SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 1995
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
1-9130 CENTERIOR ENERGY CORPORATION 34-1479083
(An Ohio Corporation)
6200 Oak Tree Boulevard
Independence, Ohio 44131
Telephone (216) 447-3100
1-2323 THE CLEVELAND ELECTRIC 34-0150020
ILLUMINATING COMPANY
(An Ohio Corporation)
55 Public Square
Cleveland, Ohio 44113
Telephone (216) 622-9800
1-3583 THE TOLEDO EDISON COMPANY 34-4375005
(An Ohio Corporation)
300 Madison Avenue
Toledo, Ohio 43652
Telephone (419) 249-5000
Indicate by check mark whether each of the registrants (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 registrants were required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes X No
On May 8, 1995, there were 148,031,503 shares of Centerior Energy
Corporation Common Stock outstanding. Centerior Energy Corporation is the
sole holder of the 79,590,689 shares and 39,133,887 shares of common stock
of The Cleveland Electric Illuminating Company and The Toledo Edison
Company, respectively, outstanding on that date.
This combined Form 10-Q is separately filed by Centerior Energy Corporation
("Centerior Energy"), The Cleveland Electric Illuminating Company
("Cleveland Electric") and The Toledo Edison Company ("Toledo Edison").
Centerior Energy, Cleveland Electric and Toledo Edison are sometimes
referred to collectively as the "Companies". Cleveland Electric and Toledo
Edison are sometimes collectively referred to as the "Operating Companies".
Information contained herein relating to any individual registrant is filed
by such registrant on its behalf. No registrant makes any representation as
to information relating to any other registrant, except that information
relating to either or both of the Operating Companies is also attributed to
Centerior Energy.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Centerior Energy Corporation and Subsidiaries
The Cleveland Electric Illuminating Company
The Toledo Edison Company
Notes to the Financial Statements (Unaudited) 1
Centerior Energy Corporation and Subsidiaries
Income Statement 4
Balance Sheet 5
Cash Flows 6
Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
The Cleveland Electric Illuminating Company
Income Statement 10
Balance Sheet 11
Cash Flows 12
Management's Discussion and Analysis of Financial 13
Condition and Results of Operations
The Toledo Edison Company
Income Statement 16
Balance Sheet 17
Cash Flows 18
Management's Discussion and Analysis of Financial 19
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders 22
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
-i-
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES,
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
AND THE TOLEDO EDISON COMPANY
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
(1) Interim Financial Statements
Centerior Energy Corporation (Centerior Energy) is the parent company of
Centerior Service Company (Service Company); two electric utilities, The
Cleveland Electric Illuminating Company (Cleveland Electric) and The Toledo
Edison Company (Toledo Edison); and four other wholly owned subsidiaries. The
two utilities are referred to collectively herein as the "Operating
Companies". Centerior Energy, Cleveland Electric and Toledo Edison are
referred to collectively herein as the "Companies".
The comparative income statement and balance sheet and the related statement
of cash flows of each of the Companies have been prepared from the records of
each of the Companies without audit by independent public accountants. In the
opinion of management, all adjustments necessary for a fair statement of
financial position at March 31, 1995 and results of operations for the three
months ended March 31, 1995 and 1994 have been included. All such adjustments
were normal recurring adjustments.
These financial statements and notes should be read in conjunction with the
financial statements and notes included in the Companies' combined Annual
Report on Form 10-K for the year ended December 31, 1994 (1994 Form 10-K).
These interim period financial results are not necessarily indicative of
results for a 12-month period.
(2) Equity Distribution Restrictions
The Operating Companies can make cash available for the funding of Centerior
Energy's common stock dividends by paying dividends on their respective common
stock, which is held solely by Centerior Energy. Federal law prohibits the
Operating Companies from paying dividends out of capital accounts. However,
the Operating Companies may pay preferred and common stock dividends out of
appropriated retained earnings and current earnings. At March 31, 1995,
Cleveland Electric and Toledo Edison had $177.6 million and $119.1 million,
respectively, of appropriated retained earnings for the payment of dividends.
However, Toledo Edison is prohibited from paying a common stock dividend by a
provision in its mortgage that essentially requires such dividends to be paid
out of the total balance of retained earnings, which currently is a deficit.
(3) Common Stock Dividends
Cash dividends per common share declared by Centerior Energy during the three
months ended March 31, 1995 and 1994 were as follows:
1995 1994
Paid February 15 $.20 $.20
Paid May 15 .20 .20
Common stock cash dividends declared by Cleveland Electric during the three
months ended March 31, 1995 and 1994 were as follows:
1995 1994
(millions)
Paid in February $ - $18.6
Toledo Edison did not declare any common stock dividends during the three
months ended March 31, 1995 and 1994.
(4) Financing Activity
During the three months ended March 31, 1995, one of Centerior Energy's
nonutility subsidiaries repaid $0.7 million of long-term debt. In addition,
the Operating Companies retired debt and preferred stock as follows:
Cleveland Electric
Mandatory redemptions consisted of $11.1 million of Serial Preferred Stock,
$9.125 Series N, and $0.8 million of bank loans.
Toledo Edison
Mandatory redemptions consisted of $4 million of unsecured notes, bank loans
and other long-term debt.
(5) Regulatory Matters
The Operating Companies are subject to the provisions of Statement of
Financial Accounting Standards (SFAS) 71, which governs the accounting for the
effects of certain types of regulation. Under SFAS 71, regulatory assets are
recorded which represent probable future revenues associated with certain
deferred costs to be recovered from customers through the ratemaking process.
Total regulatory assets at March 31, 1995 approximated $2.2 billion, $1.3
billion and $0.9 billion for Centerior Energy, Cleveland Electric and Toledo
Edison, respectively.
In March 1995, the Financial Accounting Standards Board issued SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of". SFAS 121, which is effective for 1996, imposes stricter
criteria for regulatory assets than SFAS 71 by requiring that such assets be
probable of future recovery at each balance sheet date. Adoption of SFAS 121
is not expected to have an impact on the Companies' financial position or
results of operations based on the Operating Companies' current and requested
regulatory agreements.
On April 17, 1995, the Operating Companies each filed a request with The
Public Utilities Commission of Ohio (PUCO) for a rate increase to be effective
in 1996. Cleveland Electric's requested increase is $82.8 million in annual
revenues and Toledo Edison's requested increase is $34.8 million. The
requested rates would result in an average increase of 4.9% in Cleveland
Electric's existing rates and an average increase of 4.7% in Toledo Edison's
existing rates.
The Operating Companies plan to freeze rates until at least 2002 if their rate
requests are approved, although they are not precluded from requesting
additional rate increases. This plan is premised on the Operating Companies
obtaining full recovery of all costs including an acceptable rate of return on
equity in order to continue to apply SFAS 71 for financial reporting purposes.
The Operating Companies plan to avoid the need for further rate increases
through additional cost reductions, an enhanced marketing plan designed to
increase retail revenues and other efforts. The Operating Companies will
periodically assess their continued compliance with SFAS 71 criteria and the
appropriateness of continuing to record additional deferrals pursuant to the
Rate Stabilization Program which was approved by the PUCO for the Operating
Companies in 1992. They will modify their intended course of action as
necessary to maintain compliance.
