<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 June 30, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--- ---
<TABLE>
<CAPTION>
COMMISSION
FILE REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER
NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
---------- ----------------------------------- ------------------
<C> <S> <C>
1-11375 UNICOM CORPORATION 36-3961038
(an Illinois corporation)
37th Floor, 10 South Dearborn Street
Post Office Box A-3005
Chicago, Illinois 60690-3005
312/394-7399
1-1839 COMMONWEALTH EDISON COMPANY 36-0938600
(an Illinois corporation)
37th Floor, 10 South Dearborn Street
Post Office Box 767
Chicago, Illinois 60690-0767
312/394-4321
</TABLE>
Indicate by check mark whether the registrants (1) have 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, and (2) have been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Common Stock outstanding at July 31, 1995:
Unicom Corporation 214,756,773 shares
Commonwealth Edison Company 214,192,475 shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
UNICOM CORPORATION
AND
COMMONWEALTH EDISON COMPANY
QUARTERLY REPORTS ON FORM 10-Q
TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
This document contains the Quarterly Reports on Form 10-Q for the quarterly
period ended June 30, 1995 for each of Unicom Corporation and Commonwealth
Edison Company. Information contained herein relating to an individual
registrant is filed by such registrant on its own behalf. Accordingly, except
for its subsidiaries, Commonwealth Edison Company makes no representation as to
information relating to any other companies affiliated with Unicom Corporation.
INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Definitions.............................................................. 3
PART I. FINANCIAL INFORMATION
Unicom Corporation and Subsidiary Companies:
Financial Statements--
Report of Independent Public Accountants............................. 4
Statements of Consolidated Income for the three months, six months
and twelve months ended June 30, 1994 and 1995...................... 5
Consolidated Balance Sheets--December 31, 1994 and June 30, 1995..... 6-7
Statements of Consolidated Capitalization--December 31, 1994 and June
30, 1995............................................................ 8
Statements of Consolidated Retained Earnings for the three months,
six months and twelve months ended June 30, 1994 and 1995........... 9
Statements of Consolidated Cash Flows for the three months, six
months and twelve months ended June 30, 1994 and 1995............... 10
Notes to Financial Statements........................................ 11-30
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 31-42
Commonwealth Edison Company and Subsidiary Companies:
Financial Statements--
Report of Independent Public Accountants............................. 44
Statements of Consolidated Income for the three months, six months
and twelve months ended June 30, 1994 and 1995...................... 45
Consolidated Balance Sheets--December 31, 1994 and June 30, 1995..... 46-47
Statements of Consolidated Capitalization--December 31, 1994 and June
30, 1995............................................................ 48
Statements of Consolidated Retained Earnings for the three months,
six months and twelve months ended June 30, 1994 and 1995........... 49
Statements of Consolidated Premium on Common Stock and Other Paid-In
Capital for the three months, six months and twelve months ended
June 30, 1994 and 1995.............................................. 49
Statements of Consolidated Cash Flows for the three months, six
months and twelve months ended June 30, 1994 and 1995............... 50
Notes to Financial Statements........................................ 51-55
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 56
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 57-62
Item 4. Submission of Matters to a Vote of Security Holders............ 62-63
Item 6. Exhibits and Reports on Form 8-K............................... 63
SIGNATURES............................................................... 64
</TABLE>
2
<PAGE>
DEFINITIONS
The following terms are used in the text of this document with the following
meanings:
<TABLE>
<CAPTION>
TERM MEANING
----------------------- ------------------------------------------------------
<C> <S>
AFUDC Allowance for funds used during construction
AMT Alternative minimum tax
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended
CFC Chlorofluorocarbon
Circuit Court Circuit Court of Cook County, Illinois
Clean Air Amendments Clean Air Act Amendments of 1990
ComEd Commonwealth Edison Company
Cotter Cotter Corporation, which is a wholly-owned subsidiary
of ComEd.
DOE U.S. Department of Energy
EEOC Equal Employment Opportunity Commission
EMFs Electric and magnetic fields
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Fuel Matters Settlement A settlement relating to the ICC fuel reconciliation
proceedings involving ComEd for the period from 1985
through 1988 and to future challenges by the settling
parties to the prudence of ComEd's western coal costs
for the period from 1989 through 1992.
ICC Illinois Commerce Commission
Illinois EPA Illinois Environmental Protection Agency
Indiana Company Commonwealth Edison Company of Indiana, Inc., which is
a wholly-owned subsidiary of ComEd.
IPCB Illinois Pollution Control Board
MAIN Mid-America Interconnected Network
MGP Manufactured gas plant
NEIL Nuclear Electric Insurance Limited
NML Nuclear Mutual Limited
NOPR Notice of Proposed Rulemaking issued by the FERC
NPDES National Pollutant Discharge Elimination System
NPL National Priorities List
NRC Nuclear Regulatory Commission
PCBs Polychlorinated biphenyls
PRPs Potentially responsible parties under CERCLA
Rate Matters Settlement A settlement concerning the proceedings relating to
ComEd's 1985 and 1991 ICC rate orders (which orders
related to, among other things, the recovery of costs
associated with ComEd's four most recently completed
nuclear generating units), the proceedings related to
the reduction in the difference between ComEd's
summer and non-summer residential rates that was
effected in the summer of 1988, outstanding issues
related to the appropriate interest rate and rate
design to be applied to a refund made by ComEd during
1990 related to a 1988 ICC rate order, and matters
related to a rider to ComEd's rates that it was
required to file as a result of the change in the
federal corporate income tax rate made by the Tax
Reform Act of 1986.
Rate Order ICC rate order issued on January 9, 1995, as
subsequently modified
Remand Order ICC rate order issued in January 1993, as subsequently
modified
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
Unicom Unicom Corporation
Unicom Enterprises Unicom Enterprises Inc., which is a wholly-owned
subsidiary of Unicom.
Unicom Thermal Unicom Thermal Technologies Inc., which is a wholly-
owned subsidiary of Unicom Enterprises.
Units ComEd's nuclear generating units known as Byron Unit 2
and Braidwood Units 1 and 2
U.S. EPA U.S. Environmental Protection Agency
Westinghouse Westinghouse Electric Corporation
</TABLE>
3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Unicom Corporation:
We have audited the accompanying consolidated balance sheets and statements
of consolidated capitalization of Unicom Corporation (an Illinois corporation)
and subsidiary companies as of December 31, 1994 and June 30, 1995, and the
related statements of consolidated income, retained earnings and cash flows for
the three-month, six-month and twelve-month periods ended June 30, 1994 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Unicom Corporation and
subsidiary companies as of December 31, 1994 and June 30, 1995, and the results
of their operations and their cash flows for the three-month, six-month and
twelve-month periods ended June 30, 1994 and 1995, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
August 8, 1995
4
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME
The following Statements of Consolidated Income for the three months, six
months and twelve months ended June 30, 1994 and 1995 reflect the results of
past operations and are not intended as any representation as to results of
operations for any future period. Future operations will necessarily be
affected by various and diverse factors and developments, including changes in
electric rates, population, business activity, taxes, environmental control,
energy use, fuel supply, cost of labor, fuel and purchased power and other
matters, the nature and effect of which cannot now be determined.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
---------------------- ---------------------- -----------------------
1994 1995 1994 1995 1994 1995
---------- ---------- ---------- ---------- ----------- ----------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Operating revenues..... $1,436,915 $1,559,514 $2,967,890 $3,137,632 $ 6,457,917 $6,463,173
Provisions for revenue
refunds............... (4,749) 7 (10,974) 25 (1,154,493) (4,911)
---------- ---------- ---------- ---------- ----------- ----------
$1,432,166 $1,559,521 $2,956,916 $3,137,657 $ 5,303,424 $6,458,262
---------- ---------- ---------- ---------- ----------- ----------
Operating Expenses and
Taxes:
Fuel................... $ 261,769 $ 254,575 $ 525,984 $ 527,432 $ 1,152,060 $1,051,300
Purchased power........ 27,684 6,443 44,833 9,986 49,239 24,276
Deferred
(under)/overrecovered
energy costs--net .... (32,712) 4,625 (20,959) 1,262 (19,764) 24,161
Operation.............. 394,189 371,637 792,998 757,425 1,544,943 1,497,669
Maintenance............ 170,367 139,597 335,644 284,923 616,492 510,598
Depreciation........... 221,937 224,846 443,869 449,952 876,506 893,556
Recovery of regulatory
assets................ 3,818 3,818 7,817 7,636 11,522 15,272
Taxes (except income).. 188,286 189,740 388,359 399,673 717,615 799,110
Income taxes--
Current--Federal..... 21,819 47,770 56,467 101,011 (39,403) 200,973
--State.............. 1,113 16,367 1,825 28,107 (18,743) 28,195
Deferred--Federal--
net................. (8,305) 27,037 (15,052) 39,348 80,670 157,793
--State--net......... 4,484 3,572 11,624 8,061 37,840 61,454
Investment tax credits
deferred--net ........ (7,201) (7,179) (14,425) (14,358) (29,236) (28,690)
---------- ---------- ---------- ---------- ----------- ----------
$1,247,248 $1,282,848 $2,558,984 $2,600,458 $ 4,979,741 $5,235,667
---------- ---------- ---------- ---------- ----------- ----------
Operating Income........ $ 184,918 $ 276,673 $ 397,932 $ 537,199 $ 323,683 $1,222,595
---------- ---------- ---------- ---------- ----------- ----------
Other Income and
(Deductions):
Interest on long-term
debt.................. $ (155,841) $ (150,836) $ (312,993) $ (303,106) $ (630,013) $ (611,338)
Interest on notes
payable............... (102) (221) (189) (372) (361) (741)
Allowance for funds
used during
construction--
Borrowed funds....... 4,317 3,192 10,495 4,877 20,979 13,294
Equity funds......... 5,070 3,776 12,426 5,869 25,428 16,071
Income taxes applicable
to nonoperating
activities............ 23,303 201 20,570 469 44,318 6,974
Income tax reduction
for disallowed plant
costs................. -- -- -- -- 792 --
Deferred carrying
charges............... -- -- -- -- 438,183 --
Interest and other
costs for 1993
Settlements........... (7,418) -- (17,893) (61) (116,567) (3,632)
Provision for dividends
on preferred and
preference stocks of
Commonwealth Edison
Company............... (15,483) (16,865) (31,028) (33,773) (63,401) (67,673)
Miscellaneous--net..... (62,103) (7,054) (66,639) (13,635) (102,598) (35,830)
---------- ---------- ---------- ---------- ----------- ----------
$ (208,257) $ (167,807) $ (385,251) $ (339,732) $ (383,240) $ (682,875)
---------- ---------- ---------- ---------- ----------- ----------
Net Income (Loss)....... $ (23,339) $ 108,866 $ 12,681 $ 197,467 $ (59,557) $ 539,720
========== ========== ========== ========== =========== ==========
Average Number of Common
Shares Outstanding..... 213,923 214,677 213,851 214,553 213,733 214,382
Earnings (Loss) per
Common Share........... $(0.11) $0.51 $0.06 $0.92 $(0.28) $2.52
Cash Dividends Declared
per Common Share....... $ 0.40 $0.40 $0.80 $0.80 $ 1.60 $1.60
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
5
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1994 1995
------ ------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant:
Plant and equipment, at original cost (includes
construction work in progress of $1,043 million
and $1,071 million, respectively)................. $26,257,665 $26,602,248
Less--Accumulated provision for depreciation....... 9,623,756 10,129,990
----------- -----------
$16,633,909 $16,472,258
Nuclear fuel, at amortized cost.................... 689,424 675,334
----------- -----------
$17,323,333 $17,147,592
----------- -----------
Investments and Other Property:
Nuclear decommissioning funds...................... $ 880,944 $ 1,095,393
Subsidiary companies............................... 118,051 118,735
Other, at cost..................................... 41,292 57,465
----------- -----------
$ 1,040,287 $ 1,271,593
----------- -----------
Current Assets:
Cash............................................... $ 1,927 $ 4,871
Temporary cash investments......................... 75,008 103,665
Other cash investments............................. 19,588 20,167
Special deposits................................... 29,603 29,280
Receivables--
Customers........................................ 463,241 528,753
Taxes............................................ 36,228 5,963
Other............................................ 67,389 41,736
Provisions for uncollectible accounts............ (10,720) (11,388)
Coal and fuel oil, at average cost................. 108,872 133,298
Materials and supplies, at average cost............ 384,612 366,530
Deferred unrecovered energy costs.................. 48,697 40,242
Deferred income taxes related to current assets and
liabilities--
Loss carryforward................................ 10,090 --
Other............................................ 110,267 121,205
Prepayments and other.............................. 57,050 38,243
----------- -----------
$ 1,401,852 $ 1,422,565
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets.................................. $ 2,604,270 $ 2,527,016
Unrecovered energy costs........................... 643,438 623,582
Other.............................................. 108,308 44,318
----------- -----------
$ 3,356,016 $ 3,194,916
----------- -----------
$23,121,488 $23,036,666
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
6
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
CAPITALIZATION AND LIABILITIES 1994 1995
------------------------------ ------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity................................. $ 5,448,127 $ 5,483,643
Preferred and preference stocks of Commonwealth
Edison Company--
Without mandatory redemption requirements......... 508,147 508,109
Subject to mandatory redemption requirements...... 292,163 289,183
Long-term debt of subsidiary companies.............. 7,453,206 7,315,678
----------- -----------
$13,701,643 $13,596,613
----------- -----------
Current Liabilities:
Notes payable--
Commercial paper.................................. $ -- $ 40,000
Bank loans........................................ 7,150 7,150
Current portion of long-term debt, redeemable pref-
erence stock and capitalized lease obligations of
subsidiary companies............................... 560,545 468,533
Accounts payable.................................... 350,958 313,546
Accrued interest.................................... 182,745 185,439
Accrued taxes....................................... 206,973 293,534
Dividends payable................................... 102,647 102,750
Customer deposits................................... 44,514 44,066
Other............................................... 85,845 92,350
----------- -----------
$ 1,541,377 $ 1,547,368
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes............................... $ 4,383,347 $ 4,405,436
Accumulated deferred investment tax credits......... 717,752 703,394
Accrued spent nuclear fuel disposal fee and related
interest........................................... 589,757 607,052
Obligations under capital leases of subsidiary com-
panies............................................. 433,184 396,452
Regulatory liabilities.............................. 699,426 613,385
Other............................................... 1,055,002 1,166,966
----------- -----------
$ 7,878,468 $ 7,892,685
----------- -----------
Commitments and Contingent Liabilities (Note 19)
$23,121,488 $23,036,666
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
7
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stock Equity:
Common stock, without par value--
Outstanding--214,340,067 shares and 214,756,773
shares, respectively............................. $ 4,890,931 $ 4,900,697
Preference stock expense of Commonwealth Edison
Company........................................... (3,775) (3,768)
Retained earnings.................................. 560,971 586,714
----------- -----------
$ 5,448,127 $ 5,483,643
----------- -----------
Preferred and Preference Stocks of Commonwealth
Edison Company--
Without Mandatory Redemption Requirements:
Preference stock, cumulative, without par value--
Outstanding--13,499,549 shares.................. $ 504,957 $ 504,957
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--100,323 shares and 99,112 shares,
respectively................................... 3,190 3,152
Prior preferred stock, cumulative, $100 par value
per share--
No shares outstanding........................... -- --
----------- -----------
$ 508,147 $ 508,109
----------- -----------
Subject to Mandatory Redemption Requirements:
Preference stock, cumulative, without par value--
Outstanding--3,113,205 shares and 3,083,205
shares, respectively........................... $ 309,964 $ 306,984
Current redemption requirements for preference
stock included in current liabilities........... (17,801) (17,801)
----------- -----------
$ 292,163 $ 289,183
----------- -----------
Long-Term Debt of Subsidiary Companies:
First mortgage bonds:
Maturing 1995 through 1999--5 1/4% to 7%......... $ 818,000 $ 715,000
Maturing 2000 through 2009--5.30% to 9 3/8%...... 2,220,500 2,220,400
Maturing 2010 through 2019--5.85% to 9 5/8%...... 1,106,000 1,106,000
Maturing 2020 through 2023--7 3/4% to 9 7/8%..... 1,870,000 1,870,000
----------- -----------
$ 6,014,500 $ 5,911,400
Sinking fund debentures, due 1999 through 2011--
2 3/4% to 7 5/8%.................................. 112,593 111,052
Pollution control obligations, due 2004 through
2014--4% to 9 1/8%................................ 337,200 337,200
Other long-term debt............................... 1,451,449 1,289,409
Deposit for retirement of long-term debt........... -- (377)
Current maturities of long-term debt included in
current liabilities............................... (395,554) (268,756)
Unamortized net debt discount and premium.......... (66,982) (64,250)
----------- -----------
$ 7,453,206 $ 7,315,678
----------- -----------
$13,701,643 $13,596,613
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
8
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ------------------ -------------------
1994 1995 1994 1995 1994 1995
--------- --------- -------- -------- -------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period.................... $ 499,655 $ 563,761 $549,152 $560,971 $793,449 $390,691
Add--Net income (loss)..... (23,339) 108,866 12,681 197,467 (59,557) 539,720
--------- --------- -------- -------- -------- --------
$ 476,316 $ 672,627 $561,833 $758,438 $733,892 $930,411
--------- --------- -------- -------- -------- --------
Deduct--
Cash dividends de-
clared on common
stock.................. $ 85,628 $ 85,906 $171,146 $171,717 $342,076 $343,131
Other capital stock
transactions--net...... (3) 7 (4) 7 1,125 566
--------- --------- -------- -------- -------- --------
$ 85,625 $ 85,913 $171,142 $171,724 $343,201 $343,697
--------- --------- -------- -------- -------- --------
Balance at End of Period... $ 390,691 $ 586,714 $390,691 $586,714 $390,691 $586,714
========= ========= ======== ======== ======== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
9
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- --------------------- ------------------------
1994 1995 1994 1995 1994 1995
--------- --------- --------- ---------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Cash Flow from Operating
Activities:
Net income (loss)...... $ (23,339) $ 108,866 $ 12,681 $ 197,467 $ (59,557) $ 539,720
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization........ 230,948 238,254 463,681 476,883 923,168 942,567
Deferred income taxes
and investment tax
credits--net........ (32,359) 24,350 (36,894) 34,295 64,873 197,470
Equity component of
allowance for funds
used during
construction........ (5,070) (3,776) (12,426) (5,869) (25,428) (16,071)
Provisions for
revenue refunds and
related interest.... 12,220 (231) 28,990 (231) 1,239,598 8,327
Revenue refunds and
related interest.... (327,016) 20 (673,568) 15,135 (860,661) (532,947)
Recovery/(deferral)
of regulatory
assets/deferred
carrying charges--
net................. 3,818 3,818 7,817 7,636 (426,661) 15,272
Provisions/(payments)
for liability for
early retirement and
separation costs--
net................. 15,930 180 31,537 560 31,675 2,603
Net effect on cash
flows of changes in:
Receivables........ (28,055) (10,144) 185,589 (8,926) 124,869 (80,300)
Coal and fuel oil.. (22,047) (12,802) (19,275) (24,426) 100,941 (2,271)
Materials and
supplies.......... 3,169 4,475 176 18,082 14,089 36,008
Accounts payable
adjusted for
nuclear fuel lease
principal payments
and early
retirement and
separation costs--
net............... 67,650 64,064 15,200 78,205 268,645 179,570
Accrued interest
and taxes......... (8,880) 5,572 41,844 89,255 25,860 117,942
Other changes in
certain current
assets and
liabilities....... (53,995) 4,403 (34,775) 9,888 (36,757) (9,991)
Other--net........... 97,939 49,150 137,171 129,890 149,450 126,047
--------- --------- --------- ---------- ----------- -----------
$ (69,087) $ 476,199 $ 147,748 $1,017,844 $ 1,534,104 $ 1,523,946
--------- --------- --------- ---------- ----------- -----------
Cash Flow from Investing
Activities:
Construction
expenditures.......... $(195,862) $(185,870) $(383,586) $ (392,133) $ (843,690) $ (748,226)
Nuclear fuel
expenditures.......... (56,550) (72,297) (105,299) (111,154) (213,919) (263,120)
Equity component of
allowance for funds
used during
construction.......... 5,070 3,776 12,426 5,869 25,428 16,071
Contributions to
nuclear
decommissioning
funds................. -- -- (96,229) (96,229) (132,550) (132,550)
Investment in
subsidiary companies.. -- (1) -- (1) -- (50)
Other cash investments
and special deposits.. 548,883 7,420 620,532 (579) 3,654 876
--------- --------- --------- ---------- ----------- -----------
$ 301,541 $(246,972) $ 47,844 $ (594,227) $(1,161,077) $(1,126,999)
--------- --------- --------- ---------- ----------- -----------
Cash Flow from Financing
Activities:
Issuance of
securities--
Long-term debt........ $ 211,576 $ 5,000 $ 277,114 $ 25,000 $ 1,226,954 $ 294,175
Capital stock......... 3,996 5,586 5,031 9,745 10,982 85,751
Retirement and
redemption of
securities--
Long-term debt........ (300,445) (262,026) (355,752) (291,663) (1,197,115) (639,841)
Capital stock......... (2,887) (3,000) (2,887) (3,000) (62,031) (17,822)
Deposits and
securities held for
retirement and
redemption of
securities............ 16,082 1,403 3,194 (271) 155,392 (274)
Premium paid on early
redemption of long-
term debt............. (400) -- (900) -- (26,355) (3,664)
Cash dividends paid on
common stock.......... (85,518) (85,812) (171,018) (171,550) (341,857) (342,854)
Proceeds from
sale/leaseback of
nuclear fuel.......... 51,056 -- 168,020 115,340 250,628 253,968
Nuclear fuel lease
principal payments.... (46,091) (52,832) (99,536) (115,617) (226,862) (225,770)
Increase in short-term
borrowings............ -- 40,000 150 40,000 500 41,050
--------- --------- --------- ---------- ----------- -----------
$(152,631) $(351,681) $(176,584) $ (392,016) $ (209,764) $ (555,281)
--------- --------- --------- ---------- ----------- -----------
Increase (Decrease) in
Cash and Temporary Cash
Investments............ $ 79,823 $(122,454) $ 19,008 $ 31,601 $ 163,263 $ (158,334)
Cash and Temporary Cash
Investments at
Beginning of Period.... 187,047 230,990 247,862 76,935 103,607 266,870
--------- --------- --------- ---------- ----------- -----------
Cash and Temporary Cash
Investments at End of
Period................. $ 266,870 $ 108,536 $ 266,870 $ 108,536 $ 266,870 $ 108,536
========= ========= ========= ========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
10
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Corporate Structure and Basis of Presentation. Unicom was incorporated in
January 1994, and became the parent corporation of ComEd and Unicom Enterprises
in a corporate restructuring that became effective on September 1, 1994.
Previously, Unicom Enterprises was a wholly-owned subsidiary of ComEd. The
restructuring was accounted for by the pooling-of-interests method. Under this
method, the assets, liabilities and ownership interests of each of the
companies are combined at their existing recorded amounts as of the
restructuring date, and the financial statements are presented herein as if the
restructuring took place as of the earliest period shown. In the restructuring,
each of the 214,185,572 outstanding shares of ComEd common stock, par value
$12.50 per share, was converted into one fully paid and non-assessable share of
Unicom common stock, without par value. The preferred and preference stocks,
common stock purchase warrants, first mortgage bonds and other debt obligations
of ComEd and the Indiana Company were unchanged in the restructuring and remain
their outstanding securities and obligations.
ComEd, an electric utility, is the principal subsidiary of Unicom. Unicom
Enterprises is an unregulated subsidiary of Unicom and is engaged, through its
subsidiary, Unicom Thermal, in energy service activities. Unicom also has
several other subsidiaries that intend to engage in unregulated activities.
