FORM 10-Q
UNITED STATES
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.............................March 31, 2000
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; and the number of shares
outstanding of Registrant's Common Stock, as of March 31, 2000, was 16,862,087.
All shares are owned by CH Energy Group, Inc.
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
PART I - FINANCIAL INFORMATION PAGE
------------------------------ ----
Item 1 - Consolidated Financial Statements 1
Consolidated Statement of Income -
Three Months Ended March 31, 2000 and 1999 1
Consolidated Balance Sheet - March 31, 2000
and December 31, 1999 2
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3 - Quantitative and Qualitative Disclosure
about Market Risk 10
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings 11
Item 4 - Submission of Matters to a Vote of
Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - CONSOLIDATED FINANCIAL STATEMENTS
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the 3 Months Ended
March 31,
2000 1999
-------- --------
(Thousands of Dollars)
Operating Revenues
Electric ...................................... $107,421 $100,743
Gas ........................................... 40,131 38,955
-------- --------
Total - own territory ....................... 147,552 139,698
Electric Sales to other utilities ............. 10,719 6,651
Gas Sales to other utilities .................. 709 122
-------- --------
158,980 146,471
-------- --------
Operating Expenses
Operation:
Fuel used in electric generation ............ 19,326 21,988
Purchased electricity ....................... 23,115 7,794
Purchased natural gas ....................... 22,809 21,985
Other expenses of operation ................. 25,255 23,338
Maintenance .................................. 6,999 6,636
Depreciation and amortization ................. 12,008 11,701
Taxes, other than income tax .................. 15,852 16,714
Federal income tax ............................ 9,084 11,285
-------- --------
134,448 121,441
-------- --------
Operating Income ................................ 24,532 25,030
-------- --------
Other Income and Deductions
Allowance for equity funds used
during construction ......................... -- 62
Federal income tax ............................ (28) 122
Other - net ................................... 2,274 973
-------- --------
2,246 1,157
-------- --------
Income before Interest Charges .................. 26,778 26,187
-------- --------
Interest Charges
Interest on mortgage bonds .................... 3,205 3,440
Interest on other long-term debt .............. 2,702 2,377
Other interest ................................ 2,125 1,333
Allowance for borrowed funds used
during construction ......................... (152) (67)
-------- --------
7,880 7,083
-------- --------
Net Income ...................................... 18,898 19,104
Dividends Declared on Cumulative
Preferred Stock ............................... 807 807
-------- --------
Income Available for Common Stock ............... $ 18,091 $ 18,297
-------- --------
See Notes to Consolidated Financial Statements.
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<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
March 31, December 31,
2000 1999
ASSETS (Unaudited) (Audited)
---------- ----------
(Thousands of Dollars)
Utility Plant
Electric ...................................... $1,250,840 $1,250,456
Gas ........................................... 166,691 164,767
Common ........................................ 100,965 100,659
Nuclear fuel .................................. 46,587 42,847
---------- ----------
1,565,083 1,558,729
Less: Accumulated depreciation ............... 647,459 638,910
Nuclear fuel amortization .......... 38,938 38,354
---------- ----------
878,686 881,465
Construction work in progress ................. 44,210 39,951
---------- ----------
Net Utility Plant ..................... 922,896 921,416
---------- ----------
Other Property and Plant ........................ 974 975
---------- ----------
Investments and Other Assets
Prefunded Pension Costs ...................... 50,376 46,038
Other ........................................ 19,242 17,611
---------- ----------
Total Investments and Other Assets ... 69,618 63,649
---------- ----------
Current Assets
Cash and cash equivalents ..................... 3,653 11,756
Accounts receivable from customers-net of
allowance for doubtful accounts ......... 55,970 46,483
Accrued unbilled utility revenues ............. 15,982 16,327
Other receivables ............................. 2,533 4,123
Fuel, materials and supplies, at average cost . 28,975 30,285
Special deposits and prepayments .............. 21,507 14,574
---------- ----------
Total Current Assets ................. 128,620 123,548
---------- ----------
Deferred Charges
Regulatory assets ............................. 135,785 137,487
Unamortized debt expense ...................... 4,915 5,016
Other ......................................... 8,023 7,299
---------- ----------
Total Deferred Charges ............... 148,723 149,802
---------- ----------
TOTAL ASSETS ............... $1,270,831 $1,259,390
---------- ----------
See Notes to Consolidated Financial Statements.
