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, 1997
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission 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)
c/o Centerior Energy Corporation
6200 Oak Tree Boulevard
Independence, Ohio 44131
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 9, 1997, there were 148,025,928 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.
Centerior Energy has made forward-looking statements in this Form 10-Q
which statements are subject to risks and uncertainties, including the
impact on the Companies if: (1) competitive pressure in the electric
utility industry increases significantly;(2) state and federal
regulatory initiatives are implemented that increase competition,
threaten costs and investment recovery and impact dividends or rate
structures; or (3) general economic conditions, either nationally or in
the area in which the combined company will be doing business are less
favorable than expected.
-i-
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Centerior Energy Corporation and Subsidiaries
The Cleveland Electric Illuminating Company and Subsidiary
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 and Subsidiary
Income Statement 9
Balance Sheet 10
Cash Flows 11
Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
The Toledo Edison Company
Income Statement 14
Balance Sheet 15
Cash Flows 16
Management's Discussion and Analysis of Financial 17
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security-Holders 19
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Exhibit Index 24
-ii-
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY,
AND THE TOLEDO EDISON COMPANY
(UNAUDITED)
NOTES TO THE FINANCIAL STATEMENTS
(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, 1997 and
results of operations and cash flows for the three months ended March
31, 1997 and 1996 have been included. All such adjustments were normal
recurring adjustments, except for the write-down of inactive production
facilities in the first quarter of 1996 discussed in Note 6.
A new Statement of Position issued by the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants,
Inc. effective January 1, 1997 provides guidance on the recognition and
disclosure of environmental remediation liabilities. The Companies'
adoption of this statement in 1997 did not materially affect their
results of operations or financial positions.
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, 1996 (1996
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 to fund 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. Cleveland Electric has since 1993 declared and paid preferred
and common stock dividends out of appropriated current net income
included in retained earnings. At the times of such declarations and
payments, Cleveland Electric had a deficit in its retained earnings.
From 1993 through 1996, Toledo Edison declared and paid preferred stock
dividends out of appropriated current net income included in retained
earnings. At the times of such declarations and payments, Toledo Edison
had a deficit in its retained earnings from 1993 through November 1996.
Toledo Edison also has a provision in its mortgage applicable to
approximately $94 million of outstanding first mortgage bonds ($31
million of which mature in August 1997) that requires common stock
dividends to be paid out of its total balance of retained earnings. At
March 31, 1997, Toledo Edison's total retained earnings were $10
million. At March 31, 1997, Cleveland Electric and Toledo Edison had
$120.4 million and $227.7 million, respectively, of appropriated
retained earnings for the payment of dividends. See "Management's
Financial Analysis -- Capital Resources and Liquidity-Liquidity"
contained in Item 7 of the 1996 Form 10-K for a discussion of a Federal
Energy Regulatory Commission (FERC) audit issue regarding the
declaration and payment of dividends.
(3) Common Stock Dividends
Cash dividends per common share declared by Centerior Energy during the
three months ended March 31, 1997 and 1996 were as follows:
1997 1996
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, 1997 and 1996 were as follows:
1997 1996
(millions)
Paid in February $29.6 $29.6
Toledo Edison did not declare any common stock dividends during the
three months ended March 31, 1997 and 1996.
(4) Financing Activity
During the three months ended March 31, 1997, the Operating Companies
redeemed preferred stock and debt securities as follows:
Cleveland Electric
Mandatory redemptions consisted of $15 million of Serial Preferred
Stock, $9.125 Series N.
Toledo Edison
Mandatory redemptions consisted of $8 million of notes secured by
subordinated mortgage collateral.
(5) Short-Term Borrowing Arrangements
In May 1997, Centerior Energy renewed a $125 million revolving credit
facility until May 7, 1998 on the same terms as the existing agreement.
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. There have not been any borrowings under
the facility.
(6) 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 were
no longer expected to provide revenues.
(7) 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 1996 Form 10-K and "Part II, Item 5. Other
Information" in this Quarterly Report on Form 10-Q.
In September 1996, Centerior Energy and Ohio Edison Company (Ohio
Edison) entered into an agreement and plan of merger to form a new
holding company, FirstEnergy Corp. (FirstEnergy). On March 27, 1997,
Centerior Energy and Ohio Edison common stock share owners approved the
merger. Various aspects of the merger are subject to the approval of
the FERC and other regulatory authorities.
FirstEnergy plans to account for the merger as a purchase in accordance
with generally accepted accounting principles. If FirstEnergy elects to
apply, or "push down", the effects of purchase accounting to the
financial statements of the Operating Companies, Cleveland Electric
would record adjustments to: (1) reduce the carrying value of its
nuclear generating plant by $880 million to fair value; (2) recognize
goodwill of $675 million; (3) reduce its common stock equity by $258
million; (4) reset its retained earnings to zero; and (5) reduce its
related deferred federal income tax liability by $308 million; and
Toledo Edison would record adjustments to: (1) reduce the carrying value
of its nuclear generating plant by $370 million to fair value; (2)
recognize goodwill of $307 million; (3) reduce its common stock equity
by $124 million; (4) reset its retained earnings to zero; and (5) reduce
its related deferred federal income tax liability by $130 million.
These amounts reflect FirstEnergy's estimates of the pro forma
adjustments for the Operating Companies as of December 31, 1996. The
actual adjustments to be recorded could be materially different from the
estimates. FirstEnergy has not decided whether to push down the effects
of purchase accounting to the financial statements of the Operating
Companies if the Ohio Edison-Centerior Energy merger is completed.