The consolidated financial statements include the accounts of Unicom, ComEd,
the Indiana Company and Unicom's unregulated subsidiaries. All significant
intercompany transactions have been eliminated. ComEd's investments in other
subsidiary companies, which are not material in relation to ComEd's financial
position or results of operations, are accounted for in accordance with the
equity method of accounting.
Regulation. ComEd is subject to regulation as to accounting and ratemaking
policies and practices by the ICC and FERC. ComEd's accounting policies and the
accompanying consolidated financial statements conform to generally accepted
accounting principles applicable to rate-regulated enterprises and reflect the
effects of the ratemaking process in accordance with SFAS No. 71, Accounting
for the Effects of Certain Types of Regulation. Such effects concern mainly the
time at which various items enter into the determination of net income in order
to follow the principle of matching costs and revenues.
Regulatory Assets and Liabilities. Regulatory assets are incurred costs which
have been deferred and are amortized for ratemaking and accounting purposes.
Regulatory liabilities represent amounts to be settled with customers through
future rates. Regulatory assets and liabilities reflected in base rates at
December 31, 1994 and June 30, 1995 were as follows:
11
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
------------ ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Regulatory assets:
Deferred income taxes (1)............................. $1,791,395 $1,727,351
Deferred carrying charges (2)......................... 422,966 416,444
Nuclear decommissioning costs--Dresden Unit 1 (3)..... 141,405 144,113
Unamortized loss on reacquired debt (4)............... 176,128 168,353
Other................................................. 72,376 70,755
---------- ----------
$2,604,270 $2,527,016
========== ==========
Regulatory liabilities:
Deferred income taxes (1)............................. $ 650,813 $ 613,385
Other................................................. 48,613 --
---------- ----------
$ 699,426 $ 613,385
========== ==========
</TABLE>
- --------
(1) Recorded in compliance with SFAS No. 109. See Note 14 for additional
information.
(2) Amortized over the remaining life of the Units.
(3) Amortized over the remaining life of Dresden station. See "Depreciation
and Decommissioning" below for additional information.
(4) Amortized over the lives of the long-term debt issued to finance the
reacquisition. See "Loss on Reacquired Debt" below for additional
information.
For additional information related to deferred carrying charges, see "Deferred
Carrying Charges" under the subcaption "Results of Operations" in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." See also "Deferred Unrecovered Energy Costs" below regarding the
fuel adjustment clause, the DOE assessment and coal reserves.
If a portion of ComEd's operations was no longer subject to the provisions
of SFAS No. 71 as a result of a change in regulation or the effects of
competition, ComEd would be required to write off the related regulatory
assets and liabilities. In addition, ComEd would be required to determine any
impairment to other assets and write down the assets to their fair value.
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which was issued in March 1995 and will
be effective on January 1, 1996, establishes accounting standards for the
impairment of long-lived assets. The SFAS also requires that regulatory assets
which are no longer probable of recovery through future revenue be charged to
earnings. SFAS No. 121 is not expected to have an impact on ComEd's financial
position or results of operations upon adoption.
Customer Receivables and Revenues. ComEd is engaged principally in the
production, purchase, transmission, distribution and sale of electricity to a
diverse base of residential, commercial and industrial customers. ComEd's
electric service territory has an area of approximately 11,540 square miles
and an estimated population of approximately 8.2 million, 8.1 million and 8.2
million as of December 31, 1994, 1993 and 1992, respectively. It includes the
city of Chicago, an area of about 225 square miles with an estimated
population of three million from which ComEd derived approximately one-third
of its ultimate consumer revenues in the twelve months ended June 30, 1995.
ComEd had approximately 3.4 million electric customers at June 30, 1995.
Depreciation and Decommissioning. ComEd's depreciation is provided on the
straight-line basis by amortizing the cost of depreciable plant and equipment
over estimated composite service lives. Non-nuclear plant and equipment is
depreciated at annual rates developed for each class of plant based on their
composite service lives. Provisions for depreciation were at average annual
rates of 3.13% and
12
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
3.14% for the three months ended June 30, 1994 and 1995, respectively, and
3.13% for the six months and twelve months ended June 30, 1994 and 1995, of
average depreciable utility plant and equipment. The annual rate for nuclear
plant and equipment is 2.88%, which excludes separately collected
decommissioning costs.
Nuclear plant decommissioning costs are accrued over the expected service
lives of the related nuclear generating units. The accrual is based on an
annual levelized cost of the unrecovered portion of estimated decommissioning
costs which are escalated for expected inflation to the expected time of
decommissioning and are net of expected earnings on the trust funds. See
"Decommissioning" under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," subcaption "Results of Operations," for a
discussion of questions raised by the staff of the SEC and a FASB review
regarding the electric utility industry method of accounting for
decommissioning costs. Dismantling is expected to occur relatively soon after
the end of the useful life of each related generating station. The accrual for
decommissioning is based on the prompt removal method authorized by NRC
guidelines. ComEd's twelve operating units have estimated remaining service
lives ranging from 11 to 33 years. ComEd's first nuclear unit, Dresden Unit 1,
is retired and will be dismantled upon the retirement of the remaining units at
that station, which is consistent with the regulatory treatment for the related
decommissioning costs.
Based on ComEd's most recent study, decommissioning costs, including the cost
of decontamination and dismantling but excluding a contingency allowance, are
estimated to aggregate $3.5 billion in current-year (1995) dollars. ComEd
estimates that it will expend approximately $15 billion, excluding any
contingency allowance, for decommissioning costs primarily during the period
from 2007 through 2032. Such costs are expected to be funded by external
decommissioning trusts which ComEd established in compliance with Illinois law
and into which ComEd has been making annual contributions. Future
decommissioning cost estimates may be significantly affected by the adoption of
or changes to NRC regulations.
On January 9, 1995, the ICC issued the Rate Order in the proceedings relating
to ComEd's February 1994 rate increase request. In the Rate Order, the ICC
determined that ComEd's annual nuclear plant decommissioning cost collections
from its ratepayers should be reduced from the $127 million previously
authorized in the 1991 ICC rate order to $112.7 million. The $112.7 million
annual collection amount primarily resulted from the ICC's decision to exclude
from ComEd's costs subject to collection a contingency allowance. Contingency
allowances used in decommissioning cost estimates provide for currently
unforeseeable costs that are likely to occur after decommissioning begins and
generally range from 20% to 25% of the identifiable costs. However, the Rate
Order established a rider which will allow annual adjustments to
decommissioning cost collections outside of the context of a traditional rate
proceeding. Such rider is intended to allow adjustments in decommissioning cost
recoveries from ratepayers as changes in cost estimates become identifiable. On
February 28, 1995, ComEd submitted its initial rider filing to the ICC to
increase its annual collections to $113.5 million, primarily reflecting
additional expenditures at Dresden Unit 1, its retired nuclear unit. The ICC
approved the rider filing on April 19, 1995.
As a result of the decommissioning rider filing, beginning May 2, 1995, the
effective date of the order related to the rider filing, ComEd began collecting
and accruing $113.5 million annually for decommissioning costs. The assumptions
used to calculate the $113.5 million decommissioning cost accrual include: the
decommissioning cost estimate of $3.5 billion in current-year (1995) dollars,
after-tax earnings on the tax-qualified and nontax-qualified decommissioning
funds of 7.30% and 6.26%, respectively, as well as an escalation rate for
future decommissioning costs of 5.3%. The annual accrual
13
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
of $113.5 million provided over the lives of the nuclear plants, coupled with
the expected fund earnings and amounts previously recovered in rates, is
expected to aggregate approximately $15 billion.
For the twelve operating nuclear units, decommissioning costs are recorded as
portions of depreciation expense and accumulated provision for depreciation on
the Statements of Consolidated Income and the Consolidated Balance Sheets,
respectively. As of June 30, 1995, the total decommissioning costs included in
the accumulated provision for depreciation were approximately $1,150 million.
For ComEd's retired nuclear unit, Dresden Unit 1, the total estimated liability
at June 30, 1995 in current-year (1995) dollars of $251 million was recorded on
the Consolidated Balance Sheets as a noncurrent liability and the unrecovered
portion of the liability of approximately $144 million was recorded as a
regulatory asset.
Under Illinois law, decommissioning cost collections are required to be
deposited into external trusts; and, consequently, such collections do not add
to the cash flows available for general corporate purposes. The ICC has
approved ComEd's funding plan which provides for annual contributions of
current accruals and ratable contributions of past accruals over the remaining
service lives of the nuclear plants. At June 30, 1995, the past accruals that
are required to be contributed to the external trusts aggregate $162 million.
The fair value of funds accumulated in the external trusts at June 30, 1995 was
approximately $1,095 million which includes pre-tax unrealized appreciation of
$96 million. The earnings on the external trusts accumulate in the fund balance
and in the accumulated provision for depreciation. Such earnings on the
external trust funds, which have been recorded as a component of depreciation
expense on the Statements of Consolidated Income, were $7,803,000 and
$15,186,000 for the three months ended June 30, 1994 and 1995, respectively,
$20,329,000 and $26,472,000 for the six months ended June 30, 1994 and 1995,
respectively, and $41,268,000 and $43,662,000 for the twelve months ended June
30, 1994 and 1995, respectively.
Amortization of Nuclear Fuel. The cost of nuclear fuel is amortized to fuel
expense based on the quantity of heat produced using the unit of production
method. As authorized by the ICC, provisions for spent nuclear fuel disposal
costs have been recorded at a level required to recover the fee payable on
current nuclear-generated and sold electricity and the current interest accrual
on the one-time fee payable to the DOE for nuclear generation prior to April 7,
1983. The one-time fee and interest thereon have been recovered and the current
fee and current interest on the one-time fee are currently being recovered
through the fuel adjustment clause. See Note 10 for further information
concerning the disposal of spent nuclear fuel, the one-time fee and the current
interest accrual on the one-time fee. Nuclear fuel expenses, including leased
fuel costs and provisions for spent nuclear fuel disposal costs, were
$76,916,000 and $97,695,000 for the three months ended June 30, 1994 and 1995,
respectively, $166,159,000 and $196,539,000 for the six months ended June 30,
1994 and 1995, respectively, and $363,025,000 and $388,407,000 for the twelve
months ended June 30, 1994 and 1995, respectively.
Income Taxes. Deferred income taxes are provided for income and expense items
recognized for financial accounting purposes in periods that differ from those
for income tax purposes. Income taxes deferred in prior years are charged or
credited to income as the book/tax timing differences reverse. Prior years'
deferred investment tax credits are amortized through credits to income
generally over the lives of the related property. Income tax credits resulting
from interest charges applicable to nonoperating activities, principally
construction, are classified as other income.
AFUDC. In accordance with the uniform systems of accounts prescribed by
regulatory authorities, ComEd capitalizes AFUDC, compounded semiannually, which
represents the estimated cost of funds used to finance its construction
program. The equity component of AFUDC is recorded on an after-tax
14
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
basis and the borrowed funds component of AFUDC is recorded on a pre-tax basis.
The average annual capitalization rates were 9.84% and 9.56% for the three
months ended June 30, 1994 and 1995, respectively, 9.84% and 9.61% for the six
months ended June 30, 1994 and 1995, respectively, and 9.89% and 9.73% for the
twelve months ended June 30, 1994 and 1995, respectively. AFUDC does not
contribute to the current cash flow of Unicom or ComEd.
Interest. Total interest costs incurred on debt, leases and other obligations
were $183,456,000 and $177,732,000 for the three months ended June 30, 1994 and
1995, respectively, $373,622,000 and $354,728,000 for the six months ended June
30, 1994 and 1995, respectively, and $788,819,000 and $710,816,000 for the
twelve months ended June 30, 1994 and 1995, respectively.
Debt Discount, Premium and Expense. Discount, premium and expense on long-
term debt of subsidiary companies are being amortized over the lives of the
respective issues.
Loss on Reacquired Debt. Consistent with regulatory treatment, the net loss
from ComEd's reacquisition of first mortgage bonds, sinking fund debentures and
pollution control obligations prior to their scheduled maturity dates is
deferred and amortized over the lives of the long-term debt issued to finance
the reacquisition.
Deferred Unrecovered Energy Costs. The fuel adjustment clause adopted by the
ICC provides for the recovery of changes in fossil and nuclear fuel costs and
the energy portion of purchased power costs as compared to the fuel and
purchased energy costs included in ComEd's base rates. As authorized by the
ICC, ComEd has recorded under or overrecoveries of allowable fuel and energy
costs which, under the clause, are recoverable or refundable in subsequent
months. Deferred unrecovered energy costs also include amounts to be recovered
through the fuel adjustment clause for assessments by the DOE to fund a portion
of the cost for the decontamination and decommissioning of uranium enrichment
facilities owned and previously operated by the DOE. As of December 31, 1994
and June 30, 1995, an asset of approximately $191 million and $182 million,
respectively, was recorded, of which the current portion of approximately $15
million has been included in current assets on the Consolidated Balance Sheets.
As of December 31, 1994 and June 30, 1995, a corresponding liability of
approximately $165 million and $163 million, respectively, was recorded in
other noncurrent liabilities and approximately $15 million was recorded in
other current liabilities.
At December 31, 1994 and June 30, 1995, ComEd had unrecovered fuel costs in
the form of coal reserves of approximately $498 million and $479 million,
respectively. In prior years, ComEd's commitments for the purchase of coal
exceeded its requirements. Rather than take all the coal it was required to
take, ComEd agreed to purchase the coal in place in the form of coal reserves.
ComEd has been allowed to recover from its customers the costs of the coal
reserves through its fuel adjustment clause as the coal is used for the
generation of electricity. ComEd expects to recover the costs of the coal
reserves by the year 2007. However, ComEd is not earning a return on the
expenditures for coal reserves prior to the coal reserves being used for the
generation of electricity by including the coal reserves in rate base.
Unrecovered fuel costs expected to be recovered within one year amounting to
approximately $31 million and $22 million at December 31, 1994 and June 30,
1995, respectively, have been included on the Consolidated Balance Sheets in
current assets as deferred unrecovered energy costs. See Note 19 for additional
information concerning ComEd's coal commitments.
Certain Investments. Effective January 1, 1994, SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, was adopted. SFAS No. 115
addresses the accounting and reporting for investments in equity securities
that have readily determinable fair values and for all investments in debt
securities. For additional information, see Note 11.
15
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Reclassifications. Certain prior year amounts have been reclassified to
conform with current period presentation. These reclassifications had no effect
on net income.
Statements of Consolidated Cash Flows. For purposes of the Statements of
Consolidated Cash Flows, temporary cash investments, generally investments
maturing within three months at the time of purchase, are considered to be cash
equivalents. Supplemental cash flow information for the three months, six
months and twelve months ended June 30, 1994 and 1995 was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ------------------ ----------------------
1994 1995 1994 1995 1994 1995
--------- --------- -------- -------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Supplemental Cash Flow
Information:
Cash paid during the
period for:
Interest (net of
amount capitalized). $ 146,978 $ 145,067 $320,035 $316,472 $ 647,110 $ 642,094
Income taxes (net of
refunds)............ $ 55,798 $ 52,953 $(77,591) $ 22,532 $ (81,639) $ 95,200
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Capital lease obliga-
tions incurred by
subsidiary companies.. $ 52,370 $ 1,433 $169,869 $118,243 $ 255,111 $ 258,091
</TABLE>
(2) SETTLEMENTS RELATING TO CERTAIN RATE MATTERS. Under the Rate Matters
Settlement, effective as of November 4, 1993, ComEd reduced its rates by
approximately $339 million annually and commenced refunding approximately $1.26
billion (including revenue taxes), plus interest at five percent on the unpaid
balance, through temporarily reduced rates over an initial refund period which
ended in November 1994 (followed by a reconciliation period of five months).
ComEd had previously deferred the recognition of revenues during 1993 as a
result of developments in the proceedings related to the 1991 ICC rate order,
which resulted in a reduction to 1993 net income of approximately $160 million
or $0.75 per common share. The recording of the effects of the Rate Matters
Settlement in October 1993 reduced 1993 net income by approximately $292
million or $1.37 per common share, in addition to the approximately $160
million effect of the deferred recognition of revenues and after the partially
offsetting effect of recording approximately $269 million or $1.26 per common
share in deferred carrying charges, net of income taxes, authorized in the
Remand Order. The deferred recognition of revenues was eliminated in October
1993 at the time the provisions for revenue refunds related to the Rate Matters
Settlement, which reflected those deferred revenues, were recorded.
Under the Fuel Matters Settlement, effective as of December 2, 1993, ComEd
commenced paying approximately $108 million (including revenue taxes) to its
customers through temporarily reduced collections under its fuel adjustment
clause over a twelve-month period which ended in November 1994. The recording
of the effects of the Fuel Matters Settlement in October 1993 reduced 1993 net
income by approximately $62 million or $0.29 per common share.
(3) OTHER RATE MATTERS. On January 9, 1995, the ICC issued the Rate Order in
the proceedings relating to ComEd's February 1994 rate increase request. The
Rate Order provides, among other things, for (i) an increase in ComEd's total
revenues of approximately $301.8 million (excluding add-on revenue taxes) or
5.2%, on an annual basis, including a $303.2 million increase in base rates,
(ii) the collection of municipal franchise costs as an adder to base rates
until May 1, 1995, when ComEd began collecting such costs prospectively on an
individual municipality basis through a rider, and (iii) the use of a rider,
with annual review proceedings, to pass on to ratepayers increases or decreases
in estimated costs associated with the decommissioning of ComEd's nuclear
generating units. See "Depreciation and Decommissioning" in Note 1 for
information related to the level of decommissioning cost collections allowed in
the Rate Order. The ICC also determined that the Units were 100% "used and
useful" and
16
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
that the previously determined reasonable costs of such Units, as depreciated,
should be included in full in ComEd's rate base. The rates provided in the Rate
Order became effective on January 14, 1995; however, they are being collected
subject to refund as a result of subsequent judicial action. As of June 30,
1995, electric operating revenues of approximately $139 million (excluding
revenue taxes) are subject to refund. Intervenors and ComEd have filed appeals
of the Rate Order with the Illinois Appellate Court.
(4) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK. At June 30, 1995,
Unicom's authorized shares consisted of 400,000,000 shares of common stock. The
authorized shares of ComEd preferred and preference stocks at June 30, 1995
were: preference stock--23,393,205 shares; $1.425 convertible preferred stock--
99,112 shares; and prior preferred stock--850,000 shares. The preference and
prior preferred stocks are issuable in series and may be issued with or without
mandatory redemption requirements. Holders of outstanding Unicom shares are
entitled to one vote for each share held on each matter submitted to a vote of
such shareholders; and holders of outstanding ComEd shares are entitled to one
vote for each share held on each matter submitted to a vote of such
shareholders. All such shares have the right to cumulate votes in elections for
the directors of the corporation which issued the shares.
(5) COMMON STOCK. At June 30, 1995, shares of Unicom common stock were
reserved for the following purposes:
<TABLE>
<S> <C>
Long-Term Incentive Plan........................................ 3,817,118
Employee Stock Purchase Plan.................................... 993,339
Employee Savings and Investment Plan............................ 370,403
---------
5,180,860
=========
</TABLE>
Common stock for the three months, six months and twelve months ended June
30, 1994 and 1995 was issued as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ----------------- -------------------
1994 1995 1994 1995 1994 1995
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares of Common Stock
Issued:
Long-Term Incentive
Plan.................. -- -- -- 182,882 -- 182,882
Employee Stock Purchase
Plan.................. 154,710 123,824 154,710 123,824 284,656 274,319
Employee Savings and
Investment Plan....... 27,600 110,000 65,600 110,000 148,800 129,800
Conversion of $1.425
convertible preferred
stock................. 87,356 -- 93,106 -- 106,892 91,935
Conversion of warrants. 5,554 -- 5,752 -- 6,514 7,522
--------- --------- -------- -------- --------- ---------
275,220 233,824 319,168 416,706 546,862 686,458
========= ========= ======== ======== ========= =========
<CAPTION>
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Amount of Common Stock
Issued................. $ 6,958 $ 5,587 $ 8,180 $ 9,745 $ 14,589 $ 16,346
========= ========= ======== ======== ========= =========
</TABLE>
At December 31, 1994 and June 30, 1995, 83,751 and 83,021 ComEd common stock
purchase warrants, respectively, were outstanding. The warrants entitle the
holders to convert such warrants into common stock of ComEd at a conversion
rate of one share of common stock for three warrants.
(6) COMED PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION
REQUIREMENTS. No shares of ComEd preferred or preference stocks without
mandatory redemption requirements were issued or redeemed during the twelve
months ended June 30, 1994. During the twelve months ended June 30, 1995,
3,000,000 shares of ComEd preference stock without mandatory redemption
requirements were issued and no shares of ComEd preferred or preference stocks
without mandatory redemption requirements were redeemed. The series of ComEd
preference stock without mandatory redemption requirements outstanding at June
30, 1995 are summarized as follows:
17
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
INVOLUNTARY
SHARES AGGREGATE REDEMPTION LIQUIDATION
SERIES OUTSTANDING STATED VALUE PRICE(1) PRICE(1)
------ ----------- ------------ ---------- -----------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C> <C>
$1.90 4,249,549 $106,239 $ 25.25 $25.00
$2.00 2,000,000 51,560 $ 26.04 $25.00
$1.96 2,000,000 52,440 $ 27.11 $25.00
$7.24 750,000 74,340 $101.00 $99.12
$8.40 750,000 74,175 $101.00 $98.90
$8.38 750,000 73,566 $100.16 $98.09
$2.425 3,000,000 72,637 $ 25.00 $25.00
---------- --------
13,499,549 $504,957
========== ========
</TABLE>
--------
(1) Per share plus accrued and unpaid dividends, if any.
The outstanding shares of ComEd's $1.425 convertible preferred stock are
convertible at the option of the holders thereof, at any time, into common
stock of ComEd at the rate of 1.02 shares of common stock for each share of
convertible preferred stock, subject to future adjustment. The convertible
preferred stock may be redeemed by ComEd at $42 per share, plus accrued and
unpaid dividends, if any. The involuntary liquidation price of the $1.425
convertible preferred stock is $31.80 per share, plus accrued and unpaid
dividends, if any.
(7) COMED PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS.
During the twelve months ended June 30, 1994 and 1995, no shares of ComEd
preference stock subject to mandatory redemption requirements were issued. The
series of ComEd preference stock subject to mandatory redemption requirements
outstanding at June 30, 1995 are summarized as follows:
<TABLE>
<CAPTION>
SHARES AGGREGATE
SERIES OUTSTANDING STATED VALUE OPTIONAL REDEMPTION PRICE(1)
- -------------- ----------- ------------ --------------------------------------------------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C>
$8.20 285,705 $ 28,571 $103 through October 31, 1997; and $101 thereafter
$8.40 Series B 360,000 35,757 $101
$8.85 337,500 33,750 $103 through July 31, 1998; and $101 thereafter
$9.25 750,000 75,000 $103 through July 31, 1999; and $101 thereafter
$9.00 650,000 64,431 Non-callable
$6.875 700,000 69,475 Non-callable
--------- --------
3,083,205 $306,984
========= ========
</TABLE>
- --------
(1) Per share plus accrued and unpaid dividends, if any.