The rate increases are necessary to recover capital investment and increases
in costs incurred since the Operating Companies' last rate cases, which were
decided in January 1989, and to recover certain costs deferred since 1992.
The amounts of the requested rate increases are lower than the authorized
limits set forth in the Rate Stabilization Program. The additional cash
resulting from the rate increases will strengthen the Companies' financial and
competitive position.
(6) Commitments and Contingencies
Various legal actions, claims and regulatory proceedings covering several
matters are pending against the Companies. See "Item 3. Legal Proceedings"
in the 1994 Form 10-K and "Part II, Item 5. Other Information" in this
Quarterly Report on Form 10-Q. Also, for Centerior Energy and Cleveland
Electric, see "Outlook--Competition--Cleveland Public Power" in their
respective "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in this Quarterly Report on Form 10-Q.
At their annual meeting on April 25, 1995, Centerior Energy common stock share
owners approved the Equity Compensation Plan adopted in 1994. As discussed in
Centerior Energy's Note 11(a) in its Notes to the Financial Statements for
1994 in the 1994 Form 10-K, the option and common stock grants for 1994 were
conditioned upon this approval.
The Companies continue to seek the necessary approvals to complete the merger
of Toledo Edison into Cleveland Electric. The Pennsylvania Public Utility
Commission and the PUCO approved the merger in July 1994 and December 1994,
respectively. On May 9, 1995, the Operating Companies filed the additional
information which the Federal Energy Regulatory Commission (FERC) had
requested in connection with the Operating Companies' joint application for
approval of the merger, with the exception of an open-access transmission
tariff which the Operating Companies intend to file later in May 1995. The
Operating Companies do not expect the Nuclear Regulatory Commission (NRC) to
take action on their request for authorization to transfer certain NRC
licenses to the merged entity until approvals have been obtained from the FERC
and the preferred stock share owners. The Operating Companies are seeking
preferred stock share owner approval at meetings to be held June 14, 1995.
The merger is expected to be effective in late 1995.
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
INCOME STATEMENT
(Unaudited)
(Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
OPERATING REVENUES $ 587,581 $ 587,567
OPERATING EXPENSES
Fuel and Purchased Power 119,369 115,353
Other Operation and Maintenance 140,604 147,051
Generation Facilities Rental Expense, Net 39,852 39,767
Depreciation and Amortization 69,448 68,314
Taxes, Other Than Federal Income Taxes 81,956 83,008
Deferred Operating Expenses, Net (16,064) (14,851)
Federal Income Taxes 22,678 20,282
-------- --------
Total Operating Expenses 457,843 458,924
-------- --------
OPERATING INCOME 129,738 128,643
NONOPERATING INCOME
Allowance for Equity Funds Used During Construction 1,375 842
Other Income and Deductions, Net 2,302 2,555
Deferred Carrying Charges 11,572 9,917
Federal Income Taxes - Credit (Expense) (1,800) (1,263)
-------- --------
Total Nonoperating Income 13,449 12,051
-------- --------
INCOME BEFORE INTEREST CHARGES 143,187 140,694
INTEREST CHARGES
Long-term Debt 87,078 88,347
Short-term Debt 2,982 1,466
Allowance for Borrowed Funds Used During Construction (690) (782)
-------- --------
Net Interest Charges 89,370 89,031
-------- --------
INCOME AFTER INTEREST CHARGES 53,817 51,663
Preferred Dividend Requirements of Subsidiaries 15,740 16,660
-------- --------
NET INCOME $ 38,077 $ 35,003
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 148,032 147,446
======== ========
EARNINGS PER COMMON SHARE $ .26 $ .24
======== ========
<FN>
The accompanying notes as they relate to Centerior Energy are an integral part of this statement.
</TABLE>
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
BALANCE SHEET
(Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility Plant In Service $ 9,628,257 $ 9,769,996
Accumulated Depreciation and Amortization (2,848,012) (2,906,106)
----------- -----------
6,780,245 6,863,890
Construction Work In Progress 138,572 129,495
----------- -----------
6,918,817 6,993,385
Nuclear Fuel, Net of Amortization 272,085 293,222
Other Property, Less Accumulated Depreciation 104,788 50,018
----------- -----------
7,295,690 7,336,625
CURRENT ASSETS
Cash and Temporary Cash Investments 147,035 186,399
Amounts Due from Customers and Others, Net 213,871 211,178
Unbilled Revenues 81,344 93,344
Materials and Supplies, at Average Cost 142,578 139,293
Fossil Fuel Inventory, at Average Cost 32,535 28,684
Taxes Applicable to Succeeding Years 216,093 251,877
Other 13,453 14,822
----------- -----------
846,909 925,597
DEFERRED CHARGES AND OTHER ASSETS
Amounts Due from Customers for Future Federal Income Taxes 1,049,364 1,046,317
Unamortized Loss from Beaver Valley Unit 2 Sale 99,575 100,698
Unamortized Loss on Reacquired Debt 84,057 85,921
Carrying Charges and Operating Expenses 984,649 957,053
Nuclear Plant Decommissioning Trusts 86,386 81,967
Other 146,292 157,278
----------- -----------
2,450,323 2,429,234
----------- -----------
$ 10,592,922 $ 10,691,456
=========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 1,860,642 $ 1,881,930
Preferred Stock
With Mandatory Redemption Provisions 237,809 252,656
Without Mandatory Redemption Provisions 450,871 450,871
Long-Term Debt 3,667,559 3,697,082
----------- -----------
6,216,881 6,282,539
CURRENT LIABILITIES
Current Portion of Long-Term Debt and Preferred Stock 401,572 373,451
Current Portion of Lease Obligations 97,841 83,099
Accounts Payable 120,520 143,919
Accrued Taxes 286,793 384,114
Accrued Interest 100,796 89,556
Dividends Declared 43,005 15,376
Other 62,508 59,964
----------- -----------
1,113,035 1,149,479
DEFERRED CREDITS AND OTHER LIABILITIES
Unamortized Investment Tax Credits 274,208 278,824
Accumulated Deferred Federal Income Taxes 1,796,862 1,778,429
Unamortized Gain from Bruce Mansfield Plant Sale 518,457 525,020
Accumulated Deferred Rents for Bruce Mansfield Plant
and Beaver Valley Unit 2 143,131 138,619
Nuclear Fuel Lease Obligations 203,144 219,465
Retirement Benefits 177,492 176,221
Other 149,712 142,860
----------- -----------
3,263,006 3,259,438
COMMITMENTS AND CONTINGENCIES (Note 6)
----------- -----------
$ 10,592,922 $ 10,691,456
=========== ===========
<FN>
The accompanying notes as they relate to Centerior Energy are an integral part of this
statement.
