UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 1-2385
------
THE DAYTON POWER AND LIGHT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 31-0258470
---------------------------------- --------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
COURTHOUSE PLAZA SOUTHWEST
DAYTON, OHIO 45402
-------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(937) 224-6000
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- ------
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this form with the reduced disclosure
format.
Indicate the number of shares of the issuer's classes of common stock, as of the
latest practicable date.
Common Stock, $.01 par value 41,172,173 Shares
--------------------------------------- --------------------------------------
(Title of each class) (Outstanding at September 30, 2000)
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Results of Operations 1
Consolidated Statement of Cash Flows 2
Consolidated Balance Sheet 3
Consolidated Statement of Shareholder's Equity 5
Notes to Consolidated Financial Statements 6
Operating Statistics 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 13
PART II. OTHER INFORMATION
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
i
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Utility Service Revenues --
Electric ...................................... $ 303.9 $ 304.1 $ 826.2 $ 812.7
Gas ........................................... 33.2 15.7 165.9 147.2
------ ------ ------ ------
Total utility service revenues ..... 337.1 319.8 992.1 959.9
EXPENSES
Fuel and purchased power ........................ 75.5 84.6 201.0 207.4
Gas purchased for resale ........................ 19.6 5.3 104.7 85.5
Operation and maintenance ....................... 47.1 51.0 143.4 136.6
Depreciation and amortization ................... 32.8 32.4 100.7 97.1
Amortization of regulatory assets, net .......... 2.0 .5 14.7 12.1
General taxes ................................... 31.0 34.7 96.8 103.1
------ ------ ------ ------
Total expenses .................... 208.0 208.5 661.3 641.8
------ ------ ------ ------
Operating Income ................................ 129.1 111.3 330.8 318.1
OTHER INCOME (DEDUCTIONS)
Investment income ............................... 2.2 2.0 6.6 18.9
Other income (deductions) ....................... (6.2) .8 (16.4) (2.9)
Interest expense ................................ (20.7) (19.8) (55.0) (65.3)
------ ------ ------ ------
Income Before income taxes and Extraordinary Item 104.4 94.3 266.0 268.8
Income taxes .................................... 37.4 38.0 95.7 103.8
------ ------ ------ ------
Income Before Extraordinary Item ................ 67.0 56.3 170.3 165.0
Extraordinary item, net of taxes ................ 41.4 - 41.4 -
------ ------ ------ ------
Net Income ...................................... 25.6 56.3 128.9 165.0
Preferred dividends ............................. .2 .2 .7 .7
------ ------ ------ ------
Earnings on Common Stock ........................ $ 25.4 $ 56.1 $ 128.2 $ 164.3
====== ====== ====== ======
</TABLE>
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-1-
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
----------------------------
2000 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Cash received from utility customers ........... $ 1,002.3 $ 986.1
Other operating cash receipts .................. 16.8 19.5
Cash paid for:
Fuel and purchased power ................. (197.2) (208.2)
Purchased gas ............................ (123.8) (109.2)
Operation and maintenance labor .......... (60.1) (58.0)
Nonlabor operating expenditures .......... (122.8) (96.6)
Interest ................................. (63.0) (69.2)
Income taxes ............................. (88.8) (57.4)
Property, excise and payroll taxes ....... (116.0) (115.2)
-------- ------
Net Cash Provided by Operating Activities ...... 247.4 291.8
-------- ------
INVESTING ACTIVITIES
Capital expenditures ........................... (77.2) (62.2)
Purchases of available-for-sale financial assets - (197.2)
Sales of available-for-sale financial assets ... - 58.0
-------- ------
Net Cash Used for Investing Activities ......... (77.2) (201.4)
-------- ------
FINANCING ACTIVITIES
Dividends paid on common stock ................. (189.6) (55.8)
Retirement of short-term debt .................. (73.3) (38.6)
Parent company capital contribution ............ - 245.0
Retirement of long-term debt ................... (.4) (237.5)
Dividends paid on preferred stock .............. (.7) (.7)
-------- ------
Net Cash Used for Financing Activities ......... (264.0) (87.6)
-------- ------
CASH AND TEMPORARY CASH INVESTMENTS--
Net change ..................................... (93.8) 2.8
Balance at beginning of period ................. 95.5 1.9
-------- ------
Balance at end of period ....................... $ 1.7 $ 4.7
======== ======
</TABLE>
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-2-
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
At At
September 30, December 31,