The annual sinking fund requirements and sinking fund and involuntary
liquidation prices per share of the outstanding series of ComEd preference
stock subject to mandatory redemption requirements are summarized as follows:
<TABLE>
<CAPTION>
SINKING
FUND INVOLUNTARY
SERIES ANNUAL SINKING FUND REQUIREMENT PRICE(1) LIQUIDATION PRICE(1)
- ------------ ----------------------------------- ------- -------------------
<S> <C> <C> <C>
$8.20 35,715 shares $100 $100.00
$8.40 Series B 30,000 shares(2) $100 $ 99.326
$8.85 37,500 shares $100 $100.00
$9.25 75,000 shares $100 $100.00
$9.00 130,000 shares beginning in 1996(2) $100 $ 99.125
$6.875 (3) $100 $ 99.25
</TABLE>
- --------
(1) Per share plus accrued and unpaid dividends, if any.
(2) ComEd has a non-cumulative option to increase the annual sinking fund
payment on each sinking fund redemption date to retire an additional number
of shares, not in excess of the sinking fund requirement, at the applicable
redemption price.
(3) All shares are required to be redeemed on May 1, 2000.
18
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Annual remaining sinking fund requirements through 1999 on ComEd preference
stock outstanding at June 30, 1995 will aggregate $14,822,000 in 1995,
$30,822,000 in 1996, $30,822,000 in 1997, $30,822,000 in 1998 and $30,822,000
in 1999. During the twelve months ended June 30, 1994 and 1995, 612,085 shares
and 178,215 shares, respectively, of ComEd preference stock subject to
mandatory redemption requirements were reacquired to meet sinking fund
requirements.
Sinking fund requirements due within one year are included in current
liabilities.
On November 1, 1993, ComEd redeemed the remaining 75,000 shares of its $11.70
Series of preference stock (150,000 shares had been redeemed on August 1, 1993
at the optional redemption price of $105 per share, plus accrued and unpaid
dividends). Of the remaining 75,000 shares, 37,500 shares were redeemed to meet
the November 1, 1993 mandatory sinking fund requirement and 37,500 shares were
redeemed as a permitted optional sinking fund payment, both at the sinking fund
redemption price of $100 per share, plus accrued and unpaid dividends.
On November 1, 1993, ComEd redeemed all 210,000 shares of its $9.30 Series of
preference stock, of which 70,000 shares were redeemed at the optional
redemption price of $101.03 per share, plus accrued and unpaid dividends,
70,000 shares were redeemed to meet the November 1, 1993 mandatory sinking fund
requirement and 70,000 shares were redeemed as a permitted optional sinking
fund payment, the latter two at the sinking fund redemption price of $100 per
share, plus accrued and unpaid dividends.
(8) LONG-TERM DEBT OF SUBSIDIARY COMPANIES. Sinking fund requirements and
scheduled maturities remaining through 1999 for ComEd and the Indiana Company's
first mortgage bonds, sinking fund debentures and other long-term debt
outstanding at June 30, 1995, after deducting a deposit made for retirement of
sinking fund debentures and sinking fund debentures reacquired for satisfaction
of future sinking fund requirements, are summarized as follows: 1995--
$103,624,000; 1996--$331,384,000; 1997--$689,314,000; 1998--$350,017,000; and
1999--$152,445,000. Unicom Enterprises' note payable to bank of $25,000,000
will mature in 1997.
At June 30, 1995, ComEd's outstanding first mortgage bonds maturing through
1999 were as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
SERIES ----------------------
--------------------------- (THOUSANDS OF DOLLARS)
<S> <C>
5 1/4% due April 1, 1996........................... $ 50,000
5 3/4% due November 1, 1996........................ 50,000
5 3/4% due December 1, 1996........................ 50,000
7% due February 1, 1997............................ 150,000
5 3/8% due April 1, 1997........................... 50,000
6 1/4% due October 1, 1997......................... 60,000
6 1/4% due February 1, 1998........................ 50,000
6% due March 15, 1998.............................. 130,000
6 3/4% due July 1, 1998............................ 50,000
6 3/8% due October 1, 1998......................... 75,000
--------
$715,000
========
</TABLE>
19
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Other long-term debt outstanding at June 30, 1995 is summarized as follows:
<TABLE>
<CAPTION>
PRINCIPAL
DEBT SECURITY AMOUNT INTEREST RATE
- ---------------------------------- ---------- ----------------------------------------------------
(THOUSANDS
OF
DOLLARS)
<S> <C> <C>
ComEd--
Notes:
Medium Term Notes, Series 1N due
various dates through
April 1, 1998 $ 50,500 Interest rates ranging from 9.40% to 9.65%
Medium Term Note, Series 2N due
July 1, 1996 10,000 Interest rate of 9.85%
Medium Term Notes, Series 3N due
various dates through October
15, 2004 322,250 Interest rates ranging from 8.92% to 9.20%
Medium Term Notes, Series 4N due
various dates through
May 15, 1997 46,000 Interest rates ranging from 8.11% to 8.875%
Notes due July 15, 1995 100,000 Fixed interest rate of 5.50%
Notes due February 15, 1997 150,000 Fixed interest rate of 7.00%
Notes due July 15, 1997 100,000 Fixed interest rate of 6.50%
Notes due October 15, 2005 235,000 Fixed interest rate of 6.40%
----------
$1,013,750
----------
Long-Term Notes Payable to Banks:
Note due January 9, 1996 $ 100,000 Prevailing interest rate of 6.5625% at June 30, 1995
Note due June 1, 1997 150,000 Prevailing interest rate of 6.6875% at June 30, 1995
----------
$ 250,000
----------
Purchase Contract Obligations:
Woodstock due January 2, 1997 $ 186 Fixed interest rate of 4.50%
Hinsdale due April 30, 2005 473 Fixed interest rate of 3.00%
----------
$ 659
----------
Total ComEd $1,264,409
Unicom Enterprises--
Note Payable to Bank:
Note due November 22, 1997 25,000 Prevailing interest rate of 7.0845% at June 30, 1995
----------
Total Unicom $1,289,409
==========
</TABLE>
Long-term debt maturing within one year has been included in current
liabilities.
ComEd's outstanding first mortgage bonds are secured by a lien on
substantially all property and franchises, other than expressly excepted
property, owned by ComEd.
(9) LINES OF CREDIT. ComEd had total bank lines of credit of approximately
$922 million and unused bank lines of credit of approximately $915 million at
June 30, 1995. Of that amount, $915 million (of which $175 million expires on
October 2, 1995, $72 million expires in equal quarterly installments commencing
on December 31, 1996 and ending on September 30, 1998 and $668 million expires
in equal quarterly installments commencing on December 31, 1997 and ending on
September 30, 1999) may be borrowed on secured or unsecured notes of ComEd at
various interest rates. The interest rate is set at the time of a borrowing and
is based on several floating rate bank indices plus a spread which is dependent
upon
20
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
ComEd's credit ratings, or on a prime interest rate. Amounts under the
remaining lines of credit may be borrowed at prevailing prime interest rates on
unsecured notes of ComEd. Collateral, if required for the borrowings, would
consist of first mortgage bonds issued under and in accordance with the
provisions of ComEd's mortgage. ComEd is obligated to pay commitment fees with
respect to $915 million of such lines of credit.
Unicom Enterprises has a $200 million credit facility which will expire in
1997 of which $175 million was unused as of June 30, 1995. The credit facility
can be used by Unicom Enterprises to finance investments in unregulated energy-
related businesses and projects, including Unicom Thermal, and for general
corporate purposes. The credit facility is guaranteed by Unicom and includes
certain covenants with respect to Unicom's and Unicom Enterprises' operations.
Such covenants include, among other things, (i) a requirement that Unicom and
its consolidated subsidiaries maintain a tangible net worth at least $10
million over that of ComEd and its consolidated subsidiaries, (ii) a
requirement that Unicom's consolidated debt to consolidated capitalization not
exceed 0.65 to 1, (iii) restrictions on the indebtedness for borrowed money
that Unicom (excluding ComEd) and Unicom Enterprises may incur, and (iv) a
requirement that Unicom own 100% of the outstanding stock of Unicom Enterprises
and at least 80% of the outstanding stock of ComEd; and provide that Unicom may
not declare or pay dividends during the continuance of an event of default.
Interest rates for borrowings under the credit facility are set at the time of
a borrowing and are based on either a prime interest rate or a floating rate
bank index plus a spread which varies with the credit rating of ComEd's
outstanding first mortgage bonds.
(10) DISPOSAL OF SPENT NUCLEAR FUEL. Under the Nuclear Waste Policy Act of
1982, the DOE is responsible for the selection and development of repositories
for, and the disposal of, spent nuclear fuel and high-level radioactive waste.
ComEd, as required by that Act, has signed a contract with the DOE to provide
for the disposal of spent nuclear fuel and high-level radioactive waste from
ComEd's nuclear generating stations beginning not later than January 1998;
however, this delivery schedule is expected to be delayed significantly. The
contract with the DOE requires ComEd to pay the DOE a one-time fee applicable
to nuclear generation through April 6, 1983 of approximately $277 million, with
interest to date of payment, and a fee payable quarterly equal to one mill per
kilowatthour of nuclear-generated and sold electricity after April 6, 1983.
ComEd has elected to pay the one-time fee, with interest, just prior to the
first delivery of spent nuclear fuel to the DOE. The liability for the one-time
fee and the related interest is reflected in the Consolidated Balance Sheets.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS. The following methods and
assumptions were used to estimate the fair value of financial instruments
either held or issued and outstanding. The disclosure of such information does
not purport to be a market valuation of Unicom and subsidiary companies as a
whole. The impact of any realized or unrealized gains or losses related to such
financial instruments on the financial position or results of operations of
Unicom and subsidiary companies is primarily dependent on the treatment
authorized under future ComEd ratemaking proceedings.
21
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Investments. Securities included in the nuclear decommissioning funds have
been classified and accounted for as "available for sale" securities. The
estimated fair value of the nuclear decommissioning funds, as determined by the
trustee and based on published market data, as of December 31, 1994 and June
30, 1995 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 JUNE 30, 1995
-------------------------------- --------------------------------
UNREALIZED
GAINS UNREALIZED
COST BASIS (LOSSES) FAIR VALUE COST BASIS GAINS FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Short-term
investments.......... $ 65,203 $ 106 $ 65,309 $ 53,218 $ 219 $ 53,437
U.S. Government and
Agency issues........ 94,450 (562) 93,888 132,466 11,237 143,703
Municipal bonds....... 478,074 (7,301) 470,773 456,033 18,683 474,716
Common stock.......... 220,395 9,069 229,464 331,529 60,783 392,312
Other................. 18,788 2,722 21,510 26,365 4,860 31,225
-------- ------- -------- -------- ------- ----------
$876,910 $ 4,034 $880,944 $999,611 $95,782 $1,095,393
======== ======= ======== ======== ======= ==========
</TABLE>
At June 30, 1995, the debt securities held by the nuclear decommissioning
funds had the following maturities:
<TABLE>
<CAPTION>
COST BASIS FAIR VALUE
---------- ----------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Within 1 year....................................... $ 53,218 $ 53,437
1 through 5 years................................... 48,745 50,077
5 through 10 years.................................. 216,481 229,664
Over 10 years....................................... 335,410 351,439
</TABLE>
The net earnings of the nuclear decommissioning funds, which are recorded as
increases to the accumulated provision for depreciation (only the realized
portion prior to January 1, 1994), for the three months, six months and twelve
months ended June 30, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ---------------------- ----------------------
1994 1995 1994 1995 1994 1995
--------- --------- --------- ----------- --------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Gross proceeds from
sales of securities.... $ 157,369 $ 799,974 $ 335,029 $ 1,418,581 $ 480,210 $ 1,894,920
Less cost based on spe-
cific identification... (158,754) (795,785) (332,329) (1,414,439) (471,031) (1,893,808)
--------- --------- --------- ----------- --------- -----------
Realized gains (losses)
on sales of securities. $ (1,385) $ 4,189 $ 2,700 $ 4,142 $ 9,179 $ 1,112
Other realized fund
earnings net of ex-
penses................. 9,188 10,997 17,629 22,330 32,089 42,550
--------- --------- --------- ----------- --------- -----------
Total realized net earn-
ings of the funds...... $ 7,803 $ 15,186 $ 20,329 $ 26,472 $ 41,268 $ 43,662
Unrealized gains (loss-
es).................... (4,243) 43,911 (48,453) 91,747 (36,750) 82,252
--------- --------- --------- ----------- --------- -----------
Total net earnings
(losses) of the funds. $ 3,560 $ 59,097 $ (28,124) $ 118,219 $ 4,518 $ 125,914
========= ========= ========= =========== ========= ===========
</TABLE>
Current Assets. Cash, temporary cash investments and other cash investments,
which include U.S. Government Obligations and other short-term marketable
securities, and special deposits, which primarily includes cash deposited for
the redemption, refund or discharge of debt securities, are stated at cost,
which approximates their fair value because of the short maturity of these
instruments. The securities included in these categories have been classified
as "available for sale" securities.
Capitalization. The estimated fair values of ComEd preferred and preference
stocks and long-term debt of subsidiary companies were obtained from an
independent consultant. The estimated fair values,
22
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
which include the current portions of redeemable preference stock and long-term
debt but exclude accrued interest and preferred and preference stock dividends,
as of December 31, 1994 and June 30, 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 JUNE 30, 1995
--------------------------------- --------------------------------
UNREALIZED
CARRYING UNREALIZED CARRYING LOSSES
VALUE (GAINS) FAIR VALUE VALUE (GAINS) FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Preferred and
preference stocks of
Commonwealth Edison
Company.............. $ 818,111 $ (64,443) $ 753,668 $ 815,093 $ (4,757) $ 810,336
Long-term debt of
subsidiary companies. $7,448,236 $(450,429) $6,997,807 $7,309,279 $265,184 $7,574,463
</TABLE>
Long-term notes payable to banks, which are not included in the above table,
amounted to $400 million and $275 million at December 31, 1994 and June 30,
1995, respectively. Such notes, for which interest is paid at prevailing rates,
are included in the consolidated financial statements at cost, which
approximates their fair value.
Current Liabilities. The carrying value of notes payable, which consists of
bank loans and commercial paper maturing within one year, approximates the fair
value because of the short maturity of these instruments. See "Capitalization"
above for a discussion of the fair value of the current portions of long-term
debt and redeemable preference stock.
Other Noncurrent Liabilities. The carrying value of accrued spent nuclear
fuel disposal fee and related interest represents the settlement value as of
December 31, 1994 and June 30, 1995; therefore, the carrying value is equal to
the fair value.
(12) PENSION BENEFITS. ComEd and the Indiana Company have non-contributory
defined benefit pension plans which cover all regular employees. Benefits under
these plans reflect each employee's compensation, years of service and age at
retirement. Funding is based upon actuarially determined contributions that
take into account the amount deductible for income tax purposes and the minimum
contribution required under the Employee Retirement Income Security Act of
1974, as amended. The December 31, 1994 and June 30, 1995 pension liabilities
and related data were estimated pending completion of the January 1, 1995
actuarial valuation.
During 1994, the companies implemented an early retirement program for
employees eligible to retire or who would become eligible to retire after
December 31, 1993 and before April 1, 1995. A total of 679 employees accepted
the program, resulting in the recognition of approximately $34 million of
additional pension cost and an additional increase to the projected benefit
obligation of that $34 million and $41 million of unrecognized net loss. The
charge to income was approximately $20.5 million after reflecting income tax
effects as a result of the program.
23
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The funded status of these plans at December 31, 1994 and June 30, 1995 was
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated pension plan
benefits:
Vested benefit obligation........................ $(2,071,000) $(2,123,000)
Nonvested benefit obligation..................... (442,000) (453,000)
----------- -----------
Accumulated benefit obligation................... $(2,513,000) $(2,576,000)
Effect of projected future compensation levels... (423,000) (433,000)
----------- -----------
Projected benefit obligation..................... $(2,936,000) $(3,009,000)
Fair value of plan assets, invested primarily in
U.S. Government, government-sponsored corporation
and agency securities, fixed income funds,
registered investment companies, equity index
funds and other equity funds...................... 2,547,000 2,839,000
----------- -----------
Plan assets less than projected benefit obligation. $ (389,000) $ (170,000)
Unrecognized prior service cost.................... 22,000 21,000
Unrecognized transition asset...................... (155,000) (149,000)
Unrecognized net loss (gain)....................... 226,000 (28,000)
----------- -----------
Accrued pension liability........................ $ (296,000) $ (326,000)
=========== ===========
</TABLE>
The assumed discount rate was 8.0% at December 31, 1994 and June 30, 1995,
and the assumed annual rate of increase in future compensation levels was 4.0%.
These rates were used in determining the projected benefit obligations, the
accumulated benefit obligations and the vested benefit obligations.
Pension costs were determined under the rules prescribed by SFAS No. 87,
including the use of the projected unit credit actuarial cost method and the
following actuarial assumptions for periods during 1993, 1994 and 1995:
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Annual discount rate.......................................... 7.50% 7.50% 8.00%
Annual rate of increase in future compensation levels......... 4.00% 4.00% 4.00%
Annual long-term rate of return on plan assets................ 9.50% 9.50% 9.75%
</TABLE>
The components of pension costs, portions of which were recorded as
components of construction costs, for the three months, six months and twelve
months ended June 30, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- -------------------- --------------------
1994 1995 1994 1995 1994 1995
-------- --------- --------- --------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Service cost.................... $ 25,000 $ 21,000 $ 50,000 $ 42,000 $ 96,000 $ 89,000
Interest cost on pro-
jected benefit obliga-
tion........................... 54,000 57,000 108,000 114,000 208,000 219,000
Actual loss (return) on
plan assets.................... 19,000 (208,000) 99,000 (375,000) (29,000) (435,000)
Early retirement program
cost........................... 16,000 -- 32,000 -- 32,000 2,000
Net amortization and deferral... (85,000) 145,000 (232,000) 249,000 (228,000) 177,000
-------- --------- --------- --------- --------- ---------
$ 29,000 $ 15,000 $ 57,000 $ 30,000 $ 79,000 $ 52,000
======== ========= ========= ========= ========= =========
</TABLE>
In addition, an employee savings and investment plan is available to certain
eligible employees of ComEd, Cotter, Unicom Thermal and the Indiana Company.
Each participating employee may contribute up to 20% of such employee's base
pay and the participating companies match such contribution equal to 70% of up
to the first 5% of contributed base salary. The participating companies'
contributions were $5,342,000 and $5,656,000 for the three months ended June
30, 1994 and 1995, respectively, $11,427,000 and $12,131,000 for the six months
ended June 30, 1994 and 1995, respectively, and $22,484,000 and $23,529,000 for
the twelve months ended June 30, 1994 and 1995, respectively.
24
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(13) POSTRETIREMENT HEALTH CARE BENEFITS. ComEd and the Indiana Company
provide certain postretirement health care benefits for retirees and their
dependents and for the surviving dependents of eligible employees and retirees.
Substantially all of the employees become eligible for postretirement health
care benefits when they reach retirement age while working for the companies.
ComEd and the Indiana Company fund the liability for postretirement health care
benefits through a trust fund based upon actuarially determined contributions
that take into account the amount deductible for income tax purposes. The
December 31, 1994 and June 30, 1995 postretirement health care liabilities and
related data were estimated pending completion of the January 1, 1995 actuarial
valuation.
The funded status of the plan at December 31, 1994 and June 30, 1995 was as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated postretirement
health care obligation:
Retirees............................................ $ (524,000) $ (545,000)
Active fully eligible participants.................. (7,000) (9,000)
Other participants.................................. (560,000) (582,000)
----------- -----------
Accumulated benefit obligation...................... $(1,091,000) $(1,136,000)
Fair value of plan assets, invested primarily in S&P
500 common stocks and U.S. Government and listed
corporate obligations............................... 503,000 562,000
----------- -----------
Plan assets less than accumulated postretirement
health care obligation.............................. $ (588,000) $ (574,000)
Unrecognized transition obligation................... 531,000 516,000
Unrecognized net gain................................ (61,000) (116,000)
----------- -----------
Accrued liability for postretirement health care..... $ (118,000) $ (174,000)
=========== ===========
</TABLE>
For 1994 and 1995, different health care cost trends are used for pre-
Medicare and post-Medicare expenses. Pre-Medicare trend rates are 14% for 1994
grading down in 0.5% annual increments to 5%. Post-Medicare trend rates are
11.5% for 1994 grading down in 0.5% annual increments to 5%. The effect of a 1%
increase in the assumed health care cost trend rates for each future year would
increase the accumulated postretirement health care obligation at January 1,
1995 by approximately $197 million and increase the aggregate of the service
and interest cost components of plan costs by approximately $7 million, $14
million and $28 million for the three months, six months and twelve months
ended June 30, 1995, respectively. The assumed discount rate used was 8.0% at
December 31, 1994 and June 30, 1995 and for the six months ended June 30, 1995,
and was 7.5% for the years 1993 and 1994. The annual long-term rate of return
on plan assets was 9.5% for the years 1993 and 1994, or 9.1% for the year 1993
and 9.04% for the year 1994, after including income tax effects, and was 9.75%,
or 9.32% after including income tax effects, for the six months ended June 30,
1995.
The components of postretirement health care costs, portions of which were
recorded as components of construction costs, for the three months, six months
and twelve months ended June 30, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------ ------------------ -------------------
1994 1995 1994 1995 1994 1995
-------- -------- -------- -------- -------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Service cost............ $ 12,000 $ 11,000 $ 24,000 $ 22,000 $ 45,000 $ 45,000
Interest cost on accumu-
lated benefit obliga-
tion................... 21,000 22,000 41,000 43,000 76,000 83,000
Actual loss (return) on
plan assets............ 4,000 (40,000) 19,000 (75,000) 4,000 (85,000)
Amortization of transi-
tion obligation........ 7,000 7,000 14,000 14,000 27,000 29,000
Other................... (14,000) 28,000 (39,000) 52,000 (40,000) 42,000
-------- -------- -------- -------- -------- --------
$ 30,000 $ 28,000 $ 59,000 $ 56,000 $112,000 $114,000
======== ======== ======== ======== ======== ========
</TABLE>
25
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(14) INCOME TAXES. The components of the net deferred income tax liability at
December 31, 1994 and June 30, 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
------------ ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs.......................... $3,266,930 $3,325,967
Overheads capitalized................................ 266,159 258,904
Repair allowance..................................... 210,655 205,667
Regulatory assets recoverable through future rates... 1,791,395 1,727,351
Deferred income tax assets:
Postretirement benefits.............................. (177,991) (195,427)
Unbilled revenues.................................... (90,396) (100,223)
Loss carryforward.................................... (10,090) --
Alternative minimum tax.............................. (283,331) (257,698)
Unamortized investment tax credits to be settled
through future rates................................ (471,058) (461,628)
Other regulatory liabilities to be settled through
future rates........................................ (179,755) (151,757)
Other--net........................................... (59,528) (66,925)
---------- ----------
Net deferred income tax liability..................... $4,262,990 $4,284,231
========== ==========
</TABLE>
The $21 million increase in the net deferred income tax liability from December
31, 1994 to June 30, 1995 is comprised of $48 million of deferred income tax
expense and a $27 million decrease in regulatory assets net of regulatory
liabilities pertaining to income taxes for the period. The amount of regulatory
assets included in deferred income tax liabilities primarily relates to the
equity component of AFUDC which is recorded on an after-tax basis, the borrowed
funds component of AFUDC which was previously recorded net of tax and other
temporary differences for which the related tax effects were not previously
recorded. The amount of other regulatory liabilities included in deferred
income tax assets primarily relates to deferred income taxes provided at rates
in excess of the current statutory rate.
