UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 1-2385
------
THE DAYTON POWER AND LIGHT COMPANY
(Exact name of registrant as specified in its charter)
OHIO 31-0258470
- - ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Courthouse Plaza Southwest
Dayton, Ohio 45402
----------------------------------------
(Address of principal executive offices)
(937) 224-6000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
The registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this form with
the reduced disclosure format.
Indicate the number of shares of the issuer's classes of common stock,
as of the latest practicable date.
Common Stock, $.01 par value 41,172,173 Shares
- - ---------------------------- -----------------------------------
(Title of each class) (Outstanding at September 30, 1998)
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
INDEX
Page No.
--------
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statement of Results of Operations 1
Consolidated Statement of Cash Flows 2
Consolidated Balance Sheet 3
Notes to Consolidated Financial Statements 5
Operating Statistics 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - Other Information 11
Signatures 12
i
<PAGE>
CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
The Dayton Power and Light Company
Three Months Nine Months
Ended Ended
September 30 September 30
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
--millions-- --millions--
Income
- - ------
Utility service revenues--
Electric $296.3 $260.6 $821.9 $748.4
Gas and other 22.9 23.3 143.4 162.6
------ ------ ------ ------
Total Utility Service Revenues 319.2 283.9 965.3 911.0
Interest and other income
3.7 1.7 9.9 6.1
------ ------ ------ ------
Total Income 322.9 285.6 975.2 917.1
------ ------ ------ ------
Expenses
- - --------
Fuel and purchased power 71.0 59.5 198.9 165.7
Gas purchased for resale 10.5 10.8 84.8 97.6
Operation and maintenance 71.0 52.3 164.8 163.4
Depreciation and amortization 32.4 31.5 96.9 94.0
Amortization of regulatory assets, net 5.3 4.6 14.2 12.6
General taxes 33.8 33.5 101.9 100.4
Interest expense 22.5 20.3 66.2 64.0
------ ------ ------ ------
Total Expenses 246.5 212.5 727.7 697.7
------ ------ ------ ------
Income Before Income Taxes 76.4 73.1 247.5 219.4
Income taxes 31.3 28.8 96.7 79.6
------ ------ ------ ------
Net Income 45.1 44.3 150.8 139.8
Preferred dividends 0.2 0.2 0.7 0.7
------ ------ ------ ------
Earnings on Common Stock $ 44.9 $ 44.1 $150.1 $139.1
====== ====== ====== ======
Comprehensive Income $ 41.2 $ 49.0 $158.4 $146.2
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-1-
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
The Dayton Power and Light Company
Nine Months Ended
September 30
-----------------
1998 1997
---- ----
--millions--
Operating Activities
- - --------------------
Cash received from utility customers $966.4 $940.7
Other operating cash receipts 8.4 7.2
Cash paid for:
Fuel and purchased power (204.1) (173.2)
Purchased gas (109.4) (128.7)
Operation and maintenance labor (60.8) (60.2)
Nonlabor operating expenditures (120.2) (116.5)
Interest (70.2) (68.6)
Income taxes (77.0) (43.1)
Property, excise and payroll taxes (112.5) (108.8)
------ ------
Net cash provided by operating activities 220.6 248.8
Investing Activities
- - --------------------
Property expenditures (71.2) (76.3)
Other activities (83.3) (33.1)
------ ------
Net cash used for investing activities (154.5) (109.4)
Financing Activities
- - --------------------
Dividends paid on common stock (210.1) (86.9)
Issuance (retirement) of short-term debt 86.7 (4.0)
Parent company capital contribution 49.0 -
Retirement of long-term debt (0.4) (40.4)
Dividends paid on preferred stock (0.7) (0.7)
------ ------
Net cash used for financing activities (75.5) (132.0)
Cash and temporary cash investments--
- - -----------------------------------
Net change (9.4) 7.4
Balance at beginning of period 11.8 2.1
------ ------
Balance at end of period $ 2.4 $ 9.5
====== ======
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-2-
<PAGE>
CONSOLIDATED BALANCE SHEET
The Dayton Power and Light Company
At At
September 30, December 31,
1998 1997
------------- ------------
--millions--
ASSETS
Property $3,653.2 $3,587.8
Less--
Accumulated depreciation and amortization (1,445.2) (1,355.8)
-------- --------
Net property 2,208.0 2,232.0
-------- --------
Current Assets
- - --------------
Cash and temporary cash investments 2.4 11.8
Accounts receivable, less provision for
uncollectible accounts 188.6 205.8
Inventories, at average cost 94.6 87.1
Deferred property and excise taxes 49.7 91.9
Other 27.6 61.4
-------- --------
Total current assets 362.9 458.0
-------- --------
Other Assets
- - ------------
Financial assets 206.7 111.1
Income taxes recoverable through future revenues 197.3 208.2
Regulatory assets 102.6 116.7
Other 202.2 200.8
-------- --------
Total other assets 708.8 636.8
-------- --------
Total Assets $3,279.7 $3,326.8
======== ========
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-3-
<PAGE>
CONSOLIDATED BALANCE SHEET
(continued)
The Dayton Power and Light Company
At At
September 30, December 31,
1998 1997
------------- ------------
--millions--
CAPITALIZATION AND LIABILITIES
Capitalization
- - --------------
Common shareholder's equity--
Common stock $ 0.4 $ 0.4
Other paid-in capital 788.2 739.1
Accumulated other comprehensive income 27.9 20.3
Earnings reinvested in the business 461.0 521.0
-------- --------
Total common shareholder's equity 1,277.5 1,280.8
Preferred stock 22.9 22.9
Long-term debt 885.6 886.0
-------- --------
Total capitalization 2,186.0 2,189.7
-------- --------
Current Liabilities
- - -------------------
Short-term debt 167.6 81.0
Accounts payable 74.1 124.2
Accrued taxes 100.4 157.8
Accrued interest 14.7 20.7
Other 31.8 42.3
-------- --------
Total current liabilities 388.6 426.0
-------- --------
Deferred Credits and Other
- - --------------------------
Deferred taxes 494.2 500.5
Unamortized investment tax credit 70.0 72.2
Other 140.9 138.4
-------- --------
Total deferred credits and other 705.1 711.1
-------- --------
Total Capitalization and Liabilities $3,279.7 $3,326.8
======== ========
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-4-
<PAGE>
Notes to Consolidated Financial Statements
1. Reclassifications have been made in certain prior years' amounts
to conform to the current reporting presentation of the Company.