</TABLE>
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $38,077 $35,003
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 69,448 68,314
Deferred Federal Income Taxes 15,793 12,980
Unbilled Revenues 12,000 14,000
Deferred Fuel 10,913 (3,265)
Deferred Carrying Charges (11,572) (9,917)
Leased Nuclear Fuel Amortization 30,600 28,954
Deferred Operating Expenses, Net (16,064) (14,851)
Allowance for Equity Funds Used During Construction (1,375) (842)
Changes in Amounts Due from Customers and Others, Net (2,693) (24,086)
Changes in Inventories (7,136) 1,810
Changes in Accounts Payable (23,399) (28,798)
Changes in Working Capital Affecting Operations (46,384) (23,176)
Other Noncash Items 10,270 6,348
-------- --------
Total Adjustments 40,401 27,471
-------- --------
Net Cash from Operating Activities 78,478 62,474
CASH FLOWS FROM FINANCING ACTIVITIES
Common Stock Issues -- 9,988
Maturities, Redemptions and Sinking Funds (16,506) (19,322)
Nuclear Fuel Lease Obligations (11,043) (20,122)
Common Stock Dividends Paid (29,606) (29,432)
-------- --------
Net Cash from Financing Activities (57,155) (58,888)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (35,173) (37,843)
Interest Capitalized as Allowance for Borrowed Funds Used
During Construction (690) (782)
Contributions to Nuclear Plant Decommissioning Trusts (5,897) (2,298)
Other Cash Applied (18,927) (4,458)
-------- --------
Net Cash from Investing Activities (60,687) (45,381)
-------- --------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (39,364) (41,795)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 186,399 225,253
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $147,035 $183,458
======== ========
Other Payment Information:
Interest (net of amounts capitalized) $63,000 $64,000
Federal Income Taxes 27,600 --
<FN>
The accompanying notes as they relate to Centerior Energy are an integral part of this statement.
</TABLE>
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in Item 7 of the 1994 Form
10-K. The information under "Capital Resources and Liquidity" remains un-
changed with the following exceptions:
During the first quarter of 1995, the Operating Companies redeemed various
securities as discussed in Note 4.
In April 1995, Cleveland Electric redeemed $4.3 million principal amount of
First Mortgage Bonds, 13-3/4% Series due 2005-A (13-3/4% Bonds), under
mandatory redemption provisions. At the same time, Cleveland Electric also
optionally redeemed an additional $4.3 million principal amount of the 13-3/4%
Bonds at face value and the remaining $26 million principal amount of the
13-3/4% Bonds at 104.58% of face value.
In May 1995, Cleveland Electric plans to issue $300 million principal amount
of First Mortgage Bonds, 9-1/2% Series due 2005-B. Part of the proceeds will
be used to reimburse Cleveland Electric for cash expended in the optional
redemption of $26 million principal amount of the 13-3/4% Bonds discussed
above. The remaining proceeds will help fund the payment of required sinking
fund obligations and maturing securities in 1995 and will also be used for
general corporate purposes.
Also, in May 1995, Cleveland Electric and Toledo Edison plan to issue $53.9
million and $45 million, respectively, of first mortgage bonds with a 7-5/8%
fixed interest rate as collateral security for the sale by a public authority
of equal principal amounts of tax-exempt bonds. The proceeds from the sales
of the public authority's bonds will be used on June 15, 1995 to refund equal
principal amounts of the authority's tax-exempt bonds that were issued in
1984. Concurrently with the refunding of the authority's bonds, Cleveland
Electric's first mortgage bonds and Toledo Edison's pollution control notes
securing the authority's respective issues will be redeemed. Cleveland
Electric's and Toledo Edison's new bonds will mature on May 1, 2025 and May 1,
2020, respectively.
Additional first mortgage bonds may be issued by the Operating Companies under
their respective mortgages on the basis of property additions, cash or refund-
able first mortgage bonds. If the applicable interest coverage test is met,
each Operating Company may issue first mortgage bonds on the basis of property
additions and, under certain circumstances, refundable bonds. At March 31,
1995, Cleveland Electric and Toledo Edison would have been permitted to issue
approximately $329 million and $527 million of additional first mortgage
bonds, respectively, after giving effect to the corresponding first mortgage
bond issuances and redemptions through June 15, 1995 discussed above and, for
Cleveland Electric, the additional mandatory redemptions of $107 million
aggregate principal amount of secured medium-term notes during this same
period.
Under its articles of incorporation, Toledo Edison cannot issue preferred
stock unless certain earnings coverage requirements are met. At March 31,
1995, Toledo Edison would have been permitted to issue approximately $60
million of additional preferred stock at an assumed dividend rate of 10.5%.
In mid-1995, certain letters of credit now in effect in connection with the
sale and leaseback of Beaver Valley Power Station Unit 2 will expire. The
Operating Companies are required to procure replacement letters of credit in
an aggregate amount of approximately $226 million. The letters of credit now
in effect are secured by the Operating Companies' subordinate mortgages. The
Operating Companies are planning to secure the replacement letters of credit
by a combination of first mortagage bonds of Cleveland Electric and Toledo
Edison, with the subordinate mortgage interests being released. The Companies
also plan to secure an existing $205 million revolving credit facility with a
combination of first mortgage bonds of Cleveland Electric and Toledo Edison.
Results of Operations
First quarter 1995 operating revenues were virtually the same as for the 1994
first quarter because of the following factors:
Changes from
First Quarter 1994
Factors Operating Revenues
(millions)
Fuel Cost Recovery Revenues $ 6.6
Wholesale Revenues 3.5
Kilowatt-hour Sales Volume and Mix (5.5)
Miscellaneous Revenues (4.6)
Total $ -
The increase in first quarter 1995 fuel cost recovery revenues included in
customer bills resulted from changes in the fuel cost recovery factors used by
the Operating Companies to calculate these revenues. The weighted average of
the respective fuel cost recovery factors used for the first quarter of 1995
increased about 17% for Cleveland Electric and decreased about 12% for Toledo
Edison compared to the weighted average of the respective fuel cost recovery
factors used for the first quarter of 1994.
Percentage changes between 1995 and 1994 first quarter billed electric
kilowatt-hour sales are summarized as follows:
Customer Categories % Change
Residential (7.4)%
Commercial (0.3)
Industrial 1.6
Other 33.7
Total 1.5
First quarter 1995 total kilowatt-hour sales increased because of a 60%
increase in wholesale sales (included in the "Other" category). An increase
in industrial sales was completely offset by lower residential and commercial
sales. Industrial sales increased on the strength of increased sales to large
automotive manufacturers and the broad-based, smaller industrial customer
group. Residential and commercial sales were negatively affected by the
milder winter weather as compared with the 1994 period.
First quarter 1995 miscellaneous revenues decreased primarily because the
first quarter 1994 amount included the billings to the other utility owners
and lessees for overhead expenses related to the refueling and maintenance
outage of the jointly owned Perry Nuclear Power Plant Unit 1 during that
period.
First quarter operating expenses in 1995 decreased 0.2% from the 1994 amount.