The components of net income tax expense charged to continuing operations for
the three months, six months and twelve months ended June 30, 1994 and 1995
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------ ------------------ -------------------
1994 1995 1994 1995 1994 1995
-------- ------- -------- -------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Operating income:
Current income taxes............. $ 22,932 $64,137 $ 58,292 $129,118 $(58,146) $229,168
Deferred income taxes............ (3,821) 30,609 (3,428) 47,409 118,510 219,247
Investment tax credits
deferred--net................... (7,201) (7,179) (14,425) (14,358) (29,236) (28,690)
Other (income) and deductions..... (23,465) (299) (20,838) (526) (45,720) (2,185)
-------- ------- -------- -------- -------- --------
Net income taxes charged
to continuing opera-
tions............................ $(11,555) $87,268 $ 19,601 $161,643 $(14,592) $417,540
======== ======= ======== ======== ======== ========
</TABLE>
26
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Provisions for current and deferred federal and state income taxes and
amortization of investment tax credits resulted in the following effective
income tax rates for the three months, six months and twelve months ended June
30, 1994 and 1995:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------ ----------------- -------------------
1994 1995 1994 1995 1994 1995
-------- -------- ------- -------- -------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss)....... $(23,339) $108,866 $12,681 $197,467 $(59,557) $ 539,720
Net income taxes charged
to continuing opera-
tions.................. (11,555) 87,268 19,601 161,643 (14,592) 417,540
Provision for dividends
on preferred and pref-
erence stocks of
Commonwealth Edison
Company................ 15,483 16,865 31,028 33,773 63,401 67,673
-------- -------- ------- -------- -------- ----------
Pre-tax income (loss)
before provision for
dividends on preferred
and preference stocks
of Commonwealth Edison
Company................ $(19,411) $212,999 $63,310 $392,883 $(10,748) $1,024,933
======== ======== ======= ======== ======== ==========
Effective income tax
rate................... 59.5% 41.0% 31.0% 41.1% 135.8% 40.7%
======== ======== ======= ======== ======== ==========
</TABLE>
The principal differences between net income taxes charged to continuing
operations and the amounts computed at the federal statutory rate of 35% for
the three months, six months and twelve months ended June 30, 1994 and 1995
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------ ------------------ -------------------
1994 1995 1994 1995 1994 1995
-------- -------- -------- -------- -------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
computed at statutory
rate................... $ (6,794) $74,550 $ 22,159 $137,509 $ (3,762) $358,727
Equity component of
AFUDC which was ex-
cluded from taxable
income................. (1,775) (1,322) (4,349) (2,054) (8,900) (5,625)
Amortization of invest-
ment tax credits....... (7,189) (7,178) (14,412) (14,358) (29,250) (28,755)
State income taxes, net
of federal income tax-
es..................... 728 12,888 5,729 23,284 6,007 57,696
Differences between book
and tax accounting,
primarily property-
related deductions..... 2,532 7,279 8,819 15,778 15,764 28,375
Other--net.............. 943 1,051 1,655 1,484 5,549 7,122
-------- ------- -------- -------- -------- --------
Net income taxes charged
to continuing opera-
tions.................. $(11,555) $87,268 $ 19,601 $161,643 $(14,592) $417,540
======== ======= ======== ======== ======== ========
</TABLE>
Current federal income tax liabilities were recorded that include excess
amounts of AMT over the regular federal income tax, which amounts were also
recorded as decreases to deferred federal income taxes. The excess amounts of
AMT can be carried forward indefinitely as a credit against future years'
regular federal income tax liabilities.
(15) TAXES, EXCEPT INCOME TAXES. Provisions for taxes, except income taxes,
for the three months, six months and twelve months ended June 30, 1994 and 1995
were as follows:
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ----------------- -------------------
1994 1995 1994 1995 1994 1995
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Illinois public utility
revenue................ $ 47,246 $ 51,763 $ 99,788 $107,941 $ 195,114 $ 219,416
Illinois invested capi-
tal.................... 27,076 26,814 54,488 54,110 109,816 108,995
Municipal utility gross
receipts............... 33,155 36,861 68,495 74,906 115,129 151,422
Real estate............. 46,391 40,121 91,022 86,953 170,960 176,152
Municipal compensation.. 16,885 17,637 34,610 35,427 58,085 73,464
Other--net.............. 17,533 16,544 39,956 40,336 68,511 69,661
--------- --------- -------- -------- --------- ---------
$ 188,286 $ 189,740 $388,359 $399,673 $ 717,615 $ 799,110
========= ========= ======== ======== ========= =========
</TABLE>
27
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(16) LEASE OBLIGATIONS OF SUBSIDIARY COMPANIES. Under its nuclear fuel lease
arrangement, ComEd may sell and lease back nuclear fuel from a lessor who may
borrow an aggregate of $700 million (consisting of $300 million of commercial
paper or bank borrowings and $400 million of intermediate term notes) to
finance the transactions. The commercial paper/bank borrowing portion currently
will expire on November 23, 1996, but ComEd plans to ask for an extension of
the expiration date. At June 30, 1995, ComEd's obligation to the lessor for
leased nuclear fuel amounted to approximately $619 million. ComEd has agreed to
make lease payments which cover the amortization of the nuclear fuel used in
ComEd's reactors plus the lessor's related financing costs. ComEd has an
obligation for spent nuclear fuel disposal costs of leased nuclear fuel.
Future minimum rental payments, net of executory costs, at June 30, 1995 for
capital leases are estimated to aggregate $698 million, including $138 million
in 1995, $236 million in 1996, $126 million in 1997, $85 million in 1998, $46
million in 1999 and $67 million in 2000-2043. The estimated interest component
of such rental payments aggregates $79 million. The estimated portions of
obligations due within one year under capital leases are included in current
liabilities and approximated $147 million and $182 million at December 31, 1994
and June 30, 1995, respectively.
Future minimum rental payments at June 30, 1995 for operating leases are
estimated to aggregate $145 million, including $4 million in 1995, $9 million
in 1996, $9 million in 1997, $9 million in 1998, $9 million in 1999 and $105
million in 2000-2024.
(17) INVESTMENTS IN URANIUM-RELATED PROPERTIES. In May 1994, ComEd recorded a
reduction in the carrying value of its investments in uranium-related
properties after completing a review of various alternatives and reassessing
the long-term recoverability of those investments. The effects of the reduction
reduced 1994 net income by $34 million or $0.16 per common share.
(18) JOINT PLANT OWNERSHIP. ComEd has a 75% undivided ownership interest in
the Quad-Cities nuclear generating station. Further, ComEd is responsible for
75% of all costs which are charged to appropriate investment, operation or
maintenance accounts and provides its own financing. At June 30, 1995, for its
share of ownership in the station, ComEd had an investment of $549 million in
production and transmission plant in service (before reduction of $178 million
for the related accumulated provision for depreciation) and $77 million in
construction work in progress.
(19) COMMITMENTS AND CONTINGENT LIABILITIES. Purchase commitments,
principally related to construction and nuclear fuel, approximated $1,063
million at June 30, 1995, comprised of approximately $1,054 million for ComEd
and the Indiana Company and approximately $9 million for Unicom Thermal. In
addition, ComEd has substantial commitments for the purchase of coal. ComEd's
coal costs are high compared to those of other utilities. ComEd's western coal
contracts and its rail contracts for delivery of the western coal were
renegotiated during 1992 effective as of January 1, 1993, to provide, among
other things, for significant reductions in the delivered price of the coal
over the duration of the contracts. However, the renegotiated contracts provide
for the purchase of certain coal at prices substantially above currently
prevailing market prices. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," subcaption "Liquidity and
Capital Resources," for additional information regarding ComEd's purchase
commitments.
ComEd is a member of NML, established to provide insurance coverage against
property damage to members' nuclear generating facilities. The members are
subject to a retrospective premium adjustment in the event losses exceed
accumulated reserve funds. Capital has been accumulated in the reserve funds of
NML to the extent that ComEd would not be liable for a retrospective premium
adjustment in the event of a single incident. However, ComEd could be subject
to a maximum assessment of approximately $58 million in any policy year, in the
event losses exceed accumulated reserve funds.
28
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
ComEd also is a member of NEIL, which provides insurance coverage against the
cost of replacement power obtained during certain prolonged accidental outages
of nuclear generating units and coverage for property losses in excess of $500
million occurring at nuclear stations. All companies insured with NEIL are
subject to retrospective premium adjustments if losses exceed accumulated
reserve funds. Capital has been accumulated in the reserve funds of NEIL to the
extent that ComEd would not be liable for a retrospective premium adjustment in
the event of a single incident under the replacement power coverage and the
property damage coverage. However, ComEd could be subject to maximum
assessments, in any policy year, of approximately $29 million and $89 million
in the event losses exceed accumulated reserve funds under the replacement
power and property damage coverages, respectively.
Under certain circumstances, member companies are eligible to continue to
receive distributions from accumulated reserve funds, if declared by NML or
NEIL, after insurance coverage has terminated on a nuclear generating station.
ComEd expects that any such post-coverage distributions would begin about the
time a station is decommissioned and continue for an undetermined period.
ComEd's twelve operating nuclear units have estimated remaining service lives
ranging from 11 to 33 years. Considering the circumstances related to the
declaration of such distributions and the extended period over which such
distributions may be declared, ComEd does not expect that any such
distributions would have a material impact on its financial position or results
of operations.
The NRC's indemnity for public liability coverage under the Price-Anderson
Act is supported by a mandatory industry-wide program under which owners of
nuclear generating facilities could be assessed in the event of nuclear
incidents. Based on the number of nuclear reactors with operating licenses,
ComEd would currently be subject to a maximum assessment of $991 million in the
event of an incident, limited to a maximum of $125 million in any calendar
year.
In addition, ComEd participates in the American Nuclear Insurers and Mutual
Atomic Energy Liability Underwriters Master Worker Program which provides
coverage for worker tort claims filed for bodily injury caused by the nuclear
energy hazard. The coverage applies to workers whose "nuclear related
employment" began after January 1, 1988. ComEd would currently be subject to a
maximum assessment of approximately $37 million in the event losses exceed
accumulated reserve funds.
Shareholder derivative lawsuits were filed in 1992 and 1993 in the Circuit
Court against current and former directors of ComEd alleging that they breached
their fiduciary duty and duty of care to ComEd in connection with the
management of the activities associated with the construction of ComEd's four
most recently completed nuclear generating units. The lawsuits sought
restitution to ComEd by the defendants for unquantified and undefined losses
and costs alleged to have been incurred by ComEd. Both lawsuits were dismissed
by the Circuit Court; however, appeals are pending before the Illinois
Appellate Court.
During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and Cotter seeking unspecified damages and injunctive
relief based on allegations that Cotter has permitted radioactive and other
hazardous material to be released from its mill into areas owned or occupied by
the plaintiffs resulting in property damage and potential adverse health
effects. In February 1994, a federal jury returned nominal dollar verdicts on
eight bellwether plaintiffs' claims in these cases. Plaintiffs have appealed
those judgments. Although the remaining cases will necessarily involve the
resolution of numerous contested issues of fact and law, Unicom's determination
is that these actions will not have a material impact on its financial position
or results of operations.
ComEd is involved in administrative and legal proceedings concerning air
quality, water quality and other matters. The outcome of these proceedings may
require increases in future construction
29
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONCLUDED
expenditures and operating expenses and changes in operating procedures. ComEd
and its subsidiaries are or are likely to become parties to proceedings
initiated by the U.S. EPA, state agencies and/or other responsible parties
under CERCLA with respect to a number of sites, including MGP sites, or may
voluntarily undertake to investigate and remediate sites for which they may be
liable under CERCLA.
ComEd generally did not operate MGPs as a corporate entity but did, however,
acquire MGP sites as part of the absorption of smaller utilities and as vacant
real estate on which ComEd facilities have been constructed. To date, ComEd has
identified 44 former MGP sites for which it may be liable for remediation.
ComEd presently estimates that its costs of former MGP site investigation and
remediation will aggregate from $25 million to $150 million in current-year
(1995) dollars. It is expected that the costs associated with investigation and
remediation of former MGP sites will be incurred over a period of approximately
20 to 30 years. Because ComEd is not able to determine the most probable
liability for such MGP costs, in accordance with accounting standards, a
reserve of approximately $25 million has been recorded as of December 31, 1994
and June 30, 1995, which reflects the low end of the range of ComEd's estimate
of the liability associated with former MGP sites. In addition, as of December
31, 1994 and June 30, 1995, a reserve of $8 million has been recorded,
representing ComEd's estimate of the liability associated with cleanup costs of
remediation sites other than former MGP sites. Unicom and ComEd presently
estimate that ComEd's costs of investigating and remediating the former MGP and
other remediation sites pursuant to CERCLA and state environmental laws will
not have a material impact on the financial position or results of operations
of Unicom or ComEd. These cost estimates are based on currently available
information regarding the responsible parties likely to share in the costs of
responding to site contamination, the extent of contamination at sites for
which the investigation has not yet been completed and the cleanup levels to
which sites are expected to have to be remediated.
The Clean Air Amendments require reductions in sulfur dioxide emissions from
ComEd's Kincaid station. The Clean Air Amendments also bar future utility
sulfur dioxide emissions except to the extent utilities hold allowances for
their emissions. Allowances which authorize their holder to emit sulfur dioxide
have been issued by the U.S. EPA based largely on historical levels of sulfur
dioxide emissions. These allowances are transferable and marketable. ComEd's
ability to increase generation in the future to meet expected increased demand
for electricity will depend in part on ComEd and the Indiana Company's ability
to acquire additional allowances or to reduce emissions below otherwise
allowable levels from their existing generating plants. In addition, the Clean
Air Amendments require studies to determine what controls, if any, should be
imposed on utilities to control air toxic emissions, including mercury. ComEd's
Clean Air Compliance Plan for Kincaid station was approved by the ICC in July
1993. In late 1993, however, a federal court declared the Illinois law under
which the approval was received to be unconstitutional and compliance plans
prepared and approved in reliance on the law to be void. In January 1995, the
federal court's decision was affirmed by the U.S. Court of Appeals and Illinois
has decided to not pursue further appeals. ComEd is currently burning low
sulfur coal at Kincaid station to meet Clean Air Act Phase I requirements.
ComEd will determine future compliance plans for Kincaid station as necessary.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On September 1, 1994, a corporate restructuring took place in which Unicom
became the parent holding company of ComEd and Unicom Enterprises, an
unregulated subsidiary engaged, through a subsidiary, in energy service
activities. The purpose of the restructuring was, in part, to permit Unicom
Enterprises to engage in energy service activities without the prior approval
of, or being regulated by, the ICC, in part to permit timely responses to
competitive activities which could adversely affect ComEd's utility business
and in part to permit Unicom to take advantage of unregulated business
opportunities.
Notwithstanding the restructuring, ComEd will continue to represent
substantially all of the assets, revenues and net income of Unicom; and
Unicom's resources and results of operations will be largely dependent on, and
will reflect, those of ComEd. Unicom's unregulated subsidiaries are development
stage companies and are not expected to make material contributions to Unicom's
revenues or results of operations in the near future. Consequently, the
following discussion focuses on ComEd's utility operations although information
is also provided about Unicom's unregulated operations.
LIQUIDITY AND CAPITAL RESOURCES
UTILITY OPERATIONS
Capital Budgets. ComEd and its electric utility subsidiary, the Indiana
Company, have a construction program for the three-year period 1995-97 which
consists principally of improvements to ComEd's and the Indiana Company's
existing nuclear and other electric production, transmission and distribution
facilities. It does not include funds (other than for planning) to add new
generating capacity to ComEd's system. The program, as approved by Unicom and
ComEd in December 1994, calls for electric plant and equipment expenditures of
approximately $2,750 million (excluding nuclear fuel expenditures of
approximately $800 million). It is estimated that such construction
expenditures, with cost escalation computed at 3.5% annually, will be as
follows:
<TABLE>
<CAPTION>
1995 1996 1997 TOTAL
---- ---- ---- ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Production............................................. $415 $395 $360 $1,170
Transmission and Distribution.......................... 410 445 455 1,310
General................................................ 95 90 85 270
---- ---- ---- ------
Total.............................................. $920 $930 $900 $2,750
==== ==== ==== ======
</TABLE>
In October 1994, ComEd made a commitment to provide for the replacement of
the steam generators at its Braidwood Unit 1 and Byron Unit 1 nuclear
generating plants, for service in the years 1998 and 1999, respectively, at a
total estimated cost of approximately $470 million. Approximately $170 million
of this estimated cost is included in the construction expenditures shown
above. See "Part II. Other Information, Item 1. Legal Proceedings," subcaption
"Nuclear Matters," herein for additional information.
ComEd's forecasts of peak load indicate a need for additional resources to
meet demand, either through generating capacity or through equivalent purchased
power or demand-side management resources, in 1997 and each year thereafter
through the year 2000. The projected resource needs reflect the current
planning reserve margin recommendations of MAIN, the reliability council of
which ComEd is a member. ComEd's forecasts indicate that the need for
additional resources during this period would exist only during the summer
months. ComEd does not expect to make expenditures for additional capacity to
the extent the need for capacity can be met through cost-effective demand-side
management resources, non-utility generation or other power purchases. Based on
current market information, ComEd believes that adequate resources, including
cost-effective demand-side management resources, non-
31
<PAGE>
utility generation resources and other-utility power purchases, could be
obtained sufficient to meet forecasted requirements through the year 2000.
ComEd's construction program will be reviewed and modified as necessary to
adapt to changing economic conditions, rate levels and other relevant factors
including changing business and legal needs and requirements. ComEd cannot
anticipate all such possible needs and requirements. ComEd has not budgeted for
a number of projects, particularly at generating stations, which could be
required, but which ComEd does not expect to be required during the budget
period. In particular, ComEd has not budgeted for the construction of scrubbers
at its Kincaid station or for the replacement of major amounts of piping at its
boiling water reactor nuclear stations. While regulatory needs in particular
are more likely, on balance, to require increases in construction expenditures
than decreases, financial constraints may require compensating or greater
reductions in other construction expenditures. See "Regulation" below and "Part
II. Other Information, Item 1. Legal Proceedings," subcaption "Nuclear
Matters," herein for additional information.
Purchase commitments for ComEd and the Indiana Company, principally related
to construction and nuclear fuel, approximated $1,054 million at June 30, 1995.
In addition, ComEd has substantial commitments for the purchase of coal as
indicated in the following table.
<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT(1)
-------- --------- -------------
<S> <C> <C>
Black Butte Coal Co. ............................. 1995-2007 $1,073
Decker Coal Co. .................................. 1995-2015 $ 787
Big Horn Coal Co. ................................ 1998 $ 22
Other commitments................................. 1995-1996 $ 15
</TABLE>
--------
(1) Estimated costs in millions of dollars FOB mine. No estimate of
future cost escalation has been made.
For additional information concerning these coal contracts and ComEd's fuel
supply, see "Results of Operations" below and Notes 1 and 19 of Notes to
Financial Statements.
Capital Resources. ComEd has forecast that internal sources will provide more
than three-fourths of the funds required for ComEd's construction program and
other capital requirements, including nuclear fuel expenditures, contributions
to nuclear decommissioning funds, sinking fund obligations and refinancing of
scheduled debt maturities (the annual sinking fund requirements for ComEd
preference stock and for ComEd and the Indiana Company long-term debt are
summarized in Notes 7 and 8, respectively, of Notes to Financial Statements).
The forecast assumes the rate levels reflected in the Rate Order remain in
effect.
The type and amount of external financing will depend on financial market
conditions and the needs and capital structure of ComEd at the time of such
financing. A portion of ComEd's financing is expected to be provided through
the continued sale and leaseback of nuclear fuel through ComEd's existing
nuclear fuel lease facility. ComEd has approximately $915 million of unused
bank lines of credit at June 30, 1995 which may be borrowed at various interest
rates and which may be secured or unsecured. The interest rate is set at the
time of a borrowing and is based on several floating rate bank indices plus a
spread which is dependent upon ComEd's credit ratings or on a prime interest
rate. Collateral, if required for the borrowings, would consist of first
mortgage bonds issued under and in accordance with the provisions of ComEd's
mortgage. See Note 9 of Notes to Financial Statements for information
concerning lines of credit. See the Statements of Consolidated Cash Flows for
the construction expenditures and cash flow from operating activities for the
three months, six months and twelve months ended June 30, 1995.
During the first six months of 1995, Unicom issued 233,824 shares of common
stock for approximately $5,587,000 under its employee stock plans. ComEd sold
and leased back approximately $115,340,000 of nuclear fuel through its existing
nuclear fuel lease facility.
32
<PAGE>
On July 27, 1995, ComEd filed a registration statement with the SEC for the
possible future sale of $200 million of Company-obligated preferred securities
of subsidiary trust.
As of August 8, 1995, ComEd has an effective "shelf" registration statement
with the SEC for the future sale of up to an additional $805 million of debt
securities and cumulative preference stock for general corporate purposes of
ComEd, including the discharge or refund of other outstanding securities.
Financial Condition. ComEd's financial condition will continue to depend on
its ability to generate revenues to cover its costs and to maintain adequate
debt and preferred and preference stock coverages and common stock equity
earnings. ComEd has no significant revenues other than from the sale of
electricity. ComEd's management recognizes that competitive and regulatory
circumstances in Illinois may limit its ability to raise its rates.
Consequently, ComEd's financial condition will be affected by, and ComEd's
management is addressing, actions to maintain and increase sales, to control
operating and capital expenditures and to anticipate competitive activities.
See "Regulation" below.
During the past several years, ComEd has instituted cost reduction plans
including various workforce reductions. Most recently, such efforts included an
offer of voluntary early retirement which was made to ComEd and the Indiana
Company management, non-union and union employees eligible to retire or who
became eligible to retire after December 31, 1993 and before April 1, 1995.
Such program resulted in a charge to income of approximately $20.5 million
(after reflecting income tax effects), substantially all of which was recorded
during 1994. ComEd is continuing to examine methods of reducing the size of its
workforce, including special severance offers. If such offers are made and
accepted, ComEd would be required to charge the cost of the program to income,
although it would expect to realize cost savings over time as a result of the
reductions in its workforce.
ComEd has also examined, and is continuing to examine, the possibility of
disposing of one or more of its fossil generating stations to a third party or
parties and entering into a long-term power purchase arrangement. Such
examination is focusing on the alternatives for structuring such a transaction,
the willingness of third parties to undertake it and the economics of the
transaction. ComEd has received nonbinding proposals with respect to such a
transaction and is soliciting binding proposals to see if a suitable structure
and economics can be achieved. Assuming such items can be achieved, any such
transaction would be subject to the negotiation of definitive agreements and
regulatory approvals.
The current ratings of ComEd's securities by three principal securities
rating agencies are as follows:
<TABLE>
<CAPTION>
STANDARD DUFF &
MOODY'S & POOR'S PHELPS
------- -------- ------
<S> <C> <C> <C>
First mortgage and secured pollution control
bonds........................................... Baa2 BBB BBB
Publicly-held debentures and unsecured pollution
control obligations............................. Baa3 BBB- BBB-
Convertible preferred stock...................... baa3 BBB- BB+
Preference stock................................. baa3 BBB- BB+
Commercial paper................................. P-2 A-2 D-2
</TABLE>
In June 1995, Standard & Poor's changed its rating outlook on ComEd from
negative to stable. As of April 1995, Moody's rating outlook on ComEd remained
stable and as of May 1995, Duff & Phelps' rating outlook on ComEd also remained
stable. See "Part II. Other Information, Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters" in Unicom's Annual Report on Form 10-K
for the year ended December 31, 1994, for additional information regarding
ComEd's securities ratings.
Business and Competition. The electric utility business has historically been
characterized by retail service monopolies in state or locally franchised
service territories. Investor-owned electric utilities have tended to be
vertically integrated with all aspects of their business subject to pervasive
regulation.
33
<PAGE>
Although customers have normally been free to supply their electric power needs
through self-generation, they have not had a choice of electric suppliers and
self-generation has not generally been economical.