<TABLE>
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
INCOME STATEMENT
(Unaudited)
(Thousands, Except Per Share Amounts)
Three Months Ended
March 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING REVENUES $ 611,608 $ 605,255
OPERATING EXPENSES
Fuel and Purchased Power 121,831 114,984
Other Operation and Maintenance 142,584 155,905
Generation Facilities Rental Expense, Net 39,853 39,853
Depreciation and Amortization 77,111 73,232
Taxes, Other Than Federal Income Taxes 79,614 83,952
Amortization of Deferred Operating Expenses, Net 10,858 10,543
Federal Income Taxes 27,366 17,993
-------- --------
Total Operating Expenses 499,217 496,462
-------- --------
OPERATING INCOME 112,391 108,793
NONOPERATING INCOME (LOSS)
Allowance for Equity Funds Used During Construction 658 911
Other Income and Deductions, Net (5,827) (6,460)
Federal Income Taxes - Credit (Expense) (30) 1,915
-------- --------
Total Nonoperating Income (Loss) (5,199) (3,634)
-------- --------
INCOME BEFORE INTEREST CHARGES 107,192 105,159
INTEREST CHARGES
Long-Term Debt 76,503 83,318
Short-Term Debt 1,648 1,876
Allowance for Borrowed Funds Used During Construction (563) (843)
-------- --------
Net Interest Charges 77,588 84,351
-------- --------
INCOME AFTER INTEREST CHARGES 29,604 20,808
Preferred Dividend Requirements of Subsidiaries 13,507 14,235
-------- --------
NET INCOME $ 16,097 $ 6,573
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 148,026 148,028
======== ========
EARNINGS PER COMMON SHARE $ .11 $ .04
======== ========
<FN>
The accompanying notes as they relate to Centerior Energy are an integral part of this statement.
</TABLE>
<TABLE>
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
BALANCE SHEET
(Thousands)
March 31, December 31,
1997 1996
(Unaudited)
----------- -----------
ASSETS
PROPERTY, PLANT AND EQUIPMENT
<S> <C> <C>
Utility Plant In Service $ 9,893,144 $ 9,867,193
Accumulated Depreciation and Amortization (3,352,310) (3,272,158)
----------- -----------
6,540,834 6,595,035
Construction Work In Progress 90,505 78,669
----------- -----------
6,631,339 6,673,704
Nuclear Fuel, Net of Amortization 168,125 189,148
Other Property, Less Accumulated Depreciation 87,142 89,291
----------- -----------
6,886,606 6,952,143
CURRENT ASSETS
Cash and Temporary Cash Investments 144,907 138,068
Amounts Due from Customers and Others, Net 165,367 212,680
Materials and Supplies, at Average Cost
Owned 82,906 84,846
Under Consignment 34,492 34,039
Taxes Applicable to Succeeding Years 215,913 249,961
Other 21,339 24,283
----------- -----------
664,924 743,877
REGULATORY AND OTHER ASSETS
Regulatory Assets 2,262,719 2,277,083
Nuclear Plant Decommissioning Trusts 152,885 139,667
Investment in Partnership 25,327 23,245
Other 82,336 74,187
----------- -----------
2,523,267 2,514,182
----------- -----------
$ 10,074,797 $ 10,210,202
=========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 1,943,536 $ 1,986,855
Preferred Stock
With Mandatory Redemption Provisions 189,473 189,473
Without Mandatory Redemption Provisions 448,325 448,325
Long-Term Debt 3,444,352 3,444,241
----------- -----------
6,025,686 6,068,894
CURRENT LIABILITIES
Current Portion of Long-Term Debt and Preferred Stock 173,239 196,033
Current Portion of Lease Obligations 84,371 87,836
Accounts Payable 100,518 138,005
Accrued Taxes 321,153 389,014
Accrued Interest 85,245 74,826
Dividends Declared 43,336 13,977
Other 64,934 72,653
----------- -----------
872,796 972,344
DEFERRED CREDITS AND OTHER LIABILITIES
Unamortized Investment Tax Credits 248,592 251,547
Accumulated Deferred Federal Income Taxes 1,887,576 1,876,924
Unamortized Gain from Bruce Mansfield Plant Sale 468,753 474,757
Accumulated Deferred Rents for Bruce Mansfield Plant
and Beaver Valley Unit 2 138,026 137,956
Nuclear Fuel Lease Obligations 106,860 122,655
Retirement Benefits 184,704 183,571
Other 141,804 121,554
----------- -----------
3,176,315 3,168,964
COMMITMENTS AND CONTINGENCIES (Note 7)
----------- -----------
$ 10,074,797 $ 10,210,202
=========== ===========
<FN>
The accompanying notes as they relate to Centerior Energy are an integral part of this
statement.
</TABLE>
<TABLE>
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
CASH FLOWS
(Unaudited)
(Thousands)
Three Months Ended
March 31,
--------------------
1997 1996
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $16,097 $6,573
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 77,111 73,232
Deferred Federal Income Taxes 10,467 18,601
Deferred Fuel 10,264 (2,016)
Leased Nuclear Fuel Amortization 22,853 20,688
Amortization of Deferred Operating Expenses, Net 10,858 10,543
Allowance for Equity Funds Used During Construction (658) (911)
Changes in Amounts Due from Customers and Others, Net 47,313 4,360
Changes in Materials and Supplies 1,487 7,524
Changes in Accounts Payable (37,487) 53,223
Changes in Working Capital Affecting Operations (28,169) (37,707)
Other Noncash Items 6,876 (12,463)
-------- --------
Total Adjustments 120,915 135,074
-------- --------
Net Cash from Operating Activities 137,012 141,647
CASH FLOWS FROM FINANCING ACTIVITIES
Reacquired Common Stock -- (7)
Maturities, Redemptions and Sinking Funds (23,000) (44,550)
Nuclear Fuel Lease Obligations (21,067) (32,163)
Common Stock Dividends Paid (29,605) (29,606)
Premiums, Discounts and Expenses -- (50)
-------- --------
Net Cash from Financing Activities (73,672) (106,376)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (42,961) (39,700)
Interest Capitalized as Allowance for Borrowed Funds Used
During Construction (563) (843)
Contributions to Nuclear Plant Decommissioning Trusts (5,387) --
Investment in Partnership (2,082) --
Other Cash Received (Applied) (5,508) 5,348
-------- --------
Net Cash from Investing Activities (56,501) (35,195)
-------- --------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS 6,839 76
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 138,068 179,038
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $144,907 $179,114
======== ========
Other Payment Information:
Interest (net of amounts capitalized) $64,000 $68,000
Federal Income Taxes 14,000 --
<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 1996
Form 10-K. The information under "Capital Resources and Liquidity"
remains unchanged with the following exceptions:
During the first quarter of 1997, the Operating Companies redeemed
various securities as discussed in Note 4.
