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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-2385
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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) (Zip Code)
Registrant's telephone number, including area code: 937-224-6000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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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
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Number of shares of registrant's common stock outstanding as of
February 26, 1999, all of which were held by DPL Inc., was 41,172,173.
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PART I
Item 1 - Business*
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THE COMPANY
The Dayton Power and Light Company (the "Company") is a
public utility incorporated under the laws of Ohio in 1911. The
Company sells electricity and natural gas to residential,
commercial and governmental customers in a 6,000 square mile area
of West Central Ohio. Electricity for the Company's 24 county
service area is generated at eight power plants and is
distributed to 490,000 retail customers. Natural gas is provided
to 305,000 customers in 16 counties. Principal industries served
include electrical machinery, automotive and other transportation
equipment, non-electrical machinery, agriculture, paper, and
rubber and plastic products. The Company's sales reflect the
general economic conditions and seasonal weather patterns of the
area. In 1998, electric revenues increased 6% due to higher
sales to other public utilities and commercial business
customers. Gas utility revenues decreased 13% in 1998 due to the
effects of milder weather. Gas purchased for resale by the
utility decreased 15% primarily due to milder weather. During
1998, cooling degree days were 21% above the twenty year average
and 52% above 1997. Heating degree days in 1998 were 18% below
the thirty year average and 21% below 1997. Sales patterns will
change in future years as weather and the economy fluctuate. The
Company employed 2,482 persons as of December 31, 1998, of which
2,062 are full-time employees and 420 are part-time employees.
All of the outstanding shares of common stock of the Company
are held by DPL Inc., which became the Company's corporate
parent, effective April 21, 1986. Subsidiaries of the Company
include MacGregor Park, Inc., an owner and developer of real
estate and MVE, Inc., which provides support services to DPL Inc.
and its subsidiaries.
The Company's principal executive and business office is
located at Courthouse Plaza Southwest, Dayton, Ohio 45402 -
telephone (937) 224-6000.
* Unless otherwise indicated, the information given in
"Item 1 - Business" is current as of March 29, 1999. No
representation is made that there have not been subsequent
changes to such information.
I-1
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COMPETITION
The Company competes with privately and municipally owned
electric utilities and rural electric cooperatives, natural gas
suppliers and other alternate fuel suppliers. The Company
competes on the basis of price and service.
Like other utilities, the Company from time to time may have
electric generating capacity available for sale to other
utilities. The Company competes with other utilities to sell
electricity provided by such capacity. The ability of the
Company to sell this electricity will depend on how the Company's
price, terms and conditions compare to those of other utilities.
In addition, from time to time, the Company makes power purchases
from neighboring utilities.
In an increasingly competitive energy environment,
cogenerated power may be used by customers to meet their own
power needs. Cogeneration is the dual use of a form of energy,
typically steam, for an industrial process and for the generation
of electricity. The Public Utilities Regulatory Policies Act of
1978 ("PURPA") provides regulations that govern the purchase of
excess electric energy from cogeneration and small power production
facilities that have obtained qualifying status under PURPA.
The National Energy Policy Act of 1992, which reformed the
Public Utilities Holding Company Act of 1935, allows the federal
government to mandate access by others to a utility's electric
transmission system and may accelerate competition in the supply
of electricity.
The Company provides transmission and wholesale electric
service to twelve municipal customers which distribute
electricity within their corporate limits. In 1994, eleven of
these municipal customers signed new twenty-year Power Service
Agreements ("PSAs") that were approved by the Federal Energy
Regulatory Commission ("FERC"), in June 1995. The twelfth
municipal customer signed a ten-year agreement, approved by FERC
in February 1995, that allows the Company to supply 97% of its
power requirements. In addition to these municipal customers,
the Company maintains an interconnection agreement with one
municipality that has the capability to generate a portion of its
energy requirements. Sales to municipalities represented 1.2% of
total electricity sales in 1998.
The PSAs provide, among other things, for the sale of firm
power by the Company to the municipals on specified terms.
However, the parties disagree in their interpretation of the
specified terms. After failing to resolve this dispute through
non-binding mediation, the Company filed suit against the eleven
municipals on December 28, 1998 seeking, among other things, a
declaration that the municipals are not entitled to the Company's
firm power on the terms that they assert. This dispute is not
expected to result in a material impact on the Company's
financial position.
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In October 1994, the Public Utilities Commission of Ohio
("PUCO") initiated roundtable discussions on the introduction of
competition in the electric industry. The "Electric Competition
Series" is a result of the Ohio Energy Strategy issued in April
1994. On February 15, 1996, the PUCO issued guidelines for
interruptible service, including services that accommodate the
attainment and delivery of replacement electricity during periods
when the utility faces constraints on its own resources. On
April 11, 1996, the PUCO issued an Entry on Rehearing ordering
utilities to file interruptible electric service tariffs. The
Company's interruptible electric service tariffs were approved
on May 1, 1997, and tariffs conforming to this order were
subsequently filed with the PUCO on May 15, 1997.
On December 24, 1996, the PUCO issued a Finding and Order
adopting conjunctive electric service ("CES") guidelines and
directing utilities to file tariffs regarding CES service. CES
programs enable customers to aggregate for cost of service, rate
design, rate eligibility and billing purposes. On December 30,
1998, the PUCO approved the Company's CES tariff, with an
effective date of January 4, 1999. Implementation of this
program is essentially revenue neutral.
On March 26, 1998, a twelve member Joint Committee of the
Ohio Senate and House of Representatives, created to explore and
possibly draft retail wheeling legislation, introduced an electric
deregulation Bill which expired at year end. 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. In March 1999, a group of
legislators released to the public a draft outline for
restructuring. The Company continues to participate in the Joint
Committee's working group to address issues pertaining to
restructuring the electric industry, including taxes. 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. However, the ultimate outcome for electric
restructuring legislation in Ohio is uncertain at this time.
On April 24, 1996, FERC issued orders requiring all electric
utilities that own or control transmission facilities to file
open-access transmission service tariffs. Open-access transmission
tariffs provide third parties with non-discriminatory transmission
service comparable to what the utility provides itself. In its
orders, FERC further stated that FERC-jurisdictional stranded costs
reasonably incurred and costs of complying with the rules will be
recoverable by electric utilities. Both in 1997 and 1998, the
Company reached an agreement in principle with staff and intervenors
in pending tariff cases. The Company's revenues from customers will
not be materially impacted by the final resolution of these cases.
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On September 30, 1996, FERC conditionally accepted the
Company's market-based sales tariff which will allow the Company
to sell wholesale generation supply at prices that reflect
current market prices. At the same time, FERC approved the
application and authorization of DPL Energy Inc., a wholly-owned
subsidiary of DPL Inc., to sell and broker wholesale electric
power and also charge market-based prices for such power.
On July 22, 1998, the PUCO approved the implementation of
Minimum Electric Service Standards for all of Ohio's investor-
owned electric utilities. This Order details minimum standards
of performance for a variety of service related functions
effective July 1, 1999. The Company expects to substantially
comply with these standards.
General deregulation of the natural gas industry has
continued to influence market competition as the driving force
behind natural gas procurement. The evolution of an efficient
natural gas spot market in combination with open-access interstate
transportation pipelines has provided the Company, as well as its
end-use customers, with an array of procurement options. Customers
with alternate fuel capability can continue to choose between natural
gas and their alternate fuel based upon overall performance and
economics. Therefore, demand for natural gas purchased from the
Company or purchased elsewhere and transported to the end-use
customer by the Company could fluctuate based on the economics of
each in comparison with changes in alternate fuel prices. For the
Company, price competition and reliability among both natural gas
suppliers and interstate pipeline sources are major factors
affecting procurement decisions.
CONSTRUCTION AND FINANCING PROGRAM OF THE COMPANY
Construction Program
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Construction additions were $111 million, $109 million, and
$124 million in 1998, 1997 and 1996 respectively. The capital
program for 1999 consists of construction costs of approximately
$80 million.
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 recovery.
See ENVIRONMENTAL CONSIDERATIONS for a description of
environmental control projects and regulatory proceedings which
may change the level of future construction additions. The
potential impact of these events on the Company's operations
cannot be estimated at this time.
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Financing Program
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At year-end 1998, cash and temporary cash investments were
$2 million, and debt and equity financial assets were $232 million.
Cash and financial assets are held with a view towards investing
in future opportunities in the industry. Proceeds from temporary
cash investments, together with internally generated cash and future
outside financings, will provide for the funding of the construction
program, sinking funds and general corporate requirements.
On March 19, 1999, the Company published a Notice of
Intention to Redeem on April 19, 1999 a series of First Mortgage
Bonds in the principal amount of $225 million with an interest
rate of 8.40%. In early April, DPL Inc. expects to close on a
private placement issuance of $500 million of Senior Notes Due
2004, with an interest rate of 6.32%. The proceeds will be used
to redeem the 8.40% Series First Mortgage Bonds, and for general
corporate purposes.
In December 1997, the Company redeemed a series of first
mortgage bonds in the principal amount of $40 million with an
interest rate of 8.0%. The bonds had been scheduled to mature in
2003. Another series of first mortgage bonds in the principal
amount of $40 million matured in 1997. In December 1996, the
Company redeemed a series of first mortgage bonds in the
principal amount of $25 million with an interest rate of 6.75%.
The bonds had been scheduled to mature in 1998. Sinking fund
payments for the five years ended 2003 are $2 million.
DPL Inc. and its subsidiaries have $300 million available
through revolving credit agreements with a consortium of banks.
One agreement, for $200 million, expires in 2002 and the other,
for $100 million, expires in 2000. At year-end 1998, DPL Inc.
had no outstanding borrowings under these credit agreements. The
Company also has $97 million available in short-term lines of credit.
The Company had $81 million and $10 million outstanding from these
lines of credit at year-end 1998 and 1997 respectively, and
$99 million and $70 million in commercial paper outstanding at
year-end 1998 and 1997, respectively.
Under the Company's First and Refunding Mortgage, First
Mortgage Bonds may be issued on the basis of (i) 60% of unfunded
property additions, subject to net earnings, as defined, being at
least two times interest on all First Mortgage Bonds outstanding
and to be outstanding, or (ii) 100% of retired First Mortgage
Bonds. The Company anticipates that it will be able to issue
sufficient First Mortgage Bonds to satisfy its long-term debt
requirements in connection with the financing of its construction
and refunding programs discussed above.
The maximum amount of First Mortgage Bonds which may be
issued in the future will fluctuate depending upon interest
rates, the amounts of bondable property additions, earnings and
retired First Mortgage Bonds. There are no coverage tests for
the issuance of preferred stock under the Company's Amended
Articles of Incorporation.
I-5
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ELECTRIC OPERATIONS AND FUEL SUPPLY
The Company's present winter generating capability is
3,371,000 KW. Of this capability, 2,843,000 KW (approximately
84%) is derived from coal-fired steam generating stations and the
balance consists of combustion turbine and diesel-powered peaking
units. Approximately 87% (2,472,000 KW) of the existing steam
generating capability is provided by certain units owned as
tenants in common with The Cincinnati Gas & Electric Company
("CG&E") or with CG&E and Columbus Southern Power Company ("CSP").
Under the agreements among the companies, each company owns a
specified undivided share of each facility, is entitled to its
share of capacity and energy output, and has a capital and operating
cost responsibility proportionate to its ownership share.
The remaining steam generating capability (371,000 KW) is
derived from a generating station owned solely by the Company.
The Company's all-time net peak load was 3,007,000 KW, occurring
in July 1998. The present summer generating capability is
3,264,000 KW.
GENERATING FACILITIES
MW Rating
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Operating Company
Station Ownership* Company Location Portion Total
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Coal Units
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Hutchings W Company Miamisburg, OH 371 371
Killen C Company Wrightsville, OH 402 600
Stuart C Company Aberdeen, OH 820 2,340
Conesville-Unit 4 C CSP Conesville, OH 129 780
Beckjord-Unit 6 C CG&E New Richmond, OH 210 420
Miami Fort-Units 7&8 C CG&E North Bend, OH 360 1,000
East Bend-Unit 2 C CG&E Rabbit Hash, KY 186 600
Zimmer C CG&E Moscow, OH 365 1,300
Combustion Turbines or Diesel
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Hutchings W Company Miamisburg, OH 33 33
Yankee Street W Company Centerville, OH 138 138
Monument W Company Dayton, OH 12 12
Tait W Company Dayton, OH 10 10
Sidney W Company Sidney, OH 12 12
Tait Gas Turbine 1 W Company Moraine, OH 100 100
Tait Gas Turbine 2 W Company Moraine, OH 102 102
Tait Gas Turbine 3 W Company Moraine, OH 102 102
Killen C Company Wrightsville, OH 16 24
Stuart C Company Aberdeen, OH 3 10
* W = Wholly Owned
C = Commonly Owned
I-6
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In order to transmit energy to their respective systems from
their commonly owned generating units, the companies have
constructed and own, as tenants in common, 847 circuit miles of
345,000-volt transmission lines. The Company has several
interconnections with other companies for the purchase, sale and
interchange of electricity.
The Company derived over 99% of its electric output from
coal-fired units in 1998. The remainder was derived from units
burning oil or natural gas which were used to meet peak demands.
The Company estimates that approximately 65-85% of its coal
requirements for the period 1999-2003 will be obtained through
long-term contracts, with the balance to be obtained by spot
market purchases. The Company has been informed by CG&E and CSP
through the procurement plans for the commonly owned units
operated by them that sufficient coal supplies will be available
during the same planning horizon.
The prices to be paid by the Company under its long-term
coal contracts are subject to adjustment in accordance with
various indices. Each contract has features that will limit
price escalations in any given year.
The average fuel cost per kWh generated of all fuel burned
for electric generation (coal, gas and oil) for the year was
1.30 cents in 1998, 1.31 cents in 1997 and 1.29 cents in 1996.
Through the operation of a fuel cost adjustment clause applicable
to electric sales, the increases and decreases in fuel costs are
reflected in customer rates on a timely basis. See RATE REGULATION
AND GOVERNMENT LEGISLATION and ENVIRONMENTAL CONSIDERATIONS.