2000 1999
--------------------------
<S> <C> <C>
ASSETS
PROPERTY
Electric property ............................................ $ 3,448.6 $ 3,384.1
Gas property ................................................. 336.3 330.6
Other property ............................................... 38.8 58.9
-------- --------
Total property ......................................... 3,823.7 3,773.6
Less--
Accumulated depreciation and amortization .............. (1,688.7) (1,602.6)
-------- --------
Net property ...................................... 2,135.0 2,171.0
-------- --------
CURRENT ASSETS
Cash and temporary cash investments .......................... 1.7 95.5
Accounts receivable, less provision for uncollectible accounts
of $2.3 and $4.3, respectively ......................... 192.0 206.6
Inventories, at average cost ................................. 94.2 92.9
Prepaid taxes ................................................ 12.9 94.6
Other ........................................................ 47.7 66.9
-------- --------
Total current assets ................................... 348.5 556.5
-------- --------
OTHER ASSETS
Deferred compensation plan ................................... 173.8 116.6
Income taxes recoverable through future revenues ............. 28.8 168.5
Other regulatory assets ...................................... 155.3 53.3
Other ........................................................ 58.5 87.6
-------- --------
Total other assets ..................................... 416.4 426.0
-------- --------
Total Assets ................................................. $ 2,899.9 $ 3,153.5
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-3-
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
(CONTINUED)
<TABLE>
<CAPTION>
At At
September 30, December 31,
2000 1999
-----------------------
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder's equity--
Common stock ........................... $ .4 $ .4
Other paid-in capital .................. 769.8 769.7
Accumulated other comprehensive income.. 33.2 13.6
Earnings reinvested in the business .... 452.5 513.9
-------- --------
Total common shareholders' equity.. 1,255.9 1,297.6
Preferred stock .............................. 22.9 22.9
Long-term debt ............................... 661.6 661.2
-------- --------
Total capitalization .............. 1,940.4 1,981.7
-------- --------
CURRENT LIABILITIES
Accounts payable ............................. 82.0 126.2
Accrued taxes ................................ 102.7 164.2
Accrued interest ............................. 8.6 19.7
Short-term debt .............................. 49.7 123.1
Other ........................................ 32.6 60.9
-------- --------
Total current liabilities ......... 275.6 494.1
-------- --------
DEFERRED CREDITS AND OTHER
Deferred taxes ............................... 428.6 453.9
Unamortized investment tax credit ............ 64.0 66.3
Deferred compensation ........................ 116.4 97.2
Other ....................................... 74.9 60.3
-------- --------
Total deferred credits and other.. 683.9 677.7
-------- --------
Total Capitalization and Liabilities ......... $ 2,899.9 $ 3,153.5
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-4-
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
Common Stock 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>
2000:
Beginning balance.......... 41,172,173 $.4 $769.7 $13.6 $513.9 $1,297.6
Net income................. 128.9
Unrealized gains, net of
reclassification
adjustments, after tax.. 19.6
Total comprehensive
income................. 148.5
Common stock dividends..... (189.6) (189.6)
Preferred stock dividends.. (.7) (.7)
Other...................... .1 .1
----------------- ------------ --------------- ------------------ ----------------- ----------------
Ending balance............. 41,172,173 $.4 $769.8 $33.2 $452.5 $1,255.9
================= ============ =============== ================== ================= ================
1999:
Beginning balance.......... 41,172,173 $.4 $788.2 $33.6 $450.8 $1,273.0
Net income................. 165.0
Unrealized gains, net of
reclassification
adjustments, after tax.. (.5)
Total comprehensive 164.5
income...................
Common stock dividends..... (81.9) (81.9)
Preferred stock dividends.. (.7) (.7)
Parent company capital
contribution............ 245.0 245.0
Other...................... .1 .1
----------------- ------------ --------------- ------------------ ----------------- ----------------
Ending balance............. 41,172,173 $.4 $1,033.3 $33.1 $533.2 $1,600.0
================= ============ =============== ================== ================= ================
</TABLE>
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Dayton Power and Light Company ("DP&L" or "the Company") is a wholly
owned subsidiary of DPL Inc. DP&L has prepared the consolidated financial
statements in this report without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto in the Company's 1999 Annual Report on Form 10-K.
