<PAGE>
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.................September 30, 1997
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; 17,369,787 shares
outstanding as of September 30, 1997.<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Consolidated Financial Statements
Consolidated Statement of Income - 1-2
Three Months Ended September 30, 1997 and 1996
Consolidated Statement of Income - 3-4
Nine Months Ended September 30, 1997 and 1996
Consolidated Balance Sheet - September 30, 1997 5-7
and December 31, 1996
Consolidated Statement of Cash Flows - 8-10
Nine Months Ended September 30, 1997 and 1996
Notes to Consolidated Financial Statements 11-12
Item 2 - Management's Discussion and Analysis of 13-21
Financial Condition and Results of
Operations
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 22
Item 5 - Other Information 22-24
Item 6 - Exhibits and Reports on Form 8-K 25
Signatures 26
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the 3 Months Ended
September 30,
1997 1996
(Thousands of Dollars)
Operating Revenues
Electric.............................. $ 105,575 $ 104,187
Gas................................... 13,520 10,106
Total - own territory................ 119,095 114,293
Electric sales to other utilities..... 4,402 3,310
Gas sales to other utilities.......... 10 81
Total Operating Revenues..... 123,507 117,684
Operating Expenses
Operation:
Fuel used in electric generation..... 19,569 13,423
Purchased electricity................ 12,514 15,306
Purchased natural gas................ 8,012 5,128
Other expenses of operation.......... 23,997 24,893
Maintenance........................... 6,821 6,173
Depreciation and amortization......... 10,904 10,709
Taxes, other than income tax.......... 16,328 16,185
Federal income tax.................... 7,451 7,867
Total Operating Expenses..... 105,596 99,684
Operating Income....................... 17,911 18,000
Other Income
Allowance for equity funds
used during construction............. 114 186
Federal income tax.................... 199 51
Other - net........................... 1,706 2,023
Total Other Income .......... 2,019 2,260
Income Before Interest Charges......... 19,930 20,260
1
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the 3 Months Ended
September 30,
1997 1996
(Thousands, Except for
Per Share Amounts)
Interest Charges
Interest on mortgage bonds............ 3,559 3,559
Interest on other long-term debt...... 2,203 2,097
Interest on short-term debt........... - 47
Other interest........................ 644 816
Allowance for borrowed funds
used during construction............. (71) (150)
Amortization of expense on debt....... 227 226
Total Interest Charges....... 6,562 6,595
Net Income............................. 13,368 13,665
Dividends Declared on Cumulative
Preferred Stock....................... 808 808
Income Available for Common Stock...... 12,560 12,857
Dividends Declared on
Common Stock.......................... 9,289 9,304
Balance Retained in the Business....... $ 3,271 $ 3,553
Common Stock:
Average Shares Outstanding (000s)..... 17,408 17,555
Earnings Per Share.................... $ .72 $ .73
Dividends Declared.................... $.535 $ .53
See Notes to Consolidated Financial Statements.
2
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the 9 Months Ended
September 30,
1997 1996
(Thousands of Dollars)
Operating Revenues
Electric.............................. $301,347 $307,369
Gas................................... 80,265 68,812
Total - own territory................ 381,612 376,181
Electric sales to other utilities..... 12,267 9,870
Gas sales to other utilities.......... 108 2,475
Total Operating Revenues..... 393,987 388,526
Operating Expenses
Operation:
Fuel used in electric generation.... 47,776 46,284
Purchased electricity............... 39,981 40,071
Purchased natural gas............... 46,407 35,503
Other expenses of operation......... 73,630 75,004
Maintenance.......................... 19,698 21,256
Depreciation and amortization........ 32,712 32,126
Taxes, other than income tax......... 49,767 50,007
Federal income tax................... 25,462 26,817
Total Operating Expenses.... 335,433 327,068
Operating Income...................... 58,554 61,458
Other Income
Allowance for equity funds
used during construction............. 297 493
Federal income tax.................... 558 995
Other - net........................... 5,586 4,144
Total Other Income........... 6,441 5,632
Income Before Interest Charges......... 64,995 67,090
Interest Charges
Interest on mortgage bonds............ 10,678 11,553
Interest on other long-term debt...... 6,584 6,341
Interest on short-term debt........... 94 189
Other interest........................ 1,829 1,823
3
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the 9 Months Ended
September 30,
1997 1996
(Thousands, Except for
Per Share Amounts)
Allowance for borrowed funds
used during construction............. (185) (397)
Amortization of expense on debt....... 679 713
Total Interest Charges....... 19,679 20,222
Net Income............................ 45,316 46,868
Premium on Preferred Stock Redemption. - 378
Dividends Declared on Cumulative
Preferred Stock...................... 2,422 2,422
Income Available for Common Stock..... 42,894 44,068
Dividends Declared on
Common Stock......................... 27,895 27,824
Balance Retained in the Business...... $ 14,999 $ 16,244
Common Stock:
Average Shares Outstanding (000s).... 17,472 17,547
Earnings Per Share................... $2.46 $2.51
Dividends Declared................... $1.60 $1.59
See Notes to Consolidated Financial Statements.