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<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
March 31, December 31,
2,000 1999
CAPITALIZATION AND LIABILITIES Unaudited) (Audited)
---------- ----------
(Thousands of Dollars)
Capitalization
Common Stock Equity:
Common stock, 30,000,000 shares
authorized; shares issued ($5
par value):
2000 - 16,862,087
1999 - 16,862,087 ......................... $ 84,311 $ 84,311
Paid-in capital .................................... 273,238 273,238
Retained earnings .................................. 113,371 69,281
Capital stock expense .............................. (5,920) (5,939)
---------- ----------
Total Common Stock Equity ...................... 465,000 420,891
---------- ----------
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 ..................................... 342,948 335,451
---------- ----------
Total Capitalization ........................... 863,978 812,372
---------- ----------
Current Liabilities
Current maturities of long-term debt ............... 35,110 35,100
Notes payable ...................................... 7,500 50,000
Accounts payable ................................... 22,273 26,825
Accrued taxes and interest ......................... 12,193 --
Dividends payable .................................. 807 7,808
Accrued vacation ................................... 4,472 4,344
Customer deposits .................................. 4,444 4,471
Other .............................................. 5,437 7,545
---------- ----------
Total Current Liabilities ...................... 92,236 136,093
---------- ----------
Deferred Credits and Other Liabilities
Regulatory liabilities ............................. 92,760 87,039
Operating reserves ................................. 3,393 6,294
Other .............................................. 19,943 18,351
---------- ----------
Total Deferred Credits and Other Liabilities ... 116,096 111,684
---------- ----------
Accumulated Deferred Income Tax ...................... 198,521 199,241
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES ....... $1,270,831 $1,259,390
---------- ----------
See Notes to Consolidated Financial Statements.
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<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the 3 Months Ended
March 31,
2000 1999
---------- ---------
OPERATING ACTIVITIES: (Thousands of Dollars)
<S> <C> <C>
Net Income ............................................................. $ 18,898 $ 19,104
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, amortization & nuclear fuel amortization ......... 12,955 12,856
Deferred income taxes, net ..................................... (542) (1,111)
Allowance for equity funds used during construction ............ -- 62)
Nine Mile 2 Plant deferred finance charges, net ................ (1,214) (1,214)
Provision for uncollectibles ................................... 625 450
Net accrued/deferred pension costs ............................ (3,700) (3,119)
Deferred gas costs ............................................. 3,851 6,160
Deferred gas refunds ........................................... (67) (48)
Other, net ..................................................... 942 2,636
Changes in current assets and liabilities, net:
Accounts receivable and unbilled revenues ...................... (8,177) (7,281)
Fuel, materials and supplies ................................... 1,310 147
Special deposits and prepayments ............................... (6,932) 12,969
Accounts payable ............................................... (5,753) (1,267)
Accrued taxes and interest ..................................... 13,394 17,390
Other current liabilities ...................................... (2,007) (1,591)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........................... 23,583 56,019
-------- --------
INVESTING ACTIVITIES:
Additions to plant .................................................. (14,419) (8,234)
Allowance for equity funds used during construction ................. -- 62
-------- --------
Net additions to plant ............................................ (14,419) (8,172)
Return of equity from affiliate ..................................... 26,000 --
Nine Mile 2 Plant decommissioning trust fund ........................ (217) (217)
Other, net .......................................................... (231) (563)
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ................. 11,133 (8,952)
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt ............................ 7,500 22,114
Net borrowings (repayments) of short-term debt ...................... (42,500) (18,000)
Retirement and redemption of long-term debt ......................... -- (38,106)
Dividends paid on cumulative preferred and common stock.............. (7,808) (9,913)
Issuance and Redemption Costs ....................................... (11) (459)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES ............................... (42,819) (44,364)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS .................................... (8,103) 2,703
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR .............................. 11,756 10,499
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD .................................. $ 3,653 $ 13,202
-------- --------
Supplemental Disclosure of Cash Flow Information
Interest paid (net of amounts capitalized) .......................... $ 2,947 $ 2,116
Federal income tax paid ............................................. -- --
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 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, 1999, as amended by Amendment No. 1, on Form 10K-A
(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.