The market place in which electric utilities like ComEd operate has become
more competitive as a result of technological and regulatory changes and many
observers believe competition will intensify. Self-generation can be economical
for certain customers, depending on how and when they use electricity and other
customer-specific considerations. A number of competitors are currently seeking
to identify and do business with those customers. In addition, suppliers of
other forms of energy are increasingly competing to supply energy needs which
historically were supplied primarily or exclusively by electricity.
The Energy Policy Act of 1992 will likely have a significant effect on
companies engaged in the generation, transmission, distribution, purchase and
sale of electricity. This Act, among other things, expands the authority of the
FERC to order electric utilities to transmit or "wheel" wholesale power for
others, and facilitates the creation of non-utility electric generating
companies. In March 1995, the FERC issued a NOPR seeking comments on proposals
intended to encourage a more competitive wholesale electric power market. The
NOPR addresses both the open access transmission and stranded cost issues.
ComEd is unable to predict the structure and effect of any rule that the FERC
may ultimately adopt based upon the NOPR.
ComEd is facing increased competition from several non-utility businesses
which seek to provide energy services to users of electricity, especially
larger customers such as industrial, commercial and wholesale customers. Such
suppliers include independent power producers and unregulated energy services
companies. In this regard, natural gas utilities operating in ComEd's service
area have established subsidiary ventures to provide heating, ventilating and
air conditioning services, attempting to attract ComEd's customers. Also,
several utilities in the United States have established unregulated energy
services subsidiaries which pursue business opportunities outside of the
utilities' regular service areas. In addition, cogeneration and energy services
companies have begun soliciting ComEd's customers to provide alternatives to
using ComEd's electricity. In October 1993, the ICC granted ComEd the authority
to negotiate special discount contract rates with new or existing industrial
customers for up to a total of 400 megawatts of added load, where the customers
would not have chosen service from ComEd for the increased load in the absence
of the discount rates. In addition, in June 1994, the ICC granted ComEd the
authority to negotiate special discount contract rates with up to 25 of its
largest existing customers, where such contracts would be necessary to retain
the customers' existing load on ComEd's system; this ICC decision is now on
appeal in the courts, challenging the confidential nature of these contracts.
ComEd negotiated amendments to existing contracts with its three wholesale
full requirements municipal customers, which extended the contracts for an
additional ten-year period past the 1997 expiration dates. ComEd was one of a
number of bidders for providing service to these customers. The contracts
became effective upon FERC approval.
In 1994, the ICC formed a task force for the purpose of conducting a broad-
based and open examination of the expanding presence of market components
within the electric utility industry. Participants from more than 40
organizations, including representatives from the electric utility industry
(including ComEd), met to examine three broad issues: effects of regulation,
competition and future regulatory and legislative changes. In May 1995, the
task force issued its report sharing the views of the participants on the
issues.
Legislation has been passed in Illinois to review the need for changes in the
regulatory framework under which Illinois electric utilities operate. The Joint
Committee on Electric Utility Regulatory Reform was created pursuant to
House/Senate Joint Resolution 21 to develop any legislative reform proposals it
finds necessary. A progress report, including specific legislative concepts, is
due by December 1, 1995.
34
<PAGE>
A final legislative proposal is to be delivered by November 8, 1996. ComEd is
participating as a member of the Technical Advisory Group. In addition, ComEd
will be a lead participant in the Illinois Electric Policy Summit, sponsored by
the ICC and Northwestern University's J.L. Kellogg Graduate School of
Management, in September 1995. ComEd is aware of discussions regarding
proposals that include retail wheeling efforts to increase retail competition
in Illinois such as alternative rate regulation. ComEd cannot predict whether,
or in what form, any such proposals might be introduced or what, if anything,
or when something might be enacted. A bill allowing utilities to submit plans
for alternative regulation, such as price caps or incentive regulation, has
been signed by the Governor. See "Regulation" and "Regulatory Assets and
Liabilities" in Note 1 of Notes to Financial Statements.
Capital Structure. ComEd's ratio of long-term debt to total capitalization
has decreased to 53.9% at June 30, 1995 from 54.6% at December 31, 1994. This
decrease is related primarily to the retirement of long-term debt.
UNREGULATED OPERATIONS
Unicom Enterprises is engaged, through its subsidiary, in energy service
activities which are not subject to utility regulation by state or federal
agencies. The subsidiary, Unicom Thermal, provides district cooling services to
office and other buildings from central locations in the city of Chicago.
District cooling involves, in essence, the production of chilled water at a
central location and its circulation from such location to customers' buildings
in a closed circuit of piping. Such water is used to chill air in customers'
air conditioning systems without the use of CFCs. As a result of the Clean Air
Amendments, the manufacture and use of CFCs will be curtailed, commencing in
1996, thereby creating an excellent marketing opportunity for non-CFC based
systems, such as district cooling. Unicom Thermal and the city of Chicago have
entered into a non-exclusive franchise agreement. Unicom Thermal is currently a
development stage enterprise and, as such, has generated no significant sales
revenues. Unicom Thermal has secured several long-term contracts and began
service in May 1995. Unicom Thermal is in the process of negotiating with
additional potential customers.
Capital Budgets. Unicom Thermal has forecasted capital expenditures for the
years 1995-97 of approximately $95 million, primarily representing the
construction costs of its district cooling facilities and piping system.
Construction of its first district cooling facility was completed in May 1995
and cost approximately $30 million. Unicom Thermal began construction on a
second district cooling plant in June 1995 and is in the initial stages of
detailed planning of a third site. As of June 30, 1995, Unicom Thermal's
purchase commitments, principally related to construction, were approximately
$9 million.
Capital Resources. Unicom expects to obtain funds to invest in its
unregulated subsidiaries principally from dividends received on its ComEd
common stock and from bank borrowings. While the amount of dividends on ComEd
common stock is expected to be greater than the amount of dividends on Unicom
common stock, the availability of such dividends is dependent on ComEd's
financial performance and cash position. Other forms of financing by ComEd of
Unicom or the unregulated subsidiaries, such as loans or additional equity
investments (none of which is expected), would be subject to the prior approval
of the ICC.
Unicom Enterprises has a $200 million credit facility which will expire in
1997 of which $175 million was unused as of June 30, 1995. The credit facility
can be used by Unicom Enterprises to finance investments in unregulated energy-
related businesses and projects, including Unicom Thermal, and for general
corporate purposes. The credit facility is guaranteed by Unicom and includes
certain covenants with respect to Unicom's and Unicom Enterprises' operations.
Interest rates for borrowings under the credit facility are set at the time of
a borrowing and are based on either a prime interest rate or a floating rate
bank index plus a spread which varies with the credit rating of ComEd's
outstanding first mortgage
35
<PAGE>
bonds. See Note 9 of Notes to Financial Statements for additional information
regarding certain covenants with respect to Unicom's and Unicom Enterprises'
operations.
REGULATION
ComEd and the Indiana Company are subject to state and federal regulation in
the conduct of their respective businesses, including the operations of Cotter.
Such regulation includes rates, securities issuance, nuclear operations,
environmental and other matters. Particularly in the cases of nuclear
operations and environmental matters, such regulation can and does affect
operational and capital expenditures.
Rate Proceedings. ComEd's revenues, net income, cash flows and plant carrying
costs have been affected directly by various rate-related proceedings. During
the periods presented in the consolidated financial statements, ComEd was
involved in a number of proceedings concerning its rates. The uncertainties
associated with such proceedings and related issues, among other things, led to
the Rate Matters Settlement and Fuel Matters Settlement (see Note 2 of Notes to
Financial Statements). The effects of the aforementioned rate proceedings and
settlements during the periods presented are discussed below under "Results of
Operations."
On January 9, 1995, the ICC issued the Rate Order in the proceedings relating
to ComEd's February 1994 rate increase request. The Rate Order provides, among
other things, for (i) an increase in ComEd's total revenues of approximately
$301.8 million (excluding add-on revenue taxes) or 5.2%, on an annual basis,
including a $303.2 million increase in base rates, (ii) the collection of
municipal franchise costs as an adder to base rates until May 1, 1995, when
ComEd began collecting such costs prospectively on an individual municipality
basis through a rider, and (iii) the use of a rider, with annual review
proceedings, to pass on to ratepayers increases or decreases in estimated costs
associated with the decommissioning of ComEd's nuclear generating units. See
"Depreciation and Decommissioning" in Note 1 of Notes to Financial Statements
for information related to the level of decommissioning cost collections
allowed in the Rate Order. The ICC also determined that the Units were 100%
"used and useful" and that the previously determined reasonable costs of such
Units, as depreciated, should be included in full in ComEd's rate base. The
rates provided in the Rate Order became effective on January 14, 1995; however,
they are being collected subject to refund as a result of subsequent judicial
action. As of June 30, 1995, electric operating revenues of approximately $139
million (excluding revenue taxes) are subject to refund. Intervenors and ComEd
have filed appeals of the Rate Order with the Illinois Appellate Court.
Nuclear Matters. During the past several years, the NRC has placed two of
ComEd's nuclear generating stations, Zion station and Dresden station, on its
list of plants to be monitored closely. Although Zion station (which was placed
on the list in early 1991) was removed from that list in February 1993, Dresden
station (which was placed on the list in early 1992) remains on the list. In
June 1995, the NRC reported that over the past year performance at Dresden was
cyclical; plant material condition needs to be improved at Dresden and a more
effective work management system is needed to deal with the corrective
maintenance backlog. Accordingly, Dresden will remain on the NRC list of plants
to be monitored closely. Because of the age of Zion, Dresden and Quad-Cities
stations, ComEd anticipates continued expenditures in order to improve
reliability and to meet NRC regulatory expectations. Beginning in late 1992,
ComEd restructured its management of its nuclear operations division and since
that time has committed additional resources to the stations' operations.
In January 1994, ComEd was notified by the NRC that ComEd's LaSalle County
and Quad-Cities stations were placed on the list of plants with adverse
performance trends. ComEd was informed that the NRC concerns about LaSalle
County station included, among other matters, deficient radiation worker
36
<PAGE>
practices. The NRC concerns with Quad-Cities station included, among other
matters, deficiencies in the condition of certain station equipment and the
effectiveness of the operators of the units in identifying and responding to
certain operational problems. ComEd has provided written and verbal responses
to the NRC and is working to resolve the concerns. In February 1995, the NRC
concluded that LaSalle County had arrested the adverse trends in most areas and
"normal" designation should be returned. In June 1995, the NRC concluded that
the declining trends at Quad-Cities station also had been arrested in most
areas and normal designation should be returned. As noted above, ComEd
anticipates continued expenditures in order to improve reliability and to meet
NRC regulatory expectations in connection with Zion, Dresden and Quad-Cities
stations. In addition, generating station availability and performance during a
year may be issues in fuel reconciliation proceedings in assessing the prudence
of fuel and power purchases during such year. Final ICC orders have been issued
in fuel reconciliation proceedings for years prior to 1993; however, certain
intervenors have appealed the ICC order in the 1989 fuel reconciliation
proceedings on issues relating to nuclear station performance. See "Part II.
Other Information, Item 1. Legal Proceedings," subcaption "Nuclear Matters,"
for additional information.
ComEd estimates that it will expend approximately $15 billion, excluding any
contingency allowance, for decommissioning costs primarily during the period
from 2007 through 2032. Such costs, which are estimated to aggregate $3.5
billion in current-year (1995) dollars, are expected to be funded by external
decommissioning trusts which ComEd established in compliance with Illinois law
and into which ComEd has been making annual contributions. Future
decommissioning cost estimates may be significantly affected by the adoption of
or changes to NRC regulations. See "Depreciation and Decommissioning" in Note 1
of Notes to Financial Statements for additional information regarding
decommissioning costs.
Environmental Matters. ComEd is involved in administrative and legal
proceedings concerning air quality, water quality and other matters. The
outcome of these proceedings may require increases in future construction
expenditures and operating expenses and changes in operating procedures. See
Note 19 of Notes to Financial Statements and "Part II. Other Information, Item
1. Legal Proceedings," subcaption "Environmental Matters."
RESULTS OF OPERATIONS
Unicom's earnings (loss) per common share for the three months ended June 30,
1995 were $0.51 compared to $(0.11) for the three months ended June 30, 1994,
$0.92 for the six months ended June 30, 1995 compared to $0.06 for the six
months ended June 30, 1994, and $2.52 for the twelve months ended June 30, 1995
compared to $(0.28) for the twelve months ended June 30, 1994. Substantially
all of the results of operations for Unicom are the results of operations for
ComEd. Unicom's unregulated subsidiaries currently are development stage
enterprises whose results are not material to the results of Unicom and
subsidiary companies as a whole. As such, the following section discusses the
results of operations for ComEd alone.
Net Income. The increases in ComEd's earnings in the recent three-month and
six-month periods reflect higher revenues as a result of higher rate levels
under the Rate Order which became effective on January 14, 1995 and increased
kilowatthour sales. The increases in the recent three-month and six-month
periods also reflect lower operation and maintenance expenses and lower
interest costs reflecting the refinancing of debt at generally lower rates of
interest and the recording of interest costs during the first six months of
1994 related to the Rate Matters Settlement and Fuel Matters Settlement.
Operation and maintenance expenses include an after-tax charge for additional
pension costs related to an early retirement program of $10 million or $0.04
per common share for the three months ended June 30, 1994 and $19 million or
$0.09 per common share for the six months ended June 30, 1994. ComEd also
recorded a reduction in the carrying value of its investments in uranium-
related properties which reduced
37
<PAGE>
net income by $34 million or $0.16 per common share for the three-month and
six-month periods ended June 30, 1994.
The increase in ComEd's earnings for the recent twelve-month period was
significantly affected by the favorable comparison to the prior twelve-month
period in which the effects of the Rate Matters Settlement and Fuel Matters
Settlement were recorded. The net effects of the Rate Matters Settlement and
Fuel Matters Settlement reduced net income for the twelve months ended June 30,
1994 by approximately $384 million or $1.80 per common share, in addition to
the effect of the deferred recognition of revenues which ComEd had recorded
during the twelve months ended June 30, 1994 (approximately $78 million or
$0.37 per common share), and after the partially offsetting effect of recording
approximately $263 million or $1.23 per common share in deferred carrying
charges, net of income taxes and amortization, as authorized in the Remand
Order. The increase in the recent twelve-month period also includes lower
operation and maintenance expenses. Operation and maintenance expenses include
an after-tax charge for additional pension costs related to an early retirement
program of $1 million or $0.01 per common share and $19 million or $0.09 per
common share for the twelve months ended June 30, 1995 and 1994, respectively.
ComEd also recorded a reduction in the carrying value of its investments in
uranium-related properties which reduced net income by $34 million or $0.16 per
common share for the twelve months ended June 30, 1994.
Kilowatthour Sales. Kilowatthour sales to ultimate consumers for the three
months and twelve months ended June 30, 1995 increased 1.4% and 0.6%,
respectively, compared to the three months and twelve months ended June 30,
1994. Kilowatthour sales to ultimate consumers decreased 0.6% for the six
months ended June 30, 1995 compared to the six months ended June 30, 1994. The
increase in the recent three-month period reflects higher kilowatthour sales to
all classes of customers, except electric railroads, which decreased,
reflecting a cooler spring as compared to the same period in the prior year.
The slight decrease in the recent six-month period reflects lower kilowatthour
sales to all classes of customers, except small commercial and industrial and
public authorities, which increased, due primarily to a milder winter as
compared to the same period in the prior year, partially offset by the increase
in kilowatthour sales for the three months ended June 30, 1995 mentioned above.
The slight increase in the recent twelve-month period reflects higher
kilowatthour sales to all classes of customers, except residential and electric
railroads, which decreased.
Kilowatthour sales for resale increased for the three months, six months and
twelve months ended June 30, 1995 compared to the three months, six months and
twelve months ended June 30, 1994. Total kilowatthour sales, including sales
for resale, increased 14.5%, 9.7% and 3.2% for the three months, six months and
twelve months ended June 30, 1995, respectively, compared to the three months,
six months and twelve months ended June 30, 1994.
Operating Revenues. Operating revenues increased in the three months and six
months ended June 30, 1995 compared to the three months and six months ended
June 30, 1994, primarily as a result of higher rate levels under the Rate Order
which became effective on January 14, 1995 and the increase in sales for resale
mentioned above. Operating revenues increased in the twelve months ended June
30, 1995 compared to the twelve months ended June 30, 1994, primarily as a
result of a favorable comparison to the prior twelve-month period, which
reflects the recording of the effects of the Rate Matters Settlement and Fuel
Matters Settlement, which reduced operating revenues by approximately $1,149
million.
Fuel Costs. Changes in fuel expense for the three months, six months and
twelve months ended June 30, 1995 as compared to the same periods ended June
30, 1994 primarily resulted from changes in the average cost of fuel consumed,
changes in the mix of fuel sources of electric energy generated and changes in
net generation of electric energy. Fuel mix is determined primarily by system
load, the costs of fuel consumed and the availability of nuclear generating
units. The cost of fuel consumed, net generation of electric energy and fuel
sources of kilowatthour generation were as follows:
38
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ------------------ --------------------
1994 1995 1994 1995 1994 1995
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cost of fuel consumed (per million Btu):
Nuclear..................................... $0.53 $0.50 $0.54 $0.52 $0.53 $0.52
Coal........................................ $2.44 $2.52 $2.36 $2.48 $2.54 $2.36
Oil......................................... $2.76 $3.34 $2.77 $3.04 $2.85 $3.10
Natural gas................................. $2.40 $1.83 $2.54 $1.80 $2.57 $1.91
Average all fuels........................... $1.19 $0.99 $1.15 $1.02 $1.16 $1.02
Net generation of electric energy (millions of
kilowatthours)............................... 20,300 23,979 42,513 48,175 91,957 95,905
Fuel sources of kilowatthour generation:
Nuclear..................................... 67% 77% 68% 75% 70% 74%
Coal........................................ 28 21 27 23 27 23
Oil......................................... 1 -- 2 -- 1 1
Natural gas................................. 4 2 3 2 2 2
--------- --------- -------- -------- --------- ---------
100% 100% 100% 100% 100% 100%
========= ========= ======== ======== ========= =========
</TABLE>
Under the Energy Policy Act of 1992, investor-owned electric utilities that
have purchased enrichment services from the DOE are being assessed amounts to
fund a portion of the cost for the decontamination and decommissioning of
uranium enrichment facilities owned and previously operated by the DOE. ComEd's
portion of such assessments is estimated to be approximately $15 million per
year (to be adjusted annually for inflation) to 2007. The Act provides that
such assessments are to be treated as a cost of fuel. See Note 1 of Notes to
Financial Statements under "Deferred Unrecovered Energy Costs" for information
related to the accounting for such costs.
Fuel Supply. Compared to other utilities, ComEd has relatively low average
fuel costs. This results from ComEd's reliance predominantly on lower cost
nuclear generation. ComEd's coal costs, however, are high compared to those of
other utilities. ComEd's western coal contracts and its rail contracts for
delivery of the western coal were renegotiated during 1992 effective as of
January 1, 1993, to provide, among other things, for significant reductions in
the delivered price of the coal over the duration of the contracts. However,
the renegotiated contracts provide for the purchase of certain coal at prices
substantially above currently prevailing market prices and ComEd has
significant purchase commitments under its contracts. In addition, as of June
30, 1995, ComEd had unrecovered fuel costs in the form of coal reserves of
approximately $479 million. In prior years, ComEd's commitments for the
purchase of coal exceeded its requirements. Rather than take all the coal it
was required to take, ComEd agreed to purchase the coal in place in the form of
coal reserves. For additional information concerning ComEd's coal purchase
commitments, fuel reconciliation proceedings and coal reserves, see "Liquidity
and Capital Resources" above and Notes 1, 2 and 19 of Notes to Financial
Statements.
Purchased Power. Amounts of purchased power are primarily affected by system
load, the availability of ComEd and the Indiana Company's generating units and
the availability and cost of power from other utilities.
The number and average cost of kilowatthours purchased were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ------------------- ----------------------
1994 1995 1994 1995 1994 1995
-------- -------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kilowatthours (millions)............. 965 239 1,623 448 1,859 896
Cost per kilowatthour................ 2.87c 2.70c 2.76c 2.23c 2.65c 2.71c
</TABLE>
Deferred Under or Overrecovered Energy Costs--Net. Operating expenses for the
three months, six months and twelve months ended June 30, 1995 and 1994 reflect
the net change in under or overrecovered allowable energy costs under ComEd's
fuel adjustment clause. See "Fuel Costs" and "Fuel Supply" above and Note 1 of
Notes to Financial Statements under "Deferred Unrecovered Energy Costs."
39
<PAGE>
Operation and Maintenance Expenses. ComEd's operation and maintenance
expenses decreased 9.8%, 8.0% and 7.5% for the three months, six months and
twelve months ended June 30, 1995, respectively, compared to the same periods
ended June 30, 1994. The decrease in the current three-month period primarily
reflects lower operation and maintenance expenses associated with nuclear
generating stations and pensions and other employee benefits, including
postretirement health care benefits. The decrease in the current six-month
period primarily reflects lower operation and maintenance expenses associated
with nuclear and fossil generating stations, certain administrative and
general costs, and pensions and other employee benefits, including
postretirement health care benefits. The decrease in the current twelve-month
period primarily reflects lower expenses associated with nuclear and fossil
generating stations, transmission and distribution facilities, certain
administrative and general costs, and pensions and other employee benefits,
including postretirement health care benefits, partially offset by an increase
in costs associated with employee incentive compensation. The effects of
inflation are reflected in the increases and decreases discussed below and
have increased operation and maintenance costs for the three months, six
months and twelve months ended June 30, 1995.
Operation and maintenance expenses associated with the nuclear generating
stations decreased $38 million, $38 million and $85 million for the three
months, six months and twelve months ended June 30, 1995, respectively,
compared to the same periods ended June 30, 1994. The decreases in operation
and maintenance expenses for the recent three-month and six-month periods are
primarily due to a lesser number of scheduled and non-scheduled outages
compared to the three-month and six-month periods ended June 30, 1994. The
decrease for the current twelve-month period is primarily due to activities
undertaken during a lesser number of scheduled outages and by cost containment
efforts on non-outage related activities. Future operation and maintenance
expenses associated with nuclear generating stations may be significantly
affected by regulatory, operational and other requirements. See "Nuclear
Matters" under "Regulation" above.
Operation and maintenance expenses associated with the fossil generating
stations decreased $10 million and $17 million in the six months and twelve
months ended June 30, 1995, respectively, compared to the same periods ended
June 30, 1994. The decreases in the recent six-month and twelve-month periods
reflect cost containment efforts and a lesser number of scheduled overhauls
than in the corresponding prior periods.
Operation and maintenance expenses associated with ComEd's transmission and
distribution system decreased $25 million in the twelve months ended June 30,
1995 compared to the same period ended June 30, 1994. The decrease in the
recent twelve-month period primarily reflects the effects of ComEd's cost
containment efforts and a decrease in costs related to a system safety and
reliability improvement program.
Operation and maintenance expenses in the twelve months ended June 30, 1995
reflect a $50 million cost (recorded in December 1994) for employee incentive
compensation related to the achievement of certain financial performance, cost
containment and operating performance goals in 1994. Operation and maintenance
expenses in the twelve months ended June 30, 1994 reflect $36 million of
special incentive compensation (recorded in December 1993) to employees
related to a sharing of operation and maintenance savings below 1993 budgeted
levels.
Certain administrative and general costs decreased $13 million and $18
million for the six months and twelve months ended June 30, 1995,
respectively, compared to the same periods in 1994, including decreases to the
provisions for injuries and damages of $4 million and $8 million,
respectively.