GAS OPERATIONS AND GAS SUPPLY
The Company has long-term firm pipeline transportation
agreements with ANR Gas Pipeline Company ("ANR"), Texas Gas
Transmission Corporation ("Texas Gas"), Panhandle Eastern Pipe
Line Company ("Panhandle"), Columbia Gas Transmission Corporation
("Columbia") and Columbia Gulf Transmission Corporation for
varying terms, up to late 2004. Along with firm transportation
services, the Company has approximately 14 billion cubic feet of
firm storage service with various pipelines.
In addition, the Company is interconnected with CNG
Transmission Corporation. Interconnections with interstate
pipelines provide the Company the opportunity to purchase
competitively-priced natural gas supplies and pipeline services.
The Company purchases its natural gas supplies using a portfolio
approach that minimizes price risks and ensures sufficient firm
supplies at peak demand times. The portfolio consists of long-
term, short-term and spot supply agreements. In 1998, firm
agreements provided approximately 50% of total supply, with the
remaining supplies purchased on a spot/short-term basis.
I-7
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In 1998, the Company purchased natural gas at an average
price of $3.22 per MCF, compared to $3.45 per MCF in 1997 and
1996. Through the operation of a natural gas cost adjustment
clause applicable to gas sales, increases and decreases in the
Company's natural gas costs are reflected in customer rates on a
timely basis. SEE RATE REGULATION AND GOVERNMENT LEGISLATION.
The PUCO supports open access, nondiscriminatory
transportation of natural gas by the state's local distribution
companies for end-use customers. The PUCO has guidelines to
provide a standardized structure for end-use transportation
programs which requires a tariff providing the prices, terms and
conditions for such service. The Company has an approved tariff
and provides transportation service to approximately 300 end-use
customers, delivering a total quantity of nearly 18,000,000 MCF
per year.
RATE REGULATION AND GOVERNMENT LEGISLATION
The Company's sales of electricity and natural gas to retail
customers are subject to rate regulation by the PUCO and various
municipalities. The Company's wholesale electric rates to
municipal corporations and other distributors of electric energy
are subject to regulation by FERC under the Federal Power Act.
Ohio law establishes the process for determining rates
charged by public utilities. Regulation of rates encompasses the
timing of applications, the effective date of rate increases, the
cost basis upon which the rates are based and other related
matters. Ohio law also establishes the Office of the Ohio
Consumers' Counsel (the "OCC"), which has the authority to
represent residential consumers in state and federal judicial and
administrative rate proceedings.
The Company's electric and natural gas rate schedules
contain certain recovery and adjustment clauses subject to
periodic audits by, and proceedings before, the PUCO. Electric
fuel and gas costs are expensed as recovered through rates.
On June 18, 1996, Ohio Governor Voinovich signed into law
House Bill 476 which allows for alternate natural gas rate plans
and exemption from PUCO jurisdiction for some gas services, and
establishes a code of conduct for natural gas distribution
companies. Final rules were issued on March 12, 1997.
Ohio legislation extends the jurisdiction of the PUCO to the
records and accounts of certain public utility holding company
systems, including DPL Inc. The legislation extends the PUCO's
supervisory powers to a holding company system's general
condition and capitalization, among other matters, to the extent
that they relate to the costs associated with the provision of
public utility service. Additionally, the legislation
(i) requires PUCO approval of certain transactions and transfers
of assets between public utilities and entities within the same
holding company system, and (ii) prohibits...
I-8
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...investments by a holding company in subsidiaries which are not
public utilities in an amount in excess of 15% of the aggregate
capitalization of the holding company on a consolidated basis at
the time such investments are made.
Regulatory assets recorded during the phase-in of electric
rates are being amortized and recovered in current revenues.
In addition, deferred interest charges on the William H. Zimmer
Generating Station are being amortized at $2.8 million per year
over the projected life of the asset.
A 1992 PUCO-approved settlement agreement for the phase-in
plan and demand-side management ("DSM") programs, as updated in
1995, provides for accelerated recovery of DSM costs and,
thereafter, production plant costs to the extent that the Company
return on equity exceeds a baseline 13% (subject to upward
adjustment). If the return exceeds the baseline return by one to
two percent, one-half of the excess is used to accelerate
recovery of these costs. If the return is greater than two
percent over the baseline, the entire excess is used for such
purpose. In 1998, amortization of regulatory assets included an
additional $10.4 million of accelerated cost recovery.
Regulatory deferrals on the balance sheet were:
Dec. 31 Dec. 31
1998 1997
--millions--
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Phase-in $ 12.9 $ 30.6
DSM 19.6 33.6
Deferred interest - Zimmer 49.7 52.5
Income taxes recoverable
through future revenues 195.5 208.2
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Total $277.7 $324.9
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The Company has in place a percentage of income payment plan
("PIPP") for eligible low-income households as required by the
PUCO. This plan prohibits disconnections for nonpayment of
customer bills if eligible low-income households pay a specified
percentage of their household income toward their utility bill.
The PUCO has approved a surcharge by way of a temporary base rate
tariff rider which allows companies to recover arrearages
accumulated under PIPP.
I-9
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The Company initiated a competitive bidding process in
January 1993 for the construction of electric peaking capacity
and energy. On March 7, 1994, the OPSB approved the Company's
applications for up to three combustion turbines and two natural
gas supply lines for the proposed site. The first combustion
turbine began operation on June 1, 1995, a second unit began
operation on December 23, 1996 and a third unit began operation
on December 15, 1998. All three units are available for full
operation.
In 1989 the PUCO approved rules for the implementation of a
comprehensive Integrated Resource Planning ("IRP") program for
all investor-owned electric utilities in Ohio. Under this
program, each utility is required to file an IRP as part of its
Long Term Forecast Report ("LTFR"). The IRP requires each
utility to evaluate available demand-side resource options in
addition to supply-side options to determine the most cost-
effective means for satisfying customer requirements. The rules
currently allow a utility to apply for deferred recovery of DSM
program expenditures and lost revenues between LTFR proceedings.
On June 1, 1998 and June 15, 1998, respectively, the Company
filed its natural gas and electric LTFR with the PUCO. An IRP
filed as part of the electric LTFR included plans for the
construction of a series of combustion turbine generating units.
On January 25, 1996, Ohio Governor Voinovich reappointed
Chairman Craig A. Glazer to the PUCO for a five-year term which
commenced on April 11, 1996 and will extend until April 10, 2001.
Robert Taft was elected Governor of Ohio in 1998. On February 2,
1999, Governor Taft appointed Alan Schriber to a five-year term
with the PUCO that expires April 2004, and designated him PUCO
Chairman. Alan Schriber will replace Commissioner Jolynn Butler
and is expected to begin serving April 11, 1999.
On February 7, 1997, Governor Voinovich appointed Judith A.
Jones, a Toledo City Councilwoman, to the PUCO replacing
Commissioner Richard Fanelly. Her five-year term commenced
April 11, 1997 and will extend until April 10, 2002.
On October 15, 1997 PUCO Commissioner David Johnson
announced his resignation effective November 30, 1997.
Commissioner Johnson was serving a term that would have expired
in April 1998. On January 27, 1998, Governor Voinovich appointed
Donald L. Mason, a senior management official with the Ohio
Department of Natural Resources, to replace Commissioner Johnson.
His five-year term will expire on April 10, 2003.
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ENVIRONMENTAL CONSIDERATIONS
The operations of the Company, including the commonly owned
facilities operated by the Company, CG&E and CSP, are subject to
federal, state, and local regulation as to air and water quality,
disposal of solid waste and other environmental matters,
including the location, construction and initial operation of new
electric generating facilities and most electric transmission
lines. The Company expended $5 million for environmental control
facilities during 1998. The possibility exists that current
environmental regulations could be revised which could change the
level of estimated construction expenditures. See CONSTRUCTION
AND FINANCING PROGRAM OF THE COMPANY.
Air Quality
- -----------
The Clean Air Act Amendments of 1990 (the "Act") have
limited sulfur dioxide and nitrogen oxide emissions nationwide.
The Act restricts emissions in two phases. Phase I compliance
requirements became effective on January 1, 1995 and Phase II
requirements will become effective on January 1, 2000.
Compliance by the Company has not caused any material changes in
the Company's costs or operations.
The Company's environmental compliance plan ("ECP") was
approved by the PUCO on May 6, 1993 and, on November 9, 1995, the
PUCO approved the continued appropriateness of the ECP. Phase I
requirements were met by switching to lower sulfur coal at
several commonly owned electric generating facilities and
increasing existing scrubber removal efficiency. Total capital
expenditures to comply with Phase I of the Act were approximately
$5.5 million. Phase II requirements are being met primarily by
switching to lower sulfur coal at all non-scrubbed coal-fired
electric generating units. Overall compliance is projected to
have a minimal 1% to 2% approximate price impact. Costs to
comply with the Act are eligible for recovery in fuel hearings
and other regulatory proceedings.
In September 1998, the United States Environmental
Protection Agency ("U.S. EPA") issued a final rule requiring
states to modify their State Implementation Plans ("SIPs") under
the Clean Air Act. The modified SIPs are likely to result in
further NOx reduction requirements placed on coal-fired
generating units by 2003. The Company's total capital
expenditures in order to meet these NOx requirements are estimated
to be approximately $175 million over the next five years. The
Company is part of a utility trade group that has filed a lawsuit
against the U.S. EPA challenging this rule.
I-11
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Land Use
- --------
The Company and numerous other parties have been notified by
the U.S. EPA or the Ohio Environmental Protection Agency ("Ohio
EPA") that it considers them Potentially Responsible Parties
("PRPs") for clean-up at four superfund sites in Ohio: the
Sanitary Landfill Site on Cardington Road in Montgomery County,
Ohio; the United Scrap Lead Site in Miami County, Ohio; the
Powell Road Landfill in Huber Heights, Montgomery County, Ohio;
and the North Sanitary (a.k.a. Valleycrest) Landfill in Dayton,
Montgomery County, Ohio.
The Company received notification from the U.S. EPA in July
1987 for the Cardington Road site. The Company has not joined
the PRP group formed at that site because of the absence of any
known evidence that the Company contributed hazardous substances
to this site. The Record of Decision issued by the U.S. EPA
identifies the chosen clean-up alternative at a cost estimate of
$8.1 million. This final resolution will not have a material
effect on the Company's financial position, earnings or cash flow.
The Company received notification from the U.S. EPA in
September 1987 for the United Scrap Lead Site. The Company is
one of over 200 parties to this site, and its estimated contribution
to the site is less than .01%. In October 1998, the U.S. District
Court approved a settlement involving the Company and issued an
Order barring any claims against the settling parties. Through the
settlement, the Company resolved its potential liability with no
material impact.
The Company and numerous other parties received notification
from the U.S. EPA on May 21, 1993 that it considers them PRPs for
clean-up of hazardous substances at the Powell Road Landfill Site
in Huber Heights, Ohio. The Company joined the PRP group for the
site. In late January 1998, the U.S. EPA approved a settlement
that included the Company. Through the settlement, the Company
resolved its potential liability with no resulting material impact.
The Company and numerous other parties received notification
from the Ohio EPA on July 27, 1994 that it considers them PRPs
for clean-up of hazardous substances at the North Sanitary
Landfill site in Dayton, Ohio. The Company has not joined the
PRP group formed for the site because the available information
does not demonstrate that the Company contributed wastes to the
site. The final resolution will not have a material effect on
the Company's financial position, earnings or cash flow.
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THE DAYTON POWER AND LIGHT COMPANY
OPERATING STATISTICS
ELECTRIC OPERATIONS
Years Ended December 31
------------------------------
1998 1997 1996
- -------------------------------------------------------------------------
Electric Output (millions of kWh)
General -
Coal-fired units 16,853 16,246 16,142
Other units 101 52 21
Power purchases 1,475 1,239 1,098
Exchanged and transmitted power - - (1)
Company use and line losses (947) (928) (946)
---------- ---------- ----------
Total 17,482 16,609 16,314
========== ========== ==========
Electric Sales (millions of kWh)
Residential 4,790 4,788 4,924
Commercial 3,518 3,408 3,407
Industrial 4,655 4,749 4,540
Public authorities and railroads 1,360 1,330 1,392
Private utilities and wholesale 3,158 2,334 2,051
---------- ---------- ----------
Total 17,481 16,609 16,314
========== ========== ==========
Electric Customers at End of Period
Residential 437,674 433,563 428,973
Commercial 44,716 43,923 43,381
Industrial 1,909 1,881 1,858
Public authorities and railroads 5,838 5,736 5,651
Other 43 42 29
---------- ---------- ----------
Total 490,180 485,145 479,892
========== ========== ==========
Operating Revenues (thousands)
Residential $ 419,948 $ 409,857 $ 422,876
Commercial 242,526 234,206 236,598
Industrial 228,685 225,775 222,941
Public authorities and railroads 76,686 74,018 78,140
Private utilities and wholesale 86,485 53,598 43,730
Other 18,651 12,523 12,115
---------- ---------- ----------
Total $1,072,981 $1,009,977 $1,016,400
========== ========== ==========
Residential Statistics (per
customer-average)
Sales - kWh 10,999 11,120 11,537
Revenue $ 964.40 $ 951.90 $ 990.89
Rate per kWh (month of December)
(cents) 8.43 8.10 7.91
I-13
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
OPERATING STATISTICS
GAS OPERATIONS
Years Ended December 31
--------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------
Gas Output (thousands of MCF)
Direct market purchases 36,497 43,808 46,696
Liquefied petroleum gas 3 66 90
Company use and unaccounted for (912) (1,016) (676)
Transportation gas received 18,125 19,182 17,587
-------- -------- --------
Total 53,713 62,040 63,697
======== ======== ========
Gas Sales (thousands of MCF)
Residential 24,877 29,277 31,087
Commercial 7,433 9,567 9,424
Industrial 1,916 2,520 3,404
Public authorities 1,699 2,153 2,829
Transportation gas delivered 17,788 18,523 16,953
-------- -------- --------
Total 53,713 62,040 63,697
======== ======== ========
Gas Customers at End of Period
Residential 279,784 276,189 272,616
Commercial 22,491 22,298 22,085
Industrial 1,441 1,396 1,331
Public authorities 1,509 1,475 1,463
-------- -------- --------
Total 305,225 301,358 297,495
======== ======== ========
Operating Revenues (thousands)
Residential $138,802 $160,279 $156,709
Commercial 38,243 48,302 44,092
Industrial 9,291 11,867 14,110
Public authorities 8,230 10,311 12,013
Other 16,640 12,948 11,660
-------- -------- --------
Total $211,206 $243,707 $238,584
======== ======== ========
Residential Statistics (per
customer-average)
Sales - MCF 89.6 107.0 114.8
Revenue $ 499.94 $ 585.63 $ 578.68
Rate per MCF (month of December) $ 5.31 $ 5.20 $ 5.13
I-14
<PAGE>
Item 2 - Properties
- ------------------------------------------------------------------------------
Electric
- --------
Information relating to the Company's electric properties is
contained in Item 1 - BUSINESS, THE COMPANY (page I-1),
CONSTRUCTION AND FINANCING PROGRAM OF THE COMPANY (pages I-4 and
I-5), ELECTRIC OPERATIONS AND FUEL SUPPLY (pages I-6 and I-7) and
Item 8 - Notes 2 and 5 of Notes to Consolidated Financial
Statements on pages II-16 and II-20, respectively, which pages
are incorporated herein by reference.