NOTE 2 - REGULATORY MATTERS
Reference is made to Note 2 - Regulatory Matters to the Consolidated
Financial Statements of the Company's 10-K Report under the caption "Impact of
Amended Settlement Agreement on Accounting Policies."
At March 31, 2000, net regulatory assets (liabilities) associated with
the fossil-fueled generating assets totaled $583,000. The Company did not charge
against income any of these net regulatory assets because recovery of such
assets is considered probable under the "Settlement Agreement," described under
the caption "Competitive Opportunities Proceeding Settlement Agreement" in Note
2 of the Notes to the Consolidated Financial Statements included in the
Company's 10-K Report.
HOLDING COMPANY RESTRUCTURING
As reported under the caption "Competitive Opportunities Proceeding
Agreement" in Note 2 to the Consolidated Financial Statements included in the
Company's 10-K Report, the Company had received approval from its shareholders
and regulators to form a holding company. The holding company restructuring took
place on December 15, 1999 at which time the Company became the wholly-owned
subsidiary of CH Energy Group, Inc. (Energy Group). As of March 31, 2000, $25.5
million of the $100 million authorized by the Public Service Commission of the
State of New York, hereinafter the (PSC), has been transferred from the Company
to its competitive affiliates.
- 5 -
<PAGE>
NOTE 3 - SEGMENTS AND RELATED INFORMATION
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," was adopted by the Company during the fourth quarter of 1998 (see
Note 10 to the Consolidated Financial Statements included in the Company's 10-K
Report).
The Company's reportable operating segments are its electric and gas
operations. All of the segments currently operate in the northeast region of the
United States.
Certain additional information regarding these segments is set forth in
the following table. General corporate expenses, property common to both
segments and depreciation of such common property have been allocated to the
segments in accordance with practice established for regulatory purposes.
Central Hudson Gas & Electric Segment Disclosure - FAS 131 Quarter Ended
March 31,
2000
--------------------------------
ELECTRIC GAS TOTAL
-------- ---- -------
Revenues from external
customers $118,117 $40,423 $158,540
Intersegment revenues 23 417 440
-------- ------- --------
Total revenues $118,140 $40,840 $158,980
Income Available for Common Stock $ 12,165 $ 5,926 $ 18,091
1999
--------------------------------
ELECTRIC GAS TOTAL
-------- ---- -------
Revenues from external
customers $107,374 $38,845 $146,219
Intersegment revenues 20 232 252
-------- ------- --------
Total revenues $107,394 $39,077 $146,471
Income Available for Common Stock $ 12,710 $ 5,587 $ 18,297
NOTE 4 - NEW ACCOUNTING STANDARDS
DERIVATIVE AND HEDGING ACCOUNTING: Reference is made to the caption "New
Accounting Standards and Other FASB Projects" of Note 1 - Summary of Significant
Accounting Policies, to the Consolidated Financial Statements of the Company's
10-K Report. In March 2000, the Financial Accounting Standards Board (FASB)
issued an exposure draft proposing to amend FASB Statement No. 133, "Accounting
for Derivative Instruments and Hedging Activities." Amendment provisions
potentially affecting the Company relate to the normal purchases and sales
exception and interest rate risk. The Company believes that, in its final
- 6 -
<PAGE>
form, Statement 133 will not have a material impact on its financial position or
results of operations upon implementation.
