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 the quarterly period ended September 30, 1994
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Commission file number 1-3132-2
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INDIANAPOLIS POWER & LIGHT COMPANY
----------------------------------
(Exact name of Registrant as specified in its charter)
Indiana 35-0413620
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
25 Monument Circle, P. O. Box 1595, Indianapolis, Indiana 46206
- ---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
317-261-8261
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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
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Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding At September 30, 1994
----- ---------------------------------
Common (Without Par Value) 17,206,630 Shares
INDIANAPOLIS POWER & LIGHT COMPANY
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INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
- -------------------------------
Statements of Income - Three Months Ended and
Nine Months Ended September 30, 1994 and 1993 2
Balance Sheets - September 30, 1994 and
December 31, 1993 3
Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993 4
Notes to Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-9
PART II. OTHER INFORMATION 10-11
- ---------------------------
-1-
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Income
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $ 176,437 $ 176,373 $ 498,343 $ 479,878
Steam 7,229 6,891 27,638 25,555
------------ ------------ ------------ ------------
Total operating revenues 183,666 183,264 525,981 505,433
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Operation:
Fuel 44,339 42,129 129,663 118,521
Other 26,322 24,395 78,916 74,185
Power purchased 4,997 5,958 14,857 14,324
Purchased steam 1,697 1,659 5,716 6,035
Maintenance 13,345 15,403 49,191 49,806
Depreciation and amortization 24,104 19,685 65,052 58,527
Taxes other than income taxes 7,914 7,331 23,284 22,796
Income taxes - net 18,116 22,184 45,510 49,297
------------ ------------ ------------ ------------
Total operating expenses 140,834 138,744 412,189 393,491
------------ ------------ ------------ ------------
OPERATING INCOME 42,832 44,520 113,792 111,942
------------ ------------ ------------ ------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 934 370 2,546 1,258
Other - net (421) (409) (1,029) (1,052)
Income taxes - net 130 145 611 545
------------ ------------ ------------ ------------
Total other income and (deductions) - net 643 106 2,128 751
------------ ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES 43,475 44,626 115,920 112,693
------------ ------------ ------------ ------------
INTEREST CHARGES:
Interest 11,962 11,120 35,859 33,213
Allowance for borrowed funds used during construction (1,127) (825) (3,344) (2,440)
------------ ------------ ------------ ------------
Total interest charges 10,835 10,295 32,515 30,773
------------ ------------ ------------ ------------
NET INCOME 32,640 34,331 83,405 81,920
PREFERRED DIVIDEND REQUIREMENTS 795 795 2,386 2,386
------------ ------------ ------------ ------------
INCOME APPLICABLE TO COMMON STOCK $ 31,845 $ 33,536 $ 81,019 $ 79,534
============ ============ ============ ============
See notes to financial statements.
-2-
</TABLE>
<TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
September 30 December 31
1994 1993
-------------- --------------
ASSETS
------
<S> <C> <C>
UTILITY PLANT:
Utility plant in service $ 2,383,904 $ 2,300,682
Less accumulated depreciation 902,418 876,054
-------------- --------------
Net plant in service 1,481,486 1,424,628
Construction work in progress 176,921 168,480
Property held for future use 22,991 15,763
-------------- --------------
Utility plant - net 1,681,398 1,608,871
OTHER PROPERTY - -------------- --------------
At cost, less accumulated depreciation 2,879 1,873
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents 6,656 8,349
Accounts receivable (less allowance for doubtful
accounts 1994, $807 and 1993, $626) 49,137 52,847
Fuel - at average cost 34,213 35,213
Materials and supplies - at average cost 56,229 54,847
Prepayments and other current assets 1,899 3,240
-------------- --------------
Total current assets 148,134 154,496
-------------- --------------
DEFERRED DEBITS:
Unamortized Petersburg Unit #4 carrying charges 32,029 30,587
Unamortized redemption premiums and expenses on
debt and preferred stock 27,643 25,453
Other regulatory assets 44,639 32,954
Miscellaneous 6,237 16,072
-------------- --------------
Total deferred debits 110,548 105,066
-------------- --------------
TOTAL $ 1,942,959 $ 1,870,306
============== ==============
CAPITALIZATION AND LIABILITIES
------------------------------
CAPITALIZATION:
Common shareholder's equity:
Common stock $ 324,537 $ 324,537
Premium on 4% cumulative preferred stock 1,363 1,363
Retained earnings 400,266 379,249
-------------- --------------
Total common shareholder's equity 726,166 705,149
Cumulative preferred stock 51,898 51,898
Long-term debt (less current maturities
and sinking fund requirements) 634,114 532,260
-------------- --------------
Total capitalization 1,412,178 1,289,307
-------------- --------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper 32,500 90,000
Current maturities and sinking fund requirements 350 8,729
Accounts payable 79,853 74,187
Dividends payable 20,814 20,024
Payrolls accrued 3,912 4,505
Taxes accrued 13,962 21,377
Interest accrued 12,244 11,150
Other current liabilities 8,018 5,316
-------------- --------------
Total current liabilities 171,653 235,288
-------------- --------------
DEFERRED CREDITS:
Accumulated deferred income taxes - net 273,681 270,182
Unamortized investment tax credit 54,578 57,029
Accrued postretirement benefits 29,532 17,668
Miscellaneous 1,337 832
-------------- --------------
Total deferred credits 359,128 345,711
-------------- --------------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
TOTAL $ 1,942,959 $ 1,870,306
============== ==============
See notes to financial statements.