Fuel and purchased power expenses increased as higher fuel expense was
partially offset by lower purchased power expense. The higher fuel expense
was attributable to more amortization of previously deferred fuel costs than
the amount amortized in 1994. Cost control measures resulted in lower other
operation and maintenance expenses. An increase in deferred operating
expenses resulted primarily from increased deferrals for depreciation and
postretirement benefits other than pensions in the 1995 period pursuant to the
Rate Stabilization Program. Federal income taxes increased as a result of
higher pretax operating income.
First quarter 1995 credits for carrying charges relating to the Rate
Stabilization Program increased from the 1994 amount primarily because of the
larger base (which is related to net property additions since 1989) subject to
the carrying charge calculation. The federal income tax provision for
nonoperating income increased accordingly.
Lower first quarter 1995 interest charges for long-term debt partially offset
higher interest charges for short-term debt.
Outlook--Competition--Cleveland Public Power
In March 1995, one of Cleveland Electric's large commercial customers,
comprising medical and educational institutions, signed a five-year contract
for electric service with Cleveland Public Power (CPP) beginning in September
1996 when that customer's contract with Cleveland Electric terminates. The
loss of this customer would reduce Centerior Energy's annual net income by
about $5 million based on 1994 sales. On May 3, 1995, Cleveland Electric
filed a complaint with the PUCO against this customer and American Electric
Power Company (AEP) alleging, among other things, that the purchase of power
from CPP by this customer is in reality a direct purchase from AEP and, thus,
a sham transaction in violation of Ohio's certified territory statute. Some
member institutions of this customer have indicated a desire to continue to be
served by Cleveland Electric. Cleveland Electric is hopeful that other
members will come to the same conclusion.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
INCOME STATEMENT
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
OPERATING REVENUES $ 410,383 $ 407,855
OPERATING EXPENSES
Fuel and Purchased Power (1) 106,062 99,939
Other Operation and Maintenance 94,654 98,160
Generation Facilities Rental Expense, Net 13,892 13,892
Depreciation and Amortization 48,604 47,992
Taxes, Other Than Federal Income Taxes 57,688 59,085
Deferred Operating Expenses, Net (10,893) (9,719)
Federal Income Taxes 15,075 12,994
-------- --------
Total Operating Expenses 325,082 322,343
-------- --------
OPERATING INCOME 85,301 85,512
NONOPERATING INCOME
Allowance for Equity Funds Used During Construction 1,088 630
Other Income and Deductions, Net 292 1,899
Deferred Carrying Charges 7,648 6,237
Federal Income Taxes - Credit (Expense) (495) (1,056)
-------- --------
Total Nonoperating Income 8,533 7,710
-------- --------
INCOME BEFORE INTEREST CHARGES 93,834 93,222
INTEREST CHARGES
Long-term Debt 59,968 60,433
Short-term Debt 651 626
Allowance for Borrowed Funds Used During Construction (413) (744)
-------- --------
Net Interest Charges 60,206 60,315
-------- --------
NET INCOME 33,628 32,907
Preferred Dividend Requirements 10,957 11,502
-------- --------
EARNINGS AVAILABLE FOR COMMON STOCK $ 22,671 $ 21,405
======== ========
(1) Includes purchased power expense for
purchases from Toledo Edison. $ 23,396 $ 29,669
<FN>
The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
</TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
BALANCE SHEET
(Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility Plant In Service $ 6,768,851 $ 6,870,651
Accumulated Depreciation and Amortization (1,971,924) (2,013,775)
----------- -----------
4,796,927 4,856,876
Construction Work In Progress 109,977 99,376
----------- -----------
4,906,904 4,956,252
Nuclear Fuel, Net of Amortization 161,861 173,745
Other Property, Less Accumulated Depreciation 60,418 20,575
----------- -----------
5,129,183 5,150,572
CURRENT ASSETS
Cash and Temporary Cash Investments 5,082 65,643
Amounts Due from Customers and Others, Net 146,554 146,412
Amounts Due from Affiliates 3,861 5,002
Unbilled Revenues 62,500 71,500
Materials and Supplies, at Average Cost 97,551 94,563
Fossil Fuel Inventory, at Average Cost 19,641 16,186
Taxes Applicable to Succeeding Years 153,754 179,716
Other 3,998 4,343
----------- -----------
492,941 583,365
DEFERRED CHARGES AND OTHER ASSETS
Amounts Due from Customers for Future Federal Income Taxes 643,792 641,249
Unamortized Loss on Reacquired Debt 57,069 57,827
Carrying Charges and Operating Expenses 596,821 578,302
Nuclear Plant Decommissioning Trusts 46,595 44,211
Other 89,367 95,114
----------- -----------
1,433,644 1,416,703
----------- -----------
$ 7,055,768 $ 7,150,640
=========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 1,091,666 $ 1,058,190
Preferred Stock
With Mandatory Redemption Provisions 231,124 245,971
Without Mandatory Redemption Provisions 240,871 240,871
Long-Term Debt 2,542,310 2,543,036
----------- -----------
4,105,971 4,088,068
CURRENT LIABILITIES
Current Portion of Long-Term Debt and Preferred Stock 285,708 281,785
Current Portion of Lease Obligations 55,080 47,403
Accounts Payable 69,113 87,954
Accounts and Notes Payable to Affiliates 85,986 117,635
Accrued Taxes 229,860 309,724
Accrued Interest 71,757 62,210
Dividends Declared 5,164 18,075
Other 35,371 33,028
----------- -----------
838,039 957,814
DEFERRED CREDITS AND OTHER LIABILITIES
Unamortized Investment Tax Credits 189,365 192,151
Accumulated Deferred Federal Income Taxes 1,247,367 1,233,830
Unamortized Gain from Bruce Mansfield Plant Sale 322,867 326,930
Accumulated Deferred Rents for Bruce Mansfield Plant 85,052 84,454
Nuclear Fuel Lease Obligations 123,134 132,180
Retirement Benefits 61,647 59,471
Other 82,326 75,742
----------- -----------
2,111,758 2,104,758
COMMITMENTS AND CONTINGENCIES (Note 6)
----------- -----------
$ 7,055,768 $ 7,150,640
=========== ===========
<FN>
The accompanying notes as they relate to Cleveland Electric are an integral part of this
statement.
</TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $33,628 $32,907
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 48,604 47,992
Deferred Federal Income Taxes 11,168 5,885
Unbilled Revenues 9,000 10,000
Deferred Fuel 11,305 (5,616)
Deferred Carrying Charges (7,648) (6,237)
Leased Nuclear Fuel Amortization 17,303 16,053
Deferred Operating Expenses, Net (10,893) (9,719)
Allowance for Equity Funds Used During Construction (1,088) (630)
Changes in Amounts Due from Customers and Others, Net (142) (16,484)
Changes in Inventories (6,443) 4,718
Changes in Accounts Payable (18,841) (27,882)
Changes in Working Capital Affecting Operations (47,375) (22,380)
Other Noncash Items 2,668 968
-------- --------
Total Adjustments 7,618 (3,332)
-------- --------
Net Cash from Operating Activities 41,246 29,575
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Payable to Affiliates (24,800) --
Maturities, Redemptions and Sinking Funds (11,877) (16,138)
Nuclear Fuel Lease Obligations (6,789) (11,140)
Dividends Paid (12,911) (30,328)
-------- --------
Net Cash from Financing Activities (56,377) (57,606)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (30,169) (30,366)
Interest Capitalized as Allowance for Borrowed Funds Used
During Construction (413) (744)
Contributions to Nuclear Plant Decommissioning Trusts (3,204) (1,217)
Other Cash Applied (11,644) (2,412)
-------- --------
Net Cash from Investing Activities (45,430) (34,739)
-------- --------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (60,561) (62,770)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 65,643 77,374
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $5,082 $14,604
======== ========
Other Payment Information:
Interest (net of amounts capitalized) $41,000 $43,000
Federal Income Taxes 27,600 --
<FN>
The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
</TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in Item 7 of the 1994 Form
10-K. The information under "Capital Resources and Liquidity" remains
unchanged with the following exceptions:
During the first quarter of 1995, Cleveland Electric redeemed various
securities as discussed in Note 4.