PLANT DECOMMISSIONING: Reference is made to the caption "New Accounting
Standards and Other FASB Projects" of Note 1 - Summary of Significant Accounting
Policies, to the Consolidated Financial Statements of the Company's 10-K Report.
In February 2000, the FASB issued an exposure draft proposing to amend the
initial FASB exposure draft entitled "Accounting for Certain Liabilities Related
to Closure and Removal of Long-Lived Assets." The title of the February 17, 2000
exposure draft is "Accounting for Obligations Associated with the Retirement of
Long-Lived Assets," and the FASB is proposing that the statement be effective
for financial statements for fiscal years beginning after June 15, 2001. The
Company 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, results of
operations and cash flows of the Company.
NOTE 5 - 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 9 - Commitments
and Contingencies, to the Consolidated Financial Statements included in the
Company's 10-K Report. Except for what is disclosed in Part II of this Quarterly
Report, on Form 10-Q, for the quarterly period ended March 31, 2000, and all
documents previously filed with the Securities and Exchange Commission in 2000,
there have been no material changes in the subject matters discussed in said
Note 9.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
For the three months ended March 31, 2000, cash expenditures related to
the construction program of the Company amounted to $14.4 million. Construction
expenditures during the quarter ended March 31, 2000, were primarily for normal
extensions and improvements of the Company's electric and natural gas systems.
The cash requirements for such expenditures were funded from internal sources.
Central Hudson has $50 million of committed short-term credit
facilities available, and has also entered into a revolving credit agreement
with several commercial banks. Authorization from the PSC limits the short-term
borrowing amount Central Hudson may have outstanding, at any time, to $52
million in the aggregate.
- 7 -
<PAGE>
At March 31, 2000, the Company had $7.5 million of short-term debt
outstanding. Investments in short-term securities, including cash and cash
equivalents, were $3.7 million at the end of March 2000.
RESULTS OF OPERATIONS
The following table reports the variation in the results of operations
for the three months ended March 31, 2000 compared to the same period in 1999:
3 MONTHS ENDED MARCH 31,
----------------------------------
INCREASE
2000 1999 (DECREASE)
---- ---- --------
(Thousands of Dollars)
Operating Revenues ..................... $158,980 $146,471 $ 12,509
Operating Expenses ..................... 134,448 121,441 13,007
-------- -------- --------
Operating Income ....................... 24,532 25,030 (498)
Other Income ........................... 2,246 1,157 1,089
-------- -------- --------
Income before Interest
Charges ............................... 26,778 26,187 591
Interest Charges ....................... 7,880 7,083 797
-------- -------- --------
Net Income ............................. 18,898 19,104 (206)
Dividends Declared on Cumulative
Preferred Stock ....................... 807 807 --
-------- -------- --------
Income Available for Common
Stock ................................. $ 18,091 $ 18,297 $ (206)
======== ======== ========
OPERATING REVENUES
Operating revenues increased $12.5 million (9%) for the first quarter
of 2000 as compared to the first quarter of 1999. Details of these revenue
changes by electric and gas departments are as follows:
INCREASE (DECREASE) FROM PRIOR PERIOD
-------------------------------------
FIRST QUARTER
-------------------------------------
ELECTRIC GAS
-------- ---
(Thousands of Dollars)
Customer Sales* ................. $ 1,621 $2,113**
Sales to Other
Utilities ...................... 4,071 586
Fuel and Gas Cost
Adjustment ..................... 6,073 (980)
Deferred Revenues ............... (725)*** (118)
Miscellaneous ................... (294) 162
------- ------
$10,746 $1,763
======= ======
*Includes electricity and gas supplied by others.