In May 1997, Centerior Energy renewed a $125 million revolving credit
facility until May 7, 1998 as discussed in Note 5.
Results of Operations
Factors contributing to the 1% increase in 1997 first quarter operating
revenues are shown as follows:
Changes from
First Quarter 1996
Factors Operating Revenues
(millions)
Base Rates $ 22.1
Kilowatt-hour Sales Volume and Mix (12.6)
Wholesale Revenues 5.9
Fuel Cost Recovery Revenues 0.8
Miscellaneous Revenues (9.8)
Total $ 6.4
The increase in first quarter 1997 base rates revenues resulted
primarily from the April 1996 rate order issued by The Public Utilities
Commission of Ohio (PUCO) for the Operating Companies. Renegotiated
contracts for certain large industrial customers of the Operating
Companies resulted in a decrease in base rates which partially offset
the effect of the general price increase.
Percentage changes between 1997 and 1996 first quarter billed electric
kilowatt-hour sales are summarized as follows:
Customer Categories % Change
Residential (0.6)%
Commercial 1.6
Industrial 1.7
Other 41.5
Total 5.5
First quarter 1997 total kilowatt-hour sales increased because of
increases in industrial and commercial sales along with a 56% increase
in wholesale sales (included in the "Other" category). Industrial sales
increased as more sales to large primary metals industry customers
(including the new North Star BHP Steel facility) and the broad-based,
smaller industrial customer group were partially offset by fewer sales
to large automotive manufacturers. Commercial sales increased despite
milder weather because of a 1.9% increase in the number of commercial
customers and greater economic activity. Residential sales declined
slightly because of the milder weather. However, weather-normalized
residential and commercial sales increased 3.8% and 2.5%, respectively,
for the 1997 period.
The increase in first quarter 1997 fuel cost recovery revenues included
in customer bills resulted from changes in the weighted average of the
fuel cost recovery factors used by the Operating Companies to calculate
these revenues.
First quarter miscellaneous revenues in 1997 decreased from the 1996
amount primarily because of the reclassification of certain revenues as
credits to operating expenses commencing in the second quarter of 1996
and a first quarter 1997 refund payment related to a canceled generating
plant lease agreement.
First quarter operating expenses in 1997 increased 0.6% from the 1996
amount. Higher fuel and purchased power expenses resulted from increased
purchased power requirements in the 1997 period. Depreciation and
amortization expenses increased primarily because of changes in
depreciation rates approved in the April 1996 PUCO rate order. Federal
income taxes increased as a result of higher pretax operating income.
Other operation and maintenance expenses decreased as a result of
ongoing cost cutting and work force reductions; a shift of certain
payroll expenses to the nonoperating classification for work related to
the Ohio Edison-Centerior Energy merger; and the aforementioned
reclassification of certain expense reimbursements as credits to
operating expenses. Taxes, other than federal income taxes, decreased
primarily because of lower property and payroll tax accruals.
The first quarter 1997 total nonoperating loss was larger than the first
quarter 1996 total nonoperating loss. The first quarter 1997
nonoperating loss resulted primarily from both merger-related expenses
and certain costs associated with an accounts receivable securitization.
The first quarter 1996 nonoperating loss resulted primarily from Toledo
Edison's write-down of two inactive production facilities as discussed
in Note 6.
First quarter 1997 interest charges and preferred dividend requirements
decreased because of the redemption of securities in 1996.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB) issued
two new statements of financial accounting standards, one for the
computation and presentation of earnings per share and one for the
disclosure of information about capital structure. Both statements are
effective for year-end December 31, 1997 reporting. Centerior
Energy's adoption of the statement for reporting earnings per share in
1997 is not expected to have a material effect on its reporting of
earnings per common share. Centerior Energy's adoption of the statement
for reporting about capital structure in 1997 will not affect its
financial condition.
<TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY
INCOME STATEMENT
(Unaudited)
(Thousands)
Three Months Ended
March 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING REVENUES $ 431,627 $ 427,526
OPERATING EXPENSES
Fuel and Purchased Power (1) 110,530 103,726
Other Operation and Maintenance 91,447 105,132
Generation Facilities Rental Expense, Net 13,892 13,892
Depreciation and Amortization 53,297 50,816
Taxes, Other Than Federal Income Taxes 56,686 60,010
Amortization of Deferred Operating Expenses, Net 6,567 6,368
Federal Income Taxes 19,203 11,805
-------- --------
Total Operating Expenses 351,622 351,749
-------- --------
OPERATING INCOME 80,005 75,777
NONOPERATING INCOME (LOSS)
Allowance for Equity Funds Used During Construction 327 498
Other Income and Deductions, Net (4,649) 1,649
Federal Income Taxes - Credit (Expense) 658 (752)
-------- --------
Total Nonoperating Income (Loss) (3,664) 1,395
-------- --------
INCOME BEFORE INTEREST CHARGES 76,341 77,172
INTEREST CHARGES
Long-Term Debt 54,393 60,160
Short-Term Debt 2,177 692
Allowance for Borrowed Funds Used During Construction (459) (519)
-------- --------
Net Interest Charges 56,111 60,333
-------- --------
NET INCOME 20,230 16,839
Preferred Dividend Requirements 9,315 10,032
-------- --------
EARNINGS AVAILABLE FOR COMMON STOCK $ 10,915 $ 6,807
======== ========
(1) Includes purchased power expense for
purchases from Toledo Edison. $ 28,920 $ 26,672
<FN>
The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
</TABLE>
<TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY
BALANCE SHEET
(Thousands)
March 31, December 31,
1997 1996
(Unaudited)
----------- -----------
ASSETS
PROPERTY, PLANT AND EQUIPMENT
<S> <C> <C>
Utility Plant In Service $ 6,960,941 $ 6,938,535
Accumulated Depreciation and Amortization (2,306,322) (2,252,321)
----------- -----------
4,654,619 4,686,214
Construction Work In Progress 62,173 56,853
----------- -----------
4,716,792 4,743,067
Nuclear Fuel, Net of Amortization 100,764 113,030
Other Property, Less Accumulated Depreciation 51,553 53,547
----------- -----------
4,869,109 4,909,644
CURRENT ASSETS
Cash and Temporary Cash Investments 26,698 30,273
Amounts Due from Customers and Others, Net 146,187 189,547
Amounts Due from Affiliates 347 5,634
Materials and Supplies, at Average Cost
Owned 50,777 51,686
Under Consignment 23,497 23,655
Taxes Applicable to Succeeding Years 156,147 181,609
Other 11,416 15,237
----------- -----------
415,069 497,641
REGULATORY AND OTHER ASSETS
Regulatory Assets 1,341,785 1,349,693
Nuclear Plant Decommissioning Trusts 83,067 75,573
Other 60,725 44,980
----------- -----------
1,485,577 1,470,246
----------- -----------
$ 6,769,755 $ 6,877,531
=========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 1,034,701 $ 1,044,283
Preferred Stock
With Mandatory Redemption Provisions 186,118 186,118
Without Mandatory Redemption Provisions 238,325 238,325
Long-Term Debt 2,441,297 2,441,215
----------- -----------
3,900,441 3,909,941
CURRENT LIABILITIES
Current Portion of Long-Term Debt and Preferred Stock 129,874 144,668
Current Portion of Lease Obligations 49,266 51,592
Accounts Payable 57,092 82,694
Accounts and Notes Payable to Affiliates 170,966 171,433
Accrued Taxes 253,143 315,998
Accrued Interest 60,247 52,487
Dividends Declared 5,692 15,228
Other 40,156 43,672
----------- -----------
766,436 877,772
DEFERRED CREDITS AND OTHER LIABILITIES
Unamortized Investment Tax Credits 174,158 176,130
Accumulated Deferred Federal Income Taxes 1,316,529 1,305,601
Unamortized Gain from Bruce Mansfield Plant Sale 291,993 295,730
Accumulated Deferred Rents for Bruce Mansfield Plant 99,351 98,767
Nuclear Fuel Lease Obligations 64,968 73,947
Retirement Benefits 74,512 72,843
Other 81,367 66,800
----------- -----------
2,102,878 2,089,818
COMMITMENTS AND CONTINGENCIES (Note 7)
----------- -----------
$ 6,769,755 $ 6,877,531
=========== ===========
<FN>
The accompanying notes as they relate to Cleveland Electric are an integral part of this
statement.
</TABLE>
<TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY
CASH FLOWS
(Unaudited)
(Thousands)
Three Months Ended
March 31,
----------------------
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $20,230 $16,839
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 53,297 50,816
Deferred Federal Income Taxes 10,736 14,388
Deferred Fuel 7,696 (2,639)
Leased Nuclear Fuel Amortization 13,411 11,339
Amortization of Deferred Operating Expenses, Net 6,567 6,368
Allowance for Equity Funds Used During Construction (327) (498)
Changes in Amounts Due from Customers and Others, Net 43,360 1,678
Changes in Materials and Supplies 1,067 6,643
Changes in Accounts Payable (25,602) 27,758
Changes in Working Capital Affecting Operations (27,289) (31,665)
Other Noncash Items 2,336 (9,791)
-------- --------
Total Adjustments 85,252 74,397
-------- --------
Net Cash from Operating Activities 105,482 91,236
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Payable to Affiliates 2,781 (5,000)
Maturities, Redemptions and Sinking Funds (15,000) (15,800)
Nuclear Fuel Lease Obligations (12,450) (18,194)
Dividends Paid (39,141) (39,865)
-------- --------
Net Cash from Financing Activities (63,810) (78,859)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (32,812) (25,105)
Interest Capitalized as Allowance for Borrowed Funds Used
During Construction (459) (519)
Contributions to Nuclear Plant Decommissioning Trusts (2,928) --
Other Cash Received (Applied) (9,048) 3,486
-------- --------
Net Cash from Investing Activities (45,247) (22,138)
-------- --------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (3,575) (9,761)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 30,273 69,770
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $26,698 $60,009
======== ========
Other Payment Information:
Interest (net of amounts capitalized) $47,000 $47,000
Federal Income Taxes 8,300 --
<FN>
The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
</TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY
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 1996
Form 10-K. The information under "Capital Resources and Liquidity"
remains unchanged with the following exceptions:
During the first quarter of 1997, Cleveland Electric redeemed preferred
stock as discussed in Note 4.
Cleveland Electric is a party to a $125 million revolving credit
facility which Centerior Energy renewed in May 1997 until May 7, 1998 as
discussed in Note 5. Centerior Energy plans to transfer any of its
borrowed funds under the facility to the Operating Companies.
Results of Operations
Factors contributing to the 1% increase in 1997 first quarter operating
revenues are shown as follows:
Changes from
First Quarter 1996
Factors Operating Revenues
(millions)
Base Rates $ 18.7
Kilowatt-hour Sales Volume and Mix (15.0)
Wholesale Revenues 7.5
Fuel Cost Recovery Revenues 2.3
Miscellaneous Revenues (9.4)
Total $ 4.1
The increase in first quarter 1997 base rates revenues resulted
primarily from the April 1996 rate order issued by the PUCO.