2. Reclassifications have been made in certain prior years' amounts to
conform to the current reporting presentation of the Company.
In the opinion of management, the information included in this Form 10-Q
reflects all adjustments that are necessary for a fair statement of the results
of operations for the periods presented. Any adjustments are of a normal
recurring nature.
3. Costs associated with all planned major repair and maintenance activities,
primarily power plant outages, are recognized at the time the work is performed.
Outage costs include labor, materials and supplies, and outside services
required to maintain company equipment and facilities. These costs are either
capitalized or expensed based on Company defined criteria, identifying specific
units of property to be capitalized.
4. In June 2000, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an amendment of FASB
Statement No. 133." This statement addresses a limited number of issues causing
implementation difficulties for a large number of entities getting ready to
apply Statement No. 133. The effective date of Statement No. 133 is the fiscal
year beginning after June 15, 2000. Accordingly, the Company will adopt
Statement No. 133 at the beginning of fiscal year 2001. Implementation of this
statement is not expected to have a material impact on the Company's financial
position or results of operations.
5. DP&L received approval from the Public Utilities Commission of Ohio (PUCO)
for its customer transition plan during the month of September 2000. The plan,
which begins in January 2001, provides a three-year transition period (the
market development period) ending December 31, 2003, at which time the Company's
generation business unit will be fully merchant. The plan, as approved, provides
for the recovery of DP&L's transition costs, including generation-related
regulatory assets, during the market development period. Based on the Company's
assessment of recoveries of regulatory assets during the market development
period and actual generation-related regulatory assets, a write-off of $63.7
million before tax benefits ($41.4 million net of taxes) was recorded in the
third quarter of 2000 as an extraordinary item in accordance with FASB Statement
No. 101, "Regulated Enterprises-Accounting for the Discontinuation of
Application of FASB Statement No. 71." The assessment of the impact of the plan
was based on assumptions for sales levels during the market development period.
-6-
<PAGE>
6. The reconciliation of segment profit to DP&L's consolidated income before
income taxes and extraordinary item is as follows:
<TABLE>
<CAPTION>
SEGMENT INFORMATION For the three months For the nine months
ended September 30, ended September 30,
$ in millions 2000 1999 2000 1999
----------------------------------------------------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
ELECTRIC
Revenues from external customers $303.9 $304.1 $826.2 $812.7
Intersegment revenues - .6 - 1.9
Earnings before interest, taxes, and
extraordinary item 128.4 113.4 317.7 294.5
NATURAL GAS
Revenues from external customers 33.3 15.7 165.9 147.2
Intersegment revenues .6 1.8 1.8 3.6
Earnings before interest, taxes, and
extraordinary item 2.8 (1.6) 23.0 25.0
TOTAL
Revenues from external customers 337.2 319.8 992.1 959.9
Intersegment revenues .6 2.4 1.8 5.5
Earnings before interest, taxes, and
extraordinary item 131.2 111.8 340.7 319.5
PROFIT OR LOSS RECONCILIATION (a)
Total earnings before interest, taxes, and
extraordinary item 131.2 111.8 340.7 319.5
Unallocated corporate expenses (2.1) (.5) (9.9) (1.4)
Investment income 2.2 2.0 6.6 18.9
Other income and deductions (6.2) .8 (16.4) (2.9)
Interest expense (20.7) (19.8) (55.0) (65.3)
------------------- -------------------- ------------------- --------------------
Income before income taxes and
extraordinary item $104.4 $ 94.3 $266.0 $268.8
=================== ==================== =================== ====================
</TABLE>
(a) For categories not reconciled above, segment totals equal consolidated
totals.
