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, 1996
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission 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 10, 1996, there were 148,027,828 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 15
Balance Sheet 16
Cash Flows 17
Management's Discussion and Analysis of Financial 18
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security-Holders 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Exhibit Index 24
-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 three other wholly owned subsidiaries.
The two utilities are referred to collectively herein as the "Operating
Companies" and individually as an "Operating Company". 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 presentation of financial position at March 31, 1996 and results of
operations and cash flows for the three months ended March 31, 1996 and
1995 have been included. All such adjustments were normal recurring
adjustments, except for the write-down of inactive production facilities in
1996 discussed in Note 7.
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, 1995 (1995 Form 10-K).
These interim period financial results are not necessarily indicative of
results for a 12-month period.
In August 1995, Cleveland Electric formed a wholly owned subsidiary to
serve as the transferor in connection with an asset-backed securitization
which is expected to be completed by the Operating Companies in May 1996.
At March 31, 1996, the subsidiary was not yet funded.
(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, 1996, Cleveland Electric and Toledo Edison had $199.1 million
and $187.1 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, 1996 and 1995 were as follows:
1996 1995
Paid February 15 $.20 $.20
Paid May 15 .20 .20
- - 1 -
Common stock cash dividends declared by Cleveland Electric during the three
months ended March 31, 1996 and 1995 were as follows:
1996 1995
(millions)
Paid in February $29.6 $ --
Toledo Edison did not declare any common stock dividends during the three
months ended March 31, 1996 and 1995.
(4) Financing Activity
During the three months ended March 31, 1996, the Operating Companies
redeemed or retired debt and preferred stock as follows:
Cleveland Electric
Mandatory redemptions consisted of $15 million of Serial Preferred Stock,
$9.125 Series N, and $0.8 million of bank loans secured by subordinated
mortgage collateral.
Toledo Edison
Mandatory redemptions consisted of $28.8 million of bank loans and notes
secured by subordinated mortgage collateral.
(5) Short-Term Borrowing Arrangements
In May 1996, Centerior Energy renewed a $125 million revolving credit
facility until May 8, 1997. Centerior Energy and the Service Company may
borrow under the facility, with all borrowings jointly and severally
guaranteed by the Operating Companies. Centerior Energy plans to transfer
any of its borrowed funds to the Operating Companies. The credit agreement
is secured with first mortgage bonds of Cleveland Electric and Toledo Edison
in the proportion of 40% and 60%, respectively. The banks' fee is 0.625% per
annum payable quarterly in addition to interest on any borrowings. There
have not been any borrowings under the facility.
(6) Regulatory Matters
On April 11, 1996, The Public Utilities Commission of Ohio (PUCO) issued an
order granting the full price increases aggregating $119 million in
annualized revenues ($84 million for Cleveland Electric and $35 million for
Toledo Edison) requested in April 1995. The new prices were implemented in
April 1996. The average price increase for Cleveland Electric and Toledo
Edison customers was 4.9% and 4.7%, respectively, with the actual percentage
increase depending upon the customer class. The Operating Companies intend
to freeze prices through at least 2002, although they are not precluded from
requesting further price increases.
The PUCO also recommended that the Operating Companies reduce the value of
their assets for regulatory purposes by an aggregate $1.25 billion during the
next five years. This represents an incremental reduction beyond the normal
level in nuclear plant and regulatory assets. Implementation of the price
increases was not contingent upon a revaluation of assets. The PUCO invited
the Operating Companies to file a proposal to effectuate the PUCO's
recommendation and expressed a willingness to consider alternatives to its
recommendation. The PUCO stated in its order that failure by the Operating
Companies to follow the recommendation could result in a PUCO-ordered
write-down of assets for regulatory purposes. The PUCO approved a return on
equity of 12.59% and an overall rate of return of 10.06% for both Operating
Companies. However, the PUCO also indicated the authorized return could be
lowered by the PUCO if the Operating Companies do not implement the
recommendation.
- 2 -
The Operating Companies agree with the concept of accelerating the
recognition of costs and recovery of assets as such concept is consistent
with the strategic objective to become more competitive. However, the
Operating Companies believe that such acceleration must also be consistent
with the reduction of debt and the opportunity for Centerior Energy common
stock share owners to receive a fair return on their investment.
The PUCO rate order provided for recovery of all regulatory assets in the
approved prices and the Operating Companies continue to comply with the
provisions of Statement of Financial Accounting Standards (SFAS) 71. With
respect to the PUCO's asset revaluation recommendation and the strategic
objective to become more competitive, the Operating Companies are examining a
number of accelerated cost recognition and asset recovery plans. If there is
a change in the Operating Companies' evaluation of the competitive
environment, regulatory framework or other factors, or the PUCO significantly
reduces the value of the Operating Companies' assets for future regulatory
purposes, such actions could require the Operating Companies to record
material charges to earnings.
The PUCO also approved the Operating Companies' request for changes in the
straight-line rates of depreciation. An increase in the depreciation rate
for nuclear property from 2.5% for both Operating Companies to 2.88% for
Cleveland Electric and 2.95% for Toledo Edison will increase annual
depreciation expense approximately $13 million and $8 million, respectively,
and approximately $21 million for Centerior Energy. A reduction in the
composite depreciation rate for nonnuclear property from 3.34% to 3.23% for
Cleveland Electric and from 3.36% to 3.13% for Toledo Edison will decrease
annual depreciation expense by approximately $3 million and $2 million,
respectively, and by approximately $5 million for Centerior Energy.
(7) Write-down of Inactive Production Facilities
In the first quarter of 1996, Toledo Edison wrote down the net book value of
two inactive production facilities, $11.3 million, to "Other Income and
Deductions, Net" resulting in nonoperating losses for Toledo Edison and
Centerior Energy for that period. The net write-down was $7.2 million after
taxes, or, for Centerior Energy, $.05 per common share. The write-down
resulted from a decision that the facilities are no longer expected to
provide revenues.