**Both firm and interruptible revenues.
***Includes the deferral and restoration of revenues related to the Company's
Retail Access Program and earnings in excess of rate of return cap under the
Settlement Agreement.
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<PAGE>
SALES
The Company's sales vary seasonally in response to weather conditions.
Generally electric sales peak in the summer and gas sales peak in the winter.
Total Kilowatt-hour sales of electricity within the Company's service
territory increased 3% and firm sales of natural gas increased 4% in the first
quarter of 2000 as compared to the first quarter of 1999. Changes in sales from
last year by major customer classifications including energy supplied by others
are set forth below.
INCREASE (DECREASE) FROM PRIOR PERIOD
-------------------------------------
FIRST QUARTER
-------------------------------------
ELECTRIC GAS
-------- ---
Residential .................... 3 % 5 %
Commercial ..................... 4 6
Industrial ..................... 4 5
Interruptible .................. N/A (23)
Billing heating degree days were 2% higher for the three months ended
March 31, 2000 when compared to the same period in 1999, but were 3% below
normal.
Interruptible gas sales decreased 23% in the first quarter of 2000 due
largely to a reduction in gas sales for electric generation.
OPERATING EXPENSES
The following table reports the variation in the operating expenses for
the three months ended March 31, 2000 compared to the same period in the prior
year:
INCREASE (DECREASE) FROM PRIOR PERIOD
-------------------------------------
FIRST QUARTER
-------------------------------------
AMOUNT PERCENT
------ -------
(Thousands of Dollars)
Operating Expenses
Fuel and Purchased
Electricity ..................... $12,659 42 %
Purchased Natural
Gas .............................. 824 4
Other Expenses of
Operation ........................ 1,917 8
Maintenance ....................... 363 5
Depreciation and
Amortization ..................... 307 3
Taxes, Other than Income
Tax .............................. (862) (5)
Federal Income tax ................ (2,201) (19)
------- ---
Total ....................... $13,007 11 %
======= ===
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<PAGE>
The cost of fuel and purchased electricity increased $12.7 million
(42%) for the first quarter ended March 31, 2000 resulting from an increase in
electric sales combined with a higher average price of fuel used in electric
generation.
DIVIDENDS TO CH ENERGY GROUP
Reference is made to the caption "Common Stock Dividends and Price
Ranges" of Part II, Item 7 of the Company's 10-K Report, for a discussion of the
Company's dividend payments. On April 18, 2000 the Board of Directors of the
Company declared a dividend of $9.2 million, payable May 1, 2000 to CH Energy
Group, Inc., its sole shareholder.
OTHER MATTERS
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q and the documents incorporated by
reference contain statements which, to the extent they are not recitations of
historical fact, constitute "forward-looking statements" within the meaning of
the Securities Litigation Reform Act of 1995 (Reform Act). The statements will
contain words such as "believes," "expects," "intends," "plans," and other
similar words. All such forward-looking statements are intended to be subject to
the safe harbor protection provided by the Reform Act. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions which are difficult to predict. A number of important factors
affecting the Company's business and financial results could cause actual
results to differ materially from those stated in the forward-looking
statements. Those factors include weather, energy supply and demand,
developments in the legislative, regulatory and competitive environment,
electric and gas industry restructuring and cost recovery and certain
environmental matters as well as such other factors as set forth in the
Company's 10-K Report and all documents subsequently filed with the Securities
and Exchange Commission. The Company undertakes no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.
Given these uncertainties, undue reliance should not be placed on these
forward-looking statements.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Reference is made to Part II, Item 7A of the Company's 10-K Report for
a discussion of market risk. During the first quarter of 2000, the exposure
continues to not be material to the Company's financial position or results of
operations.
- 10 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
(a) ASBESTOS LITIGATION. For a discussion of lawsuits against the
Company involving asbestos, see Note 9 - Commitments and Contingencies, under
the caption "Asbestos Litigation," in Part II, Item 8 of the Company's 10-K
Report.
