-6
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1996 and 1995 7-8
Notes to Consolidated Financial Statements 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-17
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 18-20
Item 5 - Other Information 21
Item 6 - Exhibits and Reports on Form 8-K 22
Signatures
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PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
For the 3 Months Ended
June 30,
1996 1995
(Thousands of Dollars)
Operating Revenues
Electric.............................. $ 93,875 $ 91,570
Gas................................... 20,651 25,293
Total - own territory................ 114,526 116,863
Electric sales to other utilities..... 1,942 1,755
Gas sales to other utilities.......... 526 -
Total Operating Revenues..... 116,994 118,618
Operating Expenses
Operation:
Fuel used in electric generation..... 10,220 11,232
Purchased electricity................ 15,052 14,487
Purchased natural gas................ 9,046 14,043
Other expenses of operation.......... 24,988 24,473
Maintenance........................... 7,945 7,158
Depreciation and amortization......... 10,710 10,488
Taxes, other than income tax.......... 16,042 16,337
Federal income tax.................... 6,625 5,669
Total Operating Expenses..... 100,628 103,887
Operating Income....................... 16,366 14,731
Other Income and Deductions
Allowance for equity funds
used during construction............. 153 231
Federal income tax.................... 667 (174)
Other - net........................... 499 3,128
Total Other Income
and Deductions.............. 1,319 3,185
Income Before Interest Charges......... 17,685 17,916
Interest Charges
Interest on mortgage bonds............ 3,778 4,215
Interest on other long-term debt...... 2,161 2,335
Interest on short-term debt........... 131 -
Other interest........................ 500 435
Allowance for borrowed funds
used during construction............. (123) (208)
Amortization of expense on debt....... 235 283
Total Interest Charges....... 6,682 7,060
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
For the 3 Months Ended
June 30,
1996 1995
(Thousands of Dollars)
Net Income............................ 11,003 10,856
Dividends Declared on Cumulative
Preferred Stock...................... 808 1,282
Income Available for Common Stock..... 10,195 9,574
Dividends Declared on
Common Stock......................... 9,304 9,120
Balance Retained in the Business...... $ 891 $ 454
Common Stock:
Average Shares Outstanding (000s).... 17,555 17,347
Earnings Per Share................... $ .58 $ .55
Dividends Declared................... $ .53 $.525
See Notes to Consolidated Financial Statements.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
For the 6 Months Ended
June 30,
1996 1995
(Thousands of Dollars)
Operating Revenues
Electric.............................. $ 203,182 $ 193,624
Gas................................... 58,706 64,041
Total - own territory................ 261,888 257,665
Electric sales to other utilities..... 6,559 5,640
Gas sales to other utilities.......... 2,394 -
Total Operating Revenues..... 270,841 263,305
Operating Expenses
Operation:
Fuel used in electric generation..... 32,861 27,512
Purchased electricity................ 24,765 27,101
Purchased natural gas................ 30,375 36,336
Other expenses of operation.......... 50,110 48,857
Maintenance........................... 15,083 13,326
Depreciation and amortization......... 21,417 20,976
Taxes, other than income tax.......... 33,822 33,812
Federal income tax.................... 18,950 16,450
Total Operating Expenses..... 227,383 224,370
Operating Income....................... 43,458 38,935
Other Income and Deductions
Allowance for equity funds
used during construction............. 307 495
Federal income tax.................... 943 197
Other - net........................... 2,121 4,707
Total Other Income
and Deductions.............. 3,371 5,399
Income Before Interest Charges......... 46,829 44,334
Interest Charges
Interest on mortgage bonds............ 7,993 8,431
Interest on other long-term debt...... 4,244 4,512
Interest on short-term debt........... 142 6
Other interest........................ 1,007 855
Allowance for borrowed funds
used during construction............. (247) (446)
Amortization of expense on debt....... 487 565
Total Interest Charges....... 13,626 13,923
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
For the 6 Months Ended
June 30,
1996 1995
(Thousands of Dollars)
Net Income............................ 33,203 30,411
Premium on Preferred Stock Redemption. 378 -
Dividends Declared on Cumulative
Preferred Stock...................... 1,615 2,563
Income Available for Common Stock..... 31,210 27,848
Dividends Declared on
Common Stock......................... 18,519 18,118
Balance Retained in the Business...... $ 12,691 $ 9,730
Common Stock:
Average Shares Outstanding (000s).... 17,543 17,313