(8) 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 1995 Form 10-K; "Part II, Item 5. Other Information" in this
Quarterly Report on Form 10-Q; and "Item 5. Other Events" in the Companies'
combined Current Report on Form 8-K dated April 11, 1996.
- 3 -
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
INCOME STATEMENT
(Unaudited)
(Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING REVENUES $ 605,255 $ 587,581
OPERATING EXPENSES
Fuel and Purchased Power 114,984 119,369
Other Operation and Maintenance 155,905 140,604
Generation Facilities Rental Expense, Net 39,853 39,852
Depreciation and Amortization 73,232 69,448
Taxes, Other Than Federal Income Taxes 83,952 81,956
Deferred Operating Expenses, Net 10,543 (16,064)
Federal Income Taxes 17,993 22,678
-------- --------
Total Operating Expenses 496,462 457,843
-------- --------
OPERATING INCOME 108,793 129,738
NONOPERATING INCOME (LOSS)
Allowance for Equity Funds Used
During Construction 911 1,375
Other Income and Deductions, Net (6,460) 2,302
Deferred Carrying Charges -- 11,572
Federal Income Taxes - Credit
(Expense) 1,915 (1,800)
-------- --------
Total Nonoperating Income (Loss) (3,634) 13,449
-------- --------
INCOME BEFORE INTEREST CHARGES 105,159 143,187
INTEREST CHARGES
Long-Term Debt 83,318 87,078
Short-Term Debt 1,876 2,982
Allowance for Borrowed Funds Used
During Construction (843) (690)
-------- --------
Net Interest Charges 84,351 89,370
-------- --------
INCOME AFTER INTEREST CHARGES 20,808 53,817
Preferred Dividend Requirements
of Subsidiaries 14,235 15,740
-------- --------
NET INCOME $ 6,573 $ 38,077
-------- --------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 148,028 148,032
-------- --------
EARNINGS PER COMMON SHARE $ .04 $ .26
-------- --------
<FN>
The accompanying notes as they relate to Centerior Energy are an
integral part of this statement.
</TABLE>
- 4 -
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
BALANCE SHEET
(Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility Plant In Service $ 9,812,444 $ 9,767,788
Accumulated Depreciation and
Amortization (3,110,606) (3,036,181)
----------- -----------
6,701,838 6,731,607
Construction Work In Progress 92,536 101,031
----------- -----------
6,794,374 6,832,638
Nuclear Fuel, Net of Amortization 222,484 199,707
Other Property, Less Accumulated
Depreciation 90,615 101,745
----------- -----------
7,107,473 7,134,090
CURRENT ASSETS
Cash and Temporary Cash Investments 179,114 179,038
Amounts Due from Customers and Others,
Net 228,868 223,228
Unbilled Revenues 90,344 100,344
Materials and Supplies, at Average Cost 115,269 119,507
Fossil Fuel Inventory, at Average Cost 27,377 30,663
Taxes Applicable to Succeeding Years 218,976 255,142
Other 18,184 18,562
----------- -----------
878,132 926,484
REGULATORY AND OTHER ASSETS
Amounts Due from Customers for Future
Federal Income
Taxes, Net 1,063,056 1,067,374
Unamortized Loss from Beaver Valley
Unit 2 Sale 95,083 96,206
Unamortized Loss on Reacquired Debt 87,115 88,893
Carrying Charges and Operating
Expenses 1,043,905 1,053,220
Nuclear Plant Decommissioning
Trusts 117,698 113,681
Other 151,156 163,156
----------- -----------
2,558,013 2,582,530
----------- -----------
$ 10,543,618 $ 10,643,104
----------- -----------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 1,930,855 $ 1,983,560
Preferred Stock
With Mandatory Redemption Provisions 205,646 220,440
Without Mandatory Redemption
Provisions 450,871 450,871
Long-Term Debt 3,725,698 3,733,892
----------- -----------
6,313,070 6,388,763
CURRENT LIABILITIES
Current Portion of Long-Term Debt
and Preferred Stock 213,221 234,771
Current Portion of Lease Obligations 85,295 94,653
Accounts Payable 206,132 152,909
Accrued Taxes 291,897 373,757
Accrued Interest 96,318 83,050
Dividends Declared 43,997 14,666
Other 67,669 73,328
----------- ----------
1,004,529 1,027,134
DEFERRED CREDITS AND OTHER LIABILITIES
Unamortized Investment Tax Credits 260,757 263,352
Accumulated Deferred Federal Income
Taxes 1,889,574 1,875,080
Unamortized Gain from Bruce Mansfield
Plant Sale 492,767 498,771
Accumulated Deferred Rents for Bruce
Mansfield Plant and Beaver Valley
Unit 2 136,138 145,393
Nuclear Fuel Lease Obligations 158,217 137,260
Retirement Benefits 179,855 178,579
Other 108,711 128,772
----------- -----------
3,226,019 3,227,207
COMMITMENTS AND CONTINGENCIES (Note 8)
----------- -----------
$10,543,618 $ 10,643,104
----------- -----------
<FN>
The accompanying notes as they relate to Centerior Energy are an
integral part of this statement.