In April 1995, Cleveland Electric redeemed $4.3 million principal amount of
First Mortgage Bonds, 13-3/4% Series due 2005-A (13-3/4% Bonds), under
mandatory redemption provisions. At the same time, Cleveland Electric also
optionally redeemed an additional $4.3 million principal amount of the 13-3/4%
Bonds at face value and the remaining $26 million principal amount of the
13-3/4% Bonds at 104.58% of face value.
In May 1995, Cleveland Electric plans to issue $300 million principal amount
of First Mortgage Bonds, 9-1/2% Series due 2005-B. Part of the proceeds will
be used to reimburse Cleveland Electric for cash expended in the optional
redemption of $26 million principal amount of the 13-3/4% Bonds discussed
above. The remaining proceeds will help fund the payment of required sinking
fund obligations and maturing securities in 1995 and will also be used for
general corporate purposes.
Also, in May 1995, Cleveland Electric plans to issue $53.9 million of first
mortgage bonds with a 7-5/8% fixed interest rate as collateral security for
the sale by a public authority of an equal principal amount of tax-exempt
bonds. The proceeds from the sale of the public authority's bonds will be
used on June 15, 1995 to refund $53.9 million of the authority's tax-exempt
bonds that were issued in 1984. Concurrently with the refunding of the
authority's bonds, Cleveland Electric's first mortgage bonds securing that
issue will be redeemed. The new bonds will mature on May 1, 2025.
Additional first mortgage bonds may be issued by Cleveland Electric under its
mortgage on the basis of property additions, cash or refundable first mortgage
bonds. If the applicable interest coverage test is met, Cleveland Electric
may issue first mortgage bonds on the basis of property additions and, under
certain circumstances, refundable bonds. At March 31, 1995, Cleveland
Electric would have been permitted to issue approximately $329 million of
additional first mortgage bonds after giving effect to the first mortgage bond
issuances and redemptions through June 15, 1995 discussed above and the
additional mandatory redemptions of $107 million aggregate principal amount of
secured medium-term notes during this same period.
In mid-1995, certain letters of credit now in effect in connection with the
sale and leaseback of Beaver Valley Power Station Unit 2 will expire. The
Operating Companies are required to procure replacement letters of credit in
an aggregate amount of approximately $226 million. The letters of credit now
in effect are secured by the Operating Companies' subordinate mortgages. The
Operating Companies are planning to secure the replacement letters of credit
by a combination of first mortagage bonds of Cleveland Electric and Toledo
Edison, with the subordinate mortgage interests being released. The Companies
also plan to secure an existing $205 million revolving credit facility with a
combination of first mortgage bonds of Cleveland Electric and Toledo Edison.
Results of Operations
Factors contributing to the 0.6% increase in 1995 first quarter operating
revenues are shown as follows:
Changes from
First Quarter 1994
Factors Operating Revenues
(millions)
Fuel Cost Recovery Revenues $10.4
Wholesale Revenues 3.7
Kilowatt-hour Sales Volume and Mix (5.6)
Miscellaneous Revenues (6.0)
Total $ 2.5
The increase in fuel cost recovery revenues included in customer bills
resulted from a 17% increase in the weighted average of the fuel cost recovery
factors used in the first quarter of 1995 to calculate these revenues compared
to the 1994 first quarter average.
Percentage changes between 1995 and 1994 first quarter billed electric
kilowatt-hour sales are summarized as follows:
Customer Categories % Change
Residential (8.2)%
Commercial 0.2
Industrial (0.3)
Other 62.1
Total 1.7
First quarter 1995 total kilowatt-hour sales increased because a 113% increase
in wholesale sales (included in the "Other" category) completely offset the
decreases in residential and industrial sales. Residential sales were
negatively affected by the milder winter weather as compared with the 1994
period. However, commercial sales increased slightly. Industrial sales
decreased slightly as lower sales to one large steel industry customer were
almost entirely offset by increased sales to the broad-based, smaller
industrial customer group. Wholesale sales in the 1994 first quarter were
suppressed by soft market conditions and limited power availability for bulk
power transactions because of generating plant outages.
First quarter 1995 miscellaneous revenues decreased primarily because the
first quarter 1994 amount included the billings to the other utility owners
and lessees for overhead expenses related to the refueling and maintenance
outage of the jointly owned Perry Nuclear Power Plant Unit 1 during that
period.
First quarter operating expenses in 1995 increased 0.8% from the 1994 amount.
Fuel and purchased power expenses increased as higher fuel expense was
partially offset by lower purchased power expense. The higher fuel expense
was attributable to more amortization of previously deferred fuel costs than
the amount amortized in 1994. Cost control measures resulted in lower other
operation and maintenance expenses. An increase in deferred operating
expenses resulted primarily from increased deferrals for depreciation and
postretirement benefits other than pensions in the 1995 period pursuant to the
Rate Stabilization Program. Federal income taxes increased as a result of
higher pretax operating income.
First quarter 1995 credits for carrying charges relating to the Rate
Stabilization Program increased from the 1994 amount primarily because of the
larger base (which is related to net property additions since 1989) subject to
the carrying charge calculation. This increase partially offset a decrease in
investment and other income (included in "Other Income and Deductions, Net").
However, the first quarter federal income tax provision for nonoperating
income in 1995 decreased from the 1994 amount.
Outlook--Competition--Cleveland Public Power
In March 1995, one of Cleveland Electric's large commercial customers,
comprising medical and educational institutions, signed a five-year contract
for electric service with Cleveland Public Power (CPP) beginning in September
1996 when that customer's contract with Cleveland Electric terminates. The
loss of this customer would reduce Cleveland Electric's annual net income by
about $5 million based on 1994 sales. On May 3, 1995, Cleveland Electric
filed a complaint with the PUCO against this customer and American Electric
Power Company (AEP) alleging, among other things, that the purchase of power
from CPP by this customer is in reality a direct purchase from AEP and, thus,
a sham transaction in violation of Ohio's certified territory statute. Some
member institutions of this customer have indicated a desire to continue to be
served by Cleveland Electric. Cleveland Electric is hopeful that other
members will come to the same conclusion.