Earnings Per Share................... $1.78 $1.61
Dividends Declared................... $1.055 $1.045
See Notes to Consolidated Financial Statements.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
June 30, December 31,
1996 1995
(Thousands of Dollars)
ASSETS
Utility Plant
Electric....................... $1,153,978 $1,149,233
Gas............................ 143,345 140,341
Common......................... 87,460 83,220
Nuclear fuel................... 33,902 32,541
1,418,685 1,405,335
Less: Accumulated depreciation. 509,679 490,576
Nuclear fuel amortization 28,352 26,435
880,654 888,324
Construction work in progress.. 53,682 48,770
Net Utility Plant............ 934,336 937,094
Other Property and
Investments.................... 17,250 11,332
Current Assets
Cash and cash equivalents...... 6,850 15,478
Accounts receivable from
customers-net of allowance for
doubtful accounts............. 50,548 44,536
Accrued unbilled utility
revenues...................... 9,939 15,806
Other receivables.............. 1,992 4,674
Fuel, materials and supplies,
at average cost............... 27,468 27,590
Special deposits and
prepayments................... 12,689 12,659
Total Current Assets......... 109,486 120,743
Deferred Charges
Regulatory Assets.............. 150,652 159,907
Unamortized debt expense....... 5,588 6,080
Other.......................... 15,747 14,936
Total Deferred Charges....... 171,987 180,923
Total Assets.................... $1,233,059 $1,250,092
See Notes to Consolidated Financial Statements.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
June 30, December 31,
1996 1995
(Thousands of Dollars)
LIABILITIES
Capitalization
Common Stock Equity
Common stock, 30,000,000
authorized; shares out-
standing ($5 par value):
1996 - 17,554,987
1995 - 17,496,051............ $ 87,775 $ 87,480
Paid-in capital............... 284,465 282,942
Retained earnings............. 103,166 90,475
Capital stock expense......... (6,390) (6,658)
Total Common Stock Equity... 469,016 454,239
Cumulative Preferred Stock
Not subject to mandatory
redemption.................. 21,030 21,030
Subject to mandatory
redemption.................. 35,000 35,000
Total Cumulative Preferred
Stock..................... 56,030 56,030
Long-term Debt................ 361,166 389,245
Total Capitalization....... 886,212 899,514
Current Liabilities
Current redemption of
preferred stock.............. - 13,000
Current maturities
of long-term debt............ 863 1,577
Notes payable................. 16,500 -
Accounts payable.............. 18,608 24,433
Accrued taxes and interest.... 11,607 7,824
Dividends payable............. 10,112 10,244
Accrued vacation.............. 4,251 4,157
Customer deposits............. 3,884 4,021
Other......................... 4,689 6,166
Total Current Liabilities... 70,514 71,422
Deferred Credits and Other
Liabilities
Regulatory Liabilities........ 70,872 74,132
Operating reserves............ 6,459 6,024
Other......................... 9,306 9,659
Total Deferred Credits and
Other Liabilities.......... 86,637 89,815
Accumulated Deferred Income Tax 189,696 189,341
Total Capitalization and
Liabilities................... $1,233,059 $1,250,092
See Notes to Consolidated Financial Statements.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 Months Ended
June 30,
1996 1995
(Thousands of Dollars)
Operating Activities
Net Income.......................... $ 33,203 $ 30,411
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and
nuclear fuel amortization........ 23,970 22,572
Deferred income taxes, net........ 5,547 6,072
Allowance for equity funds used
during construction.............. (307) (495)
Nine Mile 2 Plant deferred
finance charges, net............. (2,428) (2,428)
Provision for uncollectibles...... 1,877 1,750
Accrued pension costs............. (3,601) (5,314)
Deferred gas costs................ 1,582 6,490
Deferred gas refunds.............. (1,788) (1,526)
Other - net....................... 1,304 (2,572)
Changes in current assets and
liabilities, net:
Accounts receivable and unbilled
utility revenues................. 660 (149)
Fuel, materials and supplies...... 122 4,139
Special deposits and prepayments.. (30) (309)
Accounts payable.................. (5,825) (9,357)
Accrued taxes and interest........ 3,783 3,827
Other current liabilities......... (1,520) 340
Net cash provided by operating
activities......................... 56,549 53,451
Investing Activities
Additions to plant.................. (21,321) (20,840)
Allowance for equity funds used
during construction................ 307 495
Net additions to plant.............. (21,014) (20,345)
Proceeds from sale of long-term
investments........................ - 1,299
Nine Mile 2 Plant decommissioning
trust fund......................... (591) (981)
Other - net......................... 67 (725)
Net cash used in investing
activities......................... (21,538) (20,752)
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 Months Ended
June 30,
1996 1995