As of April 30, 2000, 127 new cases involving asbestos have been
brought against the Company of the type described under such caption and subject
to the insurance coverage described under such caption (which insurance does not
extend to punitive damages). As of that date, of the 2,099 cases brought against
the Company, 1,154 remain pending. Of the 945 cases no longer pending against
the Company, 817 have been dismissed or discontinued, and the Company has
settled 128 cases. The Company is presently unable to assess the validity of the
remaining asbestos lawsuits; accordingly, it cannot determine the ultimate
liability relating to these cases. Based on information known to the Company at
this time, including the Company's experience in settling asbestos cases and in
obtaining dismissals of asbestos cases, the Company believes that the cost to be
incurred in connection with the remaining lawsuits will not have a material
adverse effect on the Company's financial position or results of operations.
(b) ENVIRONMENTAL LITIGATION. For a discussion of the citizen suit
commenced in 1999 against the Company under ss.11 of the Endangered Species Act,
16 U.S.C. ss.1540 (First Citizen Suit), see the caption "Environmental
Litigation - Roseton and Danskammer Plants," in Item 3 of the Company's 10-K
Report.
Riverkeeper, Inc., (the same plaintiff as in the First Citizen Suit)
commenced a citizen suit, on March 28, 2000, in the United States District Court
for the Southern District of New York (00 Civ 2346), against the Company under
ss.11 of said Endangered Species Act seeking injunctive relief from the
Company's alleged unpermitted takings of the endangered shortnose sturgeon
through the Company's Roseton and Danskammer Plants on the Hudson River (Second
Citizen Suit).
The Complaint in the Second Citizen Suit makes substantially the same
allegations as in the Complaint in the First Citizen Suit based on a purported
notice letter sent to the Company in January 2000. The Company believes that the
Second Citizen Suit was commenced to correct defects in the notice relied upon
by plaintiffs in the First Citizen Suit.
Although the Company believes that it has not violated such Act, if the
court were to grant the relief requested by plaintiffs in either of such Suits,
the Company could be required temporarily to cease operations of the Roseton and
Danskammer Plants. If the Company were required to cease such operations
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<PAGE>
for a substantial period of time, it could have a material adverse effect on the
Company's financial position, results of operations and cash flows.
Item 4. Submission of Matters to a Vote of Security Holders.
Annual Meeting of Shareholder. The Company's Annual Shareholder
Meeting was held on April 18, 2000. The following matters were voted upon at
such meeting:
ELECTION OF DIRECTORS. All of the nominees proposed as directors by the
Board of Directors were elected, and no other nominees were proposed. The sole
shareholder of the Company, CH Energy Group, Inc., voted all of its shares of
Common Stock for the nominees. Such directors are Paul J. Ganci, Carl E. Meyer,
Arthur R. Upright and Steven V. Lant.
Item 5. Other Information
(a) APPOINTMENT OF OFFICERS. Immediately following the Company's Annual
Meeting of Shareholders, the Company's Board of Directors made the following
appointments: Paul J. Ganci as Chairman of the Board and Chief Executive
Officer; Carl E. Meyer, President and Chief Operating Officer; Arthur R.
Upright, Senior Vice President - Regulatory Affairs, Financial Planning and
Accounting; Allan R. Page, Vice President Transition; Steven V. Lant, Chief
Financial Officer and Treasurer; Ronald P. Brand, Senior Vice President -
Special Projects; Joseph J. DeVirgilio, Senior Vice President - Corporate
Services and Administration; James P. Lovette, Vice President - Fossil
Production; Donna S. Doyle, Vice President - Accounting and Controller; Charles
A. Freni, Assistant Vice President - Engineering and Environmental Affairs; John
C. Checklick, Assistant Vice President Customer Services and Marketing; Gladys
L. Cooper, Corporate Secretary and Assistant Vice President Governmental
Relations; Denise D. VanBuren, Assistant Vice President - Corporate
Communications; Christopher M. Capone, Assistant Treasurer - Investor Relations,
and John E. Gould, Assistant Secretary.