Gas
- ---
Information relating to the Company's gas properties is
contained in Item 1 - BUSINESS, THE COMPANY (page I-1), and GAS
OPERATIONS AND GAS SUPPLY (pages I-7 and I-8), which pages are
incorporated herein by reference.
Other
- -----
The Company owns a number of area service buildings located
in various operating centers.
Substantially all property and plant of the Company is subject
to the lien of the Mortgage securing the Company's First Mortgage Bonds.
Item 3 - Legal Proceedings
- ------------------------------------------------------------------------------
Information relating to legal proceedings involving the Company
is contained in Item 1 - BUSINESS, THE COMPANY (page I-1), COMPETITION
(Pages I-2 through I-4), ELECTRIC OPERATIONS AND FUEL SUPPLY (pages I-6
and I-7), GAS OPERATIONS AND GAS SUPPLY (pages I-7 and I-8), RATE
REGULATION AND GOVERNMENT LEGISLATION (pages I-8 through I-10),
ENVIRONMENTAL CONSIDERATIONS (pages I-11 and I-12) and Item 8 - Note 2
of Notes to Consolidated Financial Statements on page II-16, which
pages are incorporated herein by reference.
Item 4 - Submission Of Matters To A Vote Of Security Holders
- ------------------------------------------------------------------------------
None.
I-15
<PAGE>
PART II
Item 5 - Market For Registrant's Common Equity And Related Stockholder Matters
- ------------------------------------------------------------------------------
The Company's common stock is held solely by DPL Inc. and
as a result is not listed for trading on any stock exchange.
The information required by this item of Form 10-K is set
forth in Item 8 - Selected Quarterly Information on page II-24
and the Financial and Statistical Summary on page II-25, which
pages are incorporated herein by reference.
The Company's Mortgage restricts the payment of dividends on
the Company's Common Stock under certain conditions. In
addition, so long as any Preferred Stock is outstanding, the
Company's Amended Articles of Incorporation contain provisions
restricting the payment of cash dividends on any of its Common
Stock if, after giving effect to such dividend, the aggregate of
all such dividends distributed subsequent to December 31, 1946
exceeds the net income of the Company available for dividends on
its Common Stock subsequent to December 31, 1946, plus $1,200,000.
As of year end, all earnings reinvested in the business of the
Company were available for Common Stock dividends.
Item 6 - Selected Financial Data
- ------------------------------------------------------------------------------
The information required by this item of Form 10-K is set
forth in Item 8 - Financial and Statistical Summary on page II-25,
which page is incorporated herein by reference.
II-1
<PAGE>
Item 7 - Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
- ------------------------------------------------------------------------------
The Dayton Power and Light Company
Performance Highlights 1998 1997 1996
- -------------------------------------------------------------------
CAPITAL INVESTMENT PERFORMANCE:
Capital Structure (millions)
Common shareholder's equity $1,273.0 1,280.8 1,217.5
Preferred stock $ 22.9 22.9 22.9
Long-term debt $ 885.6 886.0 926.3
-------- ------- -------
Total $2,181.5 2,189.7 2,166.7
OPERATING PERFORMANCE:
Electric--
Sales (millions of kWh)
Residential 4,790 4,788 4,924
Commercial 3,518 3,408 3,407
Industrial 4,655 4,749 4,540
Other 4,518 3,664 3,443
-------- ------- -------
Total 17,481 16,609 16,314
Revenues (millions)
Residential $ 419.9 409.9 422.9
Commercial $ 242.5 234.2 236.6
Industrial $ 228.7 225.8 222.9
Other $ 181.9 140.1 134.0
-------- ------- -------
Total $1,073.0 1,010.0 1,016.4
Average price per kWh-retail and
wholesale customers (calendar year)
(cents) 6.03 6.01 6.16
Gas--
Sales (thousands of MCF)
Residential 24,877 29,277 31,087
Commercial 7,433 9,567 9,424
Industrial 1,916 2,520 3,404
Other 19,487 20,676 19,782
-------- ------- -------
Total 53,713 62,040 63,697
Revenues (millions)
Residential $ 138.8 160.3 156.7
Commercial $ 38.2 48.3 44.1
Industrial $ 9.3 11.9 14.1
Other $ 24.9 23.2 23.7
-------- ------- -------
Total $ 211.2 243.7 238.6
Average price per MCF - total
(calendar year) $ 3.93 3.93 3.75
II-2
<PAGE>
Results of Operations
- ---------------------
The 1998 earnings on common stock were $169 million compared
to $171 million in 1997 and $164 million in 1996.
In 1998, electric revenues increased 6% due to higher sales
to other public utilities and commercial business customers.
Fuel and purchased power expense increased 13% primarily related
to higher sales. In 1997, a 3% decline in electric residential
sales resulted in slightly lower revenue, which offset a 3%
increase in sales to business customers and higher sales to other
public utilities.
Utility gas revenues and gas purchased for resale in 1998
decreased 13% and 15%, respectively, due to the effects of milder
weather. Gas utility revenues increased 2% in 1997 due to
increased sales to business customers.
Operation and maintenance expense decreased 3% in 1998 due
to lower insurance, claims and production maintenance costs.
These decreases were partially offset by increased compensation
and benefit expense and higher electric distribution maintenance.
Operation and maintenance expense decreased 5% in 1997 due to cost
containment efforts and lower actuarially-determined benefit expense.
Regulatory assets recorded during the phase-in of electric
rates are being amortized and recovered in current revenues.
Once the phase-in balance is fully recovered, the 1992 stipulation
provides that revenues will be used for accelerated recovery of
production plant costs. In addition, deferred interest charges on
the William H. Zimmer Generating Station are being amortized at
$3 million per year over the projected life of the asset.
A 1992 PUCO-approved settlement agreement and a subsequent
stipulation in 1995 allowed accelerated recovery of demand-side
management costs and, thereafter, production plant costs to the
extent that the Company return on equity exceeds a baseline 13%.
If the return exceeds the baseline return by one to two percent,
one-half of the excess is used to accelerate recovery of these
costs. If the return is greater than two percent over the
baseline, the entire excess is used for such purpose. In 1998,
amortization of regulatory assets included an additional $10
million of accelerated cost recovery.
Depreciation and amortization expense increased 3% in 1998
and 1997 as a result of increased depreciable assets.
General taxes increased 2% in 1998 and 3% in 1997 as a
result of higher property taxes from additional property.
II-3
<PAGE>
Interest expense increased 3% in 1998 due to higher short-
term debt. Interest expense declined 3% in 1997 primarily due to
the redemption of first mortgage bonds.
Credit Ratings
- --------------
The Company's senior debt credit ratings are as follows:
Duff & Phelps AA
Standard & Poor's AA-
Moody's Investors Service Aa3
Each rating has been affirmed by its respective rating agency.
Moody's Investors Service upgraded the Company's senior debt credit
rating three times from 1992-1995. Duff & Phelps and Standard &
Poor's both upgraded the Company's senior debt credit ratings in
1994. The credit ratings are the highest the Company has achieved
since 1974, and they are all considered investment grade.
Construction Program and Financing
- ----------------------------------
Construction additions were $111 million, $109 million, and
$124 million in 1998, 1997 and 1996, respectively. The capital
program for 1999 consists of construction costs of approximately
$80 million.
During 1998, total cash provided by operating activities was
$294 million. At year-end, cash and temporary cash investments
were $2 million, and debt and equity financial assets were
$232 million. Cash and financial assets are held with a view
towards investing in future opportunities in the industry.
In December 1997, the Company redeemed a series of first
mortgage bonds in the principal amount of $40 million with an
interest rate of 8.0%. The bonds had been scheduled to mature in
2003. Another series of first mortgage bonds in the principal
amount of $40 million matured in 1997. In December 1996, the
Company redeemed a series of first mortgage bonds in the
principal amount of $25 million with an interest rate of 6.75%.
The bonds had been scheduled to mature in 1998. Sinking fund
payments for the five years ending 2003 are $2 million.
Issuance of additional amounts of first mortgage bonds by
the Company is limited by provisions of its mortgage. The amounts
and timing of future financings will depend upon market and other
conditions, rate increases, levels of sales and construction plans.
The Company anticipates that it has sufficient capacity to issue
first mortgage bonds to satisfy its requirements in connection
with its capital program.
II-4
<PAGE>
In addition, DPL Inc. has revolving credit agreements which
allow total borrowings by DPL Inc. and its subsidiaries of $300
million. At year-end 1998, DPL Inc. had no outstanding
borrowings under these credit agreements.
The Company also has $97 million available in short-term
lines of credit. The Company had $81 million and $10 million
outstanding from these lines of credit for year-end 1998 and 1997
respectively, and $99 million and $70 million in commercial paper
outstanding for year-end 1998 and 1997, respectively.
Issues and Financial Risks
- ---------------------------
This report contains certain forward-looking statements
regarding plans and expectations for the future. Investors are
cautioned that actual outcomes and results may vary materially
from those projected due to various factors beyond the Company's
control, including abnormal weather, unusual maintenance or
repair requirements, changes in fuel costs, increased
competition, regulatory changes and decisions, changes in
accounting rules and adverse economic conditions.
Computer applications of many companies may not properly
recognize dates beginning with the year 2000. This "Y2K" issue,
if not corrected, could cause disruptions in information
technology systems and operating control systems.
The Company has implemented a plan to identify and correct
Y2K issues in its computer applications. This plan includes:
(1) evaluation of applications and systems, (2) assessment of Y2K
errors, (3) correction of errors, and (4) testing of applications
and systems. At year end, the evaluation and assessment phases
are substantially complete. The correction and testing phases
continue on schedule and are expected to be completed in the
third quarter of 1999. The estimated cost of this corrective
action is $20 million, and includes modification and replacement
of hardware and software.
The electric industry relies on computer applications to
monitor and control interdependent power systems. These systems
are also susceptible to Y2K problems. The utility industry has
organized work groups to identify and solve potential problems.
The Company is evaluating the possibility of Y2K disruptions in
the industry and is adopting proper contingency plans.
The U.S. EPA and Ohio EPA have notified numerous parties,
including the Company, that they are considered "Potentially
Responsible Parties" for clean up of two hazardous waste sites in
Ohio. The U.S. EPA has estimated total costs of under
$10 million for its preferred clean-up plans at one of these
sites. The Ohio EPA has not provided an estimated cost for the
second site. During 1998, the Company settled its...
II-5
<PAGE>
...potential liability for two other sites at a minimal cost. The
final resolution of the remaining investigations will not have a
material effect on the Company's financial position, earnings or
cash flow.
In September 1998, the U.S. EPA issued a final rule requiring
states to modify their State Implementation Plans ("SIPs") under
the Clean Air Act. The modified SIPs are likely to result in
further NOx reduction requirements placed on coal-fired generating
units by 2003. In order to meet these NOx requirements, the
Company's total capital expenditures are estimated to be
approximately $175 million over the next five years.
As a public utility, the Company is subject to processes
which determine the rates it charges for energy services.
Regulators determine which costs are eligible for recovery in the
rate setting process and when the recovery will occur. They also
establish the rate of return on utility investments which are
valued under Ohio law based on historical costs.
The utility industry is subject to inflationary pressures
similar to those experienced by other capital-intensive
industries. Because rates for regulated services under existing
rules are based on historical costs, cash flows may not cover the
total future costs of providing services.
Restructuring of the electric utility industry continued to
evolve in 1998. Legislative proposals have been introduced in
Congress and in Ohio concerning electric wholesale and retail
wheeling which are designed to increase competition. These factors
increase the risk that the Company's production plant and/or
regulatory assets may not be fully recovered in rates and that
future cash flows and operating results may be adversely impacted.
The Company is part of a legislative work group addressing
issues pertaining to restructuring the electric industry,
including taxes. In September 1998, the major Ohio electric
utilities, including the Company, offered a comprehensive
restructuring proposal.
In 1996 and 1997, FERC issued orders creating a more
competitive wholesale electric power market. These orders
required all electric utilities that own or control transmission
facilities to file open-access transmission service tariffs. In
1997, the Company reached an agreement in principle with staff and
intervenors in its first pending tariff case and filed a
subsequent case based on an updated test year. In December 1998,
the Company reached an agreement in principle with staff and
intervenors in the second pending tariff case.
II-6
<PAGE>
Income Statement Highlights
$ in Millions 1998 1997 1996
- ------------------------------------------------------------------
Electric utility:
Revenues $1,073 $1,010 $1,016
Fuel and purchased power 257 227 234
------ ------ ------
Net revenues 816 783 782
Gas utility:
Revenues 211 244 239
Gas purchased for resale 128 151 145
------ ------ ------
Net revenues 83 93 94
Other income 16 14 9
Operation and maintenance expense 249 256 270
Amortization of regulatory assets, net 33 21 20
Income taxes 113 100 98
Earnings on common stock 169 171 164
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------------------
The carrying value of the Company's debt, which consists of
first mortgage bonds, guaranteed air quality development obligations,
commercial paper and lines of credit, was $1,067.3 million at December
31, 1998. The fair value of this debt, based mainly on current market
prices or discounted cash flows using current rates for similar issues
with similar terms and remaining maturities, was $1,152.5 million at
December 31, 1998.