(Thousands of Dollars)
Financing Activities
Proceeds from issuance of:
Long-term debt................... 1,240 1,000
Common stock..................... 1,818 3,515
Repayments of short-term debt...... - (3,000)
Borrowings of short-term debt...... 16,500 -
Retirement and redemption of
long-term debt.................... (30,289) (289)
Retirement and redemption of
cumulative preferred stock........ (13,000) -
Dividends paid on cumulative
preferred and common stock........ (20,266) (20,525)
Issuance and redemption costs...... 488 (3)
Redemption premium on cumulative
preferred stock................... (130) -
Net cash used in financing
activities........................ (43,639) (19,302)
Net Change in Cash and Cash
Equivalents.......................... (8,628) 13,397
Cash and Cash Equivalents -
Beginning Year....................... 15,478 5,792
Cash and Cash Equivalents -
End of Period........................ $ 6,850 $ 19,189
Supplemental Disclosure of
Cash Flow Information
Interest paid (net of amounts
capitalized)...................... $ 13,219 $13,112
Federal income tax paid............ 7,875 6,100
See Notes to Consolidated Financial Statements.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
Notes to Consolidated Financial Statements
1. General
The accompanying consolidated financial statements of Central
Hudson Gas & Electric Corporation (herein the Registrant or the
Company) are unaudited but, in the opinion of management,
reflect adjustments (which include normal recurring adjustments)
necessary for a fair statement of the results for the interim
periods presented. These condensed unaudited quarterly
consolidated financial statements do not contain the detail or
footnote disclosure concerning accounting policies and other
matters which would be included in annual consolidated financial
statements and, accordingly, should be read in conjunction with
the audited Consolidated Financial Statements (including the
notes thereto) included in the Company's Annual Report, on Form
10-K, for the year ended December 31, 1995. Due to the seasonal
nature of the Company's operations, financial results for
interim periods are not necessarily indicative of trends for a
twelve-month period. Certain 1995 amounts have been
reclassified to conform to the 1996 presentation.
2. Commitments and Contingencies
The Company faces a number of contingencies which arise during
the normal course of business and which have been discussed in
Note 8 (entitled "Commitments and Contingencies") to the
Consolidated Financial Statements included in the Company's 10-K
Report. The Financial Accounting Standards Board (FASB) has
issued an exposure draft entitled "Accounting for Certain
Liabilities related to Closure and Removal of Long-Lived
Assets," which includes nuclear plant decommissioning. If the
accounting standard proposed in such exposure draft were
adopted, it may result in higher annual provisions for
decommissioning to be recognized earlier in the operating life
of nuclear units and an accelerated recognition of the
decommissioning obligation. The FASB will be deliberating this
issue and the resulting final pronouncement could be different
from that proposed in the exposure draft. Registrant can make
no prediction at this time as to the ultimate form of such
proposed accounting standard, assuming it is adopted, nor can it
make any prediction as to its ultimate effect(s) on the
financial condition of Registrant. Except as what is disclosed
above and in Part II of this Quarterly Report, on Form 10-Q, for
the quarterly period ended June 30, 1996, the Quarterly Report,
on Form 10-Q, for the quarterly period ended March 31, 1996 and
in any Current Report, on Form 8-K, filed in 1996, there have
been no material changes in the subject matters discussed in
said Note 8.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
For the six months ended June 30, 1996, cash expenditures,
related to the construction program of the Company, amounted to
$20.8 million. The amount shown on the Consolidated Statement
of Cash Flows for "Net additions to plant" of $ 21.0 million
includes the debt portion of $247,000 of the Allowance for Funds
Used During Construction ("AFDC", as such term is described in
Note 1, entitled "Summary of Significant Accounting Policies,"
to the Consolidated Financial Statements included in the
Company's 10-K Report). The cash requirements for such
expenditures were funded from internal sources and proceeds of
$1.8 million from the issuance of 58,936 shares of common stock
under the Company's Automatic Dividend Reinvestment and Stock
Purchase Plan and the Company's Customer Stock Purchase Plan.
On May 1, 1996, the Company optionally redeemed $30 million of
its 8 3/4% Series of First Mortgage Bonds due 2001 at a
redemption price of 102.07% of the principal amount. The $30.6
million total cash requirement was financed from short-term
borrowings and the liquidation of temporary cash investments.