The costs of pension and other employee benefits, including postretirement
health care benefits, decreased $15 million, $28 million and $21 million in
the three months, six months and twelve months ended June 30, 1995,
respectively, compared to the same periods ended June 30, 1994. The decrease
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<PAGE>
in the three months ended June 30, 1995 compared to the same period ended June
30, 1994 reflects costs of $16 million related to the 1994 early retirement
program recorded in the prior period. The decreases in the six months and
twelve months ended June 30, 1995 reflect costs of $32 million also related to
this early retirement program recorded in the six months and twelve months
ended June 30, 1994, partially offset by an increase in other employee benefits
of $3 million and $8 million for the six months and twelve months ended June
30, 1995, respectively. See Note 12 of Notes to Financial Statements for
additional information relating to the early retirement program.
Depreciation. Depreciation expense for the three months, six months and
twelve months ended June 30, 1995 increased over the same periods a year ago as
a result of additions to plant in service. See "Depreciation and
Decommissioning" in Note 1 of Notes to Financial Statements for additional
information.
Interest on Debt. Changes in interest on ComEd's long-term debt and notes
payable for the three months, six months and twelve months ended June 30, 1995
as compared to the same periods ended June 30, 1994 were due to changes in
average interest rates and in the amounts of long-term debt and notes payable
outstanding. Changes in interest on ComEd's long-term debt also reflected new
issues of debt and the retirement and redemption of issues which were
refinanced at generally lower rates of interest. The average amounts of ComEd's
long-term debt and notes payable outstanding and average interest rates thereon
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
--------------------- --------------------- ---------------------
1994 1995 1994 1995 1994 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Long-term debt outstand-
ing:
Average amount
(millions)............ $7,944 $7,728 $7,985 $7,780 $8,007 $7,829
Average interest rate.. 7.85% 7.79% 7.84% 7.78% 7.87% 7.80%
Notes payable outstand-
ing:
Average amount
(millions)............ $ 6 $ 11 $ 6 $ 9 $ 6 $ 10
Average interest rate.. 6.71% 7.82% 6.29% 8.12% 6.07% 7.27%
</TABLE>
Deferred Carrying Charges. In the Remand Order, the ICC provided that, for
ratemaking purposes, deferred carrying charges on the reasonable and "used and
useful" plant costs of the Units for the period April 1, 1989 until
approximately March 20, 1991, the date under the Remand Order that the Units
were reflected in rates, could be deferred and amortized. Approximately $438
million of such costs was capitalized as a regulatory asset in October 1993 and
resulted in an increase to net income for the twelve months ended June 30, 1994
of approximately $263 million or $1.23 per common share. Amortization of
deferred carrying charges was approximately $3 million for the three months
ended June 30, 1994 and 1995, $7 million for the six months ended June 30, 1994
and 1995, and $9 million and $13 million for the twelve months ended June 30,
1994 and 1995, respectively.
Decommissioning. The staff of the SEC has questioned certain of the current
accounting practices of the electric utility industry, including ComEd,
regarding the recognition, measurement and classification of decommissioning
costs for nuclear generating stations in financial statements of electric
utilities. In response to these questions, the FASB is reviewing the accounting
for nuclear decommissioning costs. If current electric utility industry
accounting practices for such decommissioning costs are changed: (1) annual
provisions for decommissioning could increase; (2) the estimated cost for
decommissioning could be recorded as a liability rather than as accumulated
depreciation; and (3) trust fund income from the external decommissioning
trusts could be reported as investment income rather than as a reduction to
decommissioning expense. Unicom does not believe that such changes, if
required, would have an adverse effect on results of operations due to ComEd's
current and future ability to recover decommissioning costs through rates.
Investments in Uranium-Related Properties. In May 1994, ComEd recorded a
reduction in the carrying value of its investments in uranium-related
properties after completing a review of various
41
<PAGE>
alternatives and reassessing the long-term recoverability of those investments.
The effects of the reduction reduced 1994 net income by approximately $34
million or $0.16 per common share.
Other Items. The amounts of AFUDC reflect changes in the average levels of
investment subject to AFUDC and changes in the average annual capitalization
rates as discussed in Note 1 of Notes to Financial Statements. AFUDC does not
contribute to the current cash flow of Unicom or ComEd.
ComEd's ratios of earnings to fixed charges for the twelve months ended
December 31, 1994 and June 30, 1995 were 1.99 and 2.47, respectively. ComEd's
ratios of earnings to fixed charges and preferred and preference stock dividend
requirements for the twelve months ended December 31, 1994 and June 30, 1995
were 1.73 and 2.13, respectively.
Business corporations in general have been adversely affected by inflation
because amounts retained after the payment of all costs have been inadequate to
replace, at increased costs, the productive assets consumed. Electric utilities
in particular have been especially affected as a result of their capital
intensive nature and regulation which limits capital recovery and prescribes
installation or modification of facilities to comply with increasingly
stringent safety and environmental requirements. Because the regulatory process
limits the amount of depreciation expense included in ComEd's revenue allowance
to the original cost of utility plant investment, the resulting cash flows are
inadequate to provide for replacement of that investment in future years or
preserve the purchasing power of common equity capital previously invested.
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43
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Commonwealth Edison Company:
We have audited the accompanying consolidated balance sheets and statements
of consolidated capitalization of Commonwealth Edison Company (an Illinois
corporation) and subsidiary companies as of December 31, 1994 and June 30,
1995, and the related statements of consolidated income, retained earnings,
premium on common stock and other paid-in capital, and cash flows for the
three-month, six-month and twelve-month periods ended June 30, 1994 and 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Commonwealth Edison Company
and subsidiary companies as of December 31, 1994 and June 30, 1995, and the
results of their operations and their cash flows for the three-month, six-month
and twelve-month periods ended June 30, 1994 and 1995, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
August 8, 1995
44
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME
The following Statements of Consolidated Income for the three months, six
months and twelve months ended June 30, 1994 and 1995 reflect the results of
past operations and are not intended as any representation as to results of
operations for any future period. Future operations will necessarily be
affected by various and diverse factors and developments, including changes in
electric rates, population, business activity, taxes, environmental control,
energy use, fuel supply, cost of labor, fuel and purchased power and other
matters, the nature and effect of which cannot now be determined.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
---------------------- ---------------------- -----------------------
1994 1995 1994 1995 1994 1995
---------- ---------- ---------- ---------- ----------- ----------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Electric Operating Revenues:
Operating revenues............. $1,436,915 $1,559,528 $2,967,890 $3,137,646 $ 6,457,917 $6,463,187
Provisions for revenue refunds. (4,749) 7 (10,974) 25 (1,154,493) (4,911)
---------- ---------- ---------- ---------- ----------- ----------
$1,432,166 $1,559,535 $2,956,916 $3,137,671 $ 5,303,424 $6,458,276
---------- ---------- ---------- ---------- ----------- ----------
Electric Operating Expenses
and Taxes:
Fuel........................... $ 261,769 $ 254,575 $ 525,984 $ 527,432 $ 1,152,060 $1,051,300
Purchased power................ 27,684 6,443 44,833 9,986 49,239 24,276
Deferred (under)/overrecovered
energy costs--net............. (32,712) 4,625 (20,959) 1,262 (19,764) 24,161
Operation...................... 393,621 369,020 791,770 752,764 1,542,011 1,486,253
Maintenance.................... 170,367 139,597 335,644 284,923 616,492 510,598
Depreciation................... 221,924 224,708 443,846 449,796 876,483 893,383
Recovery of regulatory
assets........................ 3,818 3,818 7,817 7,636 11,522 15,272
Taxes (except income).......... 188,286 189,628 388,359 399,385 717,615 798,822
Income taxes--
Current--Federal............. 21,819 49,308 56,467 102,897 (39,403) 204,731
--State...................... 1,113 16,367 1,825 28,107 (18,743) 28,195
Deferred--Federal--net....... (8,103) 26,823 (14,624) 39,401 81,677 158,315
--State--net................. 4,484 3,572 11,624 8,061 37,840 61,454
Investment tax credits
deferred--net................. (7,201) (7,179) (14,425) (14,358) (29,236) (28,690)
---------- ---------- ---------- ---------- ----------- ----------
$1,246,869 $1,281,305 $2,558,161 $2,597,292 $ 4,977,793 $5,228,070
---------- ---------- ---------- ---------- ----------- ----------
Electric Operating Income....... $ 185,297 $ 278,230 $ 398,755 $ 540,379 $ 325,631 $1,230,206
---------- ---------- ---------- ---------- ----------- ----------
Other Income and (Deductions):
Interest on long-term debt..... $ (155,841) $ (150,568) $ (312,993) $ (302,765) $ (630,013) $ (610,998)
Interest on notes payable...... (102) (221) (189) (372) (361) (741)
Allowance for funds used
during construction--
Borrowed funds............... 4,317 3,192 10,495 4,877 20,979 13,294
Equity funds................. 5,070 3,776 12,426 5,869 25,428 16,071
Income taxes applicable to
nonoperating activities....... 23,303 201 20,570 469 44,318 6,974
Income tax reduction for
disallowed plant costs........ -- -- -- -- 792 --
Deferred carrying charges...... -- -- -- -- 438,183 --
Interest and other costs
for 1993 Settlements.......... (7,418) -- (17,893) (61) (116,567) (3,632)
Miscellaneous--net............. (62,482) (7,233) (67,462) (13,973) (104,546) (36,513)
---------- ---------- ---------- ---------- ----------- ----------
$ (193,153) $ (150,853) $ (355,046) $ (305,956) $ (321,787) $ (615,545)
---------- ---------- ---------- ---------- ----------- ----------
Net Income (Loss)............... $ (7,856) $ 127,377 $ 43,709 $ 234,423 $ 3,844 $ 614,661
Provision for Dividends on
Preferred and
Preference Stocks.............. 15,483 16,865 31,028 33,773 63,401 67,673
---------- ---------- ---------- ---------- ----------- ----------
Net Income (Loss) on
Common Stock................... $ (23,339) $ 110,512 $ 12,681 $ 200,650 $ (59,557) $ 546,988
========== ========== ========== ========== =========== ==========
Average Number of Common
Shares Outstanding............. 213,923 214,192 213,851 214,192 213,733 214,178
Earnings (Loss) per
Common Share................... $(0.11) $0.52 $0.06 $0.94 $(0.28) $2.55
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
45
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1994 1995
------ ------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant:
Plant and equipment, at original cost (includes
construction work in progress of $1,043 million
and $1,071 million, respectively)................. $26,257,665 $26,602,248
Less--Accumulated provision for depreciation....... 9,623,756 10,129,990
----------- -----------
$16,633,909 $16,472,258
Nuclear fuel, at amortized cost.................... 689,424 675,334
----------- -----------
$17,323,333 $17,147,592
----------- -----------
Investments:
Nuclear decommissioning funds...................... $ 880,944 $ 1,095,393
Subsidiary companies............................... 118,051 118,735
Other investments, at cost......................... 18,613 18,602
----------- -----------
$ 1,017,608 $ 1,232,730
----------- -----------
Current Assets:
Cash............................................... $ 84 $ 910
Temporary cash investments......................... 53,566 76,034
Other cash investments............................. 19,588 20,167
Special deposits................................... 29,603 29,280
Receivables--
Customers........................................ 463,385 528,724
Taxes............................................ 36,083 5,842
Other............................................ 68,434 40,143
Provisions for uncollectible accounts............ (10,720) (11,388)
Coal and fuel oil, at average cost................. 108,872 133,298
Materials and supplies, at average cost............ 384,612 366,530
Deferred unrecovered energy costs.................. 48,697 40,242
Deferred income taxes related to current assets and
liabilities--
Loss carryforward................................ 10,090 --
Other............................................ 110,267 120,132
Prepayments and other.............................. 56,449 37,940
----------- -----------
$ 1,379,010 $ 1,387,854
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets.................................. $ 2,604,270 $ 2,527,016
Unrecovered energy costs........................... 643,438 623,582
Other.............................................. 108,308 44,154
----------- -----------
$ 3,356,016 $ 3,194,752
----------- -----------
$23,075,967 $22,962,928
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
46
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
CAPITALIZATION AND LIABILITIES 1994 1995
------------------------------ ------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity................................. $ 5,401,423 $ 5,430,758
Preferred and preference stocks without mandatory
redemption requirements............................ 508,147 508,109
Preference stock subject to mandatory redemption re-
quirements......................................... 292,163 289,183
Long-term debt...................................... 7,453,206 7,290,677
----------- -----------
$13,654,939 $13,518,727
----------- -----------
Current Liabilities:
Notes payable--
Commercial paper.................................. $ -- $ 40,000
Bank loans........................................ 7,150 7,150
Current portion of long-term debt, redeemable pref-
erence stock and capitalized lease obligations..... 560,335 468,368
Accounts payable.................................... 351,370 316,972
Accrued interest.................................... 182,745 185,221
Accrued taxes....................................... 209,269 296,305
Dividends payable................................... 102,585 102,522
Customer deposits................................... 44,514 44,066
Other............................................... 85,845 92,350
----------- -----------
$ 1,543,813 $ 1,552,954
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes............................... $ 4,383,876 $ 4,405,836
Accumulated deferred investment tax credits......... 717,752 703,394
Accrued spent nuclear fuel disposal fee and related
interest........................................... 589,757 607,052
Obligations under capital leases.................... 431,402 394,624
Regulatory liabilities.............................. 699,426 613,385
Other............................................... 1,055,002 1,166,956
----------- -----------
$ 7,877,215 $ 7,891,247
----------- -----------
Commitments and Contingent Liabilities (Note 19)
$23,075,967 $22,962,928
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
47
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stock Equity:
Common stock, $12.50 par value per share--
Outstanding--214,191,021 shares and 214,192,468
shares, respectively............................. $ 2,677,387 $ 2,677,406
Premium on common stock and other paid-in capital.. 2,222,941 2,222,961
Capital stock and warrant expense.................. (16,240) (16,233)
Retained earnings.................................. 517,335 546,624
----------- -----------
$ 5,401,423 $ 5,430,758
----------- -----------
Preferred and Preference Stocks Without Mandatory
Redemption Requirements:
Preference stock, cumulative, without par value--
Outstanding--13,499,549 shares ................... $ 504,957 $ 504,957
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--100,323 shares and 99,112 shares, re-
spectively....................................... 3,190 3,152
Prior preferred stock, cumulative, $100 par value
per share--
No shares outstanding............................. -- --
----------- -----------
$ 508,147 $ 508,109
----------- -----------
Preference Stock Subject to Mandatory Redemption
Requirements:
Preference stock, cumulative, without par value--
Outstanding--3,113,205 shares and 3,083,205
shares, respectively............................. $ 309,964 $ 306,984
Current redemption requirements for preference
stock included in current liabilities............. (17,801) (17,801)
----------- -----------
$ 292,163 $ 289,183
----------- -----------
Long-Term Debt:
First mortgage bonds:
Maturing 1995 through 1999--5 1/4% to 7%......... $ 818,000 $ 715,000
Maturing 2000 through 2009--5.30% to 9 3/8%...... 2,220,500 2,220,400
Maturing 2010 through 2019--5.85% to 9 5/8%...... 1,106,000 1,106,000
Maturing 2020 through 2023--7 3/4% to 9 7/8%..... 1,870,000 1,870,000
----------- -----------
$ 6,014,500 $ 5,911,400
Sinking fund debentures, due 1999 through 2011--
2 3/4% to 7 5/8%.................................. 112,593 111,052
Pollution control obligations, due 2004 through
2014--4% to 9 1/8%................................ 337,200 337,200
Other long-term debt............................... 1,451,449 1,264,409
Deposit for retirement of long-term debt........... -- (377)
Current maturities of long-term debt included in
current liabilities............................... (395,554) (268,756)
Unamortized net debt discount and premium.......... (66,982) (64,251)
----------- -----------
$ 7,453,206 $ 7,290,677
----------- -----------
$13,654,939 $13,518,727
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
48
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ----------------- -------------------
1994 1995 1994 1995 1994 1995
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period................. $ 499,655 $ 521,795 $549,152 $517,335 $793,449 $340,691
Add--Net income (loss).. (7,856) 127,377 43,709 234,423 3,844 614,661
--------- --------- -------- -------- -------- --------
$ 491,799 $ 649,172 $592,861 $751,758 $797,293 $955,352
--------- --------- -------- -------- -------- --------
Deduct--
Dividends declared
on--
Common stock........ $ 135,628 $ 85,676 $221,146 $171,354 $392,076 $340,490
Preferred and pref-
erence stocks...... 15,453 16,844 30,997 33,752 62,872 68,137
Loss on reacquired
preference stock.... 27 28 27 28 1,654 101
--------- --------- -------- -------- -------- --------
$ 151,108 $ 102,548 $252,170 $205,134 $456,602 $408,728
--------- --------- -------- -------- -------- --------
Balance at End of
Period................. $ 340,691 $ 546,624 $340,691 $546,624 $340,691 $546,624
========= ========= ======== ======== ======== ========
</TABLE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED PREMIUM ON COMMON STOCK
AND OTHER PAID-IN CAPITAL
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
--------------------- --------------------- ---------------------
1994 1995 1994 1995 1994 1995
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period................. $2,217,775 $2,222,959 $2,217,110 $2,222,941 $2,213,577 $2,221,060
Add--Premium on issuance
of common stock........ 3,285 2 3,950 20 7,483 1,901
---------- ---------- ---------- ---------- ---------- ----------
Balance at End of
Period................. $2,221,060 $2,222,961 $2,221,060 $2,222,961 $2,221,060 $2,222,961
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
49
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- --------------------- ------------------------
1994 1995 1994 1995 1994 1995
--------- --------- --------- ---------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Cash Flow from Operating
Activities:
Net income (loss)...... $ (7,856) $ 127,377 $ 43,709 $ 234,423 $ 3,844 $ 614,661
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization........ 230,934 238,116 463,658 476,728 923,145 942,394
Deferred income taxes
and investment tax
credits--net........ (32,157) 24,162 (36,467) 34,444 65,880 198,096
Equity component of
allowance for funds
used during
construction........ (5,070) (3,776) (12,426) (5,869) (25,428) (16,071)
Provisions for
revenue refunds and
related interest.... 12,220 (231) 28,990 (231) 1,239,598 8,327
Revenue refunds and
related interest.... (327,016) 20 (673,568) 15,135 (860,661) (532,947)
Recovery/(deferral)
of regulatory
assets/deferred car-
rying charges--net.. 3,818 3,818 7,817 7,636 (426,661) 15,272
Provisions/(payments)
for liability for
early retirement and
separation costs--
net................. 15,930 180 31,537 560 31,675 2,603
Net effect on cash
flows of changes in:
Receivables........ (28,017) (8,148) 187,330 (6,139) 124,846 (78,534)
Coal and fuel oil.. (22,047) (12,802) (19,275) (24,426) 100,941 (2,271)
Materials and sup-
plies............. 3,169 4,475 176 18,082 14,089 36,008
Accounts payable
adjusted for
nuclear fuel lease
principal payments
and early
retirement and
separation costs--
net............... 67,606 63,992 15,929 81,219 268,161 183,480
Accrued interest
and taxes......... (8,880) 6,494 41,844 89,512 25,860 120,495
Other changes in
certain current
assets and
liabilities....... (53,995) 3,031 (34,775) 9,590 (36,757) (9,687)
Other--net........... 92,952 51,552 131,492 135,070 143,257 129,012
--------- --------- --------- ---------- ----------- -----------
$ (58,409) $ 498,260 $ 175,971 $1,065,734 $ 1,591,789 $ 1,610,838
--------- --------- --------- ---------- ----------- -----------
Cash Flow from Investing
Activities:
Construction expendi-
tures................. $(191,213) $(178,948) $(378,591) $ (379,966) $ (837,630) $ (721,977)
Nuclear fuel expendi-
tures................. (56,550) (72,297) (105,299) (111,154) (213,919) (263,120)
Equity component of
allowance for funds
used during
construction.......... 5,070 3,776 12,426 5,869 25,428 16,071
Contributions to nu-
clear decommissioning
funds................. -- -- (96,229) (96,229) (132,550) (132,550)
Investment in subsidi-
ary companies......... -- (1) -- (1) -- (50)
Other cash investments
and special deposits.. 548,883 7,420 620,532 (579) 3,654 876
--------- --------- --------- ---------- ----------- -----------
$ 306,190 $(240,050) $ 52,839 $ (582,060) $(1,155,017) $(1,100,750)
--------- --------- --------- ---------- ----------- -----------
Cash Flow from Financing
Activities:
Issuance of securi-
ties--
Long-term debt........ $ 211,576 $ -- $ 277,114 $ -- $ 1,226,954 $ 269,176
Capital stock......... 3,996 -- 5,031 -- 10,982 72,938
Retirement and redemp-
tion of securities--
Long-term debt........ (300,445) (262,026) (355,752) (291,663) (1,197,115) (639,841)
Capital stock......... (2,887) (3,000) (2,887) (3,000) (62,031) (17,822)
Deposits and securi-
ties held for retire-
ment and redemption
of securities......... 16,082 1,403 3,194 (271) 155,392 (274)
Premium paid on early
redemption of long-
term debt............. (400) -- (900) -- (26,355) (3,664)
Cash dividends paid on
capital stock......... (101,062) (102,584) (202,109) (205,169) (405,975) (449,402)
Proceeds from
sale/leaseback of
nuclear fuel.......... 51,056 -- 168,020 115,340 250,628 253,968
Nuclear fuel lease
principal payments.... (46,091) (52,832) (99,536) (115,617) (226,862) (225,770)
Increase in short-term
borrowings............ -- 40,000 150 40,000 500 41,050
--------- --------- --------- ---------- ----------- -----------
$(168,175) $(379,039) $(207,675) $ (460,380) $ (273,882) $ (699,641)
--------- --------- --------- ---------- ----------- -----------
Increase (Decrease) in
Cash and Temporary Cash
Investments............ $ 79,606 $(120,829) $ 21,135 $ 23,294 $ 162,890 $ (189,553)
Cash and Temporary Cash
Investments at
Beginning of Period.... 186,891 197,773 245,362 53,650 103,607 266,497
--------- --------- --------- ---------- ----------- -----------
Cash and Temporary Cash
Investments at End of
Period................. $ 266,497 $ 76,944 $ 266,497 $ 76,944 $ 266,497 $ 76,944
========= ========= ========= ========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
50
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
See Unicom's Note 1 of Notes to Financial Statements for a discussion of
significant accounting policies, except for the following specific policies
discussed below.
Holding Company Restructuring. Effective September 1, 1994, Unicom became
the parent corporation of ComEd and Unicom Enterprises in a corporate
restructuring. Previously, Unicom Enterprises was a wholly-owned subsidiary of
ComEd. The restructuring was accounted for by the pooling-of-interests method.
In the restructuring, each of the 214,185,572 outstanding shares of ComEd
common stock, par value $12.50 per share, was converted into one fully paid
and non-assessable share of Unicom common stock, without par value. In
addition, the outstanding shares of the common stock of CECo Merging
Corporation (a wholly-owned subsidiary of ComEd created to effect the
restructuring) were converted into the same number of shares of ComEd common
stock, par value $12.50 per share, outstanding immediately prior to the
restructuring. The preferred and preference stocks, common stock purchase
warrants, first mortgage bonds and other debt obligations of ComEd and the
Indiana Company were unchanged in the restructuring and remain their
outstanding securities and obligations.
Income Taxes. ComEd will be included in the consolidated federal and state
income tax returns filed by Unicom. Current and deferred income taxes of the
consolidated group are allocated to ComEd as if ComEd filed separate tax
returns. Deferred income taxes are provided for income and expense items
recognized for financial accounting purposes in periods that differ from those
for income tax purposes. Income taxes deferred in prior years are charged or
credited to income as the book/tax timing differences reverse. Prior years'
deferred investment tax credits are amortized through credits to income
generally over the lives of the related property. Income tax credits resulting
from interest charges applicable to nonoperating activities, principally
construction, are classified as other income.