THE TOLEDO EDISON COMPANY
INCOME STATEMENT
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
OPERATING REVENUES (1) $ 206,384 $ 216,572
OPERATING EXPENSES
Fuel and Purchased Power 37,491 45,673
Other Operation and Maintenance 52,061 55,708
Generation Facilities Rental Expense, Net 25,960 25,875
Depreciation and Amortization 20,844 20,322
Taxes, Other Than Federal Income Taxes 24,149 23,748
Deferred Operating Expenses, Net (5,171) (5,133)
Federal Income Taxes 7,655 7,371
-------- --------
Total Operating Expenses 162,989 173,564
-------- --------
OPERATING INCOME 43,395 43,008
NONOPERATING INCOME
Allowance for Equity Funds Used During Construction 287 213
Other Income and Deductions, Net 2,018 468
Deferred Carrying Charges 3,924 3,680
Federal Income Taxes - Credit (Expense) (781) (26)
-------- --------
Total Nonoperating Income 5,448 4,335
-------- --------
INCOME BEFORE INTEREST CHARGES 48,843 47,343
INTEREST CHARGES
Long-term Debt 27,110 27,913
Short-term Debt 2,500 892
Allowance for Borrowed Funds Used During Construction (277) (38)
-------- --------
Net Interest Charges 29,333 28,767
-------- --------
NET INCOME 19,510 18,576
Preferred Dividend Requirements 4,783 5,158
-------- --------
EARNINGS AVAILABLE FOR COMMON STOCK $ 14,727 $ 13,418
======== ========
(1) Includes revenues from bulk power sales
to Cleveland Electric. $ 23,396 $ 29,669
<FN>
The accompanying notes as they relate to Toledo Edison are an integral part of this statement.
</TABLE>
THE TOLEDO EDISON COMPANY
BALANCE SHEET
(Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility Plant In Service $ 2,859,406 $ 2,899,345
Accumulated Depreciation and Amortization (876,089) (892,331)
----------- -----------
1,983,317 2,007,014
Construction Work In Progress 28,595 30,119
----------- -----------
2,011,912 2,037,133
Nuclear Fuel, Net of Amortization 110,224 119,477
Other Property, Less Accumulated Depreciation 20,549 5,994
----------- -----------
2,142,685 2,162,604
CURRENT ASSETS
Cash and Temporary Cash Investments 81,613 87,800
Amounts Due from Customers and Others, Net 64,107 61,794
Amounts Due from Affiliates 47,829 18,929
Unbilled Revenues 18,844 21,844
Materials and Supplies, at Average Cost 45,027 44,730
Fossil Fuel Inventory, at Average Cost 12,894 12,498
Taxes Applicable to Succeeding Years 62,339 72,160
Other 2,155 2,369
----------- -----------
334,808 322,124
DEFERRED CHARGES AND OTHER ASSETS
Amounts Due from Customers for Future Federal Income Taxes 405,812 405,308
Unamortized Loss from Beaver Valley Unit 2 Sale 99,575 100,698
Unamortized Loss on Reacquired Debt 26,987 28,094
Carrying Charges and Operating Expenses 387,827 378,751
Nuclear Plant Decommissioning Trusts 39,791 37,755
Other 62,277 66,798
----------- -----------
1,022,269 1,017,404
----------- -----------
$ 3,499,762 $ 3,502,132
=========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 699,273 $ 684,568
Preferred Stock
With Mandatory Redemption Provisions 6,685 6,685
Without Mandatory Redemption Provisions 210,000 210,000
Long-Term Debt 1,125,249 1,154,046
----------- -----------
2,041,207 2,055,299
CURRENT LIABILITIES
Current Portion of Long-Term Debt and Preferred Stock 107,764 82,891
Current Portion of Lease Obligations 42,761 35,696
Accounts Payable 48,533 48,190
Accounts Payable to Affiliates 29,143 30,701
Accrued Taxes 57,093 74,909
Accrued Interest 29,038 27,027
Other 16,367 16,566
----------- -----------
330,699 315,980
DEFERRED CREDITS AND OTHER LIABILITIES
Unamortized Investment Tax Credits 84,842 86,673
Accumulated Deferred Federal Income Taxes 545,863 540,836
Unamortized Gain from Bruce Mansfield Plant Sale 195,590 198,089
Accumulated Deferred Rents for Bruce Mansfield Plant
and Beaver Valley Unit 2 58,080 54,165
Nuclear Fuel Lease Obligations 80,010 87,285
Retirement Benefits 103,040 102,897
Other 60,431 60,908
----------- -----------
1,127,856 1,130,853
COMMITMENTS AND CONTINGENCIES (Note 6)
----------- -----------
$ 3,499,762 $ 3,502,132
=========== ===========
<FN>
The accompanying notes as they relate to Toledo Edison are an integral part of this
statement.
</TABLE>
THE TOLEDO EDISON COMPANY
CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $19,510 $18,576
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 20,844 20,322
Deferred Federal Income Taxes 4,623 7,387
Unbilled Revenues 3,000 4,000
Deferred Fuel (391) 2,351
Deferred Carrying Charges (3,924) (3,680)
Leased Nuclear Fuel Amortization 13,297 12,901
Deferred Operating Expenses, Net (5,171) (5,133)
Allowance for Equity Funds Used During Construction (287) (213)
Changes in Amounts Due from Customers and Others, Net (2,313) (5,507)
Changes in Inventories (693) (2,908)
Changes in Accounts Payable 343 (9,509)
Changes in Working Capital Affecting Operations (3,127) 3,425
Other Noncash Items 7,602 5,380
-------- --------
Total Adjustments 33,803 28,816
-------- --------
Net Cash from Operating Activities 53,313 47,392
CASH FLOWS FROM FINANCING ACTIVITIES
Maturities, Redemptions and Sinking Funds (3,954) (3,184)
Nuclear Fuel Lease Obligations (4,254) (8,982)
Dividends Paid (4,806) (152)
-------- --------
Net Cash from Financing Activities (13,014) (12,318)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (5,004) (7,477)
Interest Capitalized as Allowance for Borrowed Funds Used
During Construction (277) (38)
Loans to Affiliates (33,300) --
Contributions to Nuclear Plant Decommissioning Trusts (2,693) (1,081)
Other Cash Applied (5,212) (5,774)
-------- --------
Net Cash from Investing Activities (46,486) (14,370)
-------- --------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (6,187) 20,704
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 87,800 82,042
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $81,613 $102,746
======== ========
Other Payment Information:
Interest (net of amounts capitalized) $22,000 $21,000
Federal Income Taxes -- --
<FN>
The accompanying notes as they relate to Toledo Edison are an integral part of this statement.
</TABLE>
THE TOLEDO EDISON COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in Item 7 of the 1994 Form
10-K. The information under "Capital Resources and Liquidity" remains
unchanged with the following exceptions:
During the first quarter of 1995, Toledo Edison redeemed various securities as
discussed in Note 4.