The carrying value and fair value of short-term debt was $181.2
million at December 31, 1998. The interest expense risk related to
this debt was estimated to be approximately an increase/decrease
of $0.7 million if the weighted average cost for each quarter
increased/decreased 10%.
The fair value of available for sale securities was $298.9
at December 31, 1998. The equity price risk related to these
securities was estimated as the potential increase/decrease in fair
value of $29.9 million at December 31, 1998 that resulted from a
hypothetical 10% increase/decrease in the quoted market prices.
II-7
<PAGE>
Item 8 - Financial Statements And Supplementary Data
- ------------------------------------------------------------------------------
Index to Consolidated Financial Statements Page No.
- ------------------------------------------ --------
Consolidated Statement of Results of Operations
for the three years in the period ended December 31, 1998 II-9
Consolidated Statement of Cash Flows for the three
years in the period ended December 31, 1998 II-10
Consolidated Balance Sheet as of December 31, 1998 and 1997 II-11 - II-12
Consolidated Statement of Shareholder's Equity for
the three years in the period ended December 31, 1998 II-13
Notes to Consolidated Financial Statements II-14 - II-23
Reports of Independent Accountants II-26 - II-27
Index to Supplemental Information Page No.
- --------------------------------- --------
Selected Quarterly Information II-24
Financial and Statistical Summary II-25
II-8
<PAGE>
The Dayton Power and Light Company
CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
- ---------------------------------------------------------------------------
For the years ended December 31,
$ in millions 1998 1997 1996
- ---------------------------------------------------------------------------
INCOME
Utility service revenues--
Electric $1,073.0 $1,010.0 $1,016.4
Gas 211.2 244.4 242.0
-------- -------- --------
Total utility service revenues 1,284.2 1,254.4 1,258.4
Other income 16.3 13.9 9.3
-------- -------- --------
Total income 1,300.5 1,268.3 1,267.7
-------- -------- --------
EXPENSES
Fuel and purchased power 257.4 227.9 234.9
Gas purchased for resale 127.9 150.7 144.8
Operation and maintenance 249.4 255.9 269.5
Depreciation and amortization (Note 1) 125.5 121.8 117.9
Amortization of regulatory assets,
net (Note 2) 33.0 20.9 19.7
General taxes 136.2 133.5 129.3
Interest expense 88.6 86.0 89.1
-------- -------- --------
Total expenses 1,018.0 996.7 1,005.2
-------- -------- --------
INCOME BEFORE INCOME TAXES 282.5 271.6 262.5
Income taxes (Notes 1 and 3) 113.0 99.6 97.7
-------- -------- --------
NET INCOME 169.5 172.0 164.8
Preferred dividends (Note 8) 0.9 0.9 0.9
-------- -------- --------
EARNINGS ON COMMON STOCK $ 168.6 $ 171.1 $ 163.9
======== ======== ========
See Notes to Consolidated Financial Statements.
II-9
<PAGE>
The Dayton Power and Light Company
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------
For the years ended December 31,
$ in millions 1998 1997 1996
- --------------------------------------------------------------------------
OPERATING ACTIVITIES
Cash received from utility customers $1,258.0 $1,230.3 $1,231.2
Other operating cash receipts 13.7 12.0 10.7
Cash paid for:
Fuel and purchased power (266.5) (235.9) (207.6)
Purchased gas (138.6) (167.2) (163.3)
Operation and maintenance labor (84.0) (81.4) (85.9)
Nonlabor operating expenditures (139.0) (153.5) (194.2)
Interest (86.0) (85.2) (87.8)
Income taxes (132.3) (89.0) (89.1)
Property, excise and payroll taxes (131.1) (130.5) (125.7)
-------- -------- --------
Net cash provided by operating
activities (Note 10) 294.2 299.6 288.3
INVESTING ACTIVITIES
Property expenditures (106.4) (110.9) (116.9)
Other activities (106.8) (48.4) (50.3)
-------- -------- --------
Net cash used for investing activities (213.2) (159.3) (167.2)
-------- -------- --------
FINANCING ACTIVITIES
Dividends paid on common stock (238.8) (118.5) (138.3)
Issuance of short-term debt 100.2 69.8 6.5
Parent company capital contribution 49.0 - -
Retirement of long-term debt (0.4) (81.0) (25.4)
Dividends paid on preferred stock (0.9) (0.9) (0.9)
-------- -------- --------
Net cash used for financing activities (90.9) (130.6) (158.1)
-------- -------- --------
Cash and temporary cash investments--
- -----------------------------------
Net change (9.9) 9.7 (37.0)
Balance at beginning of period 11.8 2.1 39.1
-------- -------- --------
Balance at end of period $ 1.9 $ 11.8 $ 2.1
======== ======== ========
See Notes to Consolidated Financial Statements.
II-10
<PAGE>
The Dayton Power and Light Company
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------
At December 31,
$ in millions 1998 1997
- --------------------------------------------------------------
ASSETS
Property $3,688.6 $3,587.8
Less--
Accumulated depreciation and
amortization (1,472.2) (1,355.8)
-------- --------
Net property 2,216.4 2,232.0
-------- --------
Current Assets
Cash and temporary cash investments 1.9 11.8
Accounts receivable, less provision for
uncollectible accounts of $4.7 and
$4.7 respectively 219.2 205.8
Inventories, at average cost 112.2 87.1
Taxes applicable to subsequent years 93.4 91.9
Other 49.7 61.4
-------- --------
Total current assets 476.4 458.0
-------- --------
Other Assets
Financial assets 232.2 111.1
Income taxes recoverable through future
revenues (Notes 1 and 2) 195.5 208.2
Other regulatory assets (Note 2) 82.2 116.7
Other assets 209.7 200.8
-------- --------
Total other assets 719.6 636.8
-------- --------
TOTAL ASSETS $3,412.4 $3,326.8
======== ========
See Notes to Consolidated Financial Statements.
II-11
<PAGE>
The Dayton Power and Light Company
CONSOLIDATED BALANCE SHEET
(continued)
- --------------------------------------------------------------
At December 31,
$ in millions 1998 1997
- --------------------------------------------------------------
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 33.6 20.3
Earnings reinvested in the business 450.8 521.0
-------- --------
Total common shareholder's equity 1,273.0 1,280.8
-------- --------
Preferred stock (Note 8) 22.9 22.9
Long-term debt (Note 7) 885.6 886.0
-------- --------
Total capitalization 2,181.5 2,189.7
-------- --------
Current Liabilities
Short-term debt (Note 6) 181.2 81.0
Accounts payable 106.6 124.2
Accrued taxes 160.9 157.8
Accrued interest 20.7 20.7
Other 50.2 42.3
-------- --------
Total current liabilities 519.6 426.0
-------- --------
Deferred Credits And Other
Deferred taxes (Note 3) 488.2 500.5
Unamortized investment tax credit 69.3 72.2
Other 153.8 138.4
-------- --------
Total deferred credits and other 711.3 711.1
-------- --------
TOTAL CAPITALIZATION AND LIABILITIES $3,412.4 $3,326.8
======== ========
See Notes to Consolidated Financial Statements.
II-12
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Shareholder's Equity
Common Stock (a) Accumulated Earnings
------------------- Other Other Reinvested
Outstanding Paid-In Comprehensive in the
$ in millions Shares Amount Capital Income Business Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996:
Beginning Balance 41,172,173 $0.4 $738.7 $ 8.2 $443.2 $1,190.5
Comprehensive income:
Net income 164.8 164.8
Net unrealized gains on
securities after tax (b) 1.5 1.5
Adjustment for net
realized gains after tax (0.1) (0.1)
--------
Total comprehensive income 166.2
Common stock dividends (138.3) (138.3)
Preferred stock dividends (0.9) (0.9)
Other 0.2 (0.2) -
------------------------------------------------------------------
Ending balance 41,172,173 $0.4 $738.9 $ 9.6 $468.6 $1,217.5
1997:
Comprehensive income:
Net income 172.0 172.0
Net unrealized gains on
securities after tax (b) 10.7 10.7
--------
Total comprehensive income 182.7
Common stock dividends (118.5) (118.5)
Preferred stock dividends (0.9) (0.9)
Other 0.2 (0.2) -
------------------------------------------------------------------
Ending balance 41,172,173 $0.4 $739.1 $20.3 $521.0 $1,280.8
1998:
Comprehensive income:
Net income 169.5 169.5
Net unrealized gains on
securities after tax (b) 13.3 13.3
--------
Total comprehensive income 182.8
Common stock dividends (238.8) (238.8)
Preferred stock dividends (0.9) (0.9)
Parent company capital
contribution 49.0 49.0
Other 0.1 - 0.1
------------------------------------------------------------------
Ending balance 41,172,173 $0.4 $788.2 $33.6 $450.8 $1,273.0
==================================================================
</TABLE>
(a) 50,000,000 shares authorized.
(b) Net of taxes of $0.8 million, $5.8 million and $7.2 million
in 1996, 1997 and 1998 respectively.
II-13
<PAGE>
The Dayton Power and Light Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary Of Significant Accounting Policies
The Company is a wholly-owned subsidiary of DPL Inc. The
accounts of the Company and its wholly-owned subsidiaries are
included in the accompanying consolidated financial statements.
These statements are presented in accordance with generally
accepted accounting principles which require management to make
estimates and assumptions related to future events. The Company's
results are presented as one segment. Reclassifications have been
made in certain prior years' amounts to conform to the current
reporting presentation. The consolidated financial statements
principally reflect the results of operations and financial
condition of the Company. DPL Inc. and its other wholly-owned
subsidiaries provide certain administrative services to the
Company including leases, equipment, insurance and other services.
These costs (in millions) were $20.1 in 1998, $53.5 in 1997 and
$52.6 in 1996. The Company is a public utility primarily engaged
in the business of selling electric energy and natural gas to
residential, commercial, industrial and governmental customers
in a 6,000 square mile area of West Central Ohio.
Revenues and Fuel
- -----------------
Revenues include amounts charged to customers through fuel and
gas recovery clauses, which are adjusted periodically for
changes in such costs. Related costs that are recoverable or
refundable in future periods are deferred along with the related
income tax effects. Also included in revenues are amounts
charged to customers through a surcharge for recovery of
arrearages from certain eligible low-income households.
The Company records revenue for services provided but not yet
billed to more closely match revenues with expenses. Accounts
receivable on the Consolidated Balance Sheet includes unbilled
revenue of (in millions) $99.5 in 1998 and $78.3 in 1997.
II-14
<PAGE>
Property, Maintenance and Depreciation
- --------------------------------------
Property is shown at its original cost. Cost includes direct
labor and material and allocable overhead costs.
When a unit of property is retired, the original cost of that
property plus the cost of removal less any salvage value is
charged to accumulated depreciation. Maintenance costs and
replacements of minor items of property are charged to expense.
Depreciation expense is calculated using the straight-line
method, which depreciates the cost of property over its
estimated useful life, at an average rate of 3.5%.
Income Taxes
- ------------
Deferred income taxes are provided for all temporary differences
between the financial statement basis and the tax basis of
assets and liabilities using the enacted tax rate. Additional
deferred income taxes and offsetting regulatory assets or
liabilities are recorded to recognize that the income taxes will
be recoverable/refundable through future revenues. Investment
tax credits, previously deferred, are being amortized over the
lives of the related properties.
Consolidated Statement of Cash Flows
- ------------------------------------
The temporary cash investments presented on this Statement
consist of liquid investments with an original maturity of three
months or less.
II-15
<PAGE>
2. Regulatory Matters
The Company applies the provisions of Statement of Financial
Accounting Standard (SFAS) No. 71, Accounting for the Effects of
Certain Types of Regulation. This accounting standard provides
for the deferral of costs authorized for future recovery by
regulators. These costs would be charged to expense without
regulatory authorization. Regulatory assets on the Consolidated
Balance Sheet include:
At December 31,
1998 1997
---- ----
--millions--
Phase-in (a) $ 12.9 $ 30.6
DSM (b) 19.6 33.6
Deferred interest (c) 49.7 52.5
Income taxes recoverable through
future revenues 195.5 208.2
------ ------
Total $277.7 $324.9
====== ======
(a) Amounts deferred during a 1992-1994 electric rate increase
phase-in (including carrying charges) are being recovered in
current revenues.
(b) DSM costs (including carrying charges) from the Company's
cost-effective programs are deferred and are being recovered
at approximately $9 million per year.
The 1992 PUCO-approved agreement for the phase-in plan and
DSM programs, as updated in 1995, provides for accelerated
recovery of DSM costs and, thereafter, production plant costs
to the extent that the Company return on equity exceeds a
baseline 13% (subject to upward adjustment). If the return
exceeds the baseline return by one to two percent, one-half
of the excess is used to accelerate recovery of these costs.
If the return is greater than two percent over the baseline,
the entire excess is used for such purpose. In 1998,
amortization of regulatory assets included an additional
$10.4 million of accelerated cost recovery.
(c) Interest charges related to the William H. Zimmer Generating
Station which were previously deferred pursuant to PUCO
approval are being amortized at $2.8 million per year over
the projected life of the asset.