Renegotiated contracts for certain large industrial customers resulted
in a decrease in base rates which partially offset the effect of the
general price increase.
Percentage changes between 1997 and 1996 first quarter billed electric
kilowatt-hour sales are summarized as follows:
Customer Categories % Change
Residential 0.5%
Commercial 1.2
Industrial (1.7)
Other 78.5
Total 8.0
Despite milder weather, first quarter 1997 total kilowatt-hour sales
rose as increases in residential and commercial sales along with a 99%
increase in wholesale sales (included in the "Other" category) were
partially offset by a decline in industrial sales. Weather-normalized
residential and commercial sales increased 5.4% and 2.2%, respectively,
for the 1997 period. The number of commercial customers at March 31,
1997 was 1.3% above the March 31, 1996 number. Industrial sales
decreased primarily because of fewer sales to large automotive
manufacturers and steel industry customers.
The increase in fuel cost recovery revenues included in customer bills
resulted from a 3% increase in the weighted average of the fuel cost
recovery factors used in the first quarter of 1997 to calculate these
revenues compared to the 1996 first quarter average.
First quarter miscellaneous revenues in 1997 decreased from the 1996
amount primarily because of the reclassification of certain revenues as
credits to operating expenses commencing in the second quarter of 1996
and a first quarter 1997 refund payment related to a canceled generating
plant lease agreement.
First quarter operating expenses in 1997 were virtually the same as in
1996. Higher fuel and purchased power expenses resulted from increased
purchased power requirements in the 1997 period. Depreciation and
amortization expenses increased primarily because of changes in
depreciation rates approved in the April 1996 PUCO rate order. Federal
income taxes increased as a result of higher pretax operating income.
Other operation and maintenance expenses decreased as a result of
ongoing cost cutting and work force reductions; a shift of certain
payroll expenses to the nonoperating classification for work related to
the Ohio Edison-Centerior Energy merger; and the aforementioned
reclassification of certain expense reimbursements as credits to
operating expenses. Taxes, other than federal income taxes, decreased
primarily because of lower property and payroll tax accruals.
A first quarter 1997 nonoperating loss resulted primarily from both
Cleveland Electric's share of merger-related expenses and certain costs
associated with an accounts receivable securitization.
First quarter 1997 interest charges and preferred dividend requirements
decreased because of the redemption of securities in 1996.
New Accounting Standard
In February 1997, the FASB issued a new statement of financial
accounting standards for the disclosure of information about capital
structure effective for year-end December 31, 1997 reporting. Cleveland
Electric's adoption of the statement in 1997 will not affect its
financial condition.
<TABLE>
THE TOLEDO EDISON COMPANY
INCOME STATEMENT
(Unaudited)
(Thousands)
Three Months Ended
March 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING REVENUES (1) $ 217,060 $ 210,793
OPERATING EXPENSES
Fuel and Purchased Power 43,314 38,768
Other Operation and Maintenance 56,317 56,519
Generation Facilities Rental Expense, Net 25,961 25,961
Depreciation and Amortization 23,814 22,416
Taxes, Other Than Federal Income Taxes 22,794 23,853
Amortization of Deferred Operating Expenses, Net 4,291 4,175
Federal Income Taxes 8,212 6,227
-------- --------
Total Operating Expenses 184,703 177,919
-------- --------
OPERATING INCOME 32,357 32,874
NONOPERATING INCOME (LOSS)
Allowance for Equity Funds Used During Construction 332 413
Other Income and Deductions, Net (427) (9,153)
Federal Income Taxes - Credit (Expense) (225) 3,195
-------- --------
Total Nonoperating Income (Loss) (320) (5,545)
-------- --------
INCOME BEFORE INTEREST CHARGES 32,037 27,329
INTEREST CHARGES
Long-Term Debt 22,111 23,159
Short-Term Debt 1,190 1,218
Allowance for Borrowed Funds Used During Construction (104) (325)
-------- --------
Net Interest Charges 23,197 24,052
-------- --------
NET INCOME 8,840 3,277
Preferred Dividend Requirements 4,194 4,204
-------- --------
EARNINGS (LOSS) AVAILABLE FOR COMMON STOCK $ 4,646 $ (927)
======== ========
(1) Includes revenues from bulk power sales
to Cleveland Electric. $ 28,920 $ 26,672
<FN>
The accompanying notes as they relate to Toledo Edison are an integral part of this statement.