4
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
September 30, December 31,
1997 1996
(Unaudited) (Audited)
(Thousands of Dollars)
ASSETS
Utility Plant
Electric....................... $1,188,164 $1,171,798
Gas............................ 146,971 145,375
Common......................... 91,043 87,591
Nuclear fuel................... 36,951 36,913
1,463,129 1,441,677
Less: Accumulated depreciation. 550,047 520,999
Nuclear fuel amortization 32,262 29,748
880,820 890,930
Construction work in progress.. 49,693 48,699
Net Utility Plant............ 930,513 939,629
Investments and Other Assets
Prefunded Pension Costs........ 20,320 10,672
Other.......................... 11,660 12,419
Total Investments and
Other Assets................ 31,980 23,091
Current Assets
Cash and cash equivalents...... 19,768 4,235
Accounts receivable from
customers-net of allowance for
doubtful accounts............. 41,633 48,080
Accrued unbilled utility
revenues...................... 9,172 16,042
Other receivables.............. 2,542 2,896
Fuel, materials and supplies,
at average cost............... 25,928 28,095
Special deposits and
prepayments................... 16,360 13,440
Total Current Assets......... 115,403 112,788
Deferred Charges
Regulatory assets.............. 138,566 151,426
Unamortized debt expense....... 5,099 5,393
Other.......................... 26,409 16,779
Total Deferred Charges....... 170,074 173,598
Total Assets.................... $1,247,970 $1,249,106
See Notes to Consolidated Financial Statements.
5<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
September 30, December 31,
1997 1996
(Unaudited) (Audited)
(Thousands of Dollars)
LIABILITIES
Capitalization
Common Stock Equity
Common stock, 30,000,000 shares
authorized; shares issued
($5 par value):
1997 - 17,369,787............
1996 - 17,554,987............ $ 87,775 $ 87,775
Paid-in capital............... 284,465 284,465
Retained earnings............. 120,820 105,821
Reacquired capital stock...... (6,066) -
Capital stock expense......... (6,296) (6,352)
Total Common Stock Equity... 480,698 471,709
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................ 362,651 362,040
Total Capitalization....... 899,379 889,779
Current Liabilities
Current maturities
of long-term debt............ 1,501 1,362
Notes payable................. - 15,600
Accounts payable.............. 16,031 26,137
Accrued taxes and interest.... 19,990 5,347
Dividends payable............. 10,096 10,112
Accrued vacation.............. 4,339 4,251
Customer deposits............. 3,820 4,019
Other......................... 5,661 6,676
Total Current Liabilities... 61,438 73,504
6
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
September 30, December 31,
1997 1996
(Unaudited) (Audited)
(Thousands of Dollars)
LIABILITIES
Deferred Credits and Other
Liabilities
Regulatory liabilities........ 76,089 74,587
Operating reserves............ 6,366 4,755
Other......................... 8,978 9,155
Total Deferred Credits and
Other Liabilities.......... 91,433 88,497
Accumulated Deferred Income Tax 195,720 197,326
Total Capitalization and
Liabilities................... $1,247,970 $1,249,106
See Notes to Consolidated Financial Statements.
