<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended March 31, 1996
DUKE POWER COMPANY
422 South Church Street
Charlotte, North Carolina 28242-0001
704-594-0887
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996 Commission File
Number 1-4928
DUKE POWER COMPANY
(Exact name of registrant as specified in its charter)
North Carolina 56-0205520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
422 South Church Street,
Charlotte, N.C. 28242-0001
(Address of principal executive office)
(Zip Code)
Registrant's telephone number, including area code
704-594-0887
No Change
(Former name, former address and former fiscal year, if changed
since last report)
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 ___
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Number of shares of Common Stock, without par value, outstanding
at March 31, 1996 ..... 204,859,339 shares
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DUKE POWER COMPANY
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income for the Three Months Ended March
31, 1996 and 1995................................................. 2
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1996 and 1995........................................... 3
Consolidated Balance Sheets - March 31, 1996 and December 31, 1995.. 4-5
Consolidated Statements of Capitalization - March 31, 1996 and
December 31, 1995................................................. 6
Notes to Consolidated Financial Statements.......................... 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 8-9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders......... 10
Item 6. Exhibits and Reports on Form 8-K............................ 10
SIGNATURES............................................................ 11
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Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands)
Three Months Ended
March 31
1996 1995
Operating revenues..................................$ 1,162,077 $ 1,111,065
Operating expenses
Fuel used in electric generation................... 176,545 169,368
Net interchange and purchased power................ 109,285 114,259
Other operation and maintenance.................... 330,073 282,130
Depreciation and amortization...................... 122,737 112,735
General taxes ..................................... 66,025 63,159
Total operating expenses ......................... 804,665 741,651
Operating income ................................... 357,412 369,414
Interest expense and other income
Interest expense................................... (71,463) (72,523)
Allowance for funds used during construction and
other deferred returns............................. 28,910 31,597
Other, net ........................................ 2,938 2,048
Total interest expense and other income ........ (39,615) (38,878)
Income before income taxes........................... 317,797 330,536
Income taxes ........................................ 126,493 129,260
Net income .......................................... 191,304 201,276
Dividends on preferred and preference stock.......... 11,127 12,735
Earnings for common stock ........................... $ 180,177 $ 188,541
Common stock data
Average common shares outstanding (thousands) .... 204,859 204,859
Earnings per share ............................... $ 0.88 $ 0.92
Dividends per share .............................. $ 0.51 $ 0.49
See Notes to Consolidated Financial Statements.
2
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DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Three Months Ended
March 31
1996 1995
Cash flows from operating activities
Net income .........................................$ 191,304 $ 201,276
Adjustments to reconcile net income to net cash
provided by operating activities:
Non-cash items
Depreciation and amortization..................... 176,905 168,727
Deferred income taxes and investment tax credit
amortization.................................... (10,759) 6,733
Allowance for equity funds used during
construction ................................... (3,421) (5,928)
Purchased capacity levelization .................. 31,037 (25,894)
Other, net ....................................... 26,780 2,728
(Increase) Decrease in
Accounts receivable ............................. 56,355 (16,518)
Inventory........................................ 9,814 (23,167)
Prepayments...................................... 1,091 (4,969)
Increase (Decrease) in
Accounts payable ................................ (67,745) (56,484)
Taxes accrued ................................... 123,849 96,673
Interest accrued and other liabilities .......... (54,549) (29,579)
Total adjustments................................. 289,357 112,322
Net cash provided by operating activities ...... 480,661 313,598
Cash flows from investing activities
Construction expenditures and other property
additions ........................................ (209,073) (215,142)
External funding for decommissioning ............... (14,118) (14,118)
Investment in nuclear fuel.......................... (6,412) (3,719)
Investment in joint ventures........................ (16,552) (2,326)
Net change in investment securities................. (9,956) (1,128)
Net cash used in investing activities........... (256,111) (236,433)
Cash flows from financing activities
Proceeds from the issuance of
Construction loans and other ...................... - 8,429
Payments for the redemption of
First and refunding mortgage bonds ................ (3,000) (40,000)
Short-term notes payable, net ..................... (118,000) 67,100
Preferred stock ................................... - (2,926)
Construction loans and other....................... (2,170) (512)
Dividends paid ..................................... (115,690) (113,305)
Other............................................... 5,153 (371)
Net cash used in financing activities .......... (233,707) (81,585)
Net increase (decrease) in cash ..................... (9,157) (4,420)
Cash at beginning of period ......................... 45,410 37,430
Cash at end of period ............................... $ 36,253 $ 33,010
See Notes to Consolidated Financial Statements.