</TABLE>
- 5 -
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 6,573 $38,077
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 73,232 69,448
Deferred Federal Income Tax 18,601 15,793
Unbilled Revenues 10,000 12,000
Deferred Fuel (2,016) 10,913
Deferred Carrying Charges -- (11,572)
Leased Nuclear Fuel Amortization 20,688 30,600
Deferred Operating Expenses, Net 10,543 (16,064)
Allowance for Equity Funds Used During Construction (911) (1,375)
Changes in Amounts Due from Customers and Others,
Net (5,640) (2,693)
Changes in Inventories 7,524 (7,136)
Changes in Accounts Payable 53,223 (23,399)
Changes in Working Capital Affecting Operations (37,707) (46,384)
Other Noncash Items (12,463) 10,270
-------- -------
Total Adjustments 135,074 40,401
-------- --------
Net Cash from Operating Activities 141,647 78,478
CASH FLOWS FROM FINANCING ACTIVITIES
Reacquired Common Stock (7) --
Maturities, Redemptions and Sinking Funds (44,550) (16,506)
Nuclear Fuel Lease Obligations (32,163) (11,043)
Common Stock Dividends Paid (29,606) (29,606)
Premiums, Discounts and Expenses (50) --
-------- --------
Net Cash from Financing Activities (106,376) (57,155)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (39,700) (35,173)
Interest Capitalized as Allowance for Borrowed
Funds Used During Construction (843) (690)
Contributions to Nuclear Plant Decommissioning
Trusts -- (5,897)
Other Cash Received (Applied) 5,348 (18,927)
-------- --------
Net Cash from Investing Activities (35,195) (60,687)
-------- --------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS 76 (39,364)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING
OF PERIOD 179,038 186,399
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $179,114 $147,035
======== ========
Other Payment Information:
Interest (net of amounts capitalized) $68,000 $63,000
Federal Income Taxes -- 27,600
<FN>
The accompanying notes as they relate to Centerior Energy are an integral
part of this statement.
</TABLE>
- 6 -
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 1995 Form
10-K. The information under "Capital Resources and Liquidity" remains
unchanged with the following exceptions:
During the first quarter of 1996, the Operating Companies redeemed or retired
various securities as discussed in Note 4.
In May 1996, Centerior Energy renewed a $125 million revolving credit
facility until May 8, 1997 as discussed in Note 5.
Additional first mortgage bonds may be issued by the Operating Companies
under their respective mortgages on the basis of property additions, cash or
refundable 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, 1996, Cleveland Electric and Toledo Edison would have been
permitted to issue approximately $392 million and $271 million of additional
first mortgage bonds, respectively.
Under its articles of incorporation, Toledo Edison cannot issue preferred
stock unless certain earnings coverage requirements are met. At March 31,
1996, Toledo Edison would have been permitted to issue approximately $54
million of additional preferred stock at an assumed dividend rate of 10.75%.
Results of Operations
Factors contributing to the 3% increase in 1996 first quarter operating
revenues are shown as follows:
Changes from
First Quarter 1995
Factors Operating Revenues
(millions)
Kilowatt-hour Sales Volume and Mix $14.4
Wholesale Revenues 3.5
Miscellaneous Revenues 5.5
Fuel Cost Recovery Revenues (5.7)
Total $17.7
Percentage changes between 1996 and 1995 first quarter billed electric
kilowatt-hour sales are summarized as follows:
Customer Categories % Change
Residential 6.5%
Commercial 3.1
Industrial (0.4)
Other 9.6
Total 3.3
- 7 -
First quarter 1996 total kilowatt-hour sales increased because of
weather-related demand and a 14.9% increase in wholesale sales (included in
the "Other" category). Residential and commercial sales increased because of
the colder weather in the first quarter of 1996 than in the first quarter of
1995, which increased heating-related demand. Weather-normalized residential
and commercial sales increased 1.9% and 1.7%, respectively, for the 1996
period. Industrial sales decreased slightly as less sales to large
automotive manufacturers were partially offset by increased sales to
petroleum refineries and the broad-based, smaller industrial customer group.
First quarter 1996 miscellaneous revenues increased from the 1995 amount
primarily because of 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 (Perry Unit 1) in 1996. This
scheduled outage began on January 27, 1996 and ended on April 10, 1996.
The decrease in first quarter 1996 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
1996 decreased about 8% for Cleveland Electric and increased about 0.5% for
Toledo Edison compared to the weighted average of the respective fuel cost
recovery factors used for the first quarter of 1995.
First quarter operating expenses in 1996 increased 8.4% from the 1995 amount.
The cessation of the Rate Stabilization Program deferrals and the
commencement of their amortization in December 1995 resulted in the decrease
in deferred operating expenses. Other operation and maintenance expenses
increased because of increases in nuclear power production expenses
(attributable to the Perry Unit 1 refueling and maintenance outage, and the
end of accelerated amortization of certain excess interim spent nuclear fuel
storage costs under the Rate Stabilization Program) and expenses related to
distribution operations and improvements in customer service and sales and
marketing efforts. Depreciation and amortization expenses increased
primarily because of the cessation of the accelerated amortization of
unrestricted investment tax credits under the Rate Stabilization Program,
which was reported in 1995 as a reduction of depreciation expense. Taxes,
other than federal income taxes, increased primarily because of increases in
payroll and property taxes, the latter resulting primarily from plant
additions. Lower fuel and purchased power expenses resulted from less
amortization of previously deferred fuel costs than the amount amortized in
1995. Federal income taxes decreased as a result of lower pretax operating
income.
A first quarter 1996 nonoperating loss resulted primarily from Toledo
Edison's write-down of two inactive production facilities as discussed in
Note 7. Also, the deferral of carrying charges related to the Rate
Stabilization Program ended in November 1995. The first quarter 1996 federal
income tax credit for nonoperating income (loss) increased accordingly.
First quarter 1996 interest charges and preferred dividend requirements
decreased because of the redemption of securities and refinancing at
favorable terms.
First quarter net income and earnings per common share in 1996 decreased
$31.5 million and $.22, respectively, from the 1995 amounts primarily because
of the negative impact ($35.2 million after taxes and $.24 per common share)
related to both the cessation of the Rate Stabilization Program deferrals and
accelerated amortizations, and the commencement of amortization of the
deferrals in December 1995. Recovery of both the costs no longer being
deferred and the amortization of the deferrals began in April 1996 with the
implementation of the price increases. First quarter 1996 earnings were also
negatively affected by Toledo Edison's write-down of two inactive production
facilities ($7.2 million after taxes and $.05 per share).
- 8 -
See Note 6 for a full discussion and analysis of the PUCO's April 11, 1996
rate order and applicable financial accounting implications.