(b) NINE MILE 2 PLANT. Reference is made to Note 3 - Nine Mile 2 Plant
under the caption "General," to the Consolidated Financial Statements included
in the Company's 10-K Report for a discussion of the July 1999 petitions of
Niagara Mohawk Power Corporation (Niagara Mohawk), New York State Electric & Gas
Corporation (NYSEG) and AmerGen Energy Company, LLC (AmerGen) to the PSC under
Section 70 of the Public Service Law seeking the PSC's consent for the transfer
of Niagara Mohawk's and NYSEG's respective interests in Unit 1 and Unit 2 of the
Nine Mile Point nuclear generation facilities to AmerGen. By Order, issued and
effective April 25, 2000, the PSC authorized the withdrawal of such petitions
principally on the basis that a disposition of these facilities would best be
accomplished through a competitive bidding process.
- 12 -
<PAGE>
The PSC in such Order observed that participation in such a competitive
bidding process would constitute appropriate mitigation of stranded costs
related to the Nine Mile 2 Plant and that determination of stranded cost
recovery would be made for each cotenant owner of the Nine Mile 2 Plant pursuant
to settlement agreements or rate case orders applicable to each such cotenant.
Reference is also made to Note 3 - Nine Mile 2 Plant under the caption
"General," for a discussion of the Nuclear Regulatory Commission (NRC) Plant
Performance Review (PPR) issued September 30, 1999 in which the NRC stated it
would increase scrutiny of the operation of the Nine Mile Plants (Units 1 and 2)
over the next six months. On March 31, 2000, the NRC issued a letter to Niagara
Mohawk indicating completion of a PPR on February 24, 2000 covering the period
January 16, 1999 through January 31, 2000. The letter states that although some
performance issues were noted, the NRC observed that the Nine Mile Plants
continued to operate in a safe manner. Improvement was noted in reactor safety
performance, however, some performance problems continue to occur in the areas
of human performance, equipment reliability and material condition, and the
corrective action program. No significant performance issues were identified in
the radiation safety or safeguards strategic performance areas. The NRC plans to
continue inspections for the period April 2000 through March 2001.
Item 6. Exhibits and Reports of 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 the following Current Report on Form 8-K:
(i) A Report, dated February 1, 2000, which described the
issuance and sale, on January 31, 2000, of a tranche of Notes, in the
aggregate principal amount of $7.5 million, under the Company's
medium-term note program.
- 13 -
<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: /s/ Arthur R. Upright
-------------------------------------
Arthur R. Upright
Senior Vice President -
Regulatory Affairs, Financial Planning
and Accounting
Dated: May 12, 2000
- 14 -
<PAGE>
EXHIBIT INDEX
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.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
<TABLE>
<CAPTION>
2000 Year Ended December 31,
------------------------ -----------------------------------------------------
3 Months 12 Months
Ended Ended
March 31 March 31 1999 1998 1997 (1) 1996(1)
----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
A. Net Income $ 18,898 $ 51,674 $ 51,881 $ 52,544 $ 55,086 $ 56,082