</TABLE>
<TABLE>
THE TOLEDO EDISON COMPANY
BALANCE SHEET
(Thousands)
March 31, December 31,
1997 1996
(Unaudited)
----------- -----------
ASSETS
PROPERTY, PLANT AND EQUIPMENT
<S> <C> <C>
Utility Plant In Service $ 2,932,203 $ 2,928,657
Accumulated Depreciation and Amortization (1,045,988) (1,019,836)
----------- -----------
1,886,215 1,908,821
Construction Work In Progress 26,443 21,479
----------- -----------
1,912,658 1,930,300
Nuclear Fuel, Net of Amortization 67,361 76,118
Other Property, Less Accumulated Depreciation 8,456 8,460
----------- -----------
1,988,475 2,014,878
CURRENT ASSETS
Cash and Temporary Cash Investments 63,416 81,454
Amounts Due from Customers and Others, Net 15,948 16,308
Amounts Due from Affiliates 130,574 95,336
Materials and Supplies, at Average Cost
Owned 32,127 33,160
Under Consignment 10,994 10,383
Taxes Applicable to Succeeding Years 59,766 68,352
Other 3,628 3,479
----------- -----------
316,453 308,472
REGULATORY AND OTHER ASSETS
Regulatory Assets 921,175 927,629
Nuclear Plant Decommissioning Trusts 69,818 64,093
Other 39,483 42,408
----------- -----------
1,030,476 1,034,130
----------- -----------
$ 3,335,404 $ 3,357,480
=========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 807,883 $ 803,237
Preferred Stock
With Mandatory Redemption Provisions 3,355 3,355
Without Mandatory Redemption Provisions 210,000 210,000
Long-Term Debt 1,003,055 1,003,026
----------- -----------
2,024,293 2,019,618
CURRENT LIABILITIES
Current Portion of Long-Term Debt and Preferred Stock 43,365 51,365
Current Portion of Lease Obligations 35,105 36,244
Accounts Payable 52,987 46,496
Accounts Payable to Affiliates 25,454 30,016
Accrued Taxes 56,203 72,829
Accrued Interest 24,998 22,348
Other 16,437 18,722
----------- -----------
254,549 278,020
DEFERRED CREDITS AND OTHER LIABILITIES
Unamortized Investment Tax Credits 74,434 75,417
Accumulated Deferred Federal Income Taxes 565,331 565,600
Unamortized Gain from Bruce Mansfield Plant Sale 176,760 179,027
Accumulated Deferred Rents for Bruce Mansfield Plant
and Beaver Valley Unit 2 38,675 39,188
Nuclear Fuel Lease Obligations 41,699 48,491
Retirement Benefits 104,210 102,214
Other 55,453 49,905
----------- -----------
1,056,562 1,059,842
COMMITMENTS AND CONTINGENCIES (Note 7)
----------- -----------
$ 3,335,404 $ 3,357,480
=========== ===========
<FN>
The accompanying notes as they relate to Toledo Edison are an integral part of this
statement.
</TABLE>
<TABLE>
THE TOLEDO EDISON COMPANY
CASH FLOWS
(Unaudited)
(Thousands)
Three Months Ended
March 31,
----------------------
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $8,840 $3,277
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 23,814 22,416
Deferred Federal Income Taxes (269) 4,403
Deferred Fuel 2,567 623
Leased Nuclear Fuel Amortization 9,442 9,349
Amortization of Deferred Operating Expenses, Net 4,291 4,175
Allowance for Equity Funds Used During Construction (332) (413)
Changes in Amounts Due from Customers and Others, Net 360 3,784
Changes in Materials and Supplies 422 881
Changes in Accounts Payable 6,491 32,445
Changes in Working Capital Affecting Operations (15,042) (12,698)
Other Noncash Items 4,540 (2,672)
-------- --------
Total Adjustments 36,284 62,293
-------- --------
Net Cash from Operating Activities 45,124 65,570
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Payable to Affiliates -- (20,950)
Maturities, Redemptions and Sinking Funds (8,000) (28,750)
Nuclear Fuel Lease Obligations (8,617) (13,969)
Dividends Paid (4,193) (4,226)
Premiums, Discounts and Expenses -- (50)
-------- --------
Net Cash from Financing Activities (20,810) (67,945)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (10,149) (14,595)
Interest Capitalized as Allowance for Borrowed Funds Used
During Construction (104) (325)
Loans to Affiliates (32,582) --
Contributions to Nuclear Plant Decommissioning Trusts (2,459) --
Other Cash Received 2,942 3,451
-------- --------
Net Cash from Investing Activities (42,352) (11,469)
-------- --------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (18,038) (13,844)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 81,454 93,669
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $63,416 $79,825
======== ========
Other Payment Information:
Interest (net of amounts capitalized) $19,000 $21,000
Federal Income Taxes 4,300 --
<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 1996
Form 10-K. The information under "Capital Resources and Liquidity"
remains unchanged with the following exceptions:
During the first quarter of 1997, Toledo Edison redeemed notes as
discussed in Note 4.
Toledo Edison is a party to a $125 million revolving credit facility
which Centerior Energy renewed in May 1997 until May 7, 1998 as
discussed in Note 5. Centerior Energy plans to transfer any of its
borrowed funds under the facility to the Operating Companies.
Results of Operations
Factors contributing to the 3% increase in 1997 first quarter operating
revenues are shown as follows:
Changes from
First Quarter 1996
Factors Operating Revenues
(millions)
Base Rates $ 3.4
Kilowatt-hour Sales Volume and Mix 2.4
Wholesale Revenues 2.9
Fuel Cost Recovery Revenues (1.5)
Miscellaneous Revenues (0.9)
Total $ 6.3
The increase in first quarter 1997 base rates revenues resulted
primarily from the April 1996 rate order issued by the PUCO.
Renegotiated contracts for certain large industrial customers also
resulted in a decrease in base rates which partially offset the effect
of the general price increase.
Percentage changes between 1997 and 1996 first quarter billed electric
kilowatt-hour sales are summarized as follows:
Customer Categories % Change
Residential (3.1)%
Commercial 2.9
Industrial 8.2
Other 21.0
Total 8.1
First quarter 1997 total kilowatt-hour sales increased because of
increases in industrial and commercial sales along with a 26% increase
in wholesale sales (included in the "Other" category). Industrial sales
growth reflected increased sales to large primary metals, automotive and
glass manufacturers and the broad-based, smaller industrial customer
group. Industrial sales for the 1997 period included sales to the new
North Star BHP Steel facility. Commercial sales increased despite milder
weather because of a 3.3% increase in the number of commercial customers
and greater economic activity. Residential sales declined because of
the milder weather. However, weather-normalized commercial and
residential sales increased 3.6% and 0.3%, respectively, for the 1997
period.
The decrease in fuel cost recovery revenues included in customer bills
resulted from a 5% decrease in the weighted average of the fuel cost
recovery factors used in the first quarter of 1997 to calculate these
revenues compared to the 1996 first quarter average.
First quarter operating expenses in 1997 increased 3.8% from the 1996
amount. Higher fuel and purchased power expenses resulted from
increased purchased power requirements in the 1997 period. Depreciation
and amortization expenses increased primarily because of changes in
depreciation rates approved in the April 1996 PUCO rate order. Federal
income taxes increased as a result of higher pretax operating income.