- 9 -
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
INCOME STATEMENT
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING REVENUES $ 427,526 $ 410,383
OPERATING EXPENSES
Fuel and Purchased Power (1) 103,726 106,062
Other Operation and Maintenance 105,132 94,654
Generation Facilities Rental Expense, Net 13,892 13,892
Depreciation and Amortization 50,816 48,604
Taxes, Other Than Federal Income Taxes 60,010 57,688
Deferred Operating Expenses, Net 6,368 (10,893)
Federal Income Taxes 11,805 15,075
-------- --------
Total Operating Expenses 351,749 325,082
-------- --------
OPERATING INCOME 75,777 85,301
NONOPERATING INCOME
Allowance for Equity Funds Used During
Construction 498 1,088
Other Income and Deductions, Net 1,649 292
Deferred Carrying Charges -- 7,648
Federal Income Taxes - Credit (Expense) (752) (495)
-------- --------
Total Nonoperating Income 1,395 8,533
-------- --------
INCOME BEFORE INTEREST CHARGES 77,172 93,834
INTEREST CHARGES
Long-Term Debt 60,160 59,968
Short-Term Debt 692 651
Allowance for Borrowed Funds Used During
Construction (519) (413)
-------- --------
Net Interest Charges 60,333 60,206
-------- --------
NET INCOME 16,839 33,628
Preferred Dividend Requirements 10,032 10,957
-------- --------
EARNINGS AVAILABLE FOR COMMON STOCK $ 6,807 $ 22,671
-------- --------
(1) Includes purchased power expense for
purchases from Toledo Edison. $ 26,672 $ 23,396
<FN>
The accompanying notes as they relate to Cleveland Electric are an
integral part of this statement.
</TABLE>
- 10 -
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
BALANCE SHEET
(Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility Plant In Service $ 6,897,466 $ 6,871,468
Accumulated Depreciation and Amortization (2,144,455) (2,094,092)
----------- -----------
4,753,011 4,777,376
Construction Work In Progress 71,295 73,250
----------- ----------
4,824,306 4,850,626
Nuclear Fuel, Net of Amortization 133,401 121,966
Other Property, Less Accumulated Depreciation 55,317 58,299
----------- -----------
5,013,024 5,030,891
CURRENT ASSETS
Cash and Temporary Cash Investments 60,009 69,770
Amounts Due from Customers and Others, Net 154,661 152,339
Amounts Due from Affiliates 8,138 4,729
Unbilled Revenues 74,500 78,500
Materials and Supplies, at Average Cost 75,857 79,540
Fossil Fuel Inventory, at Average Cost 18,431 21,391
Taxes Applicable to Succeeding Years 157,416 184,099
Other 7,223 7,197
----------- -----------
556,235 597,565
REGULATORY AND OTHER ASSETS
Amounts Due from Customers for Future
Federal Income Taxes, Net 647,122 651,264
Unamortized Loss on Reacquired Debt 60,395 61,252
Carrying Charges and Operating Expenses 637,940 643,561
Nuclear Plant Decommissioning Trusts 63,700 61,497
Other 101,312 105,696
----------- -----------
1,510,469 1,523,270
----------- -----------
$ 7,079,728 $ 7,151,726
---------- -----------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 1,112,913 $ 1,126,762
Preferred Stock
With Mandatory Redemption Provisions 200,626 215,420
Without Mandatory Redemption Provisions 240,871 240,871
Long-Term Debt 2,666,066 2,665,981
----------- -----------
4,220,476 4,249,034
CURRENT LIABILITIES
Current Portion of Long-Term Debt and
Preferred Stock 175,674 176,474
Current Portion of Lease Obligations 49,495 54,634
Accounts Payable 116,796 89,038
Accounts and Notes Payable to Affiliates 54,172 63,961
Accrued Taxes 236,252 296,141
Accrued Interest 69,817 58,608
Dividends Declared 6,434 15,818
Other 39,322 40,766
----------- -----------
747,962 795,440
DEFERRED CREDITS AND OTHER LIABILITIES
Unamortized Investment Tax Credits 182,276 184,002
Accumulated Deferred Federal Income Taxes 1,308,489 1,298,260
Unamortized Gain from Bruce Mansfield Plant
Sale 306,941 310,678
Accumulated Deferred Rents for Bruce Mansfield
Plant 92,202 91,604
Nuclear Fuel Lease Obligations 95,299 85,569
Retirement Benefits 67,197 65,424
Other 58,886 71,715
----------- -----------
2,111,290 2,107,252
COMMITMENTS AND CONTINGENCIES (Note 8)
----------- -----------
$ 7,079,728 $ 7,151,726
----------- -----------
<FN>
The accompanying notes as they relate to Cleveland Electric are an
integral part of this statement.
</TABLE>
- 11 -
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1996 1995
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 16,839 $33,628
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 50,816 48,604
Deferred Federal Income Tax 14,388 11,168
Unbilled Revenues 4,000 9,000
Deferred Fuel (2,639) 11,305
Deferred Carrying Charges -- (7,648)
Leased Nuclear Fuel Amortization 11,339 17,303
Deferred Operating Expenses, Net 6,368 (10,893)
Allowance for Equity Funds Used During
Construction (498) (1,088)
Changes in Amounts Due from Customers and Others,
Net (2,322) (142)
Changes in Inventories 6,643 (6,443)
Changes in Accounts Payable 27,758 (18,841)
Changes in Working Capital Affecting
Operations (31,665) (47,375)
Other Noncash Items (9,791) 2,668
-------- --------
Total Adjustments 74,397 7,618
-------- --------
Net Cash from Operating Activities 91,236 41,246
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Payable to Affiliates (5,000) (24,800)
Maturities, Redemptions and Sinking Funds (15,800) (11,877)
Nuclear Fuel Lease Obligations (18,194) (6,789)
Dividends Paid (39,865) (12,911)
-------- --------
Net Cash from Financing Activities (78,859) (56,377)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (25,105) (30,169)
Interest Capitalized as Allowance for Borrowed
Funds Used During Construction (519) (413)
Contributions to Nuclear Plant Decommissioning
Trusts -- (3,204)
Other Cash Received (Applied) 3,486 (11,644)
-------- --------
Net Cash from Investing Activities (22,138) (45,430)
-------- --------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (9,761) (60,561)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING
OF PERIOD 69,770 65,643
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF
PERIOD $60,009 $5,082
======== ========
Other Payment Information:
Interest (net of amounts capitalized) $47,000 $41,000
Federal Income Taxes -- 27,600
<FN>
The accompanying notes as they relate to Cleveland Electric are an integral
part of this statement.