2. The consolidated financial statements in this report have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes
thereto in the Company's 1997 Annual Report on Form 10-K.
The information included in this Form 10-Q reflects all
adjustments which are, in the opinion of management, necessary for a
fair statement of the result of operations for the periods presented.
Any adjustments are of a normal recurring nature.
-5-
<PAGE>
OPERATING STATISTICS
The Dayton Power and Light Company
Three Months Nine Months
Ended Ended
September 30 September 30
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Electric
- - --------
Sales (millions of kWh)--
Residential 1,361 1,141 3,689 3,551
Commercial 982 953 2,688 2,604
Industrial 1,202 1,244 3,500 3,526
Other 1,130 968 3,466 2,611
------- ------- ------- -------
Total 4,675 4,306 13,343 12,292
Revenues (thousands of dollars)--
Residential 121,273 102,024 323,317 304,323
Commercial 64,264 59,801 182,444 174,188
Industrial 60,253 59,633 172,171 167,462
Other 50,490 39,134 143,922 102,430
------- ------- ------- -------
Total 296,280 260,592 821,854 748,403
Other Electric Statistics--
Average price per kWh-retail and
wholesale customers (cents) 6.23 5.97 6.05 6.01
Fuel cost per net kWh generated (cents) 1.25 1.27 1.27 1.27
Electric customers at end of period 488,110 481,200 488,110 481,200
Average kWh use per residential customer 3,127 2,654 8,481 8,260
Peak demand-maximum one hour
use (mw), (net) 3,007 2,848 3,007 2,848
-6-
<PAGE>
OPERATING STATISTICS
(continued)
The Dayton Power and Light Company
Three Months Nine Months
Ended Ended
September 30 September 30
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Gas
- - ---
Sales (millions of MCF)--
Residential 2,056 2,006 16,119 19,035
Commercial 798 835 4,894 6,039
Industrial 159 164 1,329 1,729
Transported gas and other 3,197 3,305 14,601 15,418
------- ------- ------- -------
Total 6,210 6,310 36,943 42,221
Revenues (thousands of dollars)--
Residential 15,132 15,074 92,610 106,540
Commercial 4,498 4,601 25,516 30,824
Industrial 797 725 6,525 8,092
Transported gas and other 2,498 2,940 18,763 16,384
------- ------- ------- -------
Total 22,925 23,340 143,414 161,840
Other Gas Statistics--
Average price MCF-retail customers
(dollars) 6.80 6.74 5.55 5.39
Gas customers at end of period 302,628 297,458 302,628 297,458
Degree Days (based on calendar month)--
Heating 29 111 2,905 3,729
Cooling 724 486 1,070 669
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The Company's earnings on common stock for the third quarter of
1998 were $44.9 million, up $0.8 million from quarterly earnings a year
ago. Year-to-date earnings were $150.1 million, up $11.0 million from
the same period in 1997. Retail sales of electricity increased 6% for the
quarter due to the healthy West Central Ohio economy as well as more
normal summer temperatures.
The financial condition and results of operations for the third
quarter and nine months ended September 30, 1998 and 1997 are
discussed below.
Financial Condition
- - -------------------
Construction plans are subject to continuing review and are
expected to be revised in light of changes in financial and economic
conditions, load forecasts, legislative and regulatory developments
and changing environmental standards, among other factors. The
Company's ability to complete its capital projects and the reliability
of future service will be affected by its financial condition, the
availability of external funds at reasonable cost and adequate and
timely rate increases.
As of September 30, 1998, the Company's cash and temporary cash
investment balance was $2.4 million. In addition, $206.7 million was
invested in debt and equity financial assets.