Taxes, other than federal income taxes, decreased primarily because of
lower property and payroll tax accruals.
The first quarter 1997 total nonoperating loss was smaller than the
first quarter 1996 total nonoperating loss. The first quarter 1997
nonoperating loss resulted primarily from both Toledo Edison's share of
expenses related to the Ohio Edison-Centerior Energy merger and certain
costs associated with an accounts receivable securitization. The first
quarter 1996 nonoperating loss resulted primarily from the write-down of
two inactive production facilities as discussed in Note 6.
First quarter 1997 interest charges and preferred dividend requirements
decreased slightly because of the redemption of securities in 1996.
New Accounting Standard
In February 1997, the FASB issued a new statement of financial
accounting standards for the disclosure of information about capital
structure effective for year-end December 31, 1997 reporting. Toledo
Edison's adoption of the statement in 1997 will not affect its financial
condition.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
1. Centerior Energy
a. A Special Meeting of Centerior Energy's common stock share
owners was held on March 27, 1997.
b. The only matter submitted to share owners at the Special
Meeting was for the approval and adoption of an Agreement
and Plan of Merger between Ohio Edison and Centerior Energy.
The vote on this issue was as follows:
Broker
For Against Abstain Non-Vote
112,633,407 2,219,786 935,047 Not Applicable
2. Centerior Energy
a. Centerior Energy's Annual Meeting of share owners was held on
May 8, 1997.
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 April 3, 1997,
and all such nominees were elected.
c. Three 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 116,211,692 4,643,968 7,108,921
A. C. Bersticker 116,326,706 4,528,954 7,108,921
T. A. Commes 116,397,916 4,457,744 7,108,921
W. F. Conway 116,246,440 4,609,220 7,108,921
W. R. Embry 116,141,102 4,714,558 7,108,921
R. J. Farling 116,097,124 4,758,536 7,108,921
R. A. Miller 113,866,343 6,989,317 7,108,921
F. E. Mosier 116,226,823 4,628,837 7,108,921
Sr. M. M. Reinhard 116,098,360 4,757,301 7,108,921
R. C. Savage 116,274,966 4,580,694 7,108,921
W. J. Williams 116,236,011 4,619,649 7,108,921
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
1997.
The vote on this issue was as follows:
Broker
For Against Abstain Non-Vote
118,514,019 1,254,749 1,086,892 7,108,921
- 19 -
Issue 3 was a share owner proposal to eliminate all
discretionary voting when the individual share owner has not
actually voted by marking the proxy card. The vote on this
issue was as follows:
Broker
For Against Abstain Non-Vote
15,700,936 79,222,813 4,893,382 28,147,450
3. 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 May 8, 1997.
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.
4. 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 May 8, 1997.
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. 1996 Rate Order
For background relating to this topic see "Item 1. Business-
Electric Rates-1996 Rate Order" in the Companies Annual Report on
Form 10-K for the year ended December 31, 1996 ("1996 Form 10-K").
The City of Cleveland, the Office of the Ohio Consumer's Counsel
("OCC"), the Ohio Council of Retail Merchants, the Empowerment
Center of Greater Cleveland, the City of Toledo, the Lucas County
Board of Commissioners and Congresswoman Marcy Kaptur filed appeals
with the Ohio Supreme Court from the PUCO's April 11, 1996 rate
order for the Operating Companies. The Ohio Supreme Court granted
the Operating Companies' motions to dismiss the appeals of the
Lucas County Board of Commissioners and Congresswoman Marcy Kaptur
on November 20, 1996. On April 4, 1997, the OCC filed a motion to
- 20 -
stay the appeal because of the Rate Stipulation agreed to by the
OCC regarding the FirstEnergy merger, and the Operating Companies
filed a memorandum in support of the stay on April 14, 1997. The
Ohio Supreme Court granted OCC's motion to stay on April 21, 1997.
2. Joint Select Committee Hearings
Ohio's General Assembly has commissioned a Joint Committee to study
electric utility deregulation. The Joint Committee is conducting
hearings concerning various issues regarding electric utility
deregulation and plans to have a report completed by October 1997
to present to the full General Assembly for its consideration. The
Operating Companies and other interested parties will be providing
testimony on the issues as the hearings continue throughout the
summer.
3. Rachel Transmission Line
On March 24, 1997, the Ohio Power Siting Board ("OPSB") granted
Cleveland Electric a Certificate of Environmental Compatibility and
Public Need ("Certificate") to construct its nine-mile "Rachel"
138,000-volt transmission line in Geauga County, Ohio. The
transmission line is necessary to provide high-quality and reliable
electric service to the general area, which has experienced above
average load growth over the last several decades. On April 24,
1997, Citizens for a Better Way filed an Application for Rehearing
of the OPSB's decision; however, because the Application for
Rehearing was filed late, it is anticipated that the OPSB will not
entertain substantive modifications to the Certificate.
4. Chase Brass
For background relating to this topic, see "Item 1. Business-
Operations-Competitive Conditions-Toledo Edison" in the 1996 Form
10-K.
Chase Brass & Copper Co., Inc. ("Chase Brass"), a former Toledo
Edison customer, and other surrounding businesses and residences in
Jefferson Township, Ohio, have sought incorporation as a
municipality to be named the Village of Holiday City. The Williams
County (Ohio) Board of Commissioners and the Williams County Court
of Common Pleas issued an order permitting the area to be
incorporated. Toledo Edison previously appealed the Court's order
to the Sixth District Court of Appeals, but the Court of Appeals
ruled against Toledo Edison, finding a lack of standing. Toledo
Edison then appealed to the Ohio Supreme Court. On April 23, 1997,
the Ohio Supreme Court denied Toledo Edison's appeal. Toledo
Edison does not plan to apply for reconsideration at the Court.
The new municipality can negotiate with other utilities for
electric power. The other businesses in the proposed municipality
previously terminated their service with Toledo Edison and are
receiving electric service from the Village of Montpelier, one of
the consortium now supplying Chase Brass.