3
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DUKE POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
March 31 December 31
1996 1995
ASSETS
Current assets
Cash............................................ $ 36,253 $ 45,410
Short-term investments ......................... 87,787 76,300
Receivables (less allowance for losses:
1996 - $6,679;1995 - $6,352).................. 633,349 689,703
Inventory - at average cost .................... 332,028 341,841
Prepayments and other........................... 21,809 22,900
Total current assets ........................ 1,111,226 1,176,154
Investments and other assets
Investments in joint ventures .................. 179,826 163,274
Other investments, at cost or less ............. 83,664 85,194
Nuclear decommissioning trust funds............. 291,524 273,466
Pre-funded pension cost ........................ 80,000 80,000
Total investments and other assets........... 635,014 601,934
Property, plant and equipment
Electric plant in service (at original cost)
Production..................................... 7,258,416 7,154,332
Transmission................................... 1,537,403 1,532,302
Distribution .................................. 4,136,459 4,105,513
Other.......................................... 1,062,441 1,030,226
Electric plant in service..................... 13,994,719 13,822,373
Less accumulated depreciation and
amortization................................. 5,219,942 5,122,192
Electric plant in service, net................ 8,774,777 8,700,181
Nuclear fuel................................... 712,201 731,691
Less accumulated amortization.................. 467,206 453,921
Nuclear fuel, net............................. 244,995 277,770
Construction work in progress (including
nuclear fuel in process:
1996 - $25,491; 1995 - $25,500)............... 316,454 382,582
Total electric plant, net ................... 9,336,226 9,360,533
Other property - at cost (less accumulated
depreciation:
1996 - $29,519; 1995 - $29,956)............... 379,745 354,713
Total property, plant and equipment, net .... 9,715,971 9,715,246
Deferred debits
Purchased capacity costs ....................... 934,436 965,473
Debt expense, primarily refinancing costs, being
amortized over the terms of related debt...... 178,385 180,930
Regulatory asset related to income taxes ....... 489,450 490,676
Regulatory asset related to DOE assessment fee.. 101,274 101,274
Other .......................................... 111,587 126,797
Total deferred debits ....................... 1,815,132 1,865,150
Total assets .....................................$ 13,277,343 $ 13,358,484
See Notes to Consolidated Financial Statements.
4
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DUKE POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
March 31 December 31
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable................................. $ 214,391 $ 343,692
Notes payable ................................... 37,300 155,300
Taxes accrued ................................... 156,231 34,884
Interest accrued................................. 71,002 73,675
Current maturities of long-term debt and
preferred stock................................ 10,753 12,071
Other............................................ 97,594 149,555
Total current liabilities.................... 587,271 769,177
Long-term debt.................................... 3,713,875 3,711,405
Accumulated deferred income taxes............. 2,375,500 2,382,204
Deferred credits and other liabilities
Investment tax credit ........................... 258,550 261,347
DOE assesssment fee.............................. 101,274 101,274
Nuclear decommissioning costs
externally funded.............................. 291,524 273,466
Other............................................ 404,571 390,427
Total deferred credits and other
liabilities............................... 1,055,919 1,026,514
Preferred and preference stock with sinking fund
requirements.................................... 234,000 234,000
Preferred and preference stock without sinking
fund requirements............................... 450,000 450,000
Common stockholders' equity
Common stock, no par.............................. 1,926,909 1,926,909
Retained earnings................................. 2,933,869 2,858,275
Total common stockholders' equity........... 4,860,778 4,785,184
Total liabilities and stockholders' equity.........$ 13,277,343 $ 13,358,484
See Notes to Consolidated Financial Statements.
5
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DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(unaudited)
(dollars in thousands)
March 31 December 31
1996 1995
Common Stock Equity
Common stock, no par, 300,000,000 shares authorized;
204,859,339 shares outstanding for 1996 and 1995....$ 1,926,909 $ 1,926,909
Retained earnings..................................... 2,933,869 2,858,275
Total common stock equity....................... 4,860,778 4,785,184
Preferred and preference stock (At March 31, 1996 and
December 31, 1995 12,500,000 shares of preferred stock,
10,000,000 shares of preferred stock A, and 1,500,000
shares of preference stock were authorized with or
without sinking fund requirements)
Without sinking fund requirements.................... 450,000 450,000
With sinking fund requirements....................... 234,000 234,000
Total preferred and preference stock ............ 684,000 684,000
Long-term debt
First and refunding mortgage bonds ................... 3,463,281 3,466,281
Capitalized leases ................................... 12,800 7,477
Other long-term debt.................................. 147,239 147,410
Unamortized debt discount and premium, net ........... (60,504) (61,674)
Current maturities of long-term debt ................. (2,253) (4,295)
Subtotal long-term debt............................. 3,560,563 3,555,199
Subsidiary long-term debt
Crescent Resources, Inc.............................. 128,582 130,694
Nantahala Power and Light Company ................... 33,230 33,288
Current maturities of long-term debt ................ (8,500) (7,776)
Subtotal subsidiary long-term debt ................. 153,312 156,206
Total consolidated long-term debt .............. 3,713,875 3,711,405
Total capitalization ..................................$ 9,258,653 $ 9,180,589
See Notes to Consolidated Financial Statements.