-7-
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
OPERATING STATISTICS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- ---------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
ELECTRIC
Sales (millions of kWh)--
Residential.................................... 1,218 1,309 3,566 3,666
Commercial..................................... 931 927 2,637 2,577
Industrial..................................... 1,254 1,272 3,676 3,712
Other 1,307 1,084 3,267 2,927
--------- -------- --------- ---------
Total..................................... 4,710 4,592 13,146 12,882
Revenues (thousands of dollars)--
Residential.................................... $110,412 $116,756 $313,685 $318,817
Commercial..................................... 62,451 61,460 180,380 176,188
Industrial..................................... 60,886 68,208 177,910 185,919
Other 70,179 57,684 154,261 131,808
-------- -------- ------- -------
Total..................................... $303,928 $304,108 $826,236 $812,732
Other Electric Statistics--
Average price per kWh - Retail (cents)......... 6.75 6.70 6.89 6.73
Average price per kWh - Wholesale (cents)...... 4.77 3.76 4.71 3.36
Fuel cost per net kWh generated (cents)........ 1.13 1.29 1.16 1.27
Electric customers at end of period............ 497,000 491,941 497,000 491,941
Average kWh use per residential customer....... 2,750 2,982 8,057 8,356
Peak demand-maximum one hour use (MW), (net)... 2,866 3,130 2,866 3,130
</TABLE>
NOTE: Sales and revenue numbers include electric peaking generation capacity
sales.
-8-
<PAGE>
THE DAYTON POWER AND LIGHT COMPANY
OPERATING STATISTICS
(CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
GAS
Sales (millions of MCF)--
Residential......................................... 2,401 1,029 17,071 16,691
Commercial.......................................... 985 525 5,398 5,390
Industrial.......................................... 250 235 1,849 1,705
Other 125 36 737 852
Transportation gas delivered........................ 3,478 3,549 14,511 13,868
----- ----- ------ ------
Total.......................................... 7,239 5,374 39,566 38,506
Revenues (thousands of dollars)--
Residential......................................... $ 21,197 $ 8,163 $107,804 $ 94,059
Commercial.......................................... 7,160 2,932 31,917 27,607
Industrial.......................................... 1,693 1,142 9,852 8,187
Other 3,188 3,448 16,289 17,363
----- ----- ------ ------
Total.......................................... $ 33,238 $ 15,685 $165,862 $147,216
Other Gas Statistics--
Average price per MCF--retail customers (dollars)... $ 8.22 $ 6.81 $ 6.14 $ 5.44
Gas customers at end of period...................... 309,186 304,818 309,186 304,818
Degree Days (based on calendar month)--
Heating............................................. 120 83 3,248 3,381
Cooling............................................. 521 738 806 1,051
</TABLE>
-9-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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.
The Company's earnings before income taxes and extraordinary item for the
third quarter of 2000 was $67.0 million, up 19% from $56.3 million earned in the
third quarter a year ago. Year-to-date earnings before income taxes and
extraordinary item was $170.3, up 3% from $165.0 million earned in the same
period in 1999.
The earnings increase compared to the third quarter of last year is
primarily attributable to higher electric and gas operating margins, partially
offset by an increase in other deductions. The earnings increase for the
year-to-date period is primarily due to increased electric operating margins and
lower interest expense, partially offset by a decrease in investment income and
an increase in other deductions.
FINANCIAL CONDITION
DP&L completed the sale of its natural gas retail distribution assets and
certain liabiities on October 31, 2000 to Vectren Energy Delivery of Ohio, Inc.
and Indiana Gas Company, Inc. as tenants-in-common ("Vectren") for approximately
$463 million. The sale was completed in accordance with the terms of the related
Asset Purchase Agreement dated December 14, 1999. The transaction was valued
pursuant to an arms-length negotiation between DP&L and Vectren. The purchase
price was paid in cash and is subject to adjustment based upon the finalization
of the closing balance sheet in accordance with the provisions of the Asset
Purchase Agreement. Management believes any such adjustment will not be
material. DPL Inc. will invest the after-tax proceeds from the sale to continue
its regional merchant generation expansion, continue its common share repurchase
program, and reduce outstanding short-term debt.
DP&L and Vectren also entered into a continuing agreement whereby DP&L will
provide transitional support to Vectren in the areas of meter reading, billing,
cash receipts, collections, customer deposits, telecommunication services, and
other miscellaneous services for a predetermined fee.
At September 30, 2000, the Company's cash and temporary cash investment
balance was $1.7 million.
-10-
<PAGE>
DPL Inc. and its subsidiaries have $300 million available through Revolving
Credit Agreements ("Credit Agreements"). At September 30, 2000, DPL Inc. had no
borrowings outstanding under these Credit Agreements. DPL Inc. and its
subsidiaries also have $15 million available in a short-term informal line of
credit. At September 30, 2000, DPL Inc. had no borrowings outstanding from this
line. The Company has $75 million available in short-term informal lines of
credit. At September 30, 2000, the Company had no borrowings outstanding under
these informal lines and $49.7 million in commercial paper outstanding.