</TABLE>
- 12 -
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 1995 Form
10-K. The information under "Capital Resources and Liquidity" remains
unchanged with the following exceptions:
During the first quarter of 1996, Cleveland Electric redeemed or retired
various securities as discussed in Note 4.
Cleveland Electric is a party to a $125 million revolving credit facility
which Centerior Energy renewed in May 1996 until May 8, 1997 as discussed in
Note 5. Centerior Energy plans to transfer any of its borrowed funds under
the facility to the Operating Companies.
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, 1996,
Cleveland Electric would have been permitted to issue approximately
$392 million of additional first mortgage bonds.
Results of Operations
Factors contributing to the 4.2% increase in 1996 first quarter operating
revenues are shown as follows:
Changes from
First Quarter 1995
Factors Operating Revenues
(millions)
Kilowatt-hour Sales Volume and Mix $13.1
Wholesale Revenues 3.7
Miscellaneous Revenues 6.2
Fuel Cost Recovery Revenues (5.9)
Total $17.1
Percentage changes between 1996 and 1995 first quarter billed electric
kilowatt-hour sales are summarized as follows:
Customer Categories % Change
Residential 6.4%
Commercial 2.4
Industrial (1.3)
Other 3.0
Total 2.0
First quarter 1996 total kilowatt-hour sales increased because of
weather-related demand and a 6.4% increase in wholesale sales (included in
the "Other" category). Residential and commercial sales increased because of
the colder weather in the first quarter of 1996 than in the first quarter of
1995, which increased heating-related demand. Weather-normalized residential
and commercial sales increased 1.8% and 1.1%, respectively, for the 1996
period. Industrial sales decreased primarily because of less sales to large
automotive manufacturers and the broad-based, smaller industrial customer
group.
- 13 -
First quarter 1996 miscellaneous revenues increased from the 1995 amount
primarily because of 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 (Perry Unit 1) in 1996. This
scheduled outage began on January 27, 1996 and ended on April 10, 1996.
The decrease in fuel cost recovery revenues included in customer bills
resulted from an 8% decrease in the weighted average of the fuel cost
recovery factors used in the first quarter of 1996 to calculate these
revenues compared to the 1995 first quarter average.
First quarter operating expenses in 1996 increased 8.2% from the 1995 amount.
The cessation of the Rate Stabilization Program deferrals and the
commencement of their amortization in December 1995 resulted in the decrease
in deferred operating expenses. Other operation and maintenance expenses
increased because of increases in nuclear power production expenses
(attributable to the Perry Unit 1 refueling and maintenance outage, and the
end of accelerated amortization of certain excess interim spent nuclear fuel
storage costs under the Rate Stabilization Program) and expenses related to
distribution operations and improvements in customer service and sales and
marketing efforts. Depreciation and amortization expenses increased
primarily because of the cessation of the accelerated amortization of
unrestricted investment tax credits under the Rate Stabilization Program,
which was reported in 1995 as a reduction of depreciation expense. Taxes,
other than federal income taxes, increased primarily because of increases in
payroll and property taxes, the latter resulting primarily from plant
additions. Lower fuel and purchased power expenses resulted from less
amortization of previously deferred fuel costs than the amount amortized in
1995. Federal income taxes decreased as a result of lower pretax operating
income.
Nonoperating income decreased because the deferral of carrying charges
related to the Rate Stabilization Program ended in November 1995. However,
an increase in other income, primarily the result of a legal settlement,
partially offset the nonoperating income decrease.
First quarter earnings available for common stock in 1996 decreased $15.9
million from the 1995 amount primarily because of the negative impact ($22.5
million after taxes) related to both the cessation of the Rate Stabilization
Program deferrals and accelerated amortizations, and the commencement of the
amortization of the deferrals in December 1995. Recovery of both the costs
no longer being deferred and the amortization of the deferrals began in April
1996 with the implementation of the price increase.
See Note 6 for a full discussion and analysis of the PUCO's April 11, 1996
rate order and applicable financial accounting implications.
- 14 -
THE TOLEDO EDISON COMPANY
INCOME STATEMENT
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING REVENUES (1) $ 210,793 $ 206,384
OPERATING EXPENSES
Fuel and Purchased Power 38,768 37,491
Other Operation and Maintenance 56,519 52,061
Generation Facilities Rental Expense, Net 25,961 25,960
Depreciation and Amortization 22,416 20,844
Taxes, Other Than Federal Income Taxes 23,853 24,149
Deferred Operating Expenses, Net 4,175 (5,171)
Federal Income Taxes 6,227 7,655
-------- --------
Total Operating Expenses 177,919 162,989
-------- --------
OPERATING INCOME 32,874 43,395
NONOPERATING INCOME (LOSS)
Allowance for Equity Funds Used During
Construction 413 287
Other Income and Deductions, Net (9,153) 2,018
Deferred Carrying Charges -- 3,924
Federal Income Taxes - Credit (Expense) 3,195 (781)
-------- --------
Total Nonoperating Income (Loss) (5,545) 5,448
-------- --------
INCOME BEFORE INTEREST CHARGES 27,329 48,843
INTEREST CHARGES
Long-Term Debt 23,159 27,110
Short-Term Debt 1,218 2,500
Allowance for Borrowed Funds Used During
Construction (325) (277)
-------- --------
Net Interest Charges 24,052 29,333
-------- --------
NET INCOME 3,277 19,510
Preferred Dividend Requirements 4,204 4,783
-------- --------
EARNINGS (LOSS) AVAILABLE FOR COMMON STOCK $ (927) $ 14,727
-------- --------
(1) Includes revenues from bulk power sales
to Cleveland Electric. $ 26,672 $ 23,396
<FN>
The accompanying notes as they relate to Toledo Edison are an integral part
of this statement.