B. Federal Income Tax 9,112 26,093 28,144 28,627 26,237 31,068
--------- --------- --------- --------- --------- ---------
C. Earnings before Income Taxes $ 28,010 $ 77,767 $ 80,025 $ 81,171 $ 81,323 $ 87,150
--------- --------- --------- --------- --------- ---------
D. Fixed Charges
Interest on Mortgage Bonds 3,205 12,823 13,057 14,225 14,237 15,112
Interest on Other Long-Term Debt 2,702 11,419 11,094 8,890 8,860 8,505
Other Interest 1,845 5,609 4,860 3,639 2,647 2,626
Interest Portion of Rents 246 982 993 1,004 1,020 1,094
Amortization of Premium
& Expense on Debt 280 1,038 993 924 906 940
--------- --------- --------- --------- --------- ---------
8,278 31,871 30,997 28,682 27,670 28,277
--------- --------- --------- --------- --------- ---------
E. Total Earnings $ 36,288 $ 109,638 $ 111,022 $ 109,853 $ 108,993 $ 115,427
========= ========= ========= ========= ========= =========
Preferred Dividend Requirements:
F. Allowance for Preferred Stock
Dividends Under IRC Sec 247 $ 807 $ 3,230 $ 3,230 $ 3,230 $ 3,230 $ 3,230
G. Less Allowable Dividend Deduction (32) (127) (127) (127) (127) (127)
--------- --------- --------- --------- --------- ---------
H. Net Subject to Gross-up 775 3,103 3,103 3,103 3,103 3,103
I. Ratio of Earnings before Income
Taxes to Net Income (C/A) 1.482 1.505 1.542 1.545 1.476 1.554
--------- --------- --------- --------- --------- ---------
J. Pref. Dividend (Pre-tax) (HxI) 1,149 4,670 4,785 4,794 4,580 4,822
K. Plus Allowable Dividend Deduction 32 127 127 127 127 127
--------- --------- --------- --------- --------- ---------
L. Preferred Dividend Factor 1,181 4,797 4,912 4,921 4,707 4,949
M. Fixed Charges (D) 8,278 31,871 30,997 28,682 27,670 28,277
--------- --------- --------- --------- --------- ---------
N. Total Fixed Charges and
Preferred Dividends $ 9,459 $ 36,668 $ 35,909 $ 33,603 $ 32,377 $ 33,226
========= ========= ========= ========= ========= =========
O. Ratio of Earnings to
Fixed Charges (E/D) 4.38 3.44 3.58 3.83 3.94 4.08
========= ========= ========= ========= ========= =========
P. Ratio of Earnings to
Fixed Charges and
Preferred Dividends (E/N) 3.84 2.99 3.09 3.27 3.37 3.47
========= ========= ========= ========= ========= =========
</TABLE>
(1) Restated to properly reflect the exclusion of AFUDC from fixed charges.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOL STATEMENT OF INCOME AND CONSOL STATEMENT OF
CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 922,896
<OTHER-PROPERTY-AND-INVEST> 70,592
<TOTAL-CURRENT-ASSETS> 128,620
<TOTAL-DEFERRED-CHARGES> 148,723
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,270,831
<COMMON> 84,311
<CAPITAL-SURPLUS-PAID-IN> 267,318
<RETAINED-EARNINGS> 113,371
<TOTAL-COMMON-STOCKHOLDERS-EQ> 465,000
35,000
21,030
<LONG-TERM-DEBT-NET> 342,948
<SHORT-TERM-NOTES> 7,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 35,110
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 364,243
<TOT-CAPITALIZATION-AND-LIAB> 1,270,831
<GROSS-OPERATING-REVENUE> 158,980
<INCOME-TAX-EXPENSE> 9,084
<OTHER-OPERATING-EXPENSES> 125,364
<TOTAL-OPERATING-EXPENSES> 134,448
<OPERATING-INCOME-LOSS> 24,532
<OTHER-INCOME-NET> 2,246
<INCOME-BEFORE-INTEREST-EXPEN> 26,778
<TOTAL-INTEREST-EXPENSE> 7,880
<NET-INCOME> 18,898
807
<EARNINGS-AVAILABLE-FOR-COMM> 18,091
<COMMON-STOCK-DIVIDENDS> 9,106
<TOTAL-INTEREST-ON-BONDS> 5,907
<CASH-FLOW-OPERATIONS> 23,583
<EPS-BASIC> 0.00
<EPS-DILUTED> 0
</TABLE>