In May 1995, Toledo Edison plans to issue $45 million of first mortgage bonds
with a 7-5/8% fixed interest rate as collateral security for the sale by a
public authority of an equal principal amount of tax-exempt bonds. The
proceeds from the sale of the public authority's bonds will be used on
June 15, 1995 to refund $45 million of the authority's tax-exempt bonds that
were issued in 1984. Concurrently with the refunding of the authority's
bonds, Toledo Edison's pollution control notes securing that issue will be
redeemed. The new bonds will mature on May 1, 2020.
Additional first mortgage bonds may be issued by Toledo Edison under its
mortgage on the basis of property additions, cash or refundable first mortgage
bonds. If the applicable interest coverage test is met, Toledo Edison may
issue first mortgage bonds on the basis of property additions and, under
certain circumstances, refundable bonds. At March 31, 1995, Toledo Edison
would have been permitted to issue approximately $527 million of additional
first mortgage bonds after giving effect to the May 1995 first mortgage bond
issuance discussed above.
Under its articles of incorporation, Toledo Edison cannot issue preferred
stock unless certain earnings coverage requirements are met. At March 31,
1995, Toledo Edison would have been permitted to issue approximately $60
million of additional preferred stock at an assumed dividend rate of 10.5%.
In mid-1995, certain letters of credit now in effect in connection with the
sale and leaseback of Beaver Valley Power Station Unit 2 (Beaver Valley
Unit 2) will expire. The Operating Companies are required to procure
replacement letters of credit in an aggregate amount of approximately $226
million. The letters of credit now in effect are secured by the Operating
Companies' subordinate mortgages. The Operating Companies are planning to
secure the replacement letters of credit by a combination of first mortgage
bonds of Toledo Edison and Cleveland Electric, with the subordinate mortgage
interests being released. The Companies also plan to secure an existing $205
million revolving credit facility with a combination of first mortgage bonds
of Toledo Edison and Cleveland Electric.
Results of Operations
Factors contributing to the 4.7% decrease in 1995 first quarter operating
revenues are shown as follows:
Changes from
First Quarter 1994
Factors Operating Revenues
(millions)
Kilowatt-hour Sales Volume and Mix $ 0.1
Wholesale Revenues (6.3)
Fuel Cost Recovery Revenues (3.8)
Miscellaneous Revenues (0.2)
Total $(10.2)
Percentage changes between 1995 and 1994 first quarter billed electric
kilowatt-hour sales are summarized as follows:
Customer Categories % Change
Residential (5.5)%
Commercial (1.9)
Industrial 5.6
Other (6.6)
Total (1.4)
First quarter 1995 total kilowatt-hour sales decreased because of lower
residential and commercial sales and lower wholesale sales (included in the
"Other" category). Residential and commercial sales were negatively affected
by the milder winter weather as compared with the 1994 period. Industrial
sales increased on the strength of increased sales to large automotive
manufacturers and petroleum refineries and the broad-based, smaller industrial
customer group. Other sales decreased primarily because of lower wholesale
sales to Cleveland Electric as a result of the refueling and maintenance
outage of Beaver Valley Unit 2 which began as scheduled in March 1995.
The decrease in fuel cost recovery revenues included in customer bills
resulted from a 12% decrease in the weighted average of the fuel cost recovery
factors used in the first quarter of 1995 to calculate these revenues compared
to the 1994 first quarter average.
First quarter operating expenses in 1995 decreased 6.1% from the 1994 amount.
Fuel and purchased power expenses decreased because of less fuel expense and
lower purchased power requirements, both factors resulting from the increased
availability of the nuclear generating units in the 1995 period. Cost control
measures resulted in lower other operation and maintenance expenses.
First quarter 1995 nonoperating income increased from the 1994 amount because
of increased investment and other income (included in "Other Income and
Deductions, Net") and increased credits for carrying charges relating to the
Rate Stabilization Program. The federal income tax provision for nonoperating
income increased accordingly.
Lower first quarter 1995 interest charges for long-term debt partially offset
higher interest charges for short-term debt.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
1. Centerior Energy
a. Centerior Energy's Annual Meeting of share owners was held on April 25,
1995.
b. Proxies for the Annual Meeting were solicited pursuant to Regulation 14
under the Securities Exchange Act of 1934. There was no solicitation
in opposition to management's nominees for directors as listed in the
proxy statement dated March 14, 1995, and all such nominees were
elected.
c. Six matters were submitted to share owners for a vote at the Annual
Meeting.
Issue 1 was the election of 13 directors of Centerior Energy. The
vote on this issue was as follows:
Broker
Nominee For Withheld Non-Vote
R. P. Anderson 108,044,051 7,340,418 9,044,865
A. C. Bersticker 108,371,029 7,013,440 9,044,865
L. Carter 108,088,707 7,295,762 9,044,865
T. A. Commes 108,528,764 6,855,705 9,044,865
W. F. Conway 108,296,010 7,088,460 9,044,865
W. R. Embry 107,999,397 7,385,072 9,044,865
R. J. Farling 108,372,751 7,011,718 9,044,865
G. H. Kaull 108,491,300 6,893,170 9,044,865
R. A. Miller 107,963,984 7,420,486 9,044,865
F. E. Mosier 108,318,821 7,065,648 9,044,865
Sr. M. M. Reinhard 107,746,941 7,637,528 9,044,865
R. C. Savage 108,271,473 7,112,996 9,044,865
W. J. Williams 108,222,374 7,162,095 9,044,865
Issue 2 was for the approval of a restricted stock plan for non-
employee directors. The vote on this issue was as follows:
Broker
For Against Abstain Non-Vote
85,039,495 14,186,889 3,015,865 22,187,085
Issue 3 was for the approval of an equity compensation plan for
management. The vote on this issue was as follows:
Broker
For Against Abstain Non-Vote
58,604,789 40,131,202 3,506,259 22,187,085
- 22 -
Issue 4 was the ratification of the appointment by the Board of
Directors of Arthur Andersen LLP as the independent accountants of
Centerior Energy, Cleveland Electric and Toledo Edison for 1995.
The vote on this issue was as follows:
Broker
For Against Abstain Non-Vote
106,351,193 7,201,706 1,831,570 9,044,865
Issue 5 was a share owner proposal to prevent the named proxy holder
from having discretionary power of voting on any issue in future
proxies of the Company where no direction is given. The vote on this
issue was as follows:
Broker
For Against Abstain Non-Vote
28,560,617 69,550,803 4,130,828 22,187,085
Issue 6 was a share owner proposal to cap executive compensation at
specified levels, to hold all executive pay raises in abeyance, to not
allow stock options to be granted or exercised and to not award bonuses
to executives and directors for any reason until the common stock
annual dividend is returned to $1.60 per share and the common stock
price is returned to $16.00 per share. The vote on this issue was as
follows:
Broker
For Against Abstain Non-Vote
27,213,280 71,739,734 3,289,235 22,187,085
2. Cleveland Electric
a. In lieu of an Annual Meeting, Cleveland Electric's sole share owner,
Centerior Energy (the sole share owner of all 79,590,689 outstanding
shares of Cleveland Electric common stock), elected directors of
Cleveland Electric through a Written Action of Sole Share Owner on
April 25, 1995.
b. The directors elected pursuant to the Written Action were:
Robert J. Farling
Murray R. Edelman
Fred J. Lange, Jr.
c. No other matters were addressed in the Written Action in lieu of an
Annual Meeting.