6
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DUKE POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Total income taxes paid for the quarter ended March 31 were
$1,667,000 and $12,587,000 for 1996 and 1995, respectively. Interest paid,
net of amounts capitalized, for the quarter ended March 31 was $68,019,000
and $67,591,000 for 1996 and 1995, respectively.
2. The Company is involved in legal, tax and regulatory proceedings
before various courts, regulatory commissions and governmental agencies
regarding matters arising in the ordinary course of business, some of which
involve substantial amounts. Where appropriate, the Company has made
accruals in accordance with Statement of Financial Accounting Standards No.
5 "Accounting for Contingencies," in order to provide for such matters.
Management is of the opinion that the final disposition of these
proceedings will not have a material adverse effect on the results of
operations or the financial position of the Company.
3. These are quarterly financial statements and the amounts reported
in the Consolidated Statements of Income are not necessarily indicative of
amounts expected for the respective years. These amounts may be affected
by seasonal temperature variations, timing of scheduled and unscheduled
maintenance of certain electric generating units, and the Company's policy
of accruing estimates for certain other expenses ratably over twelve months
until final amounts are determined.
4. In the opinion of the Company, the accompanying financial
statements contain adjustments of a normal recurring nature such that the
financial statements present fairly the financial position of the Company
as of the respective dates shown and the results of its operations for the
respective periods then ended.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity And Capital Resources
The South Carolina Public Service Commission, on May 7, 1996, ordered a
rate reduction in the form of a decrement rider of 0.4319 cents per
kilowatt-hour, or an average of approximately 8 percent, affecting South
Carolina retail customers. The rate reduction will be reflected on bills
rendered on or after June 1, 1996. This net decrement rider reflects a
reduction for an interim true-up adjustment associated with Catawba Nuclear
Station purchased capacity costs as well as an increase for demand side
management costs recovery. The rate adjustment was made because, in the
South Carolina retail jurisdiction, cumulative levelized revenues
associated with the recovery of Catawba purchased capacity costs have
exceeded purchased capacity payments and accrual of deferred returns.
During the period January 1, 1996 through March 31, 1996, additions to
property (including nuclear fuel) of $139.4 million and retirements of
$28.1 million resulted in a net increase in gross plant of $111.3 million.
The Company has substantially completed the construction of a
combustion turbine facility in Lincoln County, North Carolina to provide
capacity at periods of peak demand. During 1995, twelve units of the
Lincoln Combustion Turbine Station began commercial operation. The last
four units began commercial operation in the first quarter of 1996, two
units on February 1, 1996 and two units on March 1, 1996.
In 1995, the Company issued two requests for proposals (RFP) to
solicit competitive bids for its future electric generating resources. The
short-term RFP solicited bids to provide options for up to 675 megawatts of
capacity with terms of 1 to 4 years. The long-term RFP solicited bids to
provide up to 300 megawatts of purchased power to be available beginning in
1998 or 1999, for contract periods of between 5 and 20 years in duration.
The Company has evaluated a total of 16 proposals received for both the
short-term RFP and the long-term RFP. The Company has signed a Letter of
Intent with PECO Energy Co. of Philadelphia for the option to purchase up
to 250 megawatts of capacity during the summer months of 1998 through 2001.
Final contract arrangements are currently underway, during which the two
parties may agree to increase the option amount to 350 megawatts. The
long-term RFP is closed and will not be awarded. This completes the
solicitation process which began with the release of the two RFP's in 1995.
The Company normally experiences seasonal peak loads in the summer and
winter which are relatively in balance. On August 14, 1995, the Company
experienced a new all-time peak load of 15,542 megawatts. This peak load
figure excludes both the portion of the demand of the other joint owners of
the Catawba Nuclear Station met by their retained ownership and the load
of Nantahala Power and Light Company.
Fixed charges coverage for the twelve months ended March 31, 1996,
using the SEC method, was 4.91 times. Internal cash generation for the
twelve months ended March 31, 1996 was 92 percent.