Interest. Total interest costs incurred on debt, leases and other
obligations for the three months ended June 30, 1994 and 1995 were
$183,415,000 and $177,024,000, respectively, for the six months ended June 30,
1994 and 1995 were $373,540,000 and $353,893,000, respectively, and for the
twelve months ended June 30, 1994 and 1995 were $788,722,000 and $709,898,000,
respectively.
Statements of Consolidated Cash Flows. For purposes of the Statements of
Consolidated Cash Flows, temporary cash investments, generally investments
maturing within three months at the time of purchase, are considered to be
cash equivalents. Supplemental cash flow information for the three months, six
months and twelve months ended June 30, 1994 and 1995 was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ------------------ --------------------
1994 1995 1994 1995 1994 1995
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Supplemental Cash Flow
Information:
Cash paid during the
period for:
Interest (net of
amount capitalized). $146,937 $145,010 $319,884 $316,266 $646,945 $641,806
Income taxes (net of
refunds)............ $ 55,798 $ 52,913 $(77,591) $ 22,492 $(81,639) $ 95,160
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Capital lease obliga-
tions incurred........ $ 52,370 $ 1,433 $169,869 $118,243 $253,118 $258,091
</TABLE>
(2) SETTLEMENTS RELATING TO CERTAIN RATE MATTERS. See Unicom's Note 2 of
Notes to Financial Statements.
(3) OTHER RATE MATTERS. See Unicom's Note 3 of Notes to Financial
Statements.
51
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK. At June 30, 1995,
the authorized shares of capital stock were: common stock--250,000,000 shares;
preference stock--23,393,205 shares; $1.425 convertible preferred stock--99,112
shares; and prior preferred stock-- 850,000 shares. The preference and prior
preferred stocks are issuable in series and may be issued with or without
mandatory redemption requirements. Holders of shares at any time outstanding,
regardless of class, are entitled to one vote for each share held on each
matter submitted to a vote at a meeting of shareholders, with the right to
cumulate votes in all elections for directors.
(5) COMMON STOCK. At June 30, 1995, shares of common stock were reserved for
the following purposes:
<TABLE>
<S> <C>
Conversion of $1.425 convertible preferred stock.................. 101,094
Conversion of warrants............................................ 27,673
-------
128,767
=======
</TABLE>
During the three months, six months and twelve months ended June 30, 1994 and
1995, shares of common stock were issued as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ---------------- -------------------
1994 1995 1994 1995 1994 1995
----------- ------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Employee Stock Purchase
Plan.................... 154,710 -- 154,710 -- 284,656 --
Employee Savings and
Investment Plan......... 27,600 -- 65,600 -- 148,800 15,800
Conversion of $1.425
convertible preferred
stock................... 87,356 161 93,106 1,231 106,892 98,175
Conversion of warrants... 5,554 86 5,752 216 6,514 8,178
----------- ------ -------- ------ --------- --------
275,220 247 319,168 1,447 546,862 122,153
=========== ====== ======== ====== ========= ========
</TABLE>
At December 31, 1994 and June 30, 1995, 83,751 and 83,021 common stock
purchase warrants, respectively, were outstanding. The warrants entitle the
holders to convert such warrants into common stock at a conversion rate of one
share of common stock for three warrants.
(6) PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION
REQUIREMENTS. See Unicom's Note 6 of Notes to Financial Statements.
(7) PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS. See
Unicom's Note 7 of Notes to Financial Statements.
(8) LONG-TERM DEBT. See Unicom's Note 8 of Notes to Financial Statements for
ComEd and the Indiana Company's long-term debt.
(9) LINES OF CREDIT. See the first paragraph of Unicom's Note 9 of Notes to
Financial Statements.
(10) DISPOSAL OF SPENT NUCLEAR FUEL. See Unicom's Note 10 of Notes to
Financial Statements.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS. See Unicom's Note 11 of Notes to
Financial Statements.
52
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(12) PENSION BENEFITS. See Unicom's Note 12 of Notes to Financial Statements.
(13) POSTRETIREMENT HEALTH CARE BENEFITS. See Unicom's Note 13 of Notes to
Financial Statements.
(14) INCOME TAXES. The components of the net deferred income tax liability at
December 31, 1994 and June 30, 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
------------ ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs.......................... $3,266,930 $3,325,967
Overheads capitalized................................ 266,159 258,904
Repair allowance..................................... 210,655 205,667
Regulatory assets recoverable through future rates... 1,791,395 1,727,351
Deferred income tax assets:
Postretirement benefits.............................. (177,991) (195,421)
Unbilled revenues.................................... (90,396) (100,223)
Loss carryforward.................................... (10,090) --
Alternative minimum tax.............................. (283,331) (257,698)
Unamortized investment tax credits to be settled
through future rates................................ (471,058) (461,628)
Other regulatory liabilities to be settled through
future rates........................................ (179,755) (151,757)
Other--net........................................... (58,999) (65,458)
---------- ----------
Net deferred income tax liability..................... $4,263,519 $4,285,704
========== ==========
</TABLE>
The $22 million increase in the net deferred income tax liability from December
31, 1994 to June 30, 1995 is comprised of $49 million of deferred income tax
expense and a $27 million decrease in regulatory assets net of regulatory
liabilities pertaining to income taxes for the period. The amount of regulatory
assets included in deferred income tax liabilities primarily relates to the
equity component of AFUDC which is recorded on an after-tax basis, the borrowed
funds component of AFUDC which was previously recorded net of tax and other
temporary differences for which the related tax effects were not previously
recorded. The amount of other regulatory liabilities included in deferred
income tax assets primarily relates to deferred income taxes provided at rates
in excess of the current statutory rate.
The components of net income tax expense charged to continuing operations for
the three months, six months and twelve months ended June 30, 1994 and 1995
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ------------------ --------------------
1994 1995 1994 1995 1994 1995
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Electric operating
income:
Current income taxes... $ 22,932 $ 65,675 $ 58,292 $131,004 $ (58,146) $ 232,926
Deferred income taxes.. (3,619) 30,395 (3,000) 47,462 119,517 219,769
Investment tax credits
deferred--net......... (7,201) (7,179) (14,425) (14,358) (29,236) (28,690)
Other (income) and
deductions............. (23,667) (299) (21,266) (526) (46,727) (2,322)
--------- -------- -------- -------- --------- ---------
Net income taxes charged
to continuing opera-
tions.................. $ (11,555) $ 88,592 $ 19,601 $163,582 $ (14,592) $ 421,683
========= ======== ======== ======== ========= =========
</TABLE>
Provisions for current and deferred federal and state income taxes and
amortization of investment tax credits resulted in the following effective
income tax rates for the three months, six months and twelve months ended June
30, 1994 and 1995:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ----------------- --------------------
1994 1995 1994 1995 1994 1995
--------- --------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax book income
(thousands)............ $(19,411) $215,969 $63,310 $398,005 $(10,748) $1,036,344
Effective income tax
rate................... 59.5% 41.0% 31.0% 41.1% 135.8% 40.7%
</TABLE>
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<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The principal differences between net income taxes charged to continuing
operations and the amounts computed at the federal statutory rate of 35% for
the three months, six months and twelve months ended June 30, 1994 and 1995
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ------------------ --------------------
1994 1995 1994 1995 1994 1995
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
computed at statutory
rate..................... $ (6,794) $ 75,589 $ 22,159 $139,302 $ (3,762) $ 362,720
Equity component of
AFUDC which was
excluded from taxable
income................... (1,775) (1,322) (4,349) (2,054) (8,900) (5,625)
Amortization of invest-
ment tax credits......... (7,189) (7,178) (14,412) (14,358) (29,250) (28,755)
State income taxes, net
of federal income taxes.. 728 12,888 5,729 23,284 6,007 57,696
Differences between book
and tax accounting,
primarily property-
related deductions....... 2,532 7,279 8,819 15,778 15,764 28,375
Other--net................ 943 1,336 1,655 1,630 5,549 7,272
--------- -------- -------- -------- --------- ---------
Net income taxes charged
to continuing opera-
tions.................... $ (11,555) $ 88,592 $ 19,601 $163,582 $ (14,592) $ 421,683
========= ======== ======== ======== ========= =========
</TABLE>
Current federal income tax liabilities were recorded that include excess
amounts of AMT over the regular federal income tax, which amounts were also
recorded as decreases to deferred federal income taxes. The excess amounts of
AMT can be carried forward indefinitely as a credit against future years'
regular federal income tax liabilities.
(15) TAXES, EXCEPT INCOME TAXES. Provisions for taxes, except income taxes,
for the three months, six months and twelve months ended June 30, 1994 and 1995
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ----------------- -------------------
1994 1995 1994 1995 1994 1995
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Illinois public utility
revenue................... $ 47,246 $ 51,763 $ 99,788 $107,941 $ 195,114 $ 219,416
Illinois invested capital.. 27,076 26,814 54,488 54,110 109,816 108,995
Municipal utility gross
receipts.................. 33,155 36,861 68,495 74,906 115,129 151,422
Real estate................ 46,391 40,121 91,022 86,953 170,960 176,152
Municipal compensation..... 16,885 17,637 34,610 35,427 58,085 73,464
Other--net................. 17,533 16,432 39,956 40,048 68,511 69,373
--------- --------- -------- -------- --------- ---------
$ 188,286 $ 189,628 $388,359 $399,385 $ 717,615 $ 798,822
========= ========= ======== ======== ========= =========
</TABLE>
(16) LEASE OBLIGATIONS. Under its nuclear fuel lease arrangement, ComEd may
sell and lease back nuclear fuel from a lessor who may borrow an aggregate of
$700 million (consisting of $300 million of commercial paper or bank borrowings
and $400 million of intermediate term notes) to finance the transactions. The
commercial paper/bank borrowing portion currently will expire on November 23,
1996, but ComEd plans to ask for an extension of the expiration date. At June
30, 1995, ComEd's obligation to the lessor for leased nuclear fuel amounted to
approximately $619 million. ComEd has agreed to make lease payments which cover
the amortization of the nuclear fuel used in ComEd's reactors plus the lessor's
related financing costs. ComEd has an obligation for spent nuclear fuel
disposal costs of leased nuclear fuel.
Future minimum rental payments, net of executory costs, at June 30, 1995 for
capital leases are estimated to aggregate $686 million, including $138 million
in 1995, $236 million in 1996, $125 million in 1997, $85 million in 1998, $46
million in 1999 and $56 million in 2000-2003. The estimated interest component
of such rental payments aggregates $67 million. The estimated portions of
obligations due within one year under capital leases are included in current
liabilities and approximated $147 million and $182 million at December 31, 1994
and June 30, 1995, respectively.
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<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONCLUDED
Future minimum rental payments at June 30, 1995 for operating leases are
estimated to aggregate $145 million, including $4 million in 1995, $9 million
in 1996, $9 million in 1997, $9 million in 1998, $9 million in 1999 and $105
million in 2000-2024.
(17) INVESTMENTS IN URANIUM-RELATED PROPERTIES. See Unicom's Note 17 of Notes
to Financial Statements.
(18) JOINT PLANT OWNERSHIP. See Unicom's Note 18 of Notes to Financial
Statements.
(19) COMMITMENTS AND CONTINGENT LIABILITIES. See Unicom's Note 19 of Notes to
Financial Statements.
55
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES. See Unicom's "Management's Discussion and
Analysis of Financial Condition and Results of Operations," subcaptions
"Liquidity and Capital Resources--UTILITY OPERATIONS" and "Regulation," which
are incorporated herein by this reference.
RESULTS OF OPERATIONS. See Unicom's "Management's Discussion and Analysis of
Financial Condition and Results of Operations," subcaption "Results of
Operations" (other than the first paragraph thereof), which is incorporated
herein by this reference.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
CERTAIN REGULATORY MATTERS. Through its fuel adjustment clause, ComEd
recovers from its customers the cost of the fuel used to generate electricity
and of purchased power as compared to fuel costs included in base rates. The
amounts collected under the fuel adjustment clause are subject to review by the
ICC, which, under the Illinois Public Utilities Act, is required to hold annual
public hearings to reconcile the collected amounts with the actual cost of fuel
and power prudently purchased. In the event that the collected amounts exceed
such actual cost, then the ICC can order that the excess be refunded. For
additional information concerning ComEd's fuel reconciliation proceedings and
coal reserves, see Notes 1 and 2 of Unicom and ComEd's Notes to Financial
Statements.
LITIGATION. During 1989 and 1991, actions were brought in federal and state
courts in Colorado against ComEd and Cotter seeking unspecified damages and
injunctive relief based on allegations that Cotter has permitted radioactive
and other hazardous material to be released from its mill into areas owned or
occupied by the plaintiffs resulting in property damage and potential adverse
health effects. In February 1994, a federal jury returned nominal dollar
verdicts on eight bellwether plaintiffs' claims in these cases. Plaintiffs have
appealed those judgments. Although the remaining cases will necessarily involve
the resolution of numerous contested issues of fact and law, Unicom and ComEd's
determination is that these actions will not have a material impact on their
financial position or results of operations.
In 1990, ComEd filed a complaint in the Circuit Court against Westinghouse
and certain of its employees. The complaint alleges that the defendants
knowingly concealed information regarding the durability of the metal used in
the steam generators (a major component of the nuclear steam supply systems) at
ComEd's Zion, Byron and Braidwood stations. The complaint further alleges that
the defects in the steam generators will prevent the plants from maintaining
their full power output through their forty-year design life without costly
remanufacture or replacement of the steam generators. Damages, including
punitive damages, in an unspecified amount are claimed. Westinghouse has filed
a counterclaim against ComEd which seeks recovery of Westinghouse's costs of
defense and damages of approximately $13 million.
Shareholder derivative lawsuits were filed in 1992 and 1993 in the Circuit
Court against current and former directors of ComEd alleging that they breached
their fiduciary duty and duty of care to ComEd in connection with the
management of the activities associated with the construction of ComEd's four
most recently completed nuclear generating units. The lawsuits sought
restitution to ComEd by the defendants for unquantified and undefined losses
and costs alleged to have been incurred by ComEd. Both lawsuits were dismissed
by the Circuit Court; however, appeals are pending before the Illinois
Appellate Court.
A number of complaints have been filed by former employees with the EEOC, and
several lawsuits have been filed by former employees in the U.S. District
Court, alleging that the employees' terminations (which occurred as part of
ComEd's management workforce reductions that were implemented in 1992) involved
discrimination on the basis of age, race, sex, national origin and/or
disabilities, in violation of applicable law. The complainants in these various
cases are seeking, among other things, awards of back pay and lost benefits,
reinstatement, pecuniary damages, and costs and attorneys' fees. Discovery in
these cases is proceeding, and ComEd does not view these cases as having a
material impact on its financial position or results of operations.
In July 1995, the Chicago area experienced several consecutive days of
unusually high temperatures coupled with high humidity. Between July 12 and 14,
1995, ComEd experienced record demand for electricity. On July 14, 1995, a fire
in a substation caused a power outage to approximately 40,000 customers. Other
equipment failures in the same general area caused certain of these customers
to be without power for up to 48 hours. In the wake of these power outages, two
class action lawsuits
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<PAGE>
were filed against ComEd seeking recovery of damages for property losses
allegedly suffered. One suit seeks at least $10 million in damages; the other
seeks unspecified damages.
NUCLEAR MATTERS. Under the Nuclear Waste Policy Act of 1982, the DOE is
responsible for the selection and development of repositories for, and the
disposal of, spent nuclear fuel and high-level radioactive waste. ComEd, as
required by that Act, has signed a contract with the DOE to provide for the
disposal of spent nuclear fuel and high-level radioactive waste from ComEd's
nuclear generating stations beginning not later than January 1998; however,
this delivery schedule is expected to be delayed significantly. It is not
certain when the DOE will accept high-level radioactive waste from ComEd and
other operators of nuclear power plants. Extended delays or a default by the
DOE would lead to consideration of costly alternatives involving serious siting
and environmental issues. The contract with the DOE requires ComEd to pay the
DOE a one-time fee applicable to nuclear generation through April 6, 1983 of
approximately $277 million, with interest to date of payment, and a fee payable
quarterly equal to one mill per kilowatthour of nuclear-generated and sold
electricity after April 6, 1983. ComEd has elected to pay the one-time fee,
with interest, just prior to the first delivery of spent nuclear fuel to the
DOE. The costs incurred by the DOE for disposal activities will be paid out of
fees charged to owners and generators of spent nuclear fuel and high-level
radioactive waste. ComEd has primary responsibility for the interim storage of
its spent nuclear fuel. ComEd's capability to store spent fuel is more than
adequate for some years to come. Dresden station has spent fuel capacity
through the year 2001, Zion station has capacity through 2005 and all of the
other stations have capacity through at least 2009. In addition, ComEd is
planning to develop dry cask spent fuel storage on site for Dresden Unit 1 at
an estimated cost of $12 million. Meeting other spent fuel storage requirements
beyond the years stated above could require new and separate storage
facilities. The costs for Zion and the other units at Dresden have not been
determined.
The federal Low-Level Radioactive Waste Policy Act of 1980 provides that
states may enter into compacts to provide for regional disposal facilities for
low-level radioactive waste and restrict use of such facilities to waste
generated within the region. Between July 1, 1994 and July 1, 1995, there were
no commercial operating sites in the United States for the disposal of low-
level radioactive waste available to ComEd. However, the Barnwell, South
Carolina low-level radioactive waste site was reopened on July 1, 1995 and is
available to ComEd. Illinois has entered into a compact with the state
of Kentucky, which has been approved by Congress as required by the Waste
Policy Act. Neither Illinois nor Kentucky currently has an operational site,
and one is currently not expected to be operational until after the year 2000.
ComEd has temporary on-site storage capacity at its nuclear generating stations
for a limited amount of low-level radioactive waste and is planning additional
such capacity pending development of disposal facilities by the state of
Illinois. ComEd anticipates the possibility of continuing difficulties in
disposing of low-level radioactive waste. Since the reopening and availability
of the Barnwell site, ComEd has been reevaluating its options.
During the past several years, the NRC has placed two of ComEd's nuclear
generating stations, Zion station and Dresden station, on its list of plants to
be monitored closely. Although Zion station (which was placed on the list in
early 1991) was removed from that list in February 1993, Dresden station (which
was placed on the list in early 1992) remains on the list. In June 1995, the
NRC reported that over the past year performance at Dresden was cyclical; plant
material condition needs to be improved at Dresden and a more effective work
management system is needed to deal with the corrective maintenance backlog.
Accordingly, Dresden will remain on the NRC list of plants to be monitored
closely. Because of the age of Zion, Dresden and Quad-Cities stations, ComEd
anticipates continued expenditures in order to improve reliability and to meet
NRC regulatory expectations. Beginning in late 1992, ComEd restructured its
management of its nuclear operations division and since that time has committed
additional resources to the stations' operations.
In January 1994, ComEd was notified by the NRC that ComEd's LaSalle County
and Quad-Cities stations were placed on the list of plants with adverse
performance trends. ComEd was informed that the NRC concerns about LaSalle
County station included, among other matters, deficient radiation worker
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<PAGE>
practices. The NRC concerns with Quad-Cities station included, among other
matters, deficiencies in the condition of certain station equipment and the
effectiveness of the operators of the units in identifying and responding to
certain operational problems. ComEd has provided written and verbal responses
to the NRC and is working to resolve the concerns. In February 1995, the NRC
concluded that LaSalle County had arrested the adverse trends in most areas and
"normal" designation should be returned. In June 1995, the NRC concluded that
the declining trends at Quad-Cities station also had been arrested in most
areas and normal designation should be returned. As noted above, ComEd
anticipates continued expenditures in order to improve reliability and to meet
NRC regulatory expectations in connection with Zion, Dresden and Quad-Cities
stations. In addition, generating station availability and performance during a
year may be issues in fuel reconciliation proceedings in assessing the prudence
of fuel and power purchases during such year. Final ICC orders have been issued
in fuel reconciliation proceedings for years prior to 1993; however, certain
intervenors have appealed the ICC order in the 1989 fuel reconciliation
proceedings on issues relating to nuclear station performance.
In accordance with a commitment to the NRC, ComEd examined its operating
boiling water nuclear generating units in 1983 to determine the existence or
extent of inter-granular stress corrosion in certain of the large diameter
piping in those units. Inter-granular stress corrosion was discovered in the
Dresden and Quad-Cities units. ComEd replaced the stainless steel piping
susceptible to stress corrosion at Dresden Unit 3 and is taking alternative
remedial actions which are intended to minimize the need to replace such piping
at Dresden Unit 2, Quad-Cities Units 1 and 2 and LaSalle County Units 1 and 2.
If ComEd is required to replace all of such piping, the estimated construction
expenditures, in current-year (1995) dollars, would be approximately $645
million.
ComEd has studied the possibility of having to replace the steam generators
at its Zion station. The initial studies were completed in June 1991 and
additional follow-up studies are continuing. Based on the most recent findings
of these studies, it will not be necessary to replace the Zion steam generators
until at least the year 2005 and ComEd believes that the potential exists that
replacement will not be necessary during the original operating license life,
which expires in 2013. ComEd has also studied the replacement of the steam
generators at Byron Unit 1 and Braidwood Unit 1. The studies indicate that,
from a technical standpoint, the steam generators should be replaced and, from
an economic standpoint, the replacements should be performed at the earliest
possible time. The steam generator replacements are currently planned to be
completed in 1998 for Braidwood Unit 1 and in 1999 for Byron Unit 1. The
estimated replacement costs, including the costs of removal of the existing
steam generators, are approximately $235 million for each unit. Approximately
$170 million of expenditures is included in the current 1995-97 construction
program. See "Litigation" herein concerning litigation by ComEd against
Westinghouse concerning steam generators.
During the year 1994, civil penalties were imposed on ComEd by the NRC on
eight occasions for violations of NRC regulations in amounts aggregating
$867,500. Since January 1, 1995, the NRC has imposed on ComEd two civil
penalties in the amount of $200,000 for violations of NRC regulations. There is
also one enforcement issue currently outstanding and under review by the NRC.
ENVIRONMENTAL MATTERS. Air quality regulations, promulgated by the IPCB as
well as the Indiana and Hammond Departments of Environmental Management in
accordance with federal standards, impose restrictions on the emission of
particulates, sulfur dioxide, nitrogen oxides and other air pollutants and
require permits from the respective state and local environmental protection
agencies for the operation of emission sources. Permits authorizing operation
of ComEd's fossil-fueled generating facilities subject to this requirement have
been obtained and, where such permits are due to expire, ComEd has, in a timely
manner, filed applications for renewal or requested extensions of the existing
permits.
Under the Federal Clean Water Act, NPDES permits for discharges into
waterways are required to be obtained from the U.S. EPA or from the state
environmental agency to which the permit program has been delegated. Those
permits must be renewed periodically. ComEd and the Indiana Company either have
NPDES permits for all of their generating stations or have pending applications
for such permits
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<PAGE>
under the current delegation of the program to the Illinois EPA or the Indiana
Department of Environmental Management. ComEd is also subject to the
jurisdiction of certain pollution control agencies of the state of Iowa with
respect to the discharge into the Mississippi River from Quad-Cities station.
In August 1990, the Sierra Club filed suit in the U.S. District Court under
Section 505 of the Federal Clean Water Act alleging violations of state of
Illinois water quality standards with respect to thermal
effluents at ComEd's Fisk, Crawford, Will County, Joliet and Dresden generating
stations. In July 1991, the Sierra Club and ComEd reached a settlement of this
suit which was approved by the Court in November 1991. Under the settlement,
ComEd has agreed to perform an ecological study of the thermal effluents
discharged from the generating stations. Ultimately, this study, which is
currently underway, may determine whether the installation of closed cycle
cooling facilities or operational restrictions are necessary at one or more of
these stations.