3. Toledo Edison
a. In lieu of an Annual Meeting, Toledo Edison's sole share owner,
Centerior Energy (the sole share owner of all 39,133,887 outstanding
shares of Toledo Edison common stock), elected directors of Toledo
Edison through a Written Action of Sole Share Owner on April 25, 1995.
b. The directors elected pursuant to the Written Action were:
Robert J. Farling
Murray R. Edelman
Fred J. Lange, Jr.
- 23 -
c. No other matters were addressed in the Written Action in lieu of an
Annual Meeting.
Item 5. Other Information
1. Rate Freeze Ordinances
For background and earlier developments relating to this topic, see "Item
1. Business--Electric Rates--General" in the Companies' Annual Report on
Form 10-K for the year ended December 31, 1994.
In April 1995, four of the more than 90 municipalities in Cleveland
Electric's service area enacted ordinances freezing Cleveland Electric
rates in those municipalities through December 1997. The municipalities
taking such action are the cities of Parma, Brook Park and Berea and the
Village of Brooklyn Heights. Under Ohio law, a municipality may regulate
the rates of an electric utility subject to appeal to The Public
Utilities Commission of Ohio ("PUCO") if not acceptable to the utility. On
May 4, 1995, Cleveland Electric appealed the rate freeze ordinances
passed by these four municipalities to the PUCO.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None.
b. Reports on Form 8-K
During the quarter ended March 31, 1995, Centerior Energy, Cleveland
Electric and Toledo Edison each filed the following Current Report on Form
8-K:
A Form 8-K dated March 15, 1995 was filed on March 17, 1995 to report,
under "Item 5. Other Events -- 1. 1995 Rate Requests", the announcement
by Cleveland Electric and Toledo Edison of their intent to file a request
with the PUCO for a rate increase to be effective in 1996. Cleveland
Electric would ask for an average increase in rates of 4.9%, resulting
in an $82.8 million increase in annual revenue, and Toledo Edison would
ask for a 4.7% average increase in rates, resulting in a $34.8 million
increase in annual revenue.
- 24 -
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The person signing this report on
behalf of each such registrant is also signing in his capacity as each
registrant's Chief Accounting Officer.
CENTERIOR ENERGY CORPORATION
(Registrant)
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
(Registrant)
THE TOLEDO EDISON COMPANY
(Registrant)
By: E. LYLE PEPIN
E. Lyle Pepin, Controller and Chief
Accounting Officer of each Registrant
Date: May 12, 1995
- 25 -
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the related
Form 10-Q financial statements for Centerior Energy Corporation and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000774197
<NAME> CENTERIOR ENERGY CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,918,817
<OTHER-PROPERTY-AND-INVEST> 463,654
<TOTAL-CURRENT-ASSETS> 846,909
<TOTAL-DEFERRED-CHARGES> 2,363,542
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 10,592,922
<COMMON> 2,319,638
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> (458,996)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,860,642
237,809
450,871
<LONG-TERM-DEBT-NET> 3,667,559
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 350,393
51,179
<CAPITAL-LEASE-OBLIGATIONS> 203,144
<LEASES-CURRENT> 97,841
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,673,484
<TOT-CAPITALIZATION-AND-LIAB> 10,592,922
<GROSS-OPERATING-REVENUE> 587,581
<INCOME-TAX-EXPENSE> 22,678
<OTHER-OPERATING-EXPENSES> 435,165
<TOTAL-OPERATING-EXPENSES> 457,843
<OPERATING-INCOME-LOSS> 129,738
<OTHER-INCOME-NET> 13,449
<INCOME-BEFORE-INTEREST-EXPEN> 143,187
<TOTAL-INTEREST-EXPENSE> 89,370
<NET-INCOME> 38,077
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 59,212
<TOTAL-INTEREST-ON-BONDS> 294,285
<CASH-FLOW-OPERATIONS> 78,478
<EPS-PRIMARY> .26
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the related
Form 10-Q financial statements for The Cleveland Electric Illuminating Company
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000020947
<NAME> THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,906,904
<OTHER-PROPERTY-AND-INVEST> 268,924
<TOTAL-CURRENT-ASSETS> 492,941
<TOTAL-DEFERRED-CHARGES> 1,386,999
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 7,055,768
<COMMON> 1,241,087
<CAPITAL-SURPLUS-PAID-IN> 78,624
<RETAINED-EARNINGS> (228,045)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,091,666
231,124
240,871
<LONG-TERM-DEBT-NET> 2,542,310
<SHORT-TERM-NOTES> 33,300
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 246,194
39,514
<CAPITAL-LEASE-OBLIGATIONS> 123,134
<LEASES-CURRENT> 55,080
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,452,575
<TOT-CAPITALIZATION-AND-LIAB> 7,055,768
<GROSS-OPERATING-REVENUE> 410,383
<INCOME-TAX-EXPENSE> 15,075
<OTHER-OPERATING-EXPENSES> 310,007
<TOTAL-OPERATING-EXPENSES> 325,082
<OPERATING-INCOME-LOSS> 85,301
<OTHER-INCOME-NET> 8,533
<INCOME-BEFORE-INTEREST-EXPEN> 93,834
<TOTAL-INTEREST-EXPENSE> 60,206
<NET-INCOME> 33,628
10,957
<EARNINGS-AVAILABLE-FOR-COMM> 22,671
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 230,123
<CASH-FLOW-OPERATIONS> 41,246
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the related
Form 10-Q financial statements for The Toledo Edison Company and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000352049
<NAME> THE TOLEDO EDISON COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,011,912
<OTHER-PROPERTY-AND-INVEST> 170,909
<TOTAL-CURRENT-ASSETS> 334,808
<TOTAL-DEFERRED-CHARGES> 982,133
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,499,762
<COMMON> 195,687
<CAPITAL-SURPLUS-PAID-IN> 602,116
<RETAINED-EARNINGS> (98,530)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 699,273
6,685
210,000
<LONG-TERM-DEBT-NET> 1,125,249
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 96,099
11,665
<CAPITAL-LEASE-OBLIGATIONS> 80,010
<LEASES-CURRENT> 42,761
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,228,020
<TOT-CAPITALIZATION-AND-LIAB> 3,499,762
<GROSS-OPERATING-REVENUE> 206,384
<INCOME-TAX-EXPENSE> 7,655
<OTHER-OPERATING-EXPENSES> 155,334
<TOTAL-OPERATING-EXPENSES> 162,989
<OPERATING-INCOME-LOSS> 43,395
<OTHER-INCOME-NET> 5,448
<INCOME-BEFORE-INTEREST-EXPEN> 48,843
<TOTAL-INTEREST-EXPENSE> 29,333
<NET-INCOME> 19,510
4,783
<EARNINGS-AVAILABLE-FOR-COMM> 14,727
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 64,162
<CASH-FLOW-OPERATIONS> 53,313
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