</TABLE>
- 15 -
THE TOLEDO EDISON COMPANY
BALANCE SHEET
(Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility Plant In Service $ 2,914,978 $ 2,896,320
Accumulated Depreciation and Amortization (966,152) (942,088)
----------- -----------
1,948,826 1,954,232
Construction Work In Progress 21,242 27,781
----------- -----------
1,970,068 1,982,013
Nuclear Fuel, Net of Amortization 89,083 77,741
Other Property, Less Accumulated Depreciation 7,420 19,555
----------- -----------
2,066,571 2,079,309
CURRENT ASSETS
Cash and Temporary Cash Investments 79,825 93,669
Amounts Due from Customers and Others, Net 70,293 68,077
Amounts Due from Affiliates 18,714 18,905
Unbilled Revenues 15,844 21,844
Materials and Supplies, at Average Cost 39,413 39,967
Fossil Fuel Inventory, at Average Cost 8,946 9,273
Taxes Applicable to Succeeding Years 61,560 71,044
Other 4,413 4,315
-------- ---------
299,008 327,094
REGULATORY AND OTHER ASSETS
Amounts Due from Customers for Future
Federal Income Taxes, Net 416,174 416,351
Unamortized Loss from Beaver Valley
Unit 2 Sale 95,083 96,206
Unamortized Loss on Reacquired Debt 26,720 27,640
Carrying Charges and Operating Expenses 405,965 409,659
Nuclear Plant Decommissioning Trusts 53,998 52,185
Other 62,712 65,345
----------- -----------
1,060,652 1,067,386
----------- -----------
$ 3,426,231 $ 3,473,789
----------- -----------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 761,928 $ 762,877
Preferred Stock
With Mandatory Redemption Provisions 5,020 5,020
Without Mandatory Redemption Provisions 210,000 210,000
Long-Term Debt 1,059,632 1,067,603
----------- -----------
2,036,580 2,045,500
CURRENT LIABILITIES
Current Portion of Long-Term Debt and
Preferred Stock 37,547 58,297
Current Portion of Lease Obligations 35,800 40,019
Accounts Payable 88,678 56,233
Accounts and Notes Payable to Affiliates 32,314 53,245
Accrued Taxes 55,722 78,178
Accrued Interest 26,311 24,250
Other 16,708 18,607
----------- -----------
293,080 328,829
DEFERRED CREDITS AND OTHER LIABILITIES
Unamortized Investment Tax Credits 78,481 79,350
Accumulated Deferred Federal Income Taxes 577,113 573,035
Unamortized Gain from Bruce Mansfield Plant
Sale 185,827 188,093
Accumulated Deferred Rents for Bruce
Mansfield Plant and Beaver Valley Unit 2 43,937 53,789
Nuclear Fuel Lease Obligations 62,632 51,691
Retirement Benefits 102,988 103,060
Other 45,593 50,442
----------- -----------
1,096,571 1,099,460
COMMITMENTS AND CONTINGENCIES (Note 8)
----------- -----------
$ 3,426,231 $ 3,473,789
----------- -----------
<FN>
The accompanying notes as they relate to Toledo Edison are an integral
part of this statement.
</TABLE>
- 16 -
THE TOLEDO EDISON COMPANY
CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 3,277 $19,510
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 22,416 20,844
Deferred Federal Income Tax 4,403 4,623
Unbilled Revenues 6,000 3,000
Deferred Fuel 623 (391)
Deferred Carrying Charges -- (3,924)
Leased Nuclear Fuel Amortization 9,349 13,297
Deferred Operating Expenses, Net 4,175 (5,171)
Allowance for Equity Funds Used During
Construction (413) (287)
Changes in Amounts Due from Customers and
Others, Net (2,216) (2,313)
Changes in Inventories 881 (693)
Changes in Accounts Payable 32,445 343
Changes in Working Capital Affecting
Operations (12,698) (3,127)
Other Noncash Items (2,672) 7,602
-------- --------
Total Adjustments 62,293 33,803
-------- --------
Net Cash from Operating Activities 65,570 53,313
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Payable to Affiliates (20,950) --
Maturities, Redemptions and Sinking Funds (28,750) (3,954)
Nuclear Fuel Lease Obligations (13,969) (4,254)
Dividends Paid (4,226) (4,806)
Premiums, Discounts and Expenses (50) --
-------- --------
Net Cash from Financing Activities (67,945) (13,014)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (14,595) (5,004)
Interest Capitalized as Allowance for Borrowed
Funds Used
During Construction (325) (277)
Loans to Affiliates -- (33,300)
Contributions to Nuclear Plant Decommissioning
Trusts -- (2,693)
Other Cash Received (Applied) 3,451 (5,212)
-------- --------
Net Cash from Investing Activities (11,469) (46,486)
-------- --------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (13,844) (6,187)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING
OF PERIOD 93,669 87,800
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF
PERIOD $79,825 $81,613
======== ========
Other Payment Information:
Interest (net of amounts capitalized) $21,000 $22,000
Federal Income Taxes -- --
<FN>
The accompanying notes as they relate to Toledo Edison are an integral
part of this statement.
</TABLE>
- 17 -
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 1995 Form
10-K. The information under "Capital Resources and Liquidity" remains
unchanged with the following exceptions:
During the first quarter of 1996, Toledo Edison redeemed or retired debt
securities as discussed in Note 4.
Toledo Edison is a party to a $125 million revolving credit facility which
Centerior Energy renewed in May 1996 until May 8, 1997 as discussed in Note
5. Centerior Energy plans to transfer any of its borrowed funds under the
facility to the Operating Companies.
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, 1996, Toledo
Edison would have been permitted to issue approximately $271 million of
additional first mortgage bonds.
Under its articles of incorporation, Toledo Edison cannot issue preferred
stock unless certain earnings coverage requirements are met. At March 31,
1996, Toledo Edison would have been permitted to issue approximately $54
million of additional preferred stock at an assumed dividend rate of 10.75%.