II-16
<PAGE>
3. Income Taxes
For the years ended December 31,
$ in millions 1998 1997 1996
- ----------------------------------------------------------------------
COMPUTATION OF TAX EXPENSE
Federal income tax (a) $ 98.9 $ 95.0 $ 91.9
Increases (decreases) in tax from -
Regulatory assets 4.0 3.6 3.3
Depreciation 12.5 11.4 10.7
Investment tax credit amortized (3.0) (3.0) (3.0)
Other, net 0.6 (7.4) (5.2)
------ ------ ------
Total tax expense $113.0 $ 99.6 $ 97.7
====== ====== ======
COMPONENTS OF TAX EXPENSE
Taxes currently payable $129.2 $102.4 $102.1
Deferred taxes--
Regulatory assets (8.3) (4.0) (3.5)
Liberalized depreciation and
amortization 5.9 5.3 7.2
Fuel and gas costs (5.8) 5.5 2.5
Other (5.0) (6.6) (6.4)
Deferred investment tax credit, net (3.0) (3.0) (4.2)
------ ------ ------
Total tax expense $113.0 $ 99.6 $ 97.7
====== ====== ======
(a) The statutory rate of 35% applied to pre-tax income.
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES
At December 31,
$ in millions 1998 1997
- ----------------------------------------------------
NON-CURRENT LIABILITIES
Depreciation/property basis $(438.2) $(443.0)
Income taxes recoverable (68.4) (72.4)
Regulatory assets (28.0) (38.6)
Investment tax credit 24.2 25.3
Other 22.2 28.2
------- -------
Net non-current liability $(488.2) $(500.5)
======= =======
Net Current Asset (Liability) $ 3.7 $ (2.7)
======= =======
II-17
<PAGE>
4. Pensions And Postretirement Benefits
Pensions
- --------
Substantially all Company employees participate in pension plans
paid for by the Company. Employee benefits are based on their
years of service, age, compensation and year of retirement. The
plans are funded in amounts actuarially determined to provide for
these benefits.
An interest rate for discounting the obligation and expense of
6.25% and the expected rate of return of 7.5% were used in
developing the amounts in the following tables. Increases in
compensation levels approximating 5.0% were used for all years.
The following table sets forth the components of pension expense
(portions of which were capitalized):
$ in millions 1998 1997 1996
- -----------------------------------------------------------
Expense for Year
- ----------------
Service cost $ 5.9 $ 6.3 $ 6.2
Interest cost 15.9 15.2 15.0
Expected return on plan assets (23.3) (20.5) (18.1)
Amortization of unrecognized:
Actuarial (gain) loss 1.2 - 1.0
Prior service cost 2.1 2.1 2.1
Transition obligation (4.2) (4.2) (4.2)
------ ------ -----
Net pension cost $ (2.4) $ (1.1) $ 2.0
====== ====== =====
The following tables set forth the plans' obligations, assets and
amounts recorded in Other assets on the Consolidated Balance
sheet at December 31:
$ in millions 1998 1997
- -------------------------------------------------------------
Change in Projected Benefit Obligation
- --------------------------------------
Benefit obligation, January 1 $259.1 $255.1
Service cost 5.9 6.3
Interest cost 15.9 15.2
Actuarial (gain) loss 0.8 7.4
Benefits paid (12.5) (24.9)
------ ------
Benefit obligation, December 31 269.2 259.1
------ ------
Change in Plan Assets
- ---------------------
Fair value of plan assets, January 1 330.2 321.4
Actual return on plan assets 41.2 33.7
Benefits paid (12.5) (24.9)
------ ------
Fair value of plan assets, December 31 358.9 330.2
------ ------
Plan assets in excess of projected
benefit obligation 89.7 71.1
Actuarial gains and losses (46.6) (28.3)
Unamortized prior service cost 11.8 13.9
Unamortized transition obligation (7.2) (11.3)
------ ------
Net pension assets $ 47.7 $ 45.4
====== ======
II-18
<PAGE>
Postretirement Benefits
- -----------------------
Qualified employees who retired prior to 1987 and their
dependents are eligible for health care and life insurance
benefits. The Company has funded the union-eligible health
benefit using a Voluntary Employee Beneficiary Association Trust.
The tables below have been developed based on the following
assumptions. The interest rate for discounting the obligation
and expense was 6.25% and the expected rate of return was 5.7%.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 8.5% and 9.0%
for 1998 and 1997, respectively, and decreases to 5.0% by 2005.
A one percentage point change in the assumed health care trend
rate would affect the service and interest cost by $0.1 million.
A one percentage point increase in the assumed health care trend
rate would increase the postretirement benefit obligation by $2.1
million; and a one percentage point decrease would decrease the
benefit obligation by $1.9 million.
The following table sets forth the components of postretirement
benefit expense:
$ in millions 1998 1997 1996
- ---------------------------------------------------------------
Expense for Year
- ----------------
Interest cost $ 2.0 $ 2.2 $ 2.5
Expected return on plan assets (1.0) (0.8) (0.6)
Amortization of unrecognized:
Actuarial (gain) loss (2.2) (4.1) -
Transition obligation 3.0 3.0 2.9
----- ----- -----
Postretirement benefit cost $ 1.8 $ 0.3 $ 4.8
===== ===== =====
The following table sets forth the accumulated postretirement
benefit obligation ("APBO"), assets and funded status amounts
recorded in Other Deferred Credits on the Consolidated Balance
Sheet at December 31:
$ in millions 1998 1997
- -----------------------------------------------------------
Change in APBO
- --------------
Benefit obligation, January 1 $ 36.5 $ 41.8
Interest cost 2.0 2.2
Actuarial (gain) loss (3.4) (5.3)
Benefits paid (2.2) (2.2)
------ ------
Benefit obligation, December 31 32.9 36.5
------ ------
Change in Plan Assets
- ---------------------
Fair value of plan assets, January 1 12.1 11.9
Actual return on plan assets 1.0 0.8
Benefits paid (0.6) (0.6)
------ ------
Fair value of plan assets, December 31 12.5 12.1
------ ------
APBO in excess of plan assets 20.4 24.4
Unamortized transition obligation (12.9) (15.9)
Actuarial gains and losses 26.4 25.5
------ ------
Accrued postretirement benefit liability $ 33.9 $ 34.0
====== ======
II-19
<PAGE>
5. Ownership of Facilities
The Company owns an undivided interest in certain electric
generating and transmission facilities with other Ohio
utilities. Each utility is obligated to pay its ownership
share of construction and operation costs of each facility. As
of December 31, 1998, the Company had $4.3 million of such
facilities under construction. The Company's share of expenses
is included in the Consolidated Statement of Results of
Operations.
The following table presents the Company's undivided interest
in such facilities at December 31, 1998:
Company
Company Share Investment
--------------------- ---------------
Production Gross Plant
Ownership Capacity in Service
(%) (MW) ($ in millions)
- ---------------------------------------------------------------------------
Production Units:
Beckjord Unit 6 50.0 210 56
Conesville Unit 4 16.5 129 31
East Bend Station 31.0 186 151
Killen Station 67.0 418 406
Miami Fort Units 7 & 8 36.0 360 124
Stuart Station 35.0 823 246
Zimmer Station 28.1 365 992
Transmission (at varying
percentages) 69
6. Notes Payable And Compensating Balances
DPL Inc. and its subsidiaries have $300 million available
through revolving credit agreements with a consortium of banks.
One agreement, for $200 million, expires in 2002 and the other,
for $100 million, expires in 2000. Facility fees are
approximately $315,000 per year. The primary purpose of the
revolving credit facilities is to provide back-up liquidity for
the Company's commercial paper program. At December 31, 1998,
DPL Inc. had no outstanding borrowings under these credit
agreements. At December 31, 1997, there was $36 million
outstanding under a previous credit agreement.
The Company also has $96.6 million available in short-term
informal lines of credit. To support these lines of credit,
the Company is required to maintain average daily compensating
balances of approximately $400,000. The commitment fees are
immaterial. The Company had $80.9 million and $10.0 million in
borrowings from these lines of credit at a weighted average
interest rate of 5.46% and 6.0% at December 31, 1998 and 1997,
respectively.
The Company had $99.0 million and $69.7 million in commercial
paper outstanding at a weighted average interest rate of 5.25%
and 6.0% at December 31, 1998 and 1997, respectively.
II-20
<PAGE>
7. Long-Term Debt
At December 31,
$ in millions 1998 1997
- --------------------------------------------------------------------
First mortgage bonds maturing:
2022-2026 - 8.14% (a) $671.0 $671.0
Pollution control series maturing
through 2027 - 6.43% (a) 106.8 107.2
------ ------
777.8 778.2
Guarantee of Air Quality Development Obligations
6.10% Series Due 2030 110.0 110.0
Unamortized debt discount and premium (net) (2.2) (2.2)
------ ------
Total $885.6 $886.0
====== ======
(a) Weighted average interest rates for 1998 and 1997.
The amounts of maturities and mandatory redemptions for first
mortgage bonds and notes are $0.4 million per year in 1999
through 2003. Substantially all property of the Company is
subject to the mortgage lien securing the first mortgage bonds.
II-21
<PAGE>
8. Preferred Stock
$25 par value, 4,000,000 shares authorized, no shares
outstanding; and $100 par value, 4,000,000 shares authorized,
228,508 shares without mandatory redemption provisions outstanding.
Current Current Par Value
Redemption Shares At December 31, 1998 and 1997
Series Rate Price Outstanding ($ in millions)
- ----------------------------------------------------------------------------
A 3.75% $102.50 93,280 $ 9.3
B 3.75% $103.00 69,398 7.0
C 3.90% $101.00 65,830 6.6
------- -----
Total 228,508 $22.9
======= =====
The shares may be redeemed at the option of the Company at the
per share prices indicated, plus cumulative accrued dividends.
9. Fair Value Of Financial Instruments
At December 31,
1998 1997
------------------ -------------------
$ in millions Fair Value Cost Fair Value Cost
- ---------------------------------------------------------------------------
$ $ $ $
Assets
Available for sale securities 298.9 247.2 165.0 133.8
Held to maturity securities (a) 55.5 54.2 57.5 56.7
Liabilities (b)
Debt 1,152.5 1,067.3 1,038.7 967.4
(a) Maturities range from 1999 to 2011.
(b) Includes current maturities.
Assets with quoted market prices are carried at market; the
remaining financial assets are carried at cost.
II-22
<PAGE>
10. Reconciliation Of Net Income To Net Cash Provided By Operating Activities
For the years ended December 31,
$ in millions 1998 1997 1996
- ----------------------------------------------------------------------------
Net income $169.5 $172.0 $164.8
Adjustments:
Depreciation and amortization 125.5 121.8 117.9
Deferred income taxes (16.2) (2.8) (3.3)
Other deferred credits 20.4 6.9 7.3
Amortization of regulatory assets, net 33.0 20.9 19.7
Operating expense provisions 2.3 (26.0) (10.2)
Accounts receivable (13.5) (12.4) (48.9)
Accounts payable (21.0) 16.4 10.0
Accrued taxes payable 3.1 21.2 20.7
Inventory (25.1) (12.0) 6.5
Other 16.2 (6.4) 3.8
------ ------ ------
Net cash provided by operating activities $294.2 $299.6 $288.3
====== ====== ======
II-23
<PAGE>
SELECTED QUARTERLY INFORMATION
March 31, June 30, September 30, December 31,
$ in millions 1998 1997 1998 1997 1998 1997 1998 1997
- -----------------------------------------------------------------------------
$ $ $ $ $ $ $ $
Utility service
revenues 352.9 357.3 293.2 269.8 319.2 283.9 318.9 343.4
Income before
income taxes 110.7 94.6 60.4 51.6 76.4 73.1 35.0 52.3
Net income 69.5 62.2 36.2 33.2 45.1 44.3 18.7 32.3
Earnings on
common stock 69.3 62.0 36.0 33.0 44.9 44.1 18.4 32.0
Dividends paid 116.8 28.9 55.2 29.0 38.1 29.0 28.7 31.6
II-24
<PAGE>
FINANCIAL AND STATISTICAL SUMMARY
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------
For the years ended December 31,
Utility service revenues
(millions) $1,284.2 1,254.4 1,258.4 1,257.5 1,190.3
Earnings on common stock
(millions) $ 168.6 171.1 163.9 158.5 147.7
Earnings per share of
common stock $ 4.10 4.16 3.98 3.85 3.59
Dividends paid (millions) $ 238.8 118.5 138.3 132.6 103.7
Electric sales (millions of kWh)--
Residential 4,790 4,788 4,924 4,871 4,465
Commercial 3,518 3,408 3,407 3,425 3,068
Industrial 4,655 4,749 4,540 4,401 4,388
Other 4,518 3,664 3,443 4,117 2,298
------ ------ ------ ------ ------
Total 17,481 16,609 16,314 16,814 14,219
Gas sales (thousands of MCF)--
Residential 24,877 29,277 31,087 29,397 27,911
Commercial 7,433 9,567 9,424 8,307 8,081
Industrial 1,916 2,520 3,404 2,584 3,150
Other 1,699 2,153 2,829 3,006 2,909
Transported gas 17,788 18,523 16,953 16,376 15,147
------ ------ ------ ------ ------
Total 53,713 62,040 63,697 59,670 57,198
At December 31,
Total assets (millions) $3,412.4 3,326.8 3,243.2 3,204.3 3,147.0
Long-term debt (millions) $ 885.6 886.0 926.3 991.5 1,003.7
First mortgage bond ratings--
Duff & Phelps, Inc. AA AA AA AA AA
Standards & Poor's Corporation AA- AA- AA- AA- AA-
Moody's Investors Service Aa3 Aa3 Aa3 Aa3 A1
Number of Preferred Shareholders 559 625 684 733 795
II-25
<PAGE>
Report of Independent Accountants
---------------------------------
To the Board of Directors of The Dayton Power and Light Company
In our opinion, the consolidated financial statements listed
in the index, appearing under Item 8 on page II-8 of this Form 10-K,
present fairly, in all material respects, the financial position of
The Dayton Power and Light Company (the "Company") and its
subsidiaries at December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These consolidated financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits
of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Dayton, Ohio
January 20, 1999
II-26
<PAGE>
Report of Independent Accountants
on Financial Statement Schedule
---------------------------------
To the Board of Directors of The Dayton Power and Light Company
Our audits of the consolidated financial statements of The Dayton
Power and Light Company and its subsidiaries referred to in our
report dated January 20, 1999 appearing on page II-26 of this
Annual Report on Form 10-K also included an audit of the Financial
Statement Schedule listed in Item 14(a) of this Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Dayton, Ohio
January 20, 1999
II-27
<PAGE>
Item 9 - Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure
- ------------------------------------------------------------------------------
None.