The growth of retained earnings in the first six months of 1996
contributed to the increase in the book value of common stock
from $25.96 at December 31, 1995 to $26.72 at June 30, 1996.
The combined effect of the sales of common stock under the
Company's Automatic Dividend Reinvestment and Stock Purchase
Plan and the Company's Customer Stock Purchase Plan, the
redemption of the Company's 7.72% Cumulative Preferred Stock and
8 3/4% Series of First Mortgage Bonds, and the growth of
retained earnings in the first six months of 1996 contributed to
the increase in the common equity ratio from 49.7% at December
31, 1995 to 51.9% at June 30, 1996.
The Company has $51.5 million of committed short-term
credit facilities available as of June 30, 1996. It also has
uncommitted short-term credit facilities with four banks, one
for $50 million, another for $30 million, and two for $25
million each. There was $16.5 million of short-term debt
outstanding at June 30, 1996 related to the uncommitted short-
term credit facilities. Authorization from the Public Service
Commission of the State of New York (PSC), limits the short-term
borrowing amount the Company may have outstanding, at any time,
to $52 million in the aggregate. Investments in short-term
securities were $.5 million at the end of June 1996.
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EARNINGS PER SHARE
Earnings per share of common stock were $.58 for the second
quarter of 1996, as compared to $.55 for the second quarter of
1995, an increase of 5%. Earnings per share of common stock were
$1.78 for the six months ended June 30, 1996, as compared to
$1.61 for the six months ended June 30, 1995, an increase of
11%.
The increase in earnings per share for the quarter ended June 30,
1996, as compared to the same period in 1995, resulted primarily
from increased electric and gas net operating revenues
attributable largely to increased sales, of which $.06 relates
to the increase in heating and cooling degree days experienced
in the second quarter of 1996 as compared to the same period in
1995. Also contributing to the increase in earnings per share
was a decrease in preferred stock dividends in 1996 resulting
from the optional redemption of all outstanding shares of 7.44%
and 7.72% Series Cumulative Preferred Stock in October 1995 and
January 1996, respectively. This favorable variation was
substantially offset by one-time charges associated with the
optional redemption in May 1996 of $30 million of 8 3/4% Series
First Mortgage Bonds at a redemption price of 102.07% of the
principal amount, increased operation and maintenance costs in
1996 resulting primarily from an increase in maintenance costs
associated with the Company's electric generating plants, and
the inclusion in 1995 of a $.03 per share non-recurring gain on
the sale of long-term stock investments. Earnings per share
were also impacted by the net effect of various other items,
including increased depreciation costs, decreased interest
income, and decreased AFUDC on capital expenditures, which were
partially offset by a decrease in interest expense.
The increase in per share earnings for the six months ended June
30, 1996 as compared to the same period in 1995 resulted
primarily from increased electric and gas net operating revenues
attributable largely to increased sales occurring because of
unseasonable weather experienced in the first and second
quarters of 1996, when compared to the same periods in 1995.
Also contributing to the increase in six-month earnings was
decreased preferred stock dividends in 1996 resulting from the
optional redemption of all outstanding shares of the Company's
7.44% and 7.72% Series Cumulative Preferred Stock in October
1995 and January 1996, respectively.
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The favorable variance in this six-month period was partially
offset by increased operation and maintenance costs in 1996
primarily from increased storm restoration costs and increased
maintenance costs associated with the Company's electric
generating plants. The six-month period was also impacted
unfavorably by the one-time charges associated with the May 1996
optional redemption of $30 million of the Company's 8 3/4%
Series First Mortgage Bonds and the 1995 non-recurring gain on
the sale of long-term stock investments.