5. Davis-Besse Plant Outage
The Davis-Besse Nuclear Power Station automatically shut down on
Sunday, May 4, 1997, when a fire suppression system on the
station's main transformer malfunctioned. Although there was no
fire, protective circuitry disconnected the transformer from the
electrical system. Safety systems automatically take the plant
- 21 -
offline under these conditions. Plant personnel are investigating
the cause of the malfunction. It is anticipated that the plant
will be back on line by the end of May, 1997. This is the first
unplanned shut down at the plant in three years.
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, 1997, Centerior Energy,
Cleveland Electric and Toledo Edison each filed two Current Reports
on Form 8-K with the Securities and Exchange Commission.
A Form 8-K dated January 28, 1997 and filed that date included one
item under "Item 5. Other Events". That item, "Recent Financial
Results (Unaudited)", reported Centerior Energy's operating
revenues, net income and earnings per share for 1996.
A Form 8-K dated January 30, 1997 and filed on February 6, 1997
included one item under "Item 5. Other Events". That item, "Rate
Reduction and Economic Development Plan", discussed a rate
reduction plan approved by the PUCO for the Operating Companies
which would take effect upon the consummation of the merger of
Centerior Energy with Ohio Edison.
- 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 15, 1997
- 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, 1997.
CLEVELAND ELECTRIC EXHIBITS
Exhibit Number Description
27(b) Financial Data Schedule for the period
ended March 31, 1997.
TOLEDO EDISON EXHIBITS
Exhibit Number Description
27(c) Financial Data Schedule for the period
ended March 31, 1997.
- 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,631,339
<OTHER-PROPERTY-AND-INVEST> 434,380
<TOTAL-CURRENT-ASSETS> 664,924
<TOTAL-DEFERRED-CHARGES> 2,344,154
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 10,074,797
<COMMON> 2,320,651
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> (377,115)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,943,536
189,473
448,325
<LONG-TERM-DEBT-NET> 3,444,352
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 156,860
16,379
<CAPITAL-LEASE-OBLIGATIONS> 106,860
<LEASES-CURRENT> 84,371
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,684,641
<TOT-CAPITALIZATION-AND-LIAB> 10,074,797
<GROSS-OPERATING-REVENUE> 611,608
<INCOME-TAX-EXPENSE> 27,366
<OTHER-OPERATING-EXPENSES> 471,851
<TOTAL-OPERATING-EXPENSES> 499,217
<OPERATING-INCOME-LOSS> 112,391
<OTHER-INCOME-NET> (5,199)
<INCOME-BEFORE-INTEREST-EXPEN> 107,192
<TOTAL-INTEREST-EXPENSE> 77,588
<NET-INCOME> 16,097
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 59,210
<TOTAL-INTEREST-ON-BONDS> 278,849
<CASH-FLOW-OPERATIONS> 137,012
<EPS-PRIMARY> .11
<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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,716,792
<OTHER-PROPERTY-AND-INVEST> 235,434
<TOTAL-CURRENT-ASSETS> 415,069
<TOTAL-DEFERRED-CHARGES> 1,402,460
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 6,769,755
<COMMON> 1,242,148
<CAPITAL-SURPLUS-PAID-IN> 78,618
<RETAINED-EARNINGS> (286,065)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,034,701
186,118
238,325
<LONG-TERM-DEBT-NET> 2,441,297
<SHORT-TERM-NOTES> 114,399
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 115,160
14,714
<CAPITAL-LEASE-OBLIGATIONS> 64,968
<LEASES-CURRENT> 49,266
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,510,807
<TOT-CAPITALIZATION-AND-LIAB> 6,769,755
<GROSS-OPERATING-REVENUE> 431,627
<INCOME-TAX-EXPENSE> 19,203
<OTHER-OPERATING-EXPENSES> 332,419
<TOTAL-OPERATING-EXPENSES> 351,622
<OPERATING-INCOME-LOSS> 80,005
<OTHER-INCOME-NET> (3,664)
<INCOME-BEFORE-INTEREST-EXPEN> 76,341
<TOTAL-INTEREST-EXPENSE> 56,111
<NET-INCOME> 20,230
9,315
<EARNINGS-AVAILABLE-FOR-COMM> 10,915
<COMMON-STOCK-DIVIDENDS> 29,605
<TOTAL-INTEREST-ON-BONDS> 208,720
<CASH-FLOW-OPERATIONS> 105,482
<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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,912,658
<OTHER-PROPERTY-AND-INVEST> 146,486
<TOTAL-CURRENT-ASSETS> 316,453
<TOTAL-DEFERRED-CHARGES> 959,807
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,335,404
<COMMON> 195,687
<CAPITAL-SURPLUS-PAID-IN> 602,113
<RETAINED-EARNINGS> 10,083
<TOTAL-COMMON-STOCKHOLDERS-EQ> 807,883
3,355
210,000
<LONG-TERM-DEBT-NET> 1,003,055
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 41,700
1,665
<CAPITAL-LEASE-OBLIGATIONS> 41,699
<LEASES-CURRENT> 35,105
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,190,942
<TOT-CAPITALIZATION-AND-LIAB> 3,335,404
<GROSS-OPERATING-REVENUE> 217,060
<INCOME-TAX-EXPENSE> 8,212
<OTHER-OPERATING-EXPENSES> 176,491
<TOTAL-OPERATING-EXPENSES> 184,703
<OPERATING-INCOME-LOSS> 32,357
<OTHER-INCOME-NET> (320)
<INCOME-BEFORE-INTEREST-EXPEN> 32,037
<TOTAL-INTEREST-EXPENSE> 23,197
<NET-INCOME> 8,840
4,194
<EARNINGS-AVAILABLE-FOR-COMM> 4,646
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 70,129
<CASH-FLOW-OPERATIONS> 45,124
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