PART III
Item 10 - Directors And Executive Officers Of The Registrant
- ------------------------------------------------------------------------------
Directors of the Registrant
- ---------------------------
The Board is presently authorized to consist of nine directors.
These nine directors are also directors of DPL Inc., the holding
company of the Company. Nine directors are to be elected this year
to serve until the Annual Meeting of Shareholders in 2000 or until
their successors are duly elected and qualified. Should any nominee
become unable to accept nomination or election, the Board will vote
for the election of such other person as a director as the present
directors may recommend in the place of such nominee.
The following information regarding the nominees is based on
information furnished by them:
Director
Since
- ------------------------------------------------------------------------------
THOMAS J. DANIS, Age 49 1989
Chairman and Chief Executive Officer, The Danis
Companies, Dayton, Ohio, construction, real estate
and environmental services.
Director: CSR America Inc.
Trustee: Dayton Foundation, Miami Valley Research
Park Foundation.
JAMES F. DICKE, II, Age 53 1990
President, Crown Equipment Corporation, New Bremen, Ohio,
international manufacturer and distributor of electric
lift trucks and material handling products.
Director: Regional Boys and Girls Clubs of America,
Anderson-Cooke, Inc., Dayton Art Institute.
Chairman: Trinity University Board of Trustees.
Secretary: Culver Educational Foundation.
III-1
<PAGE>
Director
Since
- ------------------------------------------------------------------------------
PETER H. FORSTER, Age 56 1979
Chairman, DPL Inc. and The Dayton Power and Light Company.
Chairman: Miami Valley Research Foundation.
Director: Amcast Industrial Corp., Comair Holdings, Inc.
Trustee: F. M. Tait Foundation, Arts Center Foundation.
ERNIE GREEN, Age 60 1991
President and Chief Executive Officer, Ernie Green
Industries, Dayton, Ohio, automotive components manufacturer.
Director: Pitney Bowes Inc., WPTD-TV, Eaton Corp., Gradall.
JANE G. HALEY, Age 68 1978
President and Chief Executive Officer, Gosiger, Inc.,
Dayton, Ohio, national importer and distributor of
machine tools.
Director: Ultra-Met, Urbana, Ohio, ONA America, Dayton, Ohio.
Trustee: University of Dayton, Chaminade-Julienne High School,
Dayton, Ohio.
Member: Area Progress Council, Miami Valley Economic
Development Coalition.
ALLEN M. HILL, Age 53 1989
President and Chief Executive Officer, DPL Inc. and The
Dayton Power and Light Company.
Director: Fifth Third Bank, Premier Health Partners.
Trustee: Dayton Business Committee, The University of Dayton,
Air Force Museum Foundation, Alliance Community Schools.
III-2
<PAGE>
Director
Since
- ------------------------------------------------------------------------------
W AUGUST HILLENBRAND, Age 58 1992
President and Chief Executive Officer, Hillenbrand
Industries, Batesville, Indiana, a diversified public
holding company with four wholly-owned and autonomously
operated subsidiaries manufacturing caskets, hospital
furniture, hospital supplies, and providing funeral
planning services.
Director: Forecorp, Inc., Forethought Life Insurance Company.
Trustee: Denison University, National Committee for Quality
Health Care, Batesville Girl Scouts.
DAVID R. HOLMES, Age 58 1994
Chairman, President and Chief Executive Officer, The
Reynolds and Reynolds Company, Dayton, Ohio, information
management systems.
Director: NCR Corporation, Dayton, Ohio.
Advisor: J. L. Kellogg Graduate School of Management,
Northwestern University.
Member: Dayton Business Committee, Area Progress Council,
Downtown Dayton Partnership.
BURNELL R. ROBERTS, Age 71 1987
Retired Chairman of the Board and Chief Executive Officer,
The Mead Corporation, Dayton, Ohio, forest products producer.
Director: Rayonier, Inc., Universal Protective Packaging,
Inc., Vutek, Inc.
Trustee: Granum Value Fund.
III-3
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
(As of March 1, 1999)
Business Experience,
Last Five Years
(Positions with Registrant
Name Age Unless Otherwise Indicated) Dates
- ------------------------------------------------------------------------------
Peter H. Forster 56 Chairman 4/06/92 - 3/01/99
Chairman, DPL Inc. 1/01/97 - 3/01/98
Chairman and Chief Executive 9/26/95 - 1/01/97
Officer, DPL Inc.
Chairman, President and Chief 4/05/88 - 9/26/95
Executive Officer, DPL Inc.
Allen M. Hill 53 President and Chief Executive 4/06/92 - 3/01/99
Officer
President and Chief Executive 1/01/97 - 3/01/98
Officer, DPL Inc.
President and Chief Operating 9/26/95 - 1/01/97
Officer, DPL Inc.
Beth E. Mooney 44 Executive Vice President and 6/15/98 - 3/01/99
Chief Operating Officer,
DPL Inc. and the Company
Regional Executive, 1/01/98 - 6/15/98
Banc One Corporation
Chairman and Chief Executive 11/01/95 - 1/01/98
Officer, Bank One, Dayton
President and Chief Operating 9/01/94 - 11/01/95
Officer, Bank One, Akron
Chief Financial Officer, 3/01/93 - 9/01/94
Banc One, Ohio Corporation
Paul R. Anderson 56 Controller 4/12/81 - 3/01/99
Stephen P. Bramlage 52 Assistant Vice President 1/01/94 - 3/01/99
Jeanne S. Holihan 42 Assistant Vice President 3/17/93 - 3/01/99
III-4
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
(As of March 1, 1999)
Business Experience,
Last Five Years
(Positions with Registrant
Name Age Unless Otherwise Indicated) Dates
- ------------------------------------------------------------------------------
Stephen F. Koziar Jr. 54 Group Vice President 1/31/95 - 3/01/99
and Secretary,
DPL Inc. and the Company
Group Vice President, 12/10/87 - 1/31/95
DPL Inc. and the Company
Judy W. Lansaw 47 Group Vice President, 1/31/95 - 3/01/99
DPL Inc. and the Company
Group Vice President 12/07/93 - 1/31/95
and Secretary,
DPL Inc. and the Company
Arthur G. Meyer 49 Vice President, Legal and 11/21/97 - 3/01/99
Corporate Affairs
Director, Corporate Relations 5/14/96 - 11/21/97
Treasurer 6/27/95 - 5/14/96
Director, Financial Activities 5/09/94 - 6/27/95
Manager, Service Operations 1/31/94 - 5/09/94
Bryce W. Nickel 42 Assistant Vice President 1/01/94 - 3/01/99
H. Ted Santo 48 Group Vice President 12/08/92 - 3/01/99
James P. Torgerson 46 Vice President, Chief 7/01/98 - 3/01/99
Financial Officer and
Treasurer, DPL Inc. and
the Company
Vice President and Chief 2/10/97 - 3/15/98
Financial Officer,
Puget Sound Energy, Inc.
Executive Vice President, 8/01/95 - 2/10/97
Chief Administrative Officer
and Chief Financial Officer,
Washington Energy Company
Senior Vice President 11/01/89 - 8/01/95
Finance, Planning and
Development, and Chief
Financial Officer,
Washington Energy Company
III-5
<PAGE>
Item 11 - Executive Compensation
- ------------------------------------------------------------------------------
COMPENSATION OF DIRECTORS
Directors of the Company who are not employees receive
12,000 annually for services as a director, $600 for attendance
at a Board meeting, and $500 for attendance at a committee
meeting or operating session of DPL Inc. and the Company.
Members of the Executive Committee of DPL Inc. receive $2,000
annually for services on that committee. Each committee chairman
receives an additional $1,600 annually. Directors who are not
employees of the Company also participate in a Directors'
Deferred Stock Compensation Plan (the "Stock Plan") under which a
number of DPL Inc. common shares are awarded to directors each
year. All shares awarded under the Stock Plan are transferred to
a grantor trust (the "Master Trust") maintained by DPL Inc. to
secure its obligations under various directors' and officers'
deferred and incentive compensation plans. Receipt of the shares
or cash equal to the value thereof is deferred until the
participant retires as a director or until such other time as
designated by the participant and approved by the Compensation
and Management Review Committee (the "Committee") of DPL Inc. In
the event of a change of control (as defined in the Stock Plan),
the authority and discretion which is exercisable by the
Committee, will be exercised by the trustees of the Master Trust.
In April 1998, each non-employee director was awarded 2,700 shares.
DPL Inc. maintains a Deferred Compensation Plan (the
"Compensation Plan") for non-employee directors of DPL Inc. and
the Company in which payment of directors' fees may be deferred.
The Compensation Plan also includes a supplementary deferred
income program which provides that DPL Inc. will match $5,000
annually of deferred directors' fees for a maximum of ten years.
Under the supplementary program, a $150,000 death benefit is
provided until such director ceases to participate in the
Compensation Plan. Under the standard deferred income program
directors are entitled to receive a lump sum payment or payments
in installments over a period up to 20 years. A director may
elect payment in either cash or common shares. Participants in
the supplementary program are entitled to receive deferred
payments over a ten-year period in equal installments. The
Compensation Plan provides that in the event of a change in
control of DPL Inc., as defined in the Compensation Plan, all
benefits provided under the supplementary deferred income program
become immediately vested without the need for further
contributions by the participants and the discretion which, under
the Compensation Plan, is exercisable by the Chief Executive
Officer of DPL Inc. will be exercised by the trustees of the
Master Trust. If the consent of the Chief Executive Officer of
DPL Inc. is obtained, individuals who have attained the age of 55
and who are no longer directors of DPL Inc. or the Company may
receive a lump sum payment of amounts credited to them under the
supplementary deferred income program.
Mr. Forster, who retired as Chief Executive Officer of
DPL Inc. effective December 31, 1996, has entered into an
agreement with DPL Inc. and the Company pursuant to which he
serves as Chairman of the Board of DPL Inc. and the Company and
provides advisory and strategic planning services. The term of
the agreement expires on December 31, 1999 (which term is
automatically extended on December 31, 1999 and each December 31
thereafter for an additional year unless either party gives
advance notice of nonrenewal). For these services, Mr. Forster
receives an annual consulting fee of $500,000 (as well as such
bonuses, if any, as may...
III-6
<PAGE>
...be determined by the Compensation and Management Review
Committee in its discretion) and an award opportunity of 35,000
restricted shares under the Stock Plan. As Chairman, Mr. Forster
is responsible for long-term strategic planning of the Company,
the oversight of financial assets, and the evaluation and
recommendations relating to the merger, acquisition and disposition
of utility assets. Mr. Forster participates in a bonus program for
individuals managing financial assets. Under this program, bonuses
will be paid in 2000 based on net cumulative investment performance
of such assets over the four-year period 1996 through 1999 and for
each year thereafter based on annual performance. Payments under
the bonus program, if and as earned, will be credited to a deferred
payment account, and will continue following termination of the
agreement. Mr. Forster's average annualized bonus payable under
the program is estimated to be 83,600 SIU's (at an estimated
value of $19 per unit) for each of 1996, 1997 and 1998 based on
investment performance through 1998.
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table
- --------------------------
Set forth below is certain information concerning the
compensation of the Chief Executive Officer and each of the other
four most highly compensated executive officers of the Company
for the last three fiscal years, for services rendered in all
capacities to the Company and its subsidiaries, DPL Inc., and the
other subsidiaries of DPL Inc.
Long-Term
Compensation
Annual ------------
Compensation Restricted
----------------- Stock Unit All Other
Name and Principal Salary Bonus(1) Awards(2) Compensation(3)
Position* Year ($) ($) ($) ($)
- ------------------------------------------------------------------------------
Allen M. Hill 1998 500,000 300,000 880,000 ('99-01) 1,000
President and Chief 1997 300,000 258,000 834,000 ('98-00) 1,000
Executive Officer 1996 377,000 226,000 717,000 ('97-99) 1,000
Peter H. Forster(4) 1998 500,000 200,000 840,000 ('99-01) 87,000
Chairman 1997 500,000 150,000 840,000 ('98-00) 70,400
1996 597,000 358,000 984,000 ('97-99) 1,000
Judy W. Lansaw 1998 264,000 119,000 347,000 ('99-01) 1,000
Group Vice President 1997 240,000 108,000 411,000 ('98-00) 1,000
1996 214,000 96,000 393,000 ('97-99) 1,000
Stephen F. Koziar Jr. 1998 244,000 110,000 336,000 ('99-01) 1,000
Group Vice President 1997 231,000 104,000 234,000 ('98-00) 1,000
and Secretary 1996 218,000 98,000 216,000 ('97-99) 1,000
H. Ted Santo 1998 243,000 109,000 326,000 ('99-01) 1,000
Group Vice President 1997 226,000 102,000 297,000 ('98-00) 1,000
1996 205,000 92,000 305,000 ('97-99) 1,000
* In addition to the named executive officers, Beth E. Mooney,
Executive Vice President and Chief Operating Officer-DPL Inc.,
and James P. Torgerson, Vice President, Chief Financial Officer
and Treasurer-DPL Inc., joined DPL Inc. in mid-year 1998.
III-7
<PAGE>
(1) Amounts in this column represent awards made under the
Management Incentive Compensation Program. Awards are based
on achievement of specific predetermined operating and
management goals in the year indicated and paid in the year
earned or in the following year.
(2) Amounts shown in this column have not been paid, but are
contingent on performance and represent the dollar value of
restricted stock incentive units ("SIU's") awarded to the
named executive officer under the Management Stock Incentive
Plan ("MSIP") based on the closing price of a DPL Inc. common
share on the New York Stock Exchange--Consolidated
Transactions Tape on the date of award. For the plan years
'97-99 and '98-00, the SIU's may be earned only to the extent
that the DPL Inc. average return on equity ("ROE") over a
three-year performance period is above the RRA industry
median. For the '99-01 plan, SIU's may be earned only to the
extent the DPL Inc. average ROE and total return to
shareholders ("TRS") over a three-year performance period is
above the RRA industry median. The weighting of the two
factors is 65% ROE and 35% TRS.