RESULTS OF OPERATIONS
The following table reports the variation in the results of
operations for the three months ended June 30, 1996 compared to
the same period for 1995:
3 MONTHS ENDED JUNE 30,
INCREASE
1996 1995 (DECREASE)
(Thousands of Dollars)
Operating Revenues $116,994 $118,618 $ (1,624)
Operating Expenses 100,628 103,887 (3,259)
Operating Income 16,366 14,731 1,635
Other Income & Deductions 1,319 3,185 (1,866)
Income before Interest Charges 17,685 17,916 (231)
Interest Charges 6,682 7,060 (378)
Net Income 11,003 10,856 147
Dividends Declared on Cumulative
Preferred Stock 808 1,282 (474)
Income Available for Common Stock $ 10,195 $ 9,574 $ 621
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6 MONTHS ENDED JUNE 30,
INCREASE
1996 1995 (DECREASE)
(Thousands of Dollars)
Operating Revenues $270,841 $263,305 $ 7,536
Operating Expenses 227,383 224,370 3,013
Operating Income 43,458 38,935 4,523
Other Income & Deductions 3,371 5,399 (2,028)
Income before Interest Charges 46,829 44,334 2,495
Interest Charges 13,626 13,923 (297)
Net Income 33,203 30,411 2,792
Premium on Preferred Stock
Redemption 378 - 378
Dividends Declared on Cumulative
Preferred Stock 1,615 2,563 (948)
Income Available for Common Stock $ 31,210 $ 27,848 $ 3,362
OPERATING REVENUES
Operating revenues decreased $1.6 million (1%) for the second
quarter of 1996 as compared to the second quarter of 1995 and
increased $7.5 million (3%) for the six months ended June 30,
1996. Details of these revenue changes by electric and gas
departments are as follows:
INCREASE (DECREASE) FROM PRIOR PERIOD
SECOND QUARTER SIX MONTHS
Electric Gas Electric Gas
(Thousands of Dollars)
Customer Sales $ 3,969 $(3,794) * $ 10,724 $(2,338)*
Sales to Other
Utilities 187 526 919 2,394
Fuel and Gas Cost
Adjustment (1,560) (1,054) (956) (3,755)
Deferred Revenues 117 (12) 92 846
Miscellaneous (221) 218 ** (302) (88)**
$ 2,492 $(4,116) $ 10,477 $(2,941)
*Both firm and interruptible revenues.
**Includes revenues from transportation of customer-owned gas.
Revenues collected from or credited to customers under the
electric fuel and gas cost adjustment clauses do not affect
earnings since they are offset in fuel costs, with the exception
of revenues collected pursuant to incentive mechanisms.
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During the month of March 1996, the Company began selling natural
gas to third parties who in turn resell the natural gas to their
customers. These sales totaled $526,000 for the second quarter
of 1996 and $2.4 million for the six months ended June 30, 1996.
Of the profits realized from these gas sales for resale, 85% are
returned to firm gas customers through the Gas Adjustment Clause
and 15% are retained by the Company.
SALES
Total kilowatt-hour sales of electricity within the Company's
service territory increased 5%, while firm sales of natural gas
increased 12%, for the second quarter of 1996 as compared to the
second quarter of 1995. For the six months ended June 30, 1996,
electric sales increased 6% and firm gas sales increased 18%
compared to the same period last year. Changes in sales from
last year by major customer classifications are set forth below:
INCREASE (DECREASE) FROM PRIOR PERIOD
SECOND QUARTER SIX MONTHS
Electric Gas Electric Gas
Residential 7 % 13 % 10 % 19 %
Commercial 3 9 5 17
Industrial 3 8 1 21
Interruptible N/A (81) N/A (82)
Transportation of
Customer-owned
Gas N/A 162 N/A 44
Billing degree days were 14% higher for the quarter ended June
30, 1996 and 21% higher for the six months ended June 30, 1996
when compared to the same periods in 1995.
Sales of electricity to residential customers in the second
quarter of 1996 increased 7% from the comparable prior year
period due to the combined effect of a 6% increase in usage per
customer and a 1% increase in the number of customers.
Commercial sales in the second quarter of 1996 increased 3% as
compared to last year due to the combined effect of a 2%
increase in the number of customers and a 1% increase in usage
per customer. Electric sales to industrial customers increased
3% in the second quarter of 1996 due primarily to an increase
in usage by a large industrial customer.
For the six months ended June 30, 1996, sales of electricity to
residential customers increased 10% due to the combined effect
of a 9% increase in usage per customer and a 1% increase in the
number of customers. Sales to commercial customers increased
5% due to the combined effect of a 3% increase in usage per
customer and a 2% increase in the number of customers.
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Electric sales to industrial customers increased 1% for such
six-month period due primarily to an increase in usage by a
large industrial customer.
Sales of gas to residential customers for the second quarter of
1996 increased 13% due to the combined effect of a 12% increase
in usage per customer and a 1% increase in the number of
customers. Sales of gas to commercial customers for the second
quarter of 1996 increased 9% due primarily to a 24% increase in
sales to a large commercial customer. Excluding this effect,
sales to commercial customers increased 8% due to the combined
effect of a 6% increase in usage per customer and a 2% increase
in the number of customers. Firm gas sales to industrial
customers increased 8% for the second quarter of 1996 when
compared to the same period in 1995, due primarily to an
increase in usage by a large industrial customer.