7
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the 9 Months Ended
September 30,
1997 1996
(Thousands of Dollars)
Operating Activities
Net Income.......................... $ 45,316 $ 46,868
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and
nuclear fuel amortization....... 36,101 35,893
Deferred income taxes, net........ 4,637 11,041
Allowance for equity funds used
during construction............. (297) (493)
Nine Mile 2 Plant deferred
finance charges, net............ (3,642) (3,642)
Provision for uncollectibles...... 2,475 2,872
Accrued pension costs............. (6,420) (5,385)
Deferred gas costs................ 4,081 (2,442)
Deferred gas refunds.............. 2,183 (1,828)
Other - net....................... (2,601) 1,735
Changes in current assets and
liabilities, net:
Accounts receivable and unbilled
utility revenues................. 11,196 6,918
Fuel, materials and supplies...... 2,167 (852)
Special deposits and prepayments.. (2,920) (6,396)
Accounts payable.................. (10,106) 786
Accrued taxes and interest........ 14,643 7,029
Other current liabilities......... (1,126) (737)
Net cash provided by operating
activities......................... 95,687 91,367
8
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the 9 Months Ended
September 30,
1997 1996
(Thousands of Dollars)
Investing Activities
Additions to plant.................. (28,035) (36,944)
Allowance for equity funds used
during construction................ 297 493
Net additions to plant.............. (27,738) (36,451)
Nine Mile 2 Plant decommissioning
trust fund......................... (2,232) (843)
Other - net......................... 1,082 (31)
Net cash used in investing
activities......................... (28,888) (37,325)
Financing Activities
Proceeds from issuance of:
Long-term debt................... 1,169 1,765
Common stock..................... - 1,818
Repayments of short-term debt...... (15,600) -
Borrowings of short-term debt...... - 6,100
Retirement and redemption of
long-term debt.................... (438) (30,634)
Retirement and redemption of
cumulative preferred stock........ - (13,000)
Dividends paid on cumulative
preferred and common stock........ (30,331) (30,378)
Issuance and redemption costs...... - 359
Reacquired capital stock........... (6,066) -
Net cash used in financing
activities........................ (51,266) (63,970)
9
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the 9 Months Ended
September 30,
1997 1996
(Thousands of Dollars)
Net Change in Cash and Cash
Equivalents.......................... 15,533 (9,928)
Cash and Cash Equivalents -
Beginning Year....................... 4,235 15,478
Cash and Cash Equivalents -
End of Period........................ $ 19,768 $ 5,550
Supplemental Disclosure of
Cash Flow Information
Interest paid (net of amounts
capitalized)...................... $ 13,365 $ 14,352
Federal income tax paid............ 14,111 11,875
See Notes to Consolidated Financial Statements.
10
<PAGE>
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 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 disclosures
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, 1996 (Company's 10-K Report.)
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 1996 amounts have been
reclassified to conform to the 1997 presentation.
2. New Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (SFAS 128). This Statement supersedes APB
Opinion No. 15, "Earnings per Share." SFAS 128 simplifies the
standards for computing and presenting earnings per share (EPS)
and applies to companies with publicly held common stock,
including utilities. SFAS 128 replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the
income statements for all entities with complex capital
structures. In compliance with the requirements of this
Statement, the Company will adopt SFAS 128 in the fourth quarter
of 1997. The Company does not expect that the adoption of SFAS
128 will have a significant impact on the reporting of EPS for
the Company.
11
<PAGE>
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130).
This Statement establishes standards for the reporting and
display of comprehensive income and its components in a full set
of financial statements. Comprehensive income includes charges
or credits to equity that are not the result of transactions
with owners. In compliance with the requirements of this
Statement, the Company will adopt SFAS 130 in the first quarter
of 1998. The Company does not expect that the adoption of SFAS
130 will have a significant impact on the reporting requirements
of the Company.