Depending on the performance of DPL Inc., these SIU's may be
earned in amounts ranging from 0% to 100% of the target award
at an ROE between 0 and 100 basis points above median ROE and
from 100% to 150% of target award at an ROE between 100 and
200 basis points above median ROE. For plan years '99-01,
SIU's are earned based on both ROE, as previously stated, and
TRS in amounts ranging from 0-100% of the target award at a
TRS between the 50th and 80th percentile and from 100-200% of
the target award at a TRS between the 80th and 100th percentile.
Units may be earned only if the three-year average ROE is
above 10% for incentive award years '97-99 and '98-00 and if
the TRS exceeds the return on a three-year treasury security
for plan years '99-01. Amounts shown for 1996, 1997 and 1998
reflect target awards. For each SIU which vests, a
participant receives the cash equivalent of one DPL Inc.
common share plus dividend equivalents from the date of
award. Prior to payout at retirement, an individual may
elect to convert a portion of vested SIU's to a cash
equivalent and accrue interest thereon. All payouts of
vested SIU's under the MSIP are deferred until retirement.
(3) Amounts in this column represent employer matching
contributions on behalf of each named executive under the
DP&L Employee Savings Plan made to the DPL Inc. Employee
Stock Ownership Plan.
(4) Annual compensation shown for Mr. Forster for 1997 and 1998
was paid pursuant to an agreement with DPL Inc. and the
Company. Long term compensation award opportunities shown
for 1996, 1997 and 1998 represent the dollar value of
restricted shares awarded to Mr. Forster under the Directors'
Stock Plan which are subject to the same earning and vesting
criteria generally applicable to SIU's. All other
compensation shown for 1998 represents directors fees of
$37,000 and the dollar value of the annual award of
2,700 shares to each non-employee director under the
Directors' Stock Plan and for 1997 represents directors fees
of $32,600 and an award of 2,400 shares under the Directors'
Stock Plan. See "Information Concerning the Board of
Directors and its Committees-Other Matters."
Certain Severance Pay Agreements
- --------------------------------
DPL Inc. entered into severance pay agreements with
each of Messrs. Hill, Koziar and Santo and Mrs. Lansaw providing
for the payment of severance benefits in the event that the
individual's employment with DPL Inc. or its subsidiaries is
terminated under specified circumstances within three years after
a change in control of DPL Inc. or the Company (generally,
defined as the acquisition of 15% or more of the voting
securities or certain mergers...
III-8
<PAGE>
...or other business combinations). The agreements entered into
between 1987 and 1991 require the individuals to remain with DPL
Inc. throughout the period during which any change of control is
pending in order to help put in place the best plan for the
shareholders. The principal severance benefits under each
agreement include payment of the following: (i) the individual's
full base salary and accrued benefits through the date of
termination and any awards for any completed or partial period
under the MICP and the individual's award for the current period
under the MICP (or for a completed period if no award for that
period has yet been determined) fixed at an amount equal to his
average annual award for the preceding three years; (ii) 300% of
the sum of the individual's annual base salary at the rate in
effect on the date of termination (or, if higher, at the rate in
effect as of the time of the change in control) plus the average
amount awarded to the individual under the MICP for the three
preceding years; (iii) all awarded or earned but unpaid SIU's;
and (iv) continuing medical, life, and disability insurance. In
the event any payments under these agreements are subject to an
excise tax under the Internal Revenue Code of 1986, the payments
will be adjusted so that the total payments received on an after-
tax basis will equal the amount the individual would have
received without imposition of the excise tax. The severance pay
agreements are effective for one year but are automatically
renewed each year unless DPL Inc. or the participant notifies the
other one year in advance of its or his intent not to renew.
DPL Inc. has agreed to secure its obligations under the severance
pay agreements by transferring required payments to the Master
Trust. Mr. Forster's agreement with DPL Inc. and the Company
contains similar severance benefits provisions.
Pension Plans
- -------------
The following table sets forth the estimated total annual
benefits payable under the Company retirement income plan and the
supplemental executive retirement plan to executive officers at
normal retirement date (age 65) based upon years of accredited service
and final average annual compensation (including base and incentive
compensation) for the three highest years during the last ten:
Total Annual Retirement Benefits for
Years of Accredited Service at Age 65
Final Average -------------------------------------
Annual Earnings 10 Years 15 Years 20-30 Years
- ----------------------------------------------------------
$ 200,000 $ 52,000 $ 78,000 $104,000
400,000 109,000 163,500 218,000
600,000 166,000 249,000 332,000
800,000 223,000 334,500 446,000
1,000,000 280,000 420,000 560,000
1,200,000 337,000 505,500 674,000
1,400,000 394,000 591,000 788,000
The years of accredited service for the named executive
officers are Mr. Hill -- 29 yrs.; Mr. Koziar -- 29 yrs.;
Mrs. Lansaw -- 19 yrs.; and Mr. Santo -- 23 yrs. Years of
service under the retirement income plan are capped at 30 years,
however, the retirement and supplemental plans, taken together,
can provide full benefits after 20 years of accredited service.
Benefits are...
III-9
<PAGE>
...computed on a straight-life annuity basis,are subject to
deduction for Social Security benefits and may be reduced by
benefits payable under retirement plans of other employers. For
each year an individual retires prior to age 62, benefits under
the supplemental plan are reduced by 3% or 21% for early
retirement at age 55. Mr. Forster ceased to accrue benefits
under the retirement and supplemental plans effective as of
December 31, 1996 upon his retirement as an employee of DPL Inc.
and the Company.
Item 12 - Security Ownership Of Certain Beneficial Owners And Management
- ------------------------------------------------------------------------------
The Company's stock is beneficially owned by DPL Inc.
Set forth below is information concerning the beneficial
ownership of shares of Common Stock of DPL Inc. by each director
of the Company as of January 31, 1999.
Amount and Nature of
Name of Director Beneficial Ownership (1)
- ---------------- ------------------------
Thomas J. Danis 39,871 shares
James F. Dicke, II 96,220 shares
Peter H. Forster 350,537 shares (2)
Ernie Green 38,597 shares
Jane G. Haley 56,172 shares
Allen M. Hill 233,571 shares (3)
W August Hillenbrand 24,334 shares
David R. Holmes 14,262 shares
Burnell R. Roberts 40,341 shares
Set forth below is information concerning the
beneficial ownership of shares of Common Stock of DPL Inc. by
each executive officer of the Company named in the Summary
Compensation Table (other than executive officers who are
directors of the Company whose security ownership is found above)
as of January 31, 1999.
Amount and Nature of
Name of Executive Officer Beneficial Ownership (1)
- ------------------------- ------------------------
Stephen F. Koziar 14,655 shares
H. Ted Santo 3,932 shares
Judy W. Lansaw 3,704 shares
(1) The number of shares shown represents in each instance less
than 1% of the outstanding Common Shares of DPL Inc.
III-10
<PAGE>
There were 938,067 shares or 0.58% of the total number of Common
Shares beneficially owned by all directors and executive officers
of DPL Inc. and the Company as a group at January 31, 1999. The
number of shares shown includes Common Shares transferred to the
Master Trust for non-employee directors pursuant to the Directors'
Deferred Stock Compensation Plan.
(2) The number of shares shown for Mr. Forster includes 40,537 Common
Shares and 310,000 restricted share equivalents with no voting rights.
(3) The number of shares shown for Mr. Hill includes 33,571 Common
Shares and 200,000 restricted share equivalents with no voting rights.
Item 13 - Certain Relationships And Related Transactions
- ------------------------------------------------------------------------------
None.
III-11
<PAGE>
PART IV
Item 14 - Exhibits, Financial Statement Schedule And Reports On Form 8-K
- ------------------------------------------------------------------------------
(a) Documents filed as part of the Form 10-K
1. Financial Statements
--------------------
See Item 8 - Index to Financial Statements on page II-8,
which page is incorporated herein by reference.
2. Financial Statement Schedule
----------------------------
For the three years in the period ended December 31, 1998:
Page No.
--------
Schedule II - Valuation and qualifying accounts IV-7
The information required to be submitted in Schedules I, III,
IV and V is omitted as not applicable or not required under rules
of Regulation S-X.
IV-1
<PAGE>
3. Exhibits
--------
The following exhibits have been filed with the Securities
and Exchange Commission and are incorporated herein by reference.
Incorporation by Reference
--------------------------
2 Copy of the Agreement of Merger among Exhibit A to the 1986 Proxy
DPL Inc., Holding Sub Inc. and the Statement (File No. 1-2385)
Company dated January 6, 1986
3(a) Regulations and By-Laws of the Company Exhibit 2(e) to Registration
Statement No. 2-68136 to
Form S-16
3(b) Copy of Amended Articles of Exhibit 3(b) to Report on
Incorporation of the Company dated Form 10-K for the year
January 3, 1991 ended December 31, 1991
(File No. 1-2385)
4(a) Copy of Composite Indenture dated as of Exhibit 4(a) to Report on
October 1, 1935, between the Company Form 10-K for the year
and The Bank of New York, Trustee with ended December 31, 1985
all amendments through the Twenty-Ninth (File No. 1-2385)
Supplemental Indenture
4(b) Copy of the Thirtieth Supplemental Exhibit 4(h) to Registration
Indenture dated as of March 1, 1982, Statement No. 33-53906
between the Company and The Bank of New
York, Trustee
4(c) Copy of the Thirty-First Supplemental Exhibit 4(h) to Registration
Indenture dated as of November 1, 1982, Statement No. 33-56162
between the Company and The Bank of New
York, Trustee
4(d) Copy of the Thirty-Second Supplemental Exhibit 4(i) to Registration
Indenture dated as of November 1, 1982, Statement No. 33-56162
between the Company and The Bank of New
York, Trustee
4(e) Copy of the Thirty-Third Supplemental Exhibit 4(e) to Report on
Indenture dated as of December 1, 1985, Form 10-K for the year
between the Company and The Bank of New ended December 31, 1985
York, Trustee (File No. 1-2385)
IV-2
<PAGE>
4(f) Copy of the Thirty-Fourth Supplemental Exhibit 4 to Report on
Indenture dated as of April 1, 1986, Form 10-Q for the quater
between the Company and The Bank of New ended June 30, 1986
York, Trustee (File No. 1-2385)
4(g) Copy of the Thirty-Fifth Supplemental Exhibit 4(h) to Report on
Indenture dated as of December 1, 1986, Form 10-K for the year
between the Company and The Bank of New ended December 31, 1986
York, Trustee (File No. 1-9052)
4(h) Copy of the Thirty-Sixth Supplemental Exhibit 4(i) to Registration
Indenture dated as of August 15, 1992, Statement No. 33-53906
between the Company and The Bank of New
York, Trustee
4(i) Copy of the Thirty-Seventh Supplemental Exhibit 4(j) to Registration
Indenture dated as of November 15, 1992, Statement No. 33-56162
between the Company and The Bank
of New York, Trustee
4(j) Copy of the Thirty-Eighth Supplemental Exhibit 4(k) to Registration
Indenture dated as of November 15, 1992, Statement No. 33-56162
between the Company and The Bank
of New York, Trustee
4(k) Copy of the Thirty-Ninth Supplemental Exhibit 4(k) to Registration
Indenture dated as of January 15, 1993, Statement No. 33-57928
between the Company and The Bank of New
York, Trustee
4(l) Copy of the Fortieth Supplemental Exhibit 4(m) to Report on
Indenture dated as of February 15, 1993, Form 10-K for the year
between the Company and The Bank ended December 31, 1992
of New York, Trustee (File No. 1-2385)
10(a) Description of Management Incentive Exhibit 10(d) to Report on
Compensation Program for Certain Form 10-K for the year
Executive Officers ended December 31, 1986
(File No. 1-9052)
10(b) Copy of Severance Pay Agreement with Exhibit 10(g) to Report on
Certain Executive Officers Form 10-K for the year
ended December 31, 1987
(File No. 1-2385)
IV-3
<PAGE>
10(c) Copy of Supplemental Executive Exhibit 10(f) to Report on
Retirement Plan amended August 6, 1991 Form 10-K for the year
ended December 31, 1991
(File No. 1-2385)
10(d) Amended description of Directors' Exhibit 10(d) to Report on
Deferred Stock Compensation Plan Form 10-K for the year
effective January 1, 1993 ended December 31, 1993
(File No. 1-2385)
10(e) Amended description of Deferred Exhibit 10(e) to Report on
Compensation Plan for Non-Employee Form 10-K for the year
Directors effective January 1, 1993 ended December 31, 1993
(File No. 1-2385)
10(f) Copy of Management Stock Incentive Exhibit 10(f) to Report on
Plan amended January 1, 1993 Form 10-K for the year
ended December 31, 1993
(File No. 1-2385)
18 Copy of preferability letter relating Exhibit 18 to Report on
to change in accounting for unbilled Form 10-K for the year
revenues from Price Waterhouse LLP ended December 31, 1988
(File No. 1-2385)
The following exhibits are filed herewith:
Page No.
--------
4(m) Copy of the Forty-First Supplemental
Indenture dated as of February 1, 1999,
between the Company and the Bank of New
York, Trustee
21 Copy of List of Subsidiaries of the Company
(b) Reports on Form 8-K
-------------------
None.