For the six months ended June 30, 1996, residential gas sales
increased 19% due to the combined effect of an 18% increase in
usage per customer and a 1% increase in the number of
customers. Commercial gas sales increased 17% due to the
combined effect of a 14% increase in usage per customer and a
3% increase in the number of customers. Firm gas sales to
industrial customers for the six months ended June 30, 1996
increased 21% due largely to increases in usage by two large
industrial customers.
Interruptible gas sales decreased 81% in the second quarter of
1996 and 82% for the six months ended June 30, 1996 due
primarily to the decrease in natural gas sold to the other
cotenant owners of the 1,200 MW Roseton Steam Electric
Generating Plant for use as boiler fuel at that plant.
Transportation gas volumes increased 162% for the second quarter
and increased 44% for the six months ended June 30, 1996 due
primarily to increased gas transportation service provided to a
large industrial customer.
OPERATING EXPENSES
The following table reports the variation in the operating
expenses for the three months and six months ended June 30,
1996 compared to the same periods for the prior year:
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INCREASE (DECREASE) FROM PRIOR PERIOD
SECOND QUARTER SIX MONTHS
Amount Percent Amount Percent
(Dollars in Thousands)
Operating Expenses
Fuel and Purchased
Electricity $ (447) (2) % $ 3,013 6 %
Purchased Natural Gas (4,997) (36) (5,961) (16)
Other Expenses of
Operation 315 2 613 1
Maintenance 901 14 2,232 19
Nine Mile 2 Plant Operation
and Maintenance 86 2 165 2
Depreciation and Amortiza-
tion 222 2 441 2
Taxes, Other than
Federal Income Tax (295) (2) 10 0
Federal Income Tax 956 17 2,500 15
Total $(3,259) (3) % $ 3,013 1 %
The cost of fuel and purchased electricity increased $3.0 million
(6%) for the six months ended June 30, 1996 resulting primarily
from increased supply requirements to meet customer loads.
Overall, total system output was up 3%.
Purchased natural gas costs decreased $5.0 million (36%) for the
second quarter of 1996 and $6.0 million (16%) for the six
months ended June 30, 1996 resulting primarily from lower
interruptible gas sales for usage as boiler fuel.
Maintenance expenses increased $901,000 (14%) for the
second quarter of 1996 and $2.2 million (19%) for the six
months ended June 30, 1996 due largely to increased costs
associated with the maintenance of the Company's electric
generating plants. The six-month period was further impacted
by increased costs resulting from storm restoration efforts in
1996.
Federal income taxes increased $956,000 (17%) for the second
quarter of 1996 and increased $2.5 million (15%) for the six
months ended June 30, 1996 resulting primarily from increased
pre-tax operating income when compared to the same periods in
1995.
- 16 -
<PAGE>
OTHER INCOME AND DEDUCTIONS AND PREFERRED STOCK DIVIDENDS
Other income and deductions decreased $1.9 million (59%) for the
second quarter of 1996 and $2.0 million (38%) for the six
months ended June 30, 1996. These decreases were due largely
to $1.1 million of one-time charges associated with the
optional redemption of $30 million 8 3/4% Series of First
Mortgage Bonds in May 1996 and the 1995 non-recurring gain on
the sale of long-term stock investments.
Preferred stock dividends decreased by $474,000 (37%) for the
second quarter of 1996 and $948,000 37% for the six months
ended June 30, 1996 resulting from the optional redemption of
all outstanding shares of the Company's 7.44% and 7.72% Series
Cumulative Preferred Stock in October 1995 and January 1996,
respectively.
COMMON STOCK DIVIDENDS
Reference is made to the subcaption "Common Stock Dividends and
Price Ranges" on Page 29 of Exhibit 13 to the 10-K Report, and
which is incorporated by reference in Part II, Item 5 of said
Report, for a discussion of the Company's dividend policies.
On June 28, 1996, the Board of Directors of the Company
declared a quarterly dividend of $.530 per share, payable
August 1, 1996 to shareholders of record as of July 10, 1996,
representing an increase of $.005, or 1%, over the $.525 per
share level established one year ago. The Company presently
intends to increase future dividends by a modest amount if and
to the extent supported by sustained earnings growth, while at
the same time gradually reducing the Company's payout ratio;
however, any determination of future dividend declarations, and
the amounts and dates of such dividends, will depend on the
circumstances known at the time of consideration of such
declaration.