The Great Lakes Critical Programs Act of 1990 requires that, following the
issuance of guidance by the U.S. EPA, the states of Illinois and Indiana, among
others, adopt water quality standards, policies and procedures to assure
protection of the water quality of the Great Lakes. Water quality standards and
procedures that the states would be required to adopt are to be based on the
U.S. EPA's final guidance issued on March 13, 1995. ComEd is presently
evaluating the final guidance to assess the extent to which it may impact
certain ComEd facilities. Ultimately, the new rules may require that ComEd
install additional pollution control equipment or restrict operations at its
facilities that discharge, either directly or indirectly, into Lake Michigan.
The Clean Air Amendments require reductions in sulfur dioxide emissions from
ComEd's Kincaid station. The Clean Air Amendments also bar future utility
sulfur dioxide emissions except to the extent utilities hold allowances for
their emissions. Allowances which authorize their holder to emit sulfur dioxide
have been issued by the U.S. EPA based largely on historical levels of sulfur
dioxide emissions. These allowances are transferable and marketable. ComEd's
ability to increase generation in the future to meet expected increased demand
for electricity will depend in part on ComEd and the Indiana Company's ability
to acquire additional allowances or to reduce emissions below otherwise
allowable levels from their existing generating plants. In addition, the Clean
Air Amendments require studies to determine what controls, if any, should be
imposed on utilities to control air toxic emissions, including mercury. ComEd's
Clean Air Compliance Plan for Kincaid station was approved by the ICC in July
1993. In late 1993, however, a federal court declared the Illinois law under
which the approval was received to be unconstitutional and compliance plans
prepared and approved in reliance on the law to be void. In January 1995, the
federal court's decision was affirmed by the U.S. Court of Appeals and Illinois
has decided to not pursue further appeals. ComEd is currently burning low
sulfur coal at Kincaid station to meet Clean Air Act Phase I requirements.
ComEd will determine future compliance plans for Kincaid station as necessary.
The Clean Air Amendments also require reductions in nitrogen oxide emissions
from ComEd and the Indiana Company's fossil fuel generating units. On March 6,
1995, the U.S. EPA issued a proposed rule exempting existing sources inside the
Chicago ozone non-attainment area from further nitrogen oxide emission
reductions. The Illinois EPA is now considering nitrogen oxide emission
reductions at ComEd generating stations outside the Chicago ozone non-
attainment area due to ozone transport. Under the Acid Rain program, the U.S.
EPA will prepare nitrogen oxide emission regulations for all of ComEd's boilers
with a compliance date of January 1, 2000.
CERCLA provides for immediate response and removal actions coordinated by the
U.S. EPA to releases of hazardous substances into the environment and
authorizes the U.S. Government either to clean up sites at which hazardous
substances have created actual or potential environmental hazards or to order
persons responsible for the situation to do so. Under CERCLA, generators and
transporters of hazardous substances, as well as past and present owners and
operators of hazardous waste sites, are made strictly, jointly and severally
liable for the cleanup costs of waste at sites, most of which are listed by the
U.S. EPA on the NPL. These responsible parties can be ordered to perform a
cleanup, can be
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<PAGE>
sued for costs associated with a U.S. EPA directed cleanup, or may voluntarily
settle with the U.S. Government concerning their liability for cleanup costs,
or may voluntarily begin a site investigation and site remediation prior to
listing on the NPL under state oversight. Various states, including Illinois,
have enacted statutes which contain provisions substantially similar to CERCLA.
ComEd and its subsidiaries are or are likely to become parties to proceedings
initiated by the U.S. EPA, state agencies and/or other responsible parties
under CERCLA with respect to a number of sites, including MGP sites, or may
voluntarily undertake to investigate and remediate sites for which they may be
liable under CERCLA.
MGPs manufactured gas in Illinois from approximately 1850 to 1950. ComEd
generally did not operate MGPs as a corporate entity but did, however, acquire
MGP sites as part of the absorption of smaller utilities. Approximately half of
these sites were transferred to Northern Illinois Gas Company as part of a
general conveyance in 1954. ComEd also acquired former MGP sites as vacant real
estate on which ComEd facilities have been constructed. To date, ComEd has
identified 44 former MGP sites for which it may be liable for remediation.
ComEd presently estimates that its costs of former MGP site investigation and
remediation will aggregate from $25 million to $150 million in current-year
(1995) dollars. It is expected that the costs associated with investigation and
remediation of former MGP sites will be incurred over a period of approximately
20 to 30 years. Because ComEd is not able to determine the most probable
liability for such MGP costs, in accordance with accounting standards, a
reserve of approximately $25 million has been recorded as of December 31, 1994
and June 30, 1995, which reflects the low end of the range of its estimate of
the liability associated with former MGP sites. In addition, as of December 31,
1994 and June 30, 1995, a reserve of $8 million has been recorded, representing
its estimate of the liability associated with cleanup costs of remediation
sites other than former MGP sites. Unicom and ComEd presently estimate that
ComEd's costs of investigating and remediating the former MGP and other
remediation sites pursuant to CERCLA and state environmental laws will not have
a material impact on the financial position or results of operations of Unicom
or ComEd. These cost estimates are based on currently available information
regarding the responsible parties likely to share in the costs of responding to
site contamination, the extent of contamination at sites for which the
investigation has not yet been completed and the cleanup levels to which sites
are expected to have to be remediated.
In July 1991, the U.S. Government filed a complaint in U.S. District Court
alleging that ComEd and four other defendants are PRPs for remediation costs
associated with surface, soil and groundwater contamination alleged to have
occurred from the disposal by other persons of hazardous wastes at a site
located near ComEd's Byron station in Byron, Illinois. The U.S. Government
alleges that a portion of the site is owned by ComEd. The U.S. Government is
presently seeking reimbursement from the PRPs for past study and response costs
associated with the site of approximately $7 million. ComEd is currently
pursuing a negotiated settlement and is not actively pursuing cost recovery
from other PRPs at this time.
In October 1992, the U.S. EPA notified ComEd and four other companies,
including the site operator, that they were PRPs for the costs associated with
the investigation and removal of contaminated soil at the Elgin Salvage and
Supply site in Elgin, Illinois. In April 1993, the U.S. EPA issued an order
under Section 106 of CERCLA to ComEd and the other parties to investigate and
remove the contamination from the site. ComEd sent substantial amounts of scrap
cable and other scrap metal to the site. The site investigation and remediation
was completed in March 1995 at a cost of approximately $9 million, except for
final U.S. EPA project review. The site operator claims to be unable to fund
more than a small share of the removal costs. Consequently, the other parties
have agreed to an interim allocation of the removal costs. The interim
agreement allocates 55% of the removal costs to ComEd. ComEd and the other PRPs
have filed a cost recovery action against the site operator and the site owners
to require that they provide their share of the remediation costs. ComEd and
the site owner are in litigation with several insurance companies for claims.
Also, additional PRPs have responded to informational requests concerning their
potential liability at the site. Their participation should reduce ComEd's
percent allocation of such costs.
In the operation of its electric distribution system, ComEd utilized
equipment containing PCBs. Such equipment included transformers located in
customer-owned buildings and in sidewalk vaults. Under
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<PAGE>
regulations adopted by the U.S. EPA, these transformers containing PCBs were
required to be modified (with non-PCB fluid) or be replaced. ComEd has
completed the replacement of over 2,000 PCB fluid transformers that were
located in or near commercial buildings and were subject to the federal
regulations. The estimated cost to ComEd of replacing or modifying these
transformers and disposing of the PCB fluid was approximately $120 million,
which had been expended through the end of 1993. Some of ComEd's electrical
equipment containing PCBs was sent to scrap and salvage facilities and, as a
result, ComEd may be liable for penalties and for the costs of cleanup of those
facilities. An accident or spill involving PCB oil-filled electrical equipment,
resulting in exposure of persons or property to PCBs or their by-products,
could result in material liability claims against ComEd.
In 1990, the IPCB replaced existing landfill regulations with new, more
stringent design and performance standards. These regulations are expected to
increase the cost to ComEd for disposal of coal combustion by-products at its
Joliet station. At Joliet, an existing landfill utilized for disposal of coal
ash may require the installation by 1997 of engineered retrofits designed to
protect groundwater. ComEd has requested exemptions from certain of the new
regulations from the IPCB. If its request is denied, then alternative landfill
siting, commercial disposal, or retrofitting of the existing facility could
result in significant increases in disposal expenditures.
The outcome of many of the regulatory proceedings referred to above, if not
favorable, could have a material adverse effect on Unicom and ComEd's future
business and operating results.
An unresolved issue is whether exposure to EMFs may result in adverse health
effects or damage to the environment. EMFs are produced by virtually all
devices carrying or utilizing electricity, including transmission and
distribution lines as well as home appliances. If regulations are adopted
related to EMFs, they could affect the construction and operation of electrical
equipment, including transmission and distribution lines and the cost of such
equipment. ComEd cannot predict the effect on the cost of such equipment or
operations if new regulations related to EMFs are adopted. In the absence of
such regulations, EMFs have nonetheless become an issue in siting facilities
and in other land use contexts. Litigation has been filed in a variety of
locations against a variety of defendants (including ComEd) alleging that the
presence or use of electrical equipment has had an adverse effect on the health
of persons. If plaintiffs are successful in litigation of this type and it
becomes widespread, the impact on ComEd and on the electric utility industry is
not predictable, but could be severe.
From time to time, Unicom and its subsidiaries are, or are claimed to be, in
violation of or in default under orders, statutes, rules or regulations
relating to environmental controls and other matters, compliance plans imposed
upon or agreed to by them or permits issued by various state and federal
agencies for the construction or operation of their facilities. Unicom and
ComEd do not believe, so far as they now foresee, that such violations or
defaults will have a material adverse effect on their future business and
operating results, except for events otherwise described in Unicom and ComEd's
Annual Reports on Form 10-K for the year ended December 31, 1994 or in these
Quarterly Reports on Form 10-Q for the quarterly period ended June 30, 1995,
which could have such an effect.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Unicom's annual meeting of shareholders was held on May 24, 1995. At that
meeting, each of the persons named in the table below was elected as a
director. Vote totals for each director are shown below:
<TABLE>
<CAPTION>
SHARES SHARES
NOMINEE VOTED FOR WITHHELD FROM
------- ----------- -------------
<S> <C> <C>
Jean Allard........................................ 183,923,666 3,437,237
James W. Compton................................... 184,154,083 3,206,820
Sue L. Gin......................................... 184,331,377 3,029,526
Donald P. Jacobs................................... 184,317,586 3,043,317
Edgar D. Jannotta.................................. 184,410,460 2,950,443
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
SHARES SHARES
NOMINEE VOTED FOR WITHHELD FROM
------- ----------- -------------
<S> <C> <C>
George E. Johnson.................................. 184,122,880 3,238,023
Edward A. Mason.................................... 184,151,247 3,209,656
James J. O'Connor.................................. 184,215,231 3,145,672
Frank A. Olson..................................... 184,385,906 2,974,997
Samuel K. Skinner.................................. 184,101,684 3,259,219
</TABLE>
Also at the meeting, the appointment by Unicom's Board of Directors of Arthur
Andersen LLP as auditors for the year 1995 was approved. A total of 184,239,772
shares voted to approve the appointment, 1,531,053 shares voted against and
1,590,078 shares abstained.
ComEd's annual meeting of shareholders was held on May 24, 1995. At that
meeting, each of the persons named in the table below was elected as a
director. Vote totals for each director are shown below:
<TABLE>
<CAPTION>
SHARES
NOMINEE VOTED FOR
------- -----------
<S> <C>
Jean Allard......................................................... 214,185,572
James W. Compton.................................................... 214,185,572
Sue L. Gin.......................................................... 214,185,572
Donald P. Jacobs.................................................... 214,185,572
Edgar D. Jannotta................................................... 214,185,572
George E. Johnson................................................... 214,185,572
Edward A. Mason..................................................... 214,185,572
James J. O'Connor................................................... 214,185,572
Frank A. Olson...................................................... 214,185,572
Samuel K. Skinner................................................... 214,185,572
</TABLE>
Also at the meeting, the appointment by ComEd's Board of Directors of Arthur
Andersen LLP as auditors for the year 1995 was approved. A total of 214,185,572
shares voted to approve the appointment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ------------------------------------------------------------------
<C> <S>
(12) Statement computing Commonwealth Edison Company ratios of earnings
to fixed charges and ratios of earnings to fixed charges and
preferred and preference stock dividend requirements.
(23)-1 Consent of independent public accountants applicable to Unicom
Corporation.
(23)-2 Consent of independent public accountants applicable to
Commonwealth Edison Company.
(27)-1 Financial data schedule of Unicom Corporation.
(27)-2 Financial data schedule of Commonwealth Edison Company.
</TABLE>
(b) Reports on Form 8-K
None.
63
<PAGE>
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 on the 8th day of August, 1995. The
signature for each undersigned company shall be deemed to relate only to
matters having reference to such company and its subsidiaries thereof.
Unicom Corporation
Registrant
Roger F. Kovack
By __________________________________
Roger F. Kovack
Comptroller
(Chief accounting officer and
officer duly authorized to sign on
behalf of the registrant)
Commonwealth Edison Company
Registrant
Roger F. Kovack
By __________________________________
Roger F. Kovack
Comptroller
(Chief accounting officer and
officer duly authorized to sign on
behalf of the registrant)
64
<PAGE>
EXHIBIT INDEX
Exhibits filed with or incorporated by reference in Form 10-Q for the
quarterly period ended June 30, 1995:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
(12) Statement computing Commonwealth Edison Company ratios of earnings to
fixed charges and ratios of earnings to fixed charges and preferred
and preference stock dividend requirements.
(23)-1 Consent of independent public accountants applicable to Unicom
Corporation.
(23)-2 Consent of independent public accountants applicable to Commonwealth
Edison Company.
(27)-1 Financial Data Schedule of Unicom Corporation.
(27)-2 Financial Data Schedule of Commonwealth Edison Company.
</TABLE>
<PAGE>
Exhibit (12)
Commonwealth Edison Company
Form 10-Q File No. 1-1839
Commonwealth Edison Company and Subsidiary Companies Consolidated
-----------------------------------------------------------------
Computation of Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Fixed Charges and
Preferred and Preference Stock Dividend Requirements
----------------------------------------------------
(Thousands of Dollars)
<TABLE>
<CAPTION>
Twelve Months Ended
----------------------------------
Line December 31, June 30,
No. 1994 1995
- ---- ------------ -----------
<C> <S> <C> <C>
1 Net income $ 423,946 $ 614,661
---------- ----------
2 Net provisions for income taxes and investment tax credits deferred
3 charged to-
4 Operations $ 300,764 $ 424,005
5 Other income (23,062) (2,322)
---------- ----------
6 $ 277,702 $ 421,683
---------- ----------
7 Fixed charges-
8 Interest on debt $ 621,909 $ 611,874
9 Estimated interest component of nuclear fuel and
10 other lease payments, rentals and other interest 64,885 72,533
11 Amortization of debt discount, premium and expense 22,804 22,572
---------- ----------
12 $ 709,598 $ 706,979
---------- ----------
13 Preferred and preference stock dividend requirements-
14 Provisions for preferred and preference stock dividends $ 64,927 $ 67,673
15 Taxes on income required to meet provisions for
16 preferred and preference stock dividends 42,854 44,582
---------- ----------
17 $ 107,781 $ 112,255
---------- ----------
18 Fixed charges and preferred and preference stock
19 dividend requirements $ 817,379 $ 819,234
---------- ----------
20 Earned for fixed charges and preferred and preference stock
21 dividend requirements $1,411,246 $1,743,323
---------- ----------
22 Ratios of earnings to fixed charges (line 21 divided by line 12) 1.99 2.47
==== ====
23 Ratios of earnings to fixed charges and preferred and preference
24 stock dividend requirements (line 21 divided by line 19) 1.73 2.13
==== ====
</TABLE>
<PAGE>
Exhibit (23)-1
Unicom Corporation
Form 10-Q File No. 1-11375
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference of our report included in this Form 10-Q for the quarterly period
ended June 30, 1995, into Unicom Corporation's previously filed prospectuses
dated March 18, 1994, constituting part of Form S-4 Registration Statement File
No. 33-52109, as amended (relating to Common Stock of Unicom Corporation), as
further amended by Post-Effective Amendment No. 1 on Form S-8 (relating to
Commonwealth Edison Company's Employee Savings and Investment Plan) and Post-
Effective Amendment No. 2 on Form S-8 (relating to Unicom Corporation's Employee
Stock Purchase Plan), and Form S-8 Registration Statement File No. 33-56991
(relating to Unicom Corporation's Long-Term Incentive Plan).
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 8, 1995
<PAGE>
Exhibit (23)-2
Commonwealth Edison Company
Form 10-Q File No. 1-1839
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference of our report included in this Form 10-Q for the quarterly period
ended June 30, 1995, into Commonwealth Edison Company's previously filed
prospectuses as follows: (1) prospectus dated August 21, 1986, constituting
part of Form S-3 Registration Statement File No. 33-6879, as amended (relating
to the Company's Debt Securities and Common Stock); (2) prospectus dated January
7, 1994, constituting part of Form S-3 Registration Statement File No. 33-51379
(relating to the Company's Debt Securities and Cumulative Preference Stock); and
(3) prospectus dated July 27, 1995, constituting part of Form S-3 Registration
Statement File No. 33-61343 (relating to Company-Obligated Preferred Securities
of Subsidiary Trust). We also consent to the application of our report, to the
ratios of earnings to fixed charges and the ratios of earnings to fixed charges
and preferred and preference stock dividend requirements for each of the twelve
months ended December 31, 1994 and June 30, 1995 appearing on page 42 of this
Form 10-Q.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 8, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND> This schedule contains Unicom Corporation's summary financial
information extracted from the Consolidated Balance Sheet and Statement of
Consolidated Capitalization as of June 30, 1995, and the related Statements of
Consolidated Income, Retained Earnings and Cash Flows for the six months ended
June 30, 1995, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000918040
<NAME> Unicom Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 17,147,592
<OTHER-PROPERTY-AND-INVEST> 1,271,593
<TOTAL-CURRENT-ASSETS> 1,422,565
<TOTAL-DEFERRED-CHARGES> 0<F1>
<OTHER-ASSETS> 3,194,916
<TOTAL-ASSETS> 23,036,666
<COMMON> 4,900,697
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 586,714
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,483,643<F2>
289,183<F3>
508,109<F3>
<LONG-TERM-DEBT-NET> 7,315,678<F4><F5>
<SHORT-TERM-NOTES> 7,150
<LONG-TERM-NOTES-PAYABLE> 0<F5>
<COMMERCIAL-PAPER-OBLIGATIONS> 40,000
<LONG-TERM-DEBT-CURRENT-PORT> 268,756
17,801<F3>
<CAPITAL-LEASE-OBLIGATIONS> 396,452
<LEASES-CURRENT> 181,976
<OTHER-ITEMS-CAPITAL-AND-LIAB> 8,527,918
<TOT-CAPITALIZATION-AND-LIAB> 23,036,666
<GROSS-OPERATING-REVENUE> 3,137,657
<INCOME-TAX-EXPENSE> 161,643<F6>
<OTHER-OPERATING-EXPENSES> 2,438,289
<TOTAL-OPERATING-EXPENSES> 2,600,458
<OPERATING-INCOME-LOSS> 537,199
<OTHER-INCOME-NET> (36,780)<F6><F7>
<INCOME-BEFORE-INTEREST-EXPEN> 500,945
<TOTAL-INTEREST-EXPENSE> 303,478
<NET-INCOME> 197,467
0<F7>
<EARNINGS-AVAILABLE-FOR-COMM> 197,467
<COMMON-STOCK-DIVIDENDS> 171,717
<TOTAL-INTEREST-ON-BONDS> 0<F8>
<CASH-FLOW-OPERATIONS> 1,017,844
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0
<FN>
<F1> This item is not disclosed as a separate line item on the Consolidated
Balance Sheet.
<F2> Includes a deduction of $3,768 thousand for preference stock expense of
subsidiary (Commonwealth Edison Company).
<F3> Preferred and preference stocks of subsidiary (Commonwealth Edison
Company).
<F4> Long-term debt of subsidiaries (Commonwealth Edison Company and Unicom
Enterprises Inc.).
<F5> $1,288,750 thousand of notes and long-term notes payable to banks is
included in LONG-TERM-DEBT-NET.
<F6> A tax benefit of $526 thousand related to nonoperating activities is
included in INCOME-TAX-EXPENSE.
<F7> A $33,773 thousand provision for preferred and preference stock dividends
of subsidiary (Commonwealth Edison Company) is included in
OTHER-INCOME-NET.
<F8> This item is not disclosed as a separate line item on the Statement of
Consolidated Income.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND> This schedule contains Commonwealth Edison Company's summary financial
information extracted from the Consolidated Balance Sheet and Statement of
Consolidated Capitalization as of June 30, 1995, and the related Statements of
Consolidated Income, Retained Earnings and Cash Flows for the six months ended
June 30, 1995, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<CIK> 0000022606
<NAME> Commonwealth Edison Company
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 17,147,592
<OTHER-PROPERTY-AND-INVEST> 1,232,730
<TOTAL-CURRENT-ASSETS> 1,387,854
<TOTAL-DEFERRED-CHARGES> 0<F1>
<OTHER-ASSETS> 3,194,752<F2>
<TOTAL-ASSETS> 22,962,928<F2>
<COMMON> 2,677,406
<CAPITAL-SURPLUS-PAID-IN> 2,206,728
<RETAINED-EARNINGS> 546,624
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,430,758
289,183
508,109
<LONG-TERM-DEBT-NET> 7,290,677<F3>
<SHORT-TERM-NOTES> 7,150
<LONG-TERM-NOTES-PAYABLE> 0<F3>
<COMMERCIAL-PAPER-OBLIGATIONS> 40,000
<LONG-TERM-DEBT-CURRENT-PORT> 268,756
17,801
<CAPITAL-LEASE-OBLIGATIONS> 394,624
<LEASES-CURRENT> 181,811
<OTHER-ITEMS-CAPITAL-AND-LIAB> 8,534,059<F2>
<TOT-CAPITALIZATION-AND-LIAB> 22,962,928<F2>
<GROSS-OPERATING-REVENUE> 3,137,671
<INCOME-TAX-EXPENSE> 163,582<F4>
<OTHER-OPERATING-EXPENSES> 2,433,184
<TOTAL-OPERATING-EXPENSES> 2,597,292
<OPERATING-INCOME-LOSS> 540,379
<OTHER-INCOME-NET> 3,345<F4>
<INCOME-BEFORE-INTEREST-EXPEN> 537,560
<TOTAL-INTEREST-EXPENSE> 303,137
<NET-INCOME> 234,423
33,773
<EARNINGS-AVAILABLE-FOR-COMM> 200,650
<COMMON-STOCK-DIVIDENDS> 171,354
<TOTAL-INTEREST-ON-BONDS> 0<F5>
<CASH-FLOW-OPERATIONS> 1,065,734
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0
<FN>
<F1> This item is not disclosed as a separate line item on the Consolidated
Balance Sheet.
<F2> Amended from the amount reported on Commonwealth Edison Company's Exhibit
No. (27), Form S-3, File No. 33-61343, filed on July 27, 1995.
<F3> $1,263,750 thousand of notes and long-term notes payable to banks is
included in LONG-TERM-DEBT-NET.
<F4> A tax benefit of $526 thousand related to nonoperating activities is
included in INCOME-TAX-EXPENSE.
<F5> This item is not disclosed as a separate line item on the Statement of
Consolidated Income.
</FN>
</TABLE>