</TABLE>
-3-
<TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30
1994 1993
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income $ 83,405 $ 81,920
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 66,128 59,388
Deferred income taxes and investment tax
credit adjustments, net (989) (110)
Allowance for funds used during construction (5,890) (3,698)
Decrease (increase) in certain assets:
Accounts receivable 3,710 (16,618)
Fuel, materials and supplies (382) 7,962
Other current assets 1,341 (1,262)
Increase (decrease) in certain liabilities:
Accounts payable 5,666 15,485
Taxes accrued (7,415) (2,793)
Other liabilities 3,724 (896)
-------------- --------------
Net cash provided by operating activities 149,298 139,378
-------------- --------------
CASH FLOWS FROM INVESTING:
Construction expenditures (131,111) (106,032)
Other 8,779 (6,415)
-------------- --------------
Net cash used in investing activities (122,332) (112,447)
-------------- --------------
CASH FLOWS FROM FINANCING:
Issuance of long-term debt 180,000 41,850
Retirement of long-term debt - including premiums (87,291) (43,428)
Short-term debt - net (57,500) 32,000
Dividends paid (61,615) (59,249)
Other (2,253) (590)
-------------- --------------
Net cash used in financing activities (28,659) (29,417)
-------------- --------------
Net decrease in cash and cash equivalents (1,693) (2,486)
Cash and cash equivalents at beginning of period 8,349 10,581
-------------- --------------
Cash and cash equivalents at end of period $ 6,656 $ 8,095
============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 32,139 $ 31,605
============== ==============
Income taxes $ 46,937 $ 48,037
============== ==============
See notes to financial statements.
-4-
</TABLE>
INDIANAPOLIS POWER & LIGHT COMPANY
----------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. Indianapolis Power & Light Company is a subsidiary of IPALCO
Enterprises, Inc.
2. In the opinion of management these statements reflect all
adjustments, consisting of only normal recurring accruals, which are
necessary to a fair statement of the results for the interim periods
covered by such statements. Due to the seasonal nature of the
electric utility business, the annual results are not generated
evenly by quarter during the year. Certain amounts from prior year
financial statements have been reclassified to conform to the current
year presentation. These financial statements and notes should be
read in conjunction with the audited financial statements included in
IPL's 1993 Annual Report on Form 10-K.
3. LONG-TERM DEBT
On February 3, 1994, IPL issued First Mortgage Bonds, 6.05% Series,
due 2004, in the principal amount of $80 million. The net proceeds
were used to redeem on March 1, 1994, IPL's $33.2 million First
Mortgage Bonds, 7.40% Series, due 2002, at a redemption price of
101.79%, and to redeem on March 15, 1994, IPL's $19.75 million First
Mortgage Bonds, 7 1/8% Series, due 1998, at a redemption price of
101.20% and IPL's $25.2 million First Mortgage Bonds, 7.65% Series,
due 2003, at a redemption price of 102.11%. Accrued interest was
also paid at the time of redemption.
Also, on February 3, 1994, IPL issued First Mortgage Bonds, 7.05%
Series, due 2024, in the principal amount of $100 million. The net
proceeds were used in part to repay outstanding unsecured promissory
notes, and the remaining amount will be used to finance future
construction costs.
On August 1, 1994, IPL retired First Mortgage Bond, 4.50% Series, due
August 1, 1994, in the principal amount of $7.5 million.
4. RATE MATTERS
In the retail electric rate case now pending before the Indiana
Utility Regulatory Commission (IURC), a prehearing conference was
held on June 8, 1994, and an order was issued July 20, 1994,
establishing a test year ending June 30, 1994. IPL filed its case in
chief on October 11, 1994. The IURC has scheduled hearings on IPL's
request to begin on February 