- 17 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Asbestos Litigation. For a discussion of suits against
Registrant involving asbestos, see the caption "Legal Proceedings
- - Asbestos Litigation" in Item 3, Part I of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995
("10-K Report") and the caption "Legal Proceedings - Asbestos
Litigation" in Item 1, Part II of Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 30, 1996 ("10-Q
Report").
Since 1987, Registrant has been involved as a defendant in the
"mass tort" asbestos litigation in the United States District
Court for the Southern District of New York and the New York
State Supreme Court, County of New York. This litigation
involves thousands of plaintiffs who seek large amounts of
compensatory and punitive damages from numerous defendants for
deaths and injuries allegedly caused by exposure to asbestos. As
of August 6, 1996, Registrant has been a defendant in
approximately 874 such individual lawsuits. Many of these
lawsuits have been disposed of without any payment by Registrant,
or for immaterial amounts. While the amounts specified in all
the remaining lawsuits total several billions of dollars, it is
Registrant's opinion, based on its experience in such litigation
and on information and relevant circumstances known to it at this
time, that these lawsuits will not have a material adverse effect
on Registrant's financial position. However, if Registrant were
ultimately held liable under these lawsuits and insurance
coverage were not available, the cost thereof could have a
material adverse effect (a reasonable estimate of which cannot be
made at this time) on the financial condition of Registrant if
Registrant could not recover all or a substantial portion thereof
in rates. Registrant's insurance does not extend to punitive
damages.
Item 5. Other Information.
Competition. Reference is made to the caption "Business -
Other Matters - Competition" in Item 1 of Part I of Registrant's
10-K Report and to the caption "Other Information - Competition
in Item 5, Part II of Registrant's 10-Q Report for discussions
with respect to competition as it generally affects Registrant,
with respect to electric and natural gas service, Registrant's
response to such competition, the restructuring of the natural
gas market in New York State, the Federal Energy Regulatory
Commission's so-called "NOPR", and the Public Service Commission
of the State of New York's ("PSC") Competitive Opportunities
Proceeding.
- 18 -
<PAGE>
Reference is made to Registrant's Current Report on Form 8-K
dated June 11, 1996, which discussed the pertinent aspects of an
Opinion and Order issued by the PSC on May 20, 1996 in the
Competitive Opportunities Proceeding, in which the PSC set forth
its policy direction with respect to competition in the electric
industry in New York State.
Merger of Affiliates. Reference is made to the caption
"Business - Other Matters - Affiliates" in Item 1, Part I of
Registrant's 10-K report for a discussion of a petition filed by
Registrant with the PSC seeking approvals related to the merger
of two of Registrant's affiliates, Central Hudson Cogeneration,
Inc. and Central Hudson Enterprises Corporation.
On May 22, 1996, the PSC issued an order that, among other
things, granted permission for the assignment of certain assets
of Central Hudson Cogeneration, Inc. to Central Hudson
Enterprises Corporation, clearing the way for a merger of the two
affiliates. On June 28, 1996, a Certificate of Merger evidencing
the merger of Central Hudson Cogeneration, Inc. into Central
Hudson Enterprises Corporation, with the latter being the
surviving corporation, was filed with the office of the Secretary
of State of the State of New York, effecting such merger as of
June 30, 1996.
Rate Proceedings - Gas. Reference is made to Part I, Item 1 of
Registrant's 10-K Report, the caption "Business - Rates - Rate
Proceedings - Electric and Gas" therein, and the portion of
Exhibit 13 to the 10-K Report referenced therein for information
regarding the Registrant's most recent gas case filed with the
PSC.
On June 25, 1996, the Administrative Law Judge ("ALJ")
presiding in the gas rate case issued his Recommended Decision.
The ALJ recommended, among other things, that (i) natural gas
rates not be increased and (ii) a 10.03% return on equity ("ROE")
be authorized for Registrant's gas operations, as compared to the
current 10.6% ROE. Registrant has filed comments with the PSC
which take exception to those parts of such Recommended Decision
with which it disagrees, such as the ROE and various expense
determinations. The PSC is expected to issue its order in this
proceeding in October 1996.
- 19 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are furnished in accordance with
the provisions of Item 601 of Regulation S-K:
Exhibit No.
Regulation S-K
Item 601
Designation Exhibit Description
(12) -- Statement Showing Computation
of the Ratio of Earnings to
Fixed Charges and the Ratio of
Earnings to Combined Fixed
Charges and Preferred Stock
Dividends.
(27) -- Financial Data Schedule,
pursuant to Item 601(c) of
Regulation S-K.