In June 1997, the FASB issued Statement of Financial
AccountingStandards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). This
Statement establishes standards for reporting information about
operating segments in annual and interim financial statements.
It also establishes standards for related disclosures about
products and services, geographic areas and major customers.
In compliance with the requirements of this Statement, the
Company expects to adopt SFAS 131 in 1998. The Company does
not expect that the adoption of SFAS 131 will have a significant
impact on the reporting requirements of the Company.
3. 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. Except what is disclosed in Part II of this Quarterly
Report, on Form 10-Q, for the quarterly period ended September
30, 1997, and all documents previously filed with the
Securities and Exchange Commission in 1997, there have been no
material changes in the subject matters discussed in said
Note 8.
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
For the nine months ended September 30, 1997, cash
expendituresrelated to the construction program of the Company
amounted to $27.5 million. The amount shown on the Consolidated
Statement of Cash Flows for "Net additions to plant" of $27.7
million includes the debt portion of $185,000 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.
The growth of retained earnings in the first nine months of 1997
contributed to the increase in the book value of common stock
from $26.87 at December 31, 1996 to $27.67 at September 30, 1997
and the increase in the common equity ratio from 52% at
December 31, 1996 to 53.4% at September 30, 1997.
The Company has $52 million of committed short-term credit
facilities available. In order to diversify its sources of
short-term financing, the Company has also entered into short-term credit
facilities agreements with several commercial banks.
At September 30, 1997, the Company had no short-term debt
outstanding. 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 $27.1 million at the end of September 1997.
For the nine months ended September 30, 1997, the Company
repurchased 185,200 shares of its common stock for $6.1 million
under its stock repurchase program (See Note 5 to the
Consolidated Financial Statements included in the Company's 10-K
Report).
Based on a "strengthened financial profile, which is expected to
continue to improve," Standard & Poor's Corporation (S&P), on
July 16, 1997, upgraded the Company's senior secured debt rating
from "A-" to "A" and its senior unsecured debt and preferred
stock ratings from "BBB+" to "A-".
13
EARNINGS PER SHARE
Earnings per share of common stock were $.72 for the third
quarter of 1997, as compared to $.73 for the third quarter of
1996, a decrease of 1%. Earnings per share of common stock were
$2.46 for the nine months ended September 30, 1997, as compared
to $2.51 for the nine months ended September 30, 1996, a decrease
of 2%.
The decrease in earnings per share for the quarter ended
September 30, 1997, as compared to the same period in 1996,
resulted primarily from decreased earnings related to fuel cost
incentives and energy efficiency regulatory programs. Also
contributing to the lower earnings is an increase in operating
and maintenance expense primarily due to increased tree trimming
costs.
This decrease was largely offset by increased electric and gas
net operating revenues. The increase in electric net operating
revenues was due to increased sales to residential and commercial
customers which was partially offset by reduced industrial usage.
The increase in gas net operating revenues reflects the net
effect of increased usage by gas industrial customers and
decreased usage by gas residential customers.
Earnings per share for the nine months ended September 30, 1997
decreased compared to the same period in 1996. The decrease
resulted primarily from a decline in electric and gas net
operating revenues. This was largely attributable to decreased
sales due to colder winter, early spring and warmer summer
weather experienced in the first nine months of 1996 when
compared to the same period in 1997. This unfavorable variance
was partially offset by decreased interest charges and 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.