IV-4
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 30, 1999 /s/Allen M. Hill
-------------------------------------
Allen M. Hill
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
/s/Paul R. Anderson Controller (principal March 30, 1999
- ------------------------ accounting officer)
(P. R. Anderson)
Director
- ------------------------
(T. J. Danis)
Director
- ------------------------
(J. F. Dicke, II)
/s/Peter H. Forster Director and Chairman March 30, 1999
- ------------------------
(P. H. Forster)
Director
- ------------------------
(E. Green)
/s/Jane G. Haley Director March 30, 1999
- ------------------------
(J. G. Haley)
IV-5
<PAGE>
/s/Allen M. Hill Director, President and March 30, 1999
- ------------------------ Chief Executive Officer
(A. M. Hill)
Director
- ------------------------
(W A. Hillenbrand)
/s/David R. Holmes Director March 30, 1999
- ------------------------
(D. R. Holmes)
/s/Burnell R. Roberts Director March 30, 1999
- -------------------------
(B. R. Roberts)
/s/James P. Torgerson Vice President, CFO and March 30, 1999
- ------------------------- Treasurer (principal
(J. P. Torgerson) financial officer
IV-6
<PAGE>
Schedule II
THE DAYTON POWER AND LIGHT COMPANY
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1998, 1997 and 1996
- ------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------------------------------
Additions
Balance at ---------------- Balance
Beginning of Charged at End of
Description Period to Income Other Deductions(1) Period
- ------------------------------------------------------------------------------
------------------------thousands----------------------
1998:
Deducted from accounts
receivable--
Provision for
uncollectible accounts $4,657 $8,182 $- $8,182 $4,657
1997:
Deducted from accounts
receivable--
Provisions for
uncollectible accounts $5,083 $5,515 $- $5,941 $4,657
1996:
Deducted from accounts
receivable--
Provisions for
uncollectible accounts $6,481 $4,056 $- $5,454 $5,083
(1) Amounts written off, net of recoveries of accounts previously written off.
IV-7
<PAGE>
- ------------------------------------------------------------
THE DAYTON POWER AND LIGHT COMPANY
AND
THE BANK OF NEW YORK
(formerly Irving Trust Company)
Trustee
--------------
Forty-First Supplemental Indenture
--------------
Dated as of February 1, 1999
- ------------------------------------------------------------
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
Forty-First Supplemental Indenture
Dated as of February 1, 1999
-----------
TABLE OF CONTENTS
Page
----
Parties 1
Recitals 1
ARTICLE ONE.
Amendment to First Mortgage as Amended.
Amendment to First Mortgage as Amended 4
ARTICLE TWO.
Miscellaneous.
Sec. 1 Forty-First Supplemental Indenture to Form Part of
First Mortgage. 4
Sec. 2 Definitions in First Mortgage Shall Apply to
Forty-First Supplemental Indenture 4
Sec. 3 Execution in Counterparts 5
Testimonium 5
Signatures 5
Acknowledgments 6
-1-
<PAGE>
FORTY-FIRST SUPPLEMENTAL INDENTURE, dated as of
February 1, 1999 between The Dayton Power and Light Company,
a corporation of the State of Ohio (hereinafter sometimes
called the Company), party of the first part, and The Bank
of New York (formerly Irving Trust Company), a corporation
of the State of New York, as Trustee (hereinafter sometimes
called the Trustee), party of the second part.
Whereas, the Company has heretofore executed and
delivered to Irving Trust Company (now The Bank of New York)
a certain Indenture, dated as of October 1, 1935 (hereinafter
sometimes called the First Mortgage), to secure the payment of
the principal of and interest on an issue of bonds of the
Company, unlimited in aggregate principal amount (hereinafter
sometimes called the Bonds); and
Whereas, the Company has heretofore executed and
delivered to the Trustee forty supplemental indentures
numbered, dated and providing for their respective series of
First Mortgage Bonds, all as set forth in the tabulation
below (the First Mortgage as amended and supplemented by the
First through the Fortieth Supplemental Indentures is
hereinafter called the First Mortgage as amended):
Principal
Supplemental Series Amount
Indenture Dated As Of Provided For Outstanding
- ------------ ------------ ------------ -----------
First March 1, 1937 3.25% Series None
Due 1962
Second January 1, 1940 3% Series None
Due 1970
Third October 1, 1945 2.75% Series None
Due 1975
Fourth January 1, 1948 3% Series None
Due 1978
Fifth December 1, 1948 3% Series A None
Due 1978
Sixth February 1, 1952 3.25% Series None
Due 1982
Seventh September 1, 1954 3% Series None
Due 1984
Eighth November 1, 1957 5% Series None
Due 1987
Ninth March 1, 1960 5.125% Series None
Due 1990
Tenth June 1, 1963 4.45% Series None
Due 1993
Eleventh May 1, 1967 5.625% Series None
Due 1997
Twelfth June 15, 1968 6.75% Series None
Due 1998
-2-
<PAGE>
Principal
Supplemental Series Amount
Indenture Dated As Of Provided For Outstanding
- ------------ ----------- ------------ -----------
Thirteenth October 1, 1969 8.25% Series None
Due 1999
Fourteenth June 1, 1970 9.5% Series None
Due 2000
Fifteenth August 1, 1971 8.125% Series None
Due 2001
Seventeenth November 1, 1973 8% Series None
Due 2003
Eighteenth October 1, 1974 10.125% Series None
Due 1981
Nineteenth August 1, 1975 10.70% Series None
Due 2005
Twentieth November 15, 1976 8.75% Series None
Due 2006
Twenty-First April 15, 1977 6.35% Series $11,800,000
Due 2007
Twenty-Second October 15, 1977 8.5% Series None
Due 2007
Twenty-Third April 1, 1978 8.95% Series None
Due 1998
Twenty-Fourth November 1, 1978 9.5% Series None
Due 2003
Twenty-Fifth August 1, 1979 10.25% Series None
Due 1999
Twenty-Sixth December 1, 1979 12.125% Series None
Due 2009
Twenty-Seventh February 1, 1981 14.625% Series None
Due 1988
Twenty-Eighth February 18, 1981 14.5% Series None
Due 1988
Twenty-Ninth September 1, 1981 17% Series None
Due 1991
Thirtieth March 1, 1982 16.75% Series None
Due 2012
Thirty-First November 1, 1982 11.5% Series None
Due 2012-A
Thirty-Second November 1, 1982 11.5% Series None
Due 2012-B
-3-
<PAGE>
Principal
Supplemental Series Amount
Indenture Dated As Of Provided For Outstanding
- ------------ ----------- ------------ -----------
Thirty-Third December 1, 1985 9.5% Series None
Due 2015
Thirty-Fourth April 1, 1986 9% Series None
Due 2016
Thirty-Fifth December 1, 1986 8.875% Series None
Due 2016
Thirty-Sixth August 15, 1992 6.40% Pollution $32,300,000
Control Series
1992-A Due 2027
6.40% Pollution $27,800,000
Control Series
1992-B Due 2027
Thirty-Seventh November 15, 1992 6.50% Pollution $48,000,000
Control Series
1992-C Due 2022
Thirty-Eighth November 15, 1992 8.40% Series $225,000,000
Due 2022
Thirty-Ninth January 15, 1993 8.15% Series $226,000,000
Due 2026
Fortieth February 15, 1993 7.875% Series $220,000,000
Due 2024
Whereas, the Company, by resolutions duly adopted by
its Board of Directors, has determined to make a certain
amendment hereinafter set forth in the terms and provisions
of the First Mortgage as amended; and
Whereas, Article Eighteen of the First Mortgage as
amended provides that the Company and the Trustee may from
time to time enter into one or more indentures supplemental
to the First Mortgage for the purpose of curing any ambiguity
or of curing or correcting any defective provisions, contained
in the First Mortgage or in any supplemental indenture; and
Whereas, the Company has requested the Trustee, pursuant
to Section 1 of Article Eighteen of the First Mortgage as
amended, to enter into this Forty-First Supplemental Indenture
for the purpose of curing an ambiguity or of curing or correcting
a defective provision in Section 3 of Article Eleven of the First
Mortgage as amended; and
-4-
<PAGE>
Whereas, by said resolutions the Board of Directors of
the Company duly approved the form, terms and provisions of
this Forty-First Supplemental Indenture and duly authorized
and directed the execution by the Company of an indenture in the
form and having the terms and the provisions so approved; and
Whereas, all things necessary to make this Indenture a
valid and binding agreement supplemental to the First Mortgage,
have been done and performed.
ARTICLE ONE.
Amendment of the First Mortgage.
That part of the first paragraph of Section 3 of
Article Eleven of the First Mortgage as amended which
precedes subdivision (1) of said Section is hereby restated
so as to read as follows:
"So long as the Company is not in default under
any of the provisions of this Indenture, the
Company may obtain the release of any of the
mortgaged and pledged property, including, without
limiting the generality of the foregoing, any one
or more of the Company's heating, gas or water
properties substantially as an entirety (provided,
however, that the electric property of the Company
shall not in any event be released substantially
as an entirety and, further, that prior lien bonds
deposited with the Trustee shall not be released
except as provided in Article Nine hereof), and
the Trustee shall release the same from the lien
hereof upon the application of the Company and
receipt by the Trustee of"
ARTICLE TWO.
Miscellaneous.
SECTION 1. The provisions of this Forty-First
Supplemental Indenture shall become effective immediately
upon the execution and delivery hereof. From and after such
time, this Forty-First Supplemental Indenture shall form a
part of the First Mortgage as amended and all the terms and
conditions hereof shall be deemed to be part of the terms of
the First Mortgage as amended, as fully and with the same
effect as if they had been set forth in the First Mortgage
as originally executed. Except as modified or amended by
this Forty-First Supplemental Indenture, the First Mortgage
as amended shall remain and continue in full force and
effect in accordance with the terms and provisions thereof,
and all the covenants, conditions, terms and provisions of
the First Mortgage as amended with respect to the Trustee
shall remain in full force and effect and be applicable to
the Trustee under this Forty-First Supplemental Indenture in
the same manner as though set out herein at length. All
representations and recitals contained in this Forty-First
Supplemental Indenture are made by and on behalf of the
Company, and the Trustee is in no way responsible therefor
or for any statement therein contained.
-5-
<PAGE>
SECTION 2. The terms defined in Article One of the
First Mortgage as amended, when used in this Forty-First
Supplemental Indenture, shall, respectively, have the
meanings set forth in such Article.
SECTION 3. This Forty-First Supplemental Indenture may
be executed in several counterparts and each counterpart
shall be an original instrument.
In Witness Whereof, The Dayton Power and Light Company
has caused this instrument to be signed on its behalf by its
President or a Vice President and its corporate seal to be
hereunto affixed and attested by its Secretary or an
Assistant Secretary, in the City of Dayton, Ohio, and The
Bank of New York has caused this instrument to be signed on
its behalf by a Vice President or an Assistant Vice
President and its corporate seal to be hereunto affixed and
attested by an Assistant Treasurer, in The City of New York,
New York, as of the day and year first above written.
The Dayton Power and Light Company
[SEAL] By: /s/James P. Torgerson
----------------------------------
Attest:
/s/Stephen F. Koziar Jr.
- ------------------------
Signed and acknowledged in our presence by
The Dayton Power and Light Company.
Name: /s/Michael D. Lopez
- -------------------------
Name: /s/Timothy G. Rice
- ------------------------
-6-
<PAGE>
The Bank of New York
[SEAL] By: /s/Michael Culhane
----------------------
Attest:
/s/Mary Beth Lewicki
- --------------------
Signed and acknowledged in our presence by
The Bank of New York.
Name: /s/Patrick O'Leary
- ------------------------
Name: /s/Anthony M. Hitchman
- ----------------------------
-7-
<PAGE>
State of Ohio, ) ss.:
County of Montgomery, )
On this first day of February, 1999, personally
appeared before me, a Notary Public within and for said
County in the State aforesaid, James P. Torgerson, and
Stephen F. Koziar, to me known and known to me to be,
respectively, a Vice President, CFO and Treasurer and the
Group Vice President and Secretary of The Dayton Power and
Light Company, one of the corporations which executed the
foregoing instrument, who severally acknowledged that they
did sign and seal said instrument as such Vice President,
CFO and Treasurer and Group Vice President and Secretary for
and on behalf of said corporation and that the same is their
free act and deed as such Vice President, CFO and Treasurer
and Group Vice President and Secretary , respectively, and
the free and corporate act and deed of said corporation; and
said Stephen F. Koziar, being by me duly sworn, did depose
and say: that he resides in Montgomery County; that he is a
Group Vice President and Secretary of The Dayton Power and
Light Company, one of the corporations described in and
which executed the above instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by order of
the Board of Directors of said corporation; and that he
signed his name thereto by like order.
In Witness Whereof I have hereunto set my hand and
official seal.
[SEAL]
/s/Timothy G. Rice
------------------
State of New York, ) ss.:
County of New York, )
On this second day of February, 1999, personally appeared
before me, a Notary Public within and for said County in the
State aforesaid, Michael Culhane and Mary Beth Lewicki, to me
known and known to me to be, respectively, a Vice President
and an Assistant Vice President of The Bank of New York, one
of the corporations which executed the foregoing instrument,
who severally acknowledged that they did sign and seal said
instrument as such Vice President and Assistant Vice
President for and on behalf of said corporation and that the
same is their free act and deed as such Vice President and
Assistant Vice President, respectively, and the free and
corporate act and deed of said corporation; and said Michael
Culhane being by me duly sworn, did depose and say: that he
resides in Brooklyn, New York; that he is a Vice President,
of The Bank of New York, one of the corporations described...
-8-
<PAGE>
...in and which executed the above instrument; that he knows
the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of such corporation; and
that he signed his name thereto by like order.
In Witness Whereof I have hereunto set my hand and
official seal.
[SEAL]
/s/William J. Cassels
---------------------
This instrument prepared by
/s/Timothy G. Rice
----------------------------------
Senior Counsel
The Dayton Power and Light Company
1065 Woodman Drive
Dayton, Ohio 45432
-9-
Exhibit 21
SUBSIDIARIES OF THE DAYTON POWER AND LIGHT COMPANY
The Dayton Power and Light Company had the following wholly
owned subsidiaries on March 30, 1999:
Name State of Incorporation
- ---- ----------------------
MacGregor Park, Inc. Ohio
MVE, Inc. Ohio
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
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0
22900
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<TOTAL-OPERATING-EXPENSES> 1042400
<OPERATING-INCOME-LOSS> 241800
<OTHER-INCOME-NET> 16300
<INCOME-BEFORE-INTEREST-EXPEN> 258100
<TOTAL-INTEREST-EXPENSE> 88600
<NET-INCOME> 169500
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<EARNINGS-AVAILABLE-FOR-COMM> 168600
<COMMON-STOCK-DIVIDENDS> 238800
<TOTAL-INTEREST-ON-BONDS> 86000
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