DPL Inc. and its subsidiaries have $200 million available through
a Revolving Credit Agreement ("Credit Agreement"). As of September
30, 1998, DPL Inc. had no outstanding borrowings under this Credit
Agreement. The Company has authority from the Public Utilities
Commission of Ohio ("PUCO") to issue short-term debt up to
$200 million with a maximum debt limit of $300 million including loans
from DPL Inc. under the terms of the Credit Agreement. The Company
has $97 million available in short-term informal lines of credit. As
of September 30, 1998, the Company had $79.0 million of these informal
lines outstanding and $87.3 million in commercial paper outstanding.
The Company anticipates that it has sufficient capacity to issue
First Mortgage Bonds to satisfy its requirements in connection with
the financing of its construction and refinancing programs during the
five year period 1998-2002.
-8-
<PAGE>
Results of Operations
- - ---------------------
Utility service revenues increased by $35.3 million and
$54.3 million, respectively, for the third quarter and nine months
ended September 30, 1998. Electric revenues increased $35.7 million
in the third quarter and $73.5 million year-to-date due to increased
sales to residential customers and other utilities. Gas revenues were
lower year-to-date due to mild weather.
Fuel and purchased power increased $11.5 million and
$33.2 million, respectively, from the third quarter and year-to-date
last year as a result of increased retail and wholesale sales.
Gas purchased for resale in the third quarter 1998 decreased
$0.3 million compared to the same quarter 1997 and $12.8 million
compared to year-to-date 1997. Lower sales due to milder weather
caused the variations.
Operation and maintenance expense increased from last year by
$18.7 million for the third quarter and $1.4 million year-to-date.
For the quarter, the increase was due to higher benefit costs,
software development costs, and production expenditures, which were
partially offset by lower insurance and claims costs. The year-to-
date variation was due to higher benefit costs and software
development costs. Lower insurance and claims costs as well as
Company-wide cost containment efforts offset the year-to-date
variation.
Income taxes increased $2.5 million and $17.1 million,
respectively, from the third quarter and year-to-date 1997 primarily
due to higher taxable income.
Issues and Financial Risks
- - --------------------------
This report contains forward-looking statements under the Private
Securities Litigation Reform Act of 1995 that involved risks and
uncertainties. Although the Company believes that the forward-looking
statements are based upon reasonable assumptions, there can be no
assurance that the forward-looking statements will prove to be
accurate. The Company undertakes no obligation to re-publish forward-
looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
The information systems of the Company, like those of most
companies, will be affected to some extent by the year 2000 ("Y2K").
The Company has implemented a plan to remediate Y2K problems in
critical areas by the end of the second quarter, 1999. This
includes all information technology systems, as well as embedded
technology. The Company has inventoried its applications and
equipment, is determining which of those are non-compliant,
-9-
<PAGE>
and is simultaneously remediating those situations. The four phases
of the Company's plan - inventory, assess for compliance, remediate
and test - are in various stages of completion. The Company does not
have to complete one phase to begin the next. Remediation is being
accomplished by a combination of methods. In some cases equipment or
software is being modified while in others it is being replaced.
The Company estimates that the cost of remediation for Y2K issues
including hardware and software modifications and consultant expenditures
is $15,000,000. Some of the Company's information technology systems
were already scheduled for replacement and are not included in this
amount, since the scheduled replacement was not accelerated to allow
compliance with Y2K needs.
The Company is working closely with other members of the utility
industry to assure the smooth transition. Telecommunications are needed
for monitoring and control of power systems. Also, the extent of
interdependence among electrical systems creates uncertainty. These
issues affect each utility in the industry and the Company is working
with other utilities, as well as industry and regulatory groups to ensure
that problems are understood and solutions are shared. Among other groups,
the Company is involved with the Y2K efforts of the Electric Power Research
Institute, the North American Reliability Council, and the Edison Electric
Institute.
-10-
<PAGE>
Part II. Other Information
Item 5. Other Information.
-----------------
Rate Regulation and Government Legislation
- - ------------------------------------------
In January 1997, a twelve member Joint Committee of the Ohio
Senate and House of Representatives was created to explore and
possibly draft retail wheeling legislation. The Committee has
conducted hearings to gather information from energy companies,
regulators, customers and industry experts. The Committee co-chairs
issued a draft report on January 6, 1998 recommending opening the
electric generation market, in the future, to competition for all Ohio
consumers. On March 26, 1998, the Committee co-chairs introduced an
electric deregulation Bill that reflected the recommendations
contained in their report. On September 16, 1998, the Company and the
three other major investor owned utilities in Ohio presented a
comprehensive electric utility restructuring Bill to a working group
of the Committee. The Company is participating in the Committee's
working group to discuss the restructuring process. Due to the
prospects for legislation that would restructure the electric utility
industry, the Company will continue to evaluate its portfolio of
assets to prepare for opportunities in the deregulated environment.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1998.
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE DAYTON POWER AND LIGHT COMPANY
----------------------------------
(Registrant)
Date: November 16, 1998 /s/James P. Torgerson
----------------- ----------------------------------
James P. Torgerson
Vice President, CFO and Treasurer
Date: November 16, 1998 /s/Paul R. Anderson
----------------- -----------------------------------
Paul R. Anderson
Controller
(Principal Accounting Officer)
-12-
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