14
<PAGE>
RESULTS OF OPERATIONS
The following table reports the variation in the results of
operations for the three months and nine months ended September
30, 1997 compared to the same periods for 1996:
3 MONTHS ENDED SEPTEMBER 30,
INCREASE
1997 1996 (DECREASE)
(Thousands of Dollars)
Operating Revenues $123,507 $117,684 $ 5,823
Operating Expenses 105,596 99,684 5,912
Operating Income 17,911 18,000 (89)
Other Income 2,019 2,260 (241)
Income before Interest Charges 19,930 20,260 (330)
Interest Charges 6,562 6,595 (33)
Net Income 13,368 13,665 (297)
Dividends Declared on Cumulative
Preferred Stock 808 808 -
Income Available for Common Stock $ 12,560 $ 12,857 $ (297)
9 MONTHS ENDED SEPTEMBER 30,
INCREASE
1997 1996 (DECREASE)
(Thousands of Dollars)
Operating Revenues $393,987 $388,526 $ 5,461
Operating Expenses 335,433 327,068 8,365
Operating Income 58,554 61,458 (2,904)
Other Income 6,441 5,632 809
Income before Interest Charges 64,995 67,090 (2,095)
Interest Charges 19,679 20,222 (543)
Net Income 45,316 46,868 (1,552)
Premium on Preferred Stock
Redemption - 378 (378)
Dividends Declared on Cumulative
Preferred Stock 2,422 2,422 -
Income Available for Common Stock $ 42,894 $ 44,068 $ (1,174)
15
<PAGE>
OPERATING REVENUES
Operating revenues increased $5.8 million (5%) for the third
quarter of 1997 as compared to the third quarter of 1996 and
increased $5.5 million (1%) for the nine months ended September
30, 1997. Details of these revenue changes by electric and gas
departments are as follows:
INCREASE (DECREASE) FROM PRIOR PERIOD
THIRD QUARTER NINE MONTHS
Electric Gas Electric Gas
(Thousands of Dollars)
Customer Sales $ (707) $ 3,460 * $ (7,081) $ 2,784 *
Sales to Other
Utilities 1,092 (71) 2,397 (2,368)
Fuel and Gas Cost
Adjustment 1,683 (63) 229 9,346
Deferred Revenues 256 (134) 713 (1,278)
Miscellaneous 156 151 ** 117 602 **
$ 2,480 $ 3,343 $ (3,625) $ 9,086
*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.
SALES
The Company's sales vary seasonally in response to weather
conditions. Generally electric revenues peak in the summer and
gas revenues peak in the winter.
Total kilowatt-hour sales of electricity within the Company's
service territory decreased 2%, while firm sales of natural gas
increased 5% in the third quarter of 1997 as compared to the
third quarter of 1996. For the nine months ended September 30,
1997, electric sales decreased 3% and firm gas sales decreased 8%
compared to the same period last year. Changes in sales from
last year by major customer classifications, including
interruptible gas sales, are set forth below.
16
Also indicated are the changes related to transportation of
customer owned gas:
INCREASE (DECREASE) FROM PRIOR PERIOD
THIRD QUARTER NINE MONTHS
Electric Gas Electric Gas
Residential 1 % (6)% (3)% (9)%
Commercial 1 1 (1) (8)
Industrial (10) 40 (5) 13
Interruptible N/A 240 N/A 183
Transportation of
Customer-owned
Gas N/A 39 N/A 78
Billing heating degree days were 12% lower for the nine months
ended September 30, 1997 when compared to the same period in
1996.
Sales of electricity to residential customers in the third
quarter of 1997 increased 1% from the comparable prior year
period due to a 1% increase in the number of customers.
Commercial sales in the third quarter of 1997 increased 1% as
compared to last year due to the net effect of a 2% increase in
the number of customers and a 1% decrease in usage per customer.
Electric sales to industrial customers decreased 10% in the third
quarter of 1997 due primarily to a decrease in usage by a large
industrial customer.
For the nine months ended September 30, 1997, sales of
electricity to residential customers decreased 3% due to the net
effect of a 4% decrease in usage per customer and a 1% increase
in the number of customers. Sales to commercial customers
decreased 1% due to the net effect of a 3% decrease in usage per
customer and a 2% increase in the number of customers. Electric
sales to industrial customers decreased 5% for such nine-month
period due primarily to a decrease in usage by a large industrial
customer.
Sales of gas to residential customers for the third quarter of
1997 decreased 6% due to a 6% decrease in usage per customer.
Sales of gas to commercial customers for the third quarter of
1997 increased 1% due to the net effect of a 2% increase in the
number of customers and a 1% decrease in usage per customer.
17
<PAGE>
Firm gas sales to industrial customers increased 40% for the
third quarter of 1997 when compared to the same period in 1996.