DP&L currently has sufficient capacity to issue First Mortgage Bonds to
satisfy its requirements in connection with the financing of its construction
and refinancing programs during the five-year period 2000-2004.
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 and the availability of external funds at reasonable cost.
RESULTS OF OPERATIONS
Electric revenues were essentially flat compared to the third quarter of
1999 as increases in wholesale revenues were offset by a decrease in retail
revenues. Electric revenues for the year-to-date period were $13.5 million
higher due to higher wholesale sales, partially offset by lower retail revenues.
Gas revenues increased $17.6 million from the third quarter last year primarily
due to the impact of higher gas cost recovery factors on revenues, plus higher
sales to residential customers as the result of cooler weather in the third
quarter. For year-to-date compared to last year, gas revenues increased $18.7
million primarily due to the impact of higher gas cost recovery factors on
revenue, partially offset by lower sales attributable to warmer weather in the
first quarter.
Fuel and purchased power decreased $9.1 million and $6.4 million compared
to the third quarter and year-to-date 1999 periods, respectively, primarily due
to the impact of more efficient plant operations, along with lower peak demand
levels, which reduced purchased power costs.
Gas purchased for resale in the third quarter increased $14.3 million
compared to the same quarter last year primarily due to the increases in gas
costs and retail gas sales. For year-to-date compared to last year, gas
purchased for resale increased $19.2 million primarily due to higher gas costs.
Operation and maintenance expense decreased $3.9 million compared to the
third quarter of last year primarily due to lower power production and service
costs. For year-to-date, operation and maintenance expense increased $6.8
million over the same period a year ago primarily due to increased uncollectible
receivable expense, employee benefit costs, insurance costs, and power
production costs.
-11-
<PAGE>
Depreciation and amortization increased $1.9 million and $6.2 million over
the third quarter and year-to-date a year ago, respectively, primarily due to
increased property investment and the amortization of regulatory deferrals
related to fuel expense.
General taxes decreased $3.6 million from third quarter last year and $6.3
million from year-to-date 1999, primarily due to lower taxes resulting from
property tax adjustments for air and water quality expenditures, coupled with
the timing and recognition of credits received related to the Ohio Public
Utility Excise Tax.
Due to the November 1999 transfer of the Company's ownership interest in
the assets and liabilities of MVE, Inc. to Plaza Building, Inc., which is
another wholly-owned subsidiary of DPL Inc., other income decreased $7.0 million
for the third quarter compared to 1999 and investment income decreased $12.3
million compared to year-to-date 1999. Other deductions increased $13.5 million
from year-to-date last year primarily due to increased costs associated with the
elimination of certain compensation programs.
Interest expense increased $.9 million from the third quarter of 1999
primarily due to an increase in short-term interest rates. Interest expense
decreased $10.3 million for the year-to-date period primarily due to a reduction
in first mortgage bonds, partially offset by an increase in short-term interest
rates.
Income taxes decreased $.6 million compared to the third quarter of 1999
due to book to tax timing differences, partially offset by an increase in
taxable income. Income taxes decreased $8.1 million compared to year-to-date
1999 due to lower taxable income coupled with book/tax timing differences.
Third quarter and year-to-date results for 2000 include an extraordinary
charge of $41.4 million for unrecoverable generation-related regulatory assets
associated with the discontinuance of regulatory accounting for the generation
business (see Note 5 to the Consolidated Financial Statements).
OTHER MATTERS
DP&L received approval from the PUCO for its customer transition plan
during the month of September 2000. The plan, which begins in January 2001,
provides a three-year transition period (the market development period) ending
December 31, 2003, at which time the Company's generation business unit will be
fully merchant.
On August 15, 2000, DPL Inc. announced that members of Local 175 Utility
Workers Union of America approved a six-year labor agreement with the Company.
The package includes 3.25% wage increases each year for the next six years,
additional medical and retirement benefits, and employment security through
2005.