Results of Operations
Factors contributing to the 2.1% increase in 1996 first quarter operating
revenues are shown as follows:
Changes from
First Quarter 1995
Factors Operating Revenues
(millions)
Kilowatt-hour Sales Volume and Mix $ 1.2
Wholesale Revenues 3.1
Fuel Cost Recovery Revenues 0.2
Miscellaneous Revenues (0.1)
Total $ 4.4
Percentage changes between 1996 and 1995 first quarter billed electric
kilowatt-hour sales are summarized as follows:
Customer Categories % Change
Residential 6.8%
Commercial 5.4
Industrial 1.5
Other 9.1
Total 5.2
- 18 -
First quarter 1996 total kilowatt-hour sales increased because of
weather-related demand and a 10.5% increase in wholesale sales (included in
the "Other" category). Residential and commercial sales increased because of
the colder weather in the first quarter of 1996 than in the first quarter of
1995, which increased heating-related demand. Weather-normalized residential
and commercial sales increased on the strength of a 3.5% increase in sales to
nonautomotive industrial customers which entirely offset a 4.3% decrease in
sales to large automotive manufacturers.
The increase in fuel cost recovery revenues included in customer bills
resulted from a 0.5% increase in the weighted average of the fuel cost
recovery factors used in the first quarter of 1996 to calculate these
revenues compared to the 1995 first quarter average.
First quarter operating expenses in 1996 increased 9.2% from the 1995 amount.
The cessation of the Rate Stabilization Program deferrals and the
commencement of their amortization in December 1995 resulted in the decrease
in deferred operating expenses. Other operation and maintenance expenses
increased because of increases in nuclear power production expenses
(attributable to a refueling and maintenance outage, and the end of
accelerated amortization of certain excess interim spent nuclear fuel storage
costs under the Rate Stabilization Program) and expenses related to
improvements in customer service and sales and marketing efforts.
Depreciation and amortization expenses increased primarily because of the
cessation of the accelerated amortization of unrestricted investment tax
credits under the Rate Stabilization Program, which was reported in 1995 as a
reduction of depreciation expense. Fuel and purchased power expenses
increased as increased purchased power expense was partially offset by lower
fuel expense. Federal income taxes decreased as a result of lower pretax
operating income.
A first quarter 1996 nonoperating loss resulted primarily from the write-down
of two inactive production facilities as discussed in Note 7. Also, the
deferral of carrying charges related to the Rate Stabilization Program ended
in November 1995. The first quarter 1996 federal income tax credit for
nonoperating income (loss) increased accordingly.
First quarter 1996 interest charges and preferred dividend requirements
decreased because of the redemption of securities and refinancing at
favorable terms.
The first quarter 1996 loss available for common stock in 1996 of $0.9
million resulted from the write-down of two inactive production facilities
and the negative impact ($12.7 million after taxes) related to both the
cessation of the Rate Stabilization Program deferrals and accelerated
amortizations, and the commencement of the amortization of the deferrals in
December 1995. Recovery of both the costs no longer being deferred and the
amortization of the deferrals began in April 1996 with the implementation of
the price increase.
See Note 6 for a full discussion and analysis of the PUCO's April 11, 1996
rate order and applicable financial accounting implications.
- 19 -
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
23, 1996.
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 12, 1996, and all such nominees were
elected.
c. Four matters were submitted to share owners for a vote at the
Annual Meeting.
Issue 1 was the election of 11 directors of Centerior Energy. The
vote on this issue was as follows:
Broker
Nominee For Withheld Non-Vote
R. P. Anderson 112,892,522 6,389,679 5,824,340
A. C. Bersticker 113,182,869 6,099,332 5,824,340
T. A. Commes 113,283,752 5,998,449 5,824,340
W. F. Conway 113,009,852 6,272,349 5,824,340
W. R. Embry 112,873,465 6,408,736 5,824,340
R. J. Farling 112,784,475 6,497,726 5,824,340
R. A. Miller 112,728,966 6,553,234 5,824,340
F. E. Mosier 112,985,605 6,296,596 5,824,340
Sr. M. M. Reinhard 112,770,614 6,511,587 5,824,340
R. C. Savage 113,145,611 6,136,589 5,824,340
W. J. Williams 113,001,165 6,281,035 5,824,340
Issue 2 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 1996. The
vote on this issue was as follows:
Broker
For Against Abstain Non-Vote
115,197,310 2,572,872 1,512,018 5,824,340
Issue 3 was a share owner proposal to prevent the named proxy holder
from having discretionary power of voting on any issue where no
direction is given by the share owner. The vote on this issue was as
follows:
Broker
For Against Abstain Non-Vote
20,745,772 79,082,908 4,008,360 21,269,500
Issue 4 was a share owner proposal to rescind the Centerior Energy
Equity Compensation Plan. The vote on this issue was as follows:
Broker
For Against Abstain Non-Vote
19,119,248 81,247,230 3,470,562 21,269,500
- 20 -
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 23, 1996.
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 23, 1996.
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.
Item 5. Other Information
1. Retail Wheeling Bill
For background relating to this topic, see "Item 7. Management's
Financial Analysis--Outlook--Competition" in the Companies' Annual
Report on Form 10-K for the year ended December 31, 1995.
On March 21, 1996, House Bill 653 was introduced in the Ohio House of
Representatives by Representative Ronald Amstutz (R-Wooster) which, if
enacted, would provide for the deregulation of the electric utility
industry in Ohio. H.B. 653 includes provisions allowing customers to
choose their electricity provider, ensuring that all customers have
access to alternative suppliers, and removing electric services except
distribution services from regulation. H.B. 653 does not provide
for the recovery of stranded investment. H.B. 653 is expected to get
hearings in the House Public Utilities Committee, but the Companies do
not expect the bill to pass this legislative session which runs
through the end of the year.
2. FERC Open-Access Transmission
For background relating to this topic, see "Item 7. Management's
Financial Analysis--Outlook--Competition" in the Companies' Annual
Report on Form 10-K for the year ended December 31, 1995.
