<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.................June 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; 17,445,287 shares
outstanding as of June 30, 1997.
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Consolidated Financial Statements
Consolidated Statement of Income -
Three Months Ended June 30, 1997 and 1996 1-2
Consolidated Statement of Income -
Six Months Ended June 30, 1997 and 1996 3-4
Consolidated Balance Sheet - June 30, 1997
and December 31, 1996 5-6
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1997 and 1996 7-8
Notes to Consolidated Financial Statements 9-10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-18
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 19
Item 5 - Other Information 19-20
Item 6 - Exhibits and Reports on Form 8-K 21
Signatures 22
<PAGE>
<TABLE> PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the 3 Months Ended
June 30,
1997 1996
<S> (Thousands of Dollars)
Operating Revenues <C> <C>
Electric.............................. $ 90,853 $ 93,875
Gas................................... 24,216 20,651
Total - own territory................ 115,069 114,526
Electric sales to other utilities..... 3,503 1,942
Gas sales to other utilities.......... 32 526
Total Operating Revenues..... 118,604 116,994
Operating Expenses
Operation:
Fuel used in electric generation..... 13,274 10,220
Purchased electricity................ 12,509 15,052
Purchased natural gas................ 13,028 9,046
Other expenses of operation.......... 25,378 24,988
Maintenance........................... 7,080 7,945
Depreciation and amortization......... 10,904 10,710
Taxes, other than income tax.......... 15,740 16,042
Federal income tax.................... 5,849 6,625
Total Operating Expenses..... 103,762 100,628
Operating Income....................... 14,842 16,366
Other Income
Allowance for equity funds
used during construction............. 82 153
Federal income tax.................... 169 667
Other - net........................... 2,014 499
Total Other Income........... 2,265 1,319
Income Before Interest Charges......... 17,107 17,685
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<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
For the 3 Months Ended
June 30,
1997 1996
(Thousands of Dollars)
<S> <C> <C>
Interest Charges
Interest on mortgage bonds............ 3,559 3,778
Interest on other long-term debt...... 2,299 2,161
Interest on short-term debt........... 1 131
Other interest........................ 609 500
Allowance for borrowed funds
used during construction............. (51) (123)
Amortization of expense on debt....... 226 235
Total Interest Charges....... 6,643 6,682
Net Income............................ 10,464 11,003
Dividends Declared on Cumulative
Preferred Stock...................... 808 808
Income Available for Common Stock..... 9,656 10,195
Dividends Declared on
Common Stock......................... 9,331 9,304
Balance Retained in the Business...... $ 325 $ 891
Common Stock:
Average Shares Outstanding (000s).... 17,475 17,555
Earnings Per Share................... $ .55 $ .58
Dividends Declared................... $.535 $ .53
See Notes to Consolidated Financial Statements.