For the nine months ended September 30, 1997, residential gas
sales decreased 9% due to the combined effect of a 10% decrease
in usage per customer and a 1% increase in the number of
customers. Commercial gas sales decreased 8% due to the net
effect of a 10% decrease in usage per customer and a 2% increase
in the number of customers. Firm gas sales to industrial
customers for the nine months ended September 30, 1997 increased
13% due largely to an increase in usage by two large industrial
customers.
Interruptible gas sales increased 240% in the third quarter of
1997 and 183% for the nine months ended September 30, 1997 due
primarily to an increase 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 39% for the third quarter of
1997 and 78% for the nine months ended September 30, 1997 due
primarily to increased gas transportation service provided to a
large industrial customer.
18
<PAGE>
OPERATING EXPENSES
The following table reports the variation in the operating
expenses for the three months and nine months ended September 30,
1997 compared to the same periods for the prior year:
INCREASE (DECREASE) FROM PRIOR PERIOD
THIRD QUARTER NINE MONTHS
Amount Percent Amount Percent
(Dollars in Thousands)
Operating Expenses
Fuel and Purchased
Electricity $ 3,354 12 % $ 1,402 2 %
Purchased Natural Gas 2,884 56 10,904 31
Other Expenses of
Operation (896) (4) (1,374) (2)
Maintenance 648 11 (1,558) (7)
Depreciation and Amortiza-
tion 195 2 586 2
Taxes, Other than
Income Tax 143 1 (240) (1)
Federal Income Tax (416) (5) (1,355) (5)
Total $ 5,912 6 % $ 8,365 3 %
The cost of fuel and purchased electricity increased $3.4 million
(12%) for the third quarter ended September 30, 1997 resulting
from the combined effect of a 3% increase in total system output
and an increase in the average cost of fuel used in electric
generation.
Purchased natural gas costs increased $2.9 million (56%) for the
third quarter of 1997 and $10.9 million (31%) for the nine
months ended September 30, 1997 resulting primarily from higher
interruptible gas sales for usage as boiler fuel.
19
<PAGE>
COMMON STOCK DIVIDENDS
Reference is made to the subcaption "Common Stock Dividends and
Price Ranges" on Page 28 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
September 26, 1997, the Board of Directors of the Company
declared a quarterly dividend of $.535 per share, payable
November 1, 1997 to shareholders of record as of October 10,
1997.
STORM COSTS
On April 1, 1997, a snow and wind storm disrupted service to
approximately 100,000 customers in the Company's service
territory. The restoration costs of the storm are approximately
$8.4 million and are reflected in "Deferred Charges-Regulatory
Assets" in the Consolidated Balance Sheet. While the Company
believes these costs are recoverable in rates and has requested
the PSC to authorize deferral of these costs, the Company cannot
predict the outcome of its request before the PSC.
YEAR 2000
As the year 2000 approaches, the Company recognizes the need to
ensure its operations will not be adversely impacted by Year 2000
computer software failures. The Company is addressing this issue
to ensure the availability and integrity of its financial systems
and the reliability of its operational systems. The Company has
established processes for evaluating and managing the risks and
costs associated with this problem. The Company has and will
continue to make certain investments in its software systems and
applications to ensure the Company is Year 2000 compliant. The
financial impact to the Company has not been determined and is
not anticipated to have a material impact on the Company.
20
<PAGE>
Federal Income Tax Refund
In the second quarter of 1997 the Company received a $1.9 million
net refund as a result of audits by the Internal Revenue Service
of the Company's federal income tax returns for the years 1987 -
1991. The Company is in the process of complying with the PSC
notification requirements for tax refunds before recognizing any
portion of the refund which may ultimately be available to
shareholders.
21
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Asbestos Litigation. For a discussion of lawsuits against
Registrant (hereinafter called "the Company") involving asbestos,
see the caption "Legal Proceedings - Asbestos Litigation" in Item
3, Part I of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 ("10-K Report").
Since 1987, the Company has been involved as a defendant in the
"mass tort" asbestos litigation in the United States District
Courts for the Southern and Eastern Districts 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 September 30, 1997, the Company has been a
defendant in approximately 1,190 such individual lawsuits. Many
of these lawsuits have been disposed of without any payment by
the Company, or for immaterial amounts. While the amounts
demanded in all the remaining lawsuits total several billions of
dollars, it is the Company'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 the Company's financial position.
However, if the Company 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 the Company if the Company could not recover all or
a substantial portion thereof in rates. the Company's insurance
does not extend to punitive damages.
Item 5. Other Information
COMPETITION. Reference is made to the caption "Generally" in Item
1 of Part I of the Company's 10-K Report and the Company's
Current Report on Form 8-K dated April 1, 1997, for a discussion
of the settlement negotiations and Settlement Agreement
undertaken as part of the Public Service Commission of the State
of New York's ("PSC") Competitive Opportunities Proceeding.
22
At its September 17, 1997 session, the PSC discussed the status
of the current negotiations regarding the Settlement Agreement,
and indicated that further negotiation was needed on certain open
issues related to the auctioning of the Company's fossil-fuel
generating assets, the provision of certain types of meters, and
environmental program funding. Negotiations are continuing with
respect to the final form of the Settlement Agreement, and the
Company cannot predict at this time what action the PSC will
ultimately take with respect to the Settlement Agreement, nor can
it predict the date on which the PSC will render its ultimate
decision.
Reference is also made to the caption "Recent Developments - New
York - Electric - Competitive Opportunities Proceeding" in
Management's Discussion and Analysis of Financial Condition and
Results of Operation incorporated by reference into the 10-K
Report, regarding the appeal to the Third Department of the
Appellate Division of the Supreme Court of New York State filed
by the members of the Energy Association of the State of New York
against the PSC regarding the PSC's Competitive Opportunities
Proceeding. The PSC has agreed to extend the deadline for
perfecting such appeal for a period of six months from September
24, 1997.
Although the Company cannot predict the outcome of the
Competitive Opportunities Proceeding, it believes it continues to
meet the criteria for the application of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation," (SFAS 71). Published reports have
indicated that the Securities and Exchange Commission has
questioned the continued applicability of SFAS 71 to certain
electric utilities other than the Company that face restructuring
and transition to competition. The FASB Emerging Issues Task
Force (EITF) considered how SFAS 71 should be applied in light of
recent changes within the regulated utility industry. The EITF
reached a consensus during a July 24, 1997 meeting. The
consensus was as follows:
1. An entity should discontinue application of SFAS 71 to the
electric generation portion of its business when a deregulation
transition plan is in place and its terms are known.
23
<PAGE>
2. The decision to continue to carry some or all of the
"regulatory" assets and liabilities of the separable portion of
the business to which Statement of Financial Accounting Standards
No. 101, "Accounting for the Discontinuation of Application of
SFAS 71," is being applied (electric generation) should be
determined on the basis of where the regulated cash flows to
realize and settle them, respectively, will be derived.
3. In applying the conclusion above, the entity should consider
the source of the regulated cash flows for the "regulatory"
assets and liabilities, and the costs or obligations that are
covered by that cash flow regardless of whether they are
"incurred" as of the date that application of SFAS 71 ceases.
4. Deregulated and regulated portions of the business should be
shown separately in the financial statements.
The Company would expect to discontinue the application of SFAS
71 when the PSC approves the final form of the Settlement
Agreement. When the application of SFAS 71 is discontinued, the
Company may have to record as expense or revenue certain
previously deferred items (regulatory assets and regulatory
liabilities), as well as write down plant assets, the effect of
which the Company cannot predict at this time.
Reference is also made to the caption "Other Information -
Competition" in Item 5 of Part II of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997, and to
the discussion of the Company's motion seeking rehearing of a PSC
Order dated June 23, 1997 regarding a retail access pilot program
for eligible commercial farms and food processors. At its
session held on September 17, 1997, the PSC orally rejected such
motion.
24
<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, the Company filed no Current Reports on Form
8-K.
25
<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: October 30, 1997
26
</PAGE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FOR 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> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $930,513
<OTHER-PROPERTY-AND-INVEST> $31,980
<TOTAL-CURRENT-ASSETS> $115,403
<TOTAL-DEFERRED-CHARGES> $170,074
<OTHER-ASSETS> $0
<TOTAL-ASSETS> $1,247,970
<COMMON> $87,775
<CAPITAL-SURPLUS-PAID-IN> $284,465
<RETAINED-EARNINGS> $120,820
<TOTAL-COMMON-STOCKHOLDERS-EQ> $480,698
$35,000
$21,030
<LONG-TERM-DEBT-NET> $362,651
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $1,501
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $347,090
<TOT-CAPITALIZATION-AND-LIAB> $1,247,970
<GROSS-OPERATING-REVENUE> $393,987
<INCOME-TAX-EXPENSE> $25,462
<OTHER-OPERATING-EXPENSES> $309,971
<TOTAL-OPERATING-EXPENSES> $335,433
<OPERATING-INCOME-LOSS> $58,554
<OTHER-INCOME-NET> $6,441
<INCOME-BEFORE-INTEREST-EXPEN> $64,995
<TOTAL-INTEREST-EXPENSE> $19,679
<NET-INCOME> $45,316
$2,422
<EARNINGS-AVAILABLE-FOR-COMM> $42,894
<COMMON-STOCK-DIVIDENDS> $27,895
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $95,687
<EPS-PRIMARY> $2.46
<EPS-DILUTED> $0
</TABLE>
<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>
1997
3 Months 9 Months 12 Months
Ended Ended Ended Year Ended December 31,
<S> Sept 30 Sept 30 Sept 30 1996 1995 1994 1993 1992
Earnings: <C> <C> <C> <C> <C> <C> <C> <C>
A. Net Income $13,368 $45,316 $ 54,530 $ 56,082 $ 52,722 $ 50,929 $ 50,390 $ 47,688
B. Federal Income Tax 7,252 24,904 30,151 31,068 28,687 26,806 27,158 24,363
C. Earnings before Income Taxes 20,620 70,220 84,681 87,150 81,409 77,735 77,548 72,051
D. Total Fixed Charges <FN1> 6,653 20,168 26,721 27,231 30,433 32,679 33,820 34,888
E. Total Earnings, $27,273 $90,388 $111,402 $114,381 $111,842 $110,414 $111,368 $106,939
Preferred Dividend Requirements:
F. Allowance for Preferred Stock
Dividends Under IRC Sec 247 $ 808 $ 2,422 $ 3,230 $ 3,231 $ 4,903 $ 5,127 $ 5,562 $ 5,544
G. Less Allowable Dividend Deduction 32 96 127 127 528 528 528 544
H. Net Subject to Gross-up 776 2,326 3,103 3,104 4,375 4,599 5,034 5,000
I. Ratio of Earnings before Income
Taxes to Net Income (C/A) 1.542 1.550 1.553 1.554 1.544 1.526 1.539 1.511
J. Pref. Dividend (Pre-tax) (HxI) 1,197 3,605 4,819 4,824 6,755 7,018 7,747 7,555
K. Plus Allowable Dividend Deduction 32 96 127 127 528 528 528 544
L. Preferred Dividend Factor 1,229 3,701 4,946 4,951 7,283 7,546 8,275 8,099
M. Fixed Charges (D) 6,653 20,168 26,721 27,231 30,433 32,679 33,820 34,888
N. Total Fixed Charges
and Preferred Dividends $ 7,882 $23,869 $ 31,667 $ 32,182 $ 37,716 $ 40,225 $ 42,095 $ 42,987
O. Ratio of Earnings to Fixed
Charges (E/D) 4.10 4.48 4.17 4.20 3.68 3.38 3.29 3.07
P. Ratio of Earnings to Fixed Charges
and Preferred Dividends (E/N) 3.46 3.79 3.52 3.55 2.97 2.74 2.65 2.49
<FN1> Includes a portion of rent expense deemed to be representive of the interest factor.
</TABLE>
</PAGE>