On April 24, 1996, the Federal Energy Regulatory Commission ("FERC")
adopted final rules as to the requirement that all electric utilities
provide transmission service to others on the same rates, terms and
conditions under which they utilize their transmission system for
- 21 -
their own use. These rules permit utilities to seek recovery of
legitimate, prudent stranded costs. The Operating Companies' open-
access transmission tariffs are currently pending before the FERC.
The Operating Companies are reviewing the final rules to determine
their impact on the pending tariffs.
3. Cost Reduction Efforts
On May 13, 1996, the Companies announced their intention to reduce the
number of employees from 6,800 at January 1, 1996 to 6,300 by December
31, 1996. The Companies also announced plans to decommission two
older fossil-fueled generating units at the Acme Station in Toledo and
the C-Plant in Ashtabula and to reduce generating activities at three
other plants. These steps are part of an ongoing effort to reduce
annual operating costs and will result in annualized savings of about
$18 million.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
See Exhibit Index following.
b. Reports on Form 8-K
During the quarter ended March 31, 1996, Centerior Energy, Cleveland
Electric and Toledo Edison did not file any Current Reports on Form
8-K.
- 22 -
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 14, 1996
- 23 -
EXHIBIT INDEX
The following exhibits are submitted herewith:
CENTERIOR ENERGY EXHIBIT
Exhibit Number Description
27(a) Financial Data Schedule for the period ended
March 31, 1996.
CLEVELAND ELECTRIC EXHIBITS
Exhibit Number Description
27(b) Financial Data Schedule for the period ended
March 31, 1996.
TOLEDO EDISON EXHIBITS
Exhibit Number Description
27(c) Financial Data Schedule for the period ended
March 31, 1996.
- 24 -
<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>
<CIK> 0000774197
<NAME> CENTERIOR ENERGY CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,794,374
<OTHER-PROPERTY-AND-INVEST> 431,198
<TOTAL-CURRENT-ASSETS> 878,132
<TOTAL-DEFERRED-CHARGES> 2,439,914
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 10,543,618
<COMMON> 2,319,825
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> (388,970)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,930,855
205,646
450,871
<LONG-TERM-DEBT-NET> 3,725,698
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 181,842
31,379
<CAPITAL-LEASE-OBLIGATIONS> 158,217
<LEASES-CURRENT> 85,295
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,773,815
<TOT-CAPITALIZATION-AND-LIAB> 10,543,618
<GROSS-OPERATING-REVENUE> 605,255
<INCOME-TAX-EXPENSE> 17,993
<OTHER-OPERATING-EXPENSES> 478,469
<TOTAL-OPERATING-EXPENSES> 496,462
<OPERATING-INCOME-LOSS> 108,793
<OTHER-INCOME-NET> (3,634)
<INCOME-BEFORE-INTEREST-EXPEN> 105,159
<TOTAL-INTEREST-EXPENSE> 84,351
<NET-INCOME> 6,573
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 59,211
<TOTAL-INTEREST-ON-BONDS> 303,505
<CASH-FLOW-OPERATIONS> 141,647
<EPS-PRIMARY> .04
<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> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,824,306
<OTHER-PROPERTY-AND-INVEST> 252,468
<TOTAL-CURRENT-ASSETS> 556,235
<TOTAL-DEFERRED-CHARGES> 1,446,719
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 7,079,728
<COMMON> 1,241,309
<CAPITAL-SURPLUS-PAID-IN> 78,624
<RETAINED-EARNINGS> (207,020)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,112,913
200,626
240,871
<LONG-TERM-DEBT-NET> 2,666,066
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 145,960
29,714
<CAPITAL-LEASE-OBLIGATIONS> 95,299
<LEASES-CURRENT> 49,495
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,538,784
<TOT-CAPITALIZATION-AND-LIAB> 7,079,728
<GROSS-OPERATING-REVENUE> 427,526
<INCOME-TAX-EXPENSE> 11,805
<OTHER-OPERATING-EXPENSES> 339,944
<TOTAL-OPERATING-EXPENSES> 351,749
<OPERATING-INCOME-LOSS> 75,777
<OTHER-INCOME-NET> 1,395
<INCOME-BEFORE-INTEREST-EXPEN> 77,172
<TOTAL-INTEREST-EXPENSE> 60,333
<NET-INCOME> 16,839
10,032
<EARNINGS-AVAILABLE-FOR-COMM> 6,807
<COMMON-STOCK-DIVIDENDS> 29,606
<TOTAL-INTEREST-ON-BONDS> 231,195
<CASH-FLOW-OPERATIONS> 91,236
<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> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,970,068
<OTHER-PROPERTY-AND-INVEST> 150,852
<TOTAL-CURRENT-ASSETS> 299,008
<TOTAL-DEFERRED-CHARGES> 1,006,303
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,426,231
<COMMON> 195,687
<CAPITAL-SURPLUS-PAID-IN> 602,116
<RETAINED-EARNINGS> (35,875)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 761,928
5,020
210,000
<LONG-TERM-DEBT-NET> 1,059,632
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 35,882
1,665
<CAPITAL-LEASE-OBLIGATIONS> 62,632
<LEASES-CURRENT> 35,800
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,253,672
<TOT-CAPITALIZATION-AND-LIAB> 3,426,231
<GROSS-OPERATING-REVENUE> 210,793
<INCOME-TAX-EXPENSE> 6,227
<OTHER-OPERATING-EXPENSES> 171,692
<TOTAL-OPERATING-EXPENSES> 177,919
<OPERATING-INCOME-LOSS> 32,874
<OTHER-INCOME-NET> (5,545)
<INCOME-BEFORE-INTEREST-EXPEN> 27,329
<TOTAL-INTEREST-EXPENSE> 24,052
<NET-INCOME> 3,277
4,204
<EARNINGS-AVAILABLE-FOR-COMM> (927)
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 72,310
<CASH-FLOW-OPERATIONS> 65,570
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