-12-
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The carrying value of the Company's debt was $785 million at December 31,
1999, consisting of the Company's first mortgage bonds and guaranteed air
quality development obligations, notes and commercial paper. The fair value of
this debt was $776 million, based on current market prices or discounted cash
flows using current rates for similar issues with similar terms and remaining
maturities. The following table presents the principal cash repayments and
related weighted average interest rates by maturity date for long-term,
fixed-rate debt at December 31, 1999.
<TABLE>
<CAPTION>
Expected Maturity Date
----------------------
2000 2001 2002 2003 2004 Thereafter Total Fair Value
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term Debt
Amount ($ in millions) $.4 $.4 $.4 $.4 $.4 $660.8 $662.8 $651.4
Average rate 6.4% 6.4% 6.4% 6.4% 6.4% 7.4% 7.4%
</TABLE>
Because the long-term debt is at a fixed rate, the primary market risk to
the Company is short-term interest rate risk. The carrying value and fair value
of short-term debt was $125 million with a weighted average interest rate of
5.9% at December 31, 1999. The carrying value and fair value of short-term debt
has been reduced to $49.7 million as of September 30, 2000. The interest expense
risk related to short-term debt at December 31, 1999 was estimated to be
approximately an increase/decrease of $.5 million if the weighted average cost
for each quarter increased/decreased by 10%. Given the reduction in short-term
debt from year-end 1999 to the third quarter 2000, the interest expense risk has
become negligible.
The fair value of available-for-sale securities was $126 million and $62
million at September 30, 2000 and December 31, 1999, respectively. The equity
price risk related to these securities was estimated as the potential
increase/decrease in fair value of $13 million and $6 million at September 30,
2000 and December 31, 1999, respectively, that resulted from a hypothetical 10%
increase/decrease in the market prices.
As of September 30, 2000, there have been no other material changes in the
above information since the end of the preceding fiscal year.
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<PAGE>
PART II. OTHER INFORMATION
Item 5. OTHER INFORMATION.
RATE REGULATION AND GOVERNMENT LEGISLATION
In October 1999, legislation became effective in Ohio that will give
electric utility customers a choice of energy providers starting January 1,
2001. Under the legislation, electric generation, aggregation, power marketing
and power brokerage services supplied to retail customers in Ohio will be deemed
competitive and will not be subject to supervision and regulation by the PUCO.
As required by the legislation, the Company filed its transition plan at the
PUCO on December 20, 1999. The review and hearing process was completed with the
PUCO on June 21, 2000, with the Company reaching agreement with major groups
participating in the filing, including the Staff of the PUCO. The Company
received PUCO approval of its plan on September 21, 2000.
The plan, which begins in January 2001, provides a three-year transition
period ending December 31, 2003, at which time the Company's generation business
unit will be fully merchant. The plan also provides the organizational and
financial flexibility for the Company to continue its corporate realignment
initiatives. The Company has functionally separated its generation,
transmission, and distribution business units and completed the sale of its
natural gas retail distribution operations to Vectren Energy Delivery of Ohio,
Inc. and Indiana Gas Company, Inc. as tenants-in-common on October 5, 2000 for
$463 million in cash.
ENVIRONMENTAL CONSIDERATIONS
The Company and numerous other parties received notification from the Ohio
EPA on July 27, 1994 that it considers them Potentially Responsible Parties
("PRP's") 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 PRP group recently brought an action against the Company and numerous
other parties alleging that the Company and the others are PRP's that should be
liable for a portion of clean-up costs at the site. The Company will vigorously
challenge this action. The final resolution is not expected to have a material
effect on the Company's financial position, earnings or cash flow.
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<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibit is filed herewith:
Exhibit No. Description
-------------- -------------------
2 Copy of Asset Purchase Agreement, dated
December 14, 1999, between The Dayton
Power and Light Company, Indiana Energy,
Inc., and Number-3CHK, Inc. (exclusive
of Exhibits, Schedules, and Ancillary
Agreements, which will be furnished to
the Commission upon request)
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
quarter ended September 30, 2000.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DAYTON POWER AND LIGHT COMPANY
-------------------------------------
(Registrant)
Date: November 14, 2000 /s/ Elizabeth M. McCarthy
----------------------- --------------------------------
Elizabeth M. McCarthy
Vice President and Chief Financial Officer
Date: November 14, 2000 /s/ Stephen F. Koziar, Jr.
----------------------- ---------------------------------
Stephen F. Koziar, Jr.
Group Vice President and Secretary
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