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<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
For the 6 Months Ended
June 30,
1997 1996
<S> (Thousands of Dollars)
Operating Revenues <C> <C>
Electric.............................. $ 195,772 $ 203,182
Gas................................... 66,745 58,706
Total - own territory................ 262,517 261,888
Electric sales to other utilities..... 7,864 6,559
Gas sales to other utilities.......... 98 2,394
Total Operating Revenues..... 270,479 270,841
Operating Expenses
Operation:
Fuel used in electric generation..... 28,206 32,861
Purchased electricity................ 27,467 24,765
Purchased natural gas................ 38,395 30,375
Other expenses of operation.......... 49,633 50,110
Maintenance........................... 12,876 15,083
Depreciation and amortization......... 21,808 21,417
Taxes, other than income tax.......... 33,439 33,822
Federal income tax.................... 18,012 18,950
Total Operating Expenses..... 229,836 227,383
Operating Income....................... 40,643 43,458
Other Income
Allowance for equity funds
used during construction............. 183 307
Federal income tax.................... 360 943
Other - net........................... 3,880 2,121
Total Other Income........... 4,423 3,371
Income Before Interest Charges......... 45,066 46,829
Interest Charges
Interest on mortgage bonds............ 7,118 7,993
Interest on other long-term debt...... 4,381 4,244
Interest on short-term debt........... 94 142
Other interest........................ 1,184 1,007
Allowance for borrowed funds
used during construction............. (113) (247)
Amortization of expense on debt....... 453 487
Total Interest Charges....... 13,117 13,626
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<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the 6 Months Ended
June 30,
<CAPTION> 1997 1996
(Thousands of Dollars)
<S> <C> <C>
Net Income............................ 31,949 33,203
Premium on Preferred Stock Redemption. - 378
Dividends Declared on Cumulative
Preferred Stock...................... 1,615 1,615
Income Available for Common Stock..... 30,334 31,210
Dividends Declared on
Common Stock......................... 18,606 18,519
Balance Retained in the Business...... $ 11,728 $ 12,691
Common Stock:
Average Shares Outstanding (000s).... 17,504 17,543
Earnings Per Share................... $1.73 $1.78
Dividends Declared................... $1.065 $1.055
See Notes to Consolidated Financial Statements.
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<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
<CAPTION>
June 30, December 31,
1997* 1996
<S> (Thousands of Dollars)
ASSETS
Utility Plant <C> <C>
Electric....................... $1,185,555 $1,171,798
Gas............................ 146,742 145,375
Common......................... 90,729 87,591
Nuclear fuel................... 36,943 36,913
1,459,969 1,441,677
Less: Accumulated depreciation. 541,723 520,999
Nuclear fuel amortization 31,467 29,748
886,779 890,930
Construction work in progress.. 45,712 48,699
Net Utility Plant............ 932,491 939,629
Investments and Other Assets
Prefunded pension costs........ 17,104 10,672
Other.......................... 13,919 12,419
Total Investments and Other
Assets...................... 31,023 23,091
Current Assets
Cash and cash equivalents...... 14,654 4,235
Accounts receivable from
customers-net of allowance for
doubtful accounts............. 52,892 48,080
Accrued unbilled utility
revenues...................... 8,997 16,042
Other receivables.............. 2,650 2,896
Fuel, materials and supplies,
at average cost............... 23,478 28,095
Special deposits and
prepayments................... 12,382 13,440
Total Current Assets......... 115,053 112,788
Deferred Charges
Regulatory Assets.............. 138,635 151,426
Unamortized debt expense....... 5,197 5,393
Other.......................... 21,683 16,779
Total Deferred Charges....... 165,515 173,598
Total Assets.................... $1,244,082 $1,249,106
See Notes to Consolidated Financial Statements.
* Unaudited
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
<CAPTION> June 30, December 31,
1997* 1996
<S> (Thousands of Dollars)
LIABILITIES <C> <C>
Capitalization
Common Stock Equity
Common stock, 30,000,000
authorized; shares issued
($5 par value):
1997 - 17,554,987
1996 - 17,554,987............ $ 87,775 $ 87,775
Paid-in capital............... 284,465 284,465
Retained earnings............. 117,549 105,821
Reacquired capital stock...... (3,535) -
Capital stock expense......... (6,315) (6,352)
Total Common Stock Equity... 479,939 471,709
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................ 361,988 362,040
Total Capitalization....... 897,957 889,779
Current Liabilities
Current maturities
of long-term debt............ 1,501 1,362
Notes payable................. - 15,600
Accounts payable.............. 22,736 26,137
Accrued taxes and interest.... 14,172 5,347
Dividends payable............. 10,138 10,112
Accrued vacation.............. 4,339 4,251
Customer deposits............. 3,763 4,019
Other......................... 5,081 6,676
Total Current Liabilities... 61,730 73,504
Deferred Credits and Other
Liabilities
Regulatory Liabilities........ 74,761 74,587
Operating reserves............ 5,967 4,755
Other......................... 9,333 9,155
Total Deferred Credits and
Other Liabilities.......... 90,061 88,497
Accumulated Deferred Income Tax 194,334 197,326
Total Capitalization and
Liabilities................... $1,244,082 $1,249,106
See Notes to Consolidated Financial Statements.
* Unaudited
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<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the 6 Months Ended
June 30,
1997 1996
<S> (Thousands of Dollars)
Operating Activities <C> <C>
Net Income.......................... $ 31,949 $ 33,203
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and
nuclear fuel amortization........ 24,133 23,970
Deferred income taxes, net........ 1,404 5,547
Allowance for equity funds used
during construction.............. (183) (307)
Nine Mile 2 Plant deferred
finance charges, net............. (2,428) (2,428)
Provision for uncollectibles...... 1,650 1,877
Accrued pension costs............. (4,459) (3,601)
Deferred gas costs................ 7,146 1,582
Deferred gas refunds.............. 2,103 (1,788)
Other - net....................... (3,539) 1,304
Changes in current assets and
liabilities, net:
Accounts receivable and unbilled
utility revenues................. 829 660
Fuel, materials and supplies...... 4,617 122
Special deposits and prepayments.. 1,058 (30)
Accounts payable.................. (3,401) (5,825)
Accrued taxes and interest........ 8,825 3,783
Other current liabilities......... (1,763) (1,520)
Net cash provided by operating
activities......................... 67,941 56,549
Investing Activities
Additions to plant.................. (17,684) (21,321)
Allowance for equity funds used
during construction................ 183 307
Net additions to plant.............. (17,501) (21,014)
Nine Mile 2 Plant decommissioning
trust fund......................... (1,478) (591)
Other - net......................... 712 67
Net cash used in investing
activities......................... (18,267) (21,538)
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<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the 6 Months Ended
June 30,
1997 1996
(Thousands of Dollars)
<S>
Financing Activities <C> <C>
Proceeds from issuance of:
Long-term debt................... 932 1,240
Common stock..................... - 1,818
Repayments of short-term debt...... (15,600) -
Borrowings of short-term debt...... - 16,500
Retirement and redemption of
long-term debt.................... (859) (30,289)
Retirement and redemption of
cumulative preferred stock........ - (13,000)
Dividends paid on cumulative
preferred and common stock........ (20,193) (20,266)
Issuance and redemption costs...... - 488
Redemption premium on cumulative
preferred stock................... - (130)
Reacquired capital stock........... (3,535) -
Net cash used in financing
activities........................ (39,255) (43,639)
Net Change in Cash and Cash
Equivalents.......................... 10,419 (8,628)
Cash and Cash Equivalents -
Beginning Year....................... 4,235 15,478
Cash and Cash Equivalents -
End of Period........................ $ 14,654 $ 6,850
Supplemental Disclosure of
Cash Flow Information
Interest paid (net of amounts
capitalized)...................... $ 12,029 $13,219
Federal income tax paid............ 11,111 7,875
See Notes to Consolidated Financial Statements.
</TABLE>
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<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 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, 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.
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
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<PAGE>
130 will have a significant impact on the reporting requirements
of the Company.
In June 1997, the FASB issued Statement of Financial Accounting
Standards 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 as what is disclosed in Part II of this
Quarterly Report, on Form 10-Q, for the quarterly period ended
June 30, 1997, the Quarterly Report, on Form 10-Q, for the
quarterly period ended March 31, 1997 and in any Current Report,
on Form 8-K, filed in 1997, there have been no material changes
in the subject matters discussed in said Note 8.
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<PAGE>
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, 1997, cash expenditures,
related to the construction program of the Company, amounted to
$17.4 million. The amount shown on the Consolidated Statement
of Cash Flows for "Net additions to plant" of $17.5 million
includes the debt portion of $113,000 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 six months of 1997
contributed to the increase in the book value of common stock
from $26.87 at December 31, 1996 to $27.51 at June 30, 1997 and
the increase in the common equity ratio from 52% at December 31,
1996 to 53.4% at June 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 June 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 $10.9 million at the end of June 1997.
For the six months ended June 30, 1997, the Company repurchased
109,700 shares of its common stock for $3.5 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 secured debt rating from
"A-" to "A" and its senior unsecured debt and preferred stock
ratings from "BBB+" to "A-".
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<PAGE>
EARNINGS PER SHARE
Earnings per share of common stock were $.55 for the second
quarter of 1997, as compared to $.58 for the second quarter of
1996, a decrease of 5%. Earnings per share of common stock were
$1.73 for the six months ended June 30, 1997, as compared to
$1.78 for the six months ended June 30, 1996, a decrease of 3%.
The decrease in earnings per share for the quarter ended June 30,
1997, as compared to the same period in 1996, resulted primarily
from decreased electric and gas net operating revenues
(including fuel costs and purchased electricity) attributable
largely to a decrease in usage by residential and commercial
customers. The decrease in electric net operating revenue was
also affected by decreased usage by electric industrial
customers. A 7% decrease in heating degree days contributed to
the reduction in net operating revenues. This unfavorable
variation was substantially offset by decreased interest expense
and the one-time charges (in 1996) associated with the optional
redemption in May 1996 of $30 million of the Company's 8 3/4%
Series First Mortgage Bonds at a redemption price of 102.07% of
the principal amount. Earnings per share were also impacted by
the net effect of various other items, including increased
depreciation costs and AFDC on capital expenditures, which were
partially offset by an increase in other taxes.
The decrease in per share earnings for the six months ended
June 30, 1997 as compared to the same period in 1996 resulted
primarily from decreased electric and gas net operating revenues
attributable largely to decreased sales occurring because of
colder winter and early spring weather experienced in the first
and second quarters of 1996, when compared to the same periods
in 1997. The unfavorable variance in this six-month period 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.
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<PAGE>
RESULTS OF OPERATIONS
The following tables report the variation in the results of
operations for the three months and the six months ended
June 30, 1997 compared to the same period for 1996:
3 MONTHS ENDED JUNE 30,
INCREASE
1997 1996 (DECREASE)
(Thousands of Dollars)
Operating Revenues $118,604 $116,994 $ 1,610
Operating Expenses 103,762 100,628 3,134
Operating Income 14,842 16,366 (1,524)
Other Income 2,265 1,319 946
Income before Interest Charges 17,107 17,685 (578)
Interest Charges 6,643 6,682 (39)
Net Income 10,464 11,003 (539)
Dividends Declared on Cumulative
Preferred Stock 808 808 -
Income Available for Common Stock $ 9,656 $ 10,195 $ (539)
6 MONTHS ENDED JUNE 30,
INCREASE
1997 1996 (DECREASE)
(Thousands of Dollars)
Operating Revenues $270,479 $270,841 $ (362)
Operating Expenses 229,836 227,383 2,453
Operating Income 40,643 43,458 (2,815)
Other Income 4,423 3,371 1,052
Income before Interest Charges 45,066 46,829 (1,763)
Interest Charges 13,117 13,626 (509)
Net Income 31,949 33,203 (1,254)
Premium on Preferred Stock
Redemption - 378 (378)
Dividends Declared on Cumulative
Preferred Stock 1,615 1,615 -
Income Available for Common Stock $ 30,334 $ 31,210 $ (876)
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<PAGE>
OPERATING REVENUES
Operating revenues increased $1.6 million (1%) for the second
quarter of 1997 as compared to the second quarter of 1996 and
decreased $362,000 (.1%) for the six months ended June 30, 1997.
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 $ (2,320) $ 2,051 * $ (6,374) $ (676)*
Sales to Other
Utilities 1,561 (494) 1,305 (2,296)
Fuel and Gas Cost
Adjustment (740) 1,797 (1,454) 9,409
Deferred Revenues 61 (341) 457 (1,144)
Miscellaneous (23) 58 ** (40) 451 **
$ (1,461) $ 3,071 $ (6,106) $ 5,744
*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.
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 3%, while firm sales of natural gas
decreased 5%, for the second quarter of 1997 as compared to the
second quarter of 1996. For the six months ended June 30, 1997,
electric sales decreased 3% and firm gas sales decreased 9%
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. Also indicated
are changes related to transportation of customer owned gas:
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<PAGE>
INCREASE (DECREASE) FROM PRIOR PERIOD
SECOND QUARTER SIX MONTHS
Electric Gas Electric Gas
Residential (3)% (7)% (5)% (9)%
Commercial (1) (1) (2) (9)
Industrial (4) 17 (3) 7
Interruptible N/A 189 N/A 149
Transportation of
Customer-owned
Gas N/A 73 N/A 101
Billing heating degree days were 7% lower for the quarter ended
June 30, 1997 and 13% lower for the six months ended
June 30, 1997 when compared to the same periods in 1996.
Sales of electricity to residential customers in the second
quarter of 1997 decreased 3% from the comparable prior year
period due to the net effect of a 4% decrease in usage per
customer and a 1% increase in the number of customers.
Commercial sales in the second quarter of 1997 decreased 1% as
compared to last year 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 4%
in the second quarter of 1997.
For the six months ended June 30, 1997, sales of electricity to
residential customers decreased 5% due to the net effect of a
6% decrease in usage per customer and a 1% increase in the
number of customers. Sales to commercial customers decreased
2% due to the net effect of a 4% decrease in usage per customer
and a 2% increase in the number of customers. Electric sales
to industrial customers decreased 3% for such six-month period.
Sales of gas to residential customers for the second quarter of
1997 decreased 7% due to the net effect of an 8% decrease in
usage per customer and a 1% increase in the number of
customers. Sales of gas to commercial customers for the second
quarter of 1997 decreased 1% due to the net effect of a 4%
decrease in usage per customer and a 3% increase in the number
of customers. Firm gas sales to industrial customers
increased 17% for the second quarter of 1997 when compared to
the same period in 1996, due primarily to an increase in usage
by a large industrial customer.
For the six months ended June 30, 1997, residential gas sales
decreased 9% due to the net effect of an 11% decrease in usage
per customer and a 2% increase in the number of customers.
Commercial gas sales decreased 9% due to the net effect of an
11% decrease in usage per customer and a 2% increase in the
number of customers. Firm gas sales to industrial customers
for the six months ended June 30, 1997 increased 7% due largely
to an increase in usage by a large industrial customer.
- 15 -<PAGE>
Interruptible gas sales increased 189% in the second quarter of
1997 and 149% for the six months ended June 30, 1997 due
primarily to the 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 73% for the second quarter
and increased 101% for the six months ended June 30, 1997 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,
1997 compared to the same periods for the prior year:
INCREASE (DECREASE) FROM PRIOR PERIOD
SECOND QUARTER SIX MONTHS
Amount Percent Amount Percent
(Dollars in Thousands)
Operating Expenses
Fuel and Purchased
Electricity $ 511 2 % $ (1,953) (3) %
Purchased Natural Gas 3,982 44 8,020 26
Other Expenses of
Operation 390 2 (477) (1)
Maintenance (865) (11) (2,207) (15)
Depreciation and
Amortization 194 2 391 2
Taxes, Other than
Federal Income Tax (302) (2) (383) (1)
Federal Income Tax (776) (12) (938) (5)
Total $ 3,134 3 % $ 2,453 1 %
Purchased natural gas costs increased $4.0 million (44%) for the
second quarter of 1997 and $8.0 million (26%) for the six
months ended June 30, 1997 resulting primarily from higher
interruptible gas sales for usage as boiler fuel.
Maintenance expenses decreased $2.2 million (15%) for the six
months ended June 30, 1997 due largely to decreased storm-
related expense in 1997, exclusive of storm related costs
discussed under the caption "Storm Costs" below.
- 16 -
<PAGE>
OTHER INCOME
Other income increased $946,000 (72%) for the second quarter of
1997 and $1.1 million (31%) for the six months ended June 30,
1997. These increases 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.
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 June 27, 1997, the Board of Directors of the Company
declared a quarterly dividend of $.535 per share, payable
August 1, 1997 to shareholders of record as of July 10, 1997,
representing an increase of $.005, or 1%, over the $.53 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; 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.
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 $8.6 million and are reflected in "Deferred
Charges-Regulatory Assets" in the Consolidated Balance Sheet.
The Company believes these costs are recoverable in rates and
has requested the PSC to authorize deferral of these costs.
YEAR 2000
As the year 2000 approaches, the Company recognizes the need to
ensure its operations will not be adversely impacted by Year
2000 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 and is not anticipated to have a material impact on the
Company.
- 17 -
<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.
- 18 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Asbestos Litigation. For a discussion of lawsuits against 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 June 15, 1997, the Company has been a
defendant in approximately 1,135 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
1. 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.
On July 1, 1997, the PSC Administrative Law Judge issued a
Recommended Decision recommending that said Settlement
Agreement not be approved in its present form. The
Administrative Law Judge based the recommendation in part on
what he believed to be deficiencies in the provisions of the
- 19 -
<PAGE>
Settlement Agreement addressing stranded cost recovery and
proposed reductions in electric rates. The Company filed a brief
outlining its exceptions to such Recommended Decision on July 22,
1997. The Company cannot predict at this time what action the
PSC will take with respect to the Settlement Agreement and the
Administrative Law Judge's recommendation, nor can it predict the
date on which the PSC will render its ultimate decision.
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 facing
restructuring and transition to competition. Published reports
also indicate that the FASB Emerging Issues Task Force is
considering how SFAS 71 should be applied in light of recent
changes within the regulated utility industry. If the
application of SFAS 71 were 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.
By Order, issued and effective June 23, 1997, the PSC ordered
Company, Niagara Mohawk Power Corporation, New York State
Electric and Gas Corporation and Rochester Gas and Electric
Corporation to unbundle their retail electric services in order
to effect a retail access pilot program for eligible commercial
farms and food processors ("Program"). The Program will be
available for two years, commencing on November 1, 1997 in the
case of the Company. The Company believes there are few
customers in its service territory eligible for the Program.
The Company is unable to determine the interrelationship of
such Order with said Settlement Agreement. On July 23, 1997,
the Company filed a motion seeking rehearing of the June 23,
1997 PSC Order. The Company cannot predict at this time the
ultimate outcome of this motion.
2. AIR EMISSIONS. Reference is made to the caption "Environmental
Quality - Air" in Item 1 of Part I of the Company's 10-K Report
for a discussion of regulations governing air emissions at the
Company's generating plants.
- 20 -
<PAGE>
Published reports have indicated that the federal Environmental
Protection Agency adopted on July 16, 1997 new air quality
regulations that may have significant effects on the operation
of fossil fossil fuel-burning generating facilities, by
tightening restrictions on the emission of fine particles. The
Company is unable to predict at this time what impact, if any,
such regulations (if adopted) will have on the operation of its
coal-burning generating facilities.
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 a Current Report on Form
8-K, dated April 1, 1997, relating to a certain Settlement
Agreement entered into among the Company, the staff of the
Public Service Commission of the State of New York ("PSC") and
the New York State Department of Economic Development in
connection with the ongoing Competitive Opportunities
Proceeding( described under the caption "Competition - New York
- Electric - Competitive Opportunities Proceeding" in
"Management's Discussion and Analysis of Financial Condition
and Results of Operations," which was incorporated by reference
as Exhibit 13 to the 10-K Report) and filed with the PSC on
March 20, 1997. A copy of such Settlement Agreement was
attached thereto as Exhibit (10).
- 21 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company 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: July 31, 1997
- 22 -
</PAGE>
<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> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $932,491
<OTHER-PROPERTY-AND-INVEST> $31,023
<TOTAL-CURRENT-ASSETS> $115,053
<TOTAL-DEFERRED-CHARGES> $165,515
<OTHER-ASSETS> $0
<TOTAL-ASSETS> $1,244,082
<COMMON> $87,775
<CAPITAL-SURPLUS-PAID-IN> $274,615
<RETAINED-EARNINGS> $117,549
<TOTAL-COMMON-STOCKHOLDERS-EQ> $479,939
$35,000
$21,030
<LONG-TERM-DEBT-NET> $361,988
<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> $344,624
<TOT-CAPITALIZATION-AND-LIAB> $1,244,082
<GROSS-OPERATING-REVENUE> $270,479
<INCOME-TAX-EXPENSE> $18,012
<OTHER-OPERATING-EXPENSES> $211,824
<TOTAL-OPERATING-EXPENSES> $229,836
<OPERATING-INCOME-LOSS> $40,643
<OTHER-INCOME-NET> $4,423
<INCOME-BEFORE-INTEREST-EXPEN> $45,066
<TOTAL-INTEREST-EXPENSE> $13,117
<NET-INCOME> $31,949
$1,615
<EARNINGS-AVAILABLE-FOR-COMM> $30,334
<COMMON-STOCK-DIVIDENDS> $18,606
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $67,941
<EPS-PRIMARY> $1.73
<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 6 Months 12 Months
Ended Ended Ended Year Ended December 31,
June 30 June 30 June 30 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
A. Net Income $10,464 $31,949 $ 54,827 $ 56,082 $ 52,722 $ 50,929 $ 50,390 $ 47,688
B. Federal Income Tax 5,680 17,652 30,714 31,068 28,687 26,806 27,158 24,363
C. Earnings before Income Taxes 16,144 49,601 85,541 87,150 81,409 77,735 77,548 72,051
D. Total Fixed Charges <FN1> 6,841 13,516 26,767 27,231 30,433 32,679 33,820 34,888
E. Total Earnings $22,985 $63,117 $112,308 $114,381 $111,842 $110,414 $111,368 $106,939
Preferred Dividend Requirements:
F. Allowance for Preferred Stock
Dividends Under IRC Sec 247 $ 808 $ 1,615 $ 3,231 $ 3,231 $ 4,903 $ 5,127 $ 5,562 $ 5,544
G. Less Allowable Dividend Deduction 32 64 127 127 528 528 528 544
H. Net Subject to Gross-up 776 1,551 3,104 3,104 4,375 4,599 5,034 5,000
I. Ratio of Earnings before Income
Taxes to Net Income (C/A) 1.543 1.553 1.560 1.554 1.544 1.526 1.539 1.511
J. Pref. Dividend (Pre-tax) (HxI) 1,197 2,409 4,843 4,824 6,755 7,018 7,747 7,555
K. Plus Allowable Dividend Deduction 32 64 127 127 528 528 528 544
L. Preferred Dividend Factor 1,229 2,473 4,970 4,951 7,283 7,546 8,275 8,099
M. Fixed Charges (D) 6,841 13,516 26,767 27,231 30,433 32,679 33,820 34,888
N. Total Fixed Charges
and Preferred Dividends $ 8,070 $15,989 $ 31,737 $ 32,182 $ 37,716 $ 40,225 $ 42,095 $ 42,987
O. Ratio of Earnings to Fixed
Charges (E/D) 3.36 4.67 4.20 4.20 3.68 3.38 3.29 3.07
P. Ratio of Earnings to Fixed Charges
and Preferred Dividends (E/N) 2.85 3.95 3.54 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>