(b) Reports on Form 8-K. During the period covered by this
Report on Form 10-Q, Registrant filed a Current Report on Form 8-
K, dated June 11, 1996, which discussed the pertinent aspects of
an Opinion and Order issued by the PSC on May 20, 1996 in the
Competitive Opportunities Proceeding, in which the PSC set forth
its policy direction with respect to competition in the electric
industry in New York State.
- 20 -
<PAGE>
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 hereunder duly authorized.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
(Registrant)
By:
Donna S. Doyle
Controller
Authorized Officer and Chief
Accounting Officer
Dated: August 8, 1996
- 21 -
</PAGE>
<TABLE>
EXHIBIT 12
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
<CAPTION>
1996
3 Months 6 Months 12 Months
Ended Ended Ended Year Ended December 31,
June 30 June 30 June 30 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
A. Net Income $11,003 $33,203 $ 55,514 $ 52,722 $ 50,929 $ 50,390 $ 47,688 $ 42,941
B. Federal Income Tax 5,958 18,007 30,441 28,687 26,806 27,158 24,363 21,361
C. Earnings before Income Taxes 16,961 51,210 85,955 81,409 77,735 77,548 72,051 64,302
D. Total Fixed Charges 1 6,825 13,979 29,022 30,433 32,679 33,820 34,888 37,737
E. Total Earnings $23,786 $65,189 $114,977 $111,842 $110,414 $111,368 $106,939 $102,039
Preferred Dividend Requirements:
F. Allowance for Preferred Stock
Dividends Under IRC Sec 247 $ 808 $ 1,615 $ 3,954 $ 4,903 $ 5,127 $ 5,562 $ 5,544 $ 5,659
G. Less Allowable Dividend Deduction 32 64 328 528 528 528 544 544
H. Net Subject to Gross-up 776 1,551 3,626 4,375 4,599 5,034 5,000 5,115
I. Ratio of Earnings before Income
Taxes to Net Income (C/A) 1.541 1.542 1.548 1.544 1.526 1.539 1.511 1.497
J. Pref. Dividend (Pre-tax) (HxI) 1,196 2,392 5,613 6,755 7,018 7,747 7,555 7,657
K. Plus Allowable Dividend Deduction 32 64 328 528 528 528 544 544
L. Preferred Dividend Factor 1,228 2,456 5,941 7,283 7,546 8,275 8,099 8,201
M. Fixed Charges (D) 6,825 13,979 29,022 30,433 32,679 33,820 34,888 37,737
N. Total Fixed Charges
and Preferred Dividends $ 8,053 $16,435 $ 34,963 $ 37,716 $ 40,225 $ 42,095 $ 42,987 $ 45,938
O. Ratio of Earnings to Fixed
Charges (E/D) 3.49 4.66 3.96 3.68 3.38 3.29 3.07 2.70
P. Ratio of Earnings to Fixed Charges
and Preferred Dividends (E/N) 2.95 3.97 3.29 2.97 2.74 2.65 2.49 2.22
<FN>
<F1>
1 Includes a portion of rent expense deemed to be representive of the interest factor.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $934,336
<OTHER-PROPERTY-AND-INVEST> $17,250
<TOTAL-CURRENT-ASSETS> $109,486
<TOTAL-DEFERRED-CHARGES> $171,987
<OTHER-ASSETS> $0
<TOTAL-ASSETS> $1,233,059
<COMMON> $87,775
<CAPITAL-SURPLUS-PAID-IN> $278,076
<RETAINED-EARNINGS> $103,166
<TOTAL-COMMON-STOCKHOLDERS-EQ> $469,016
$35,000
$21,030
<LONG-TERM-DEBT-NET> $361,166
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $863
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $345,984
<TOT-CAPITALIZATION-AND-LIAB> $1,233,059
<GROSS-OPERATING-REVENUE> $270,841
<INCOME-TAX-EXPENSE> $18,950
<OTHER-OPERATING-EXPENSES> $208,433
<TOTAL-OPERATING-EXPENSES> $227,383
<OPERATING-INCOME-LOSS> $43,458
<OTHER-INCOME-NET> $3,371
<INCOME-BEFORE-INTEREST-EXPEN> $46,829
<TOTAL-INTEREST-EXPENSE> $13,626
<NET-INCOME> $33,203
$1,615
<EARNINGS-AVAILABLE-FOR-COMM> $31,210
<COMMON-STOCK-DIVIDENDS> $18,519
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $56,549
<EPS-PRIMARY> $1.78
<EPS-DILUTED> $0
</TABLE>