The Company is involved in legal, tax and regulatory proceedings
before various courts, regulatory commissions and governmental agencies
regarding matters arising in the ordinary course of business, some of which
involve substantial amounts. Where appropriate, the Company has made
accruals in accordance with Statement of Financial Accounting Standards
No. 5 "Accounting for Contingencies," in order to provide for
such matters. Management is of the opinion that the final
8
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disposition of these proceedings will not have a material adverse effect
on the results of operations or the financial position of the Company.
The Federal Energy Regulatory Commission (FERC) on December 14, 1995
issued an order accepting the Company's open access transmission tariffs
and ordered a hearing on the rates to be charged for service under those
tariffs. The terms and conditions of service are subject to the outcome of
the FERC's final rule and the rates are subject to the outcome of ongoing
proceedings before the FERC. On April 24, 1996, the FERC issued its final
rule. The Company is evaluating any revisions to its transmission tariffs
which may be required as a result of the final rule.
Results Of Operations
Earnings per share for the first quarter 1996 were $0.88, down 4.3%
compared to the same period in 1995. This decrease was primarily due to
increased operating and maintenance expenses.
Revenues for first quarter 1996 increased $51 million when compared to
the same period in 1995. Total kilowatt-hour sales increased 2.8% from the
first quarter 1995 primarily due to higher sales to the Company's
residential and general service customers. Residential sales were up 13.6%
and general service sales were up 8.8% resulting from colder winter
weather. Total industrial sales were down 0.8% with textile sales
decreasing 8.0% and other industrial sales up 4.1%. Textile sales declined
as a result of weak demand for textile goods. This increase in revenues
was partially aided by increased revenues from the Associated Enterprises
Group business units, primarily by the Company's real estate subsidiary,
Crescent Resources, Inc.
Fuel expense for first quarter 1996 increased by $7.2 million compared
to the same period in 1995. This increase was primarily due to higher
levels of fossil generation as a percentage of total generation.
Net interchange and purchased power expense decreased $5.0 million for
first quarter 1996 compared to first quarter 1995. This decrease was
primarily due to decreases in power purchased from the other Catawba joint
owners.
Operating and maintenance expenses increased $47.9 million for the
first quarter 1996 compared to first quarter 1995. This 17.0% increase was
primarily due to the costs associated with a severe winter storm affecting
large portions of the Company's service area in February 1996 and higher
fossil maintenance costs from planned outages.
Depreciation and amortization expense increased $10.0 million for the
first quarter 1996 compared to the first quarter 1995. This increase was
primarily due to the completion of the Lincoln Combustion Turbine Station
and additions to distribution plant to meet customer growth.
Allowance for funds used during construction and other deferred
returns decreased $2.7 million for the first quarter 1996 compared to the
same period during 1995. This decrease was largely due to the completion
of the Lincoln Combustion Turbine Station.
9
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders of
the Company during the first quarter of 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
(27) Financial Data Schedule (included in electronic filing only)
(B) Reports on Form 8-K
The Company filed no Form 8-K reports during the first quarter of 1996.
10
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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.
DUKE POWER COMPANY
Date: May 13, 1996 ______________________________________
Richard J. Osborne
Senior Vice President and Chief Financial Officer
Date: May 13, 1996 ______________________________________
Jeffrey L. Boyer
Controller
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED STATEMENTS OF CASH FLOWS,
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF CAPITALIZATION FOR
EACH OF THE THREE MONTHS ENDED 03/31/96 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000030371
<NAME> DUKE POWER COMPANY
<MULTIPLIER> 1000
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 9,336,226
<OTHER-PROPERTY-AND-INVEST> 1,014,759
<TOTAL-CURRENT-ASSETS> 1,111,226
<TOTAL-DEFERRED-CHARGES> 1,815,132
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 13,277,343
<COMMON> 1,926,909
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 2,933,869
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,860,778
234,000
450,000
<LONG-TERM-DEBT-NET> 3,713,875
<SHORT-TERM-NOTES> 37,300
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<CAPITAL-LEASE-OBLIGATIONS> 11,294
<LEASES-CURRENT> 1,506
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,970,637
<TOT-CAPITALIZATION-AND-LIAB> 13,277,343
<GROSS-OPERATING-REVENUE> 1,162,077
<INCOME-TAX-EXPENSE> 126,493
<OTHER-OPERATING-EXPENSES> 804,665
<TOTAL-OPERATING-EXPENSES> 931,158
<OPERATING-INCOME-LOSS> 357,412
<OTHER-INCOME-NET> 31,848
<INCOME-BEFORE-INTEREST-EXPEN> 262,767
<TOTAL-INTEREST-EXPENSE> 71,463
<NET-INCOME> 191,304
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<EARNINGS-AVAILABLE-FOR-COMM> 180,177
<COMMON-STOCK-DIVIDENDS> 104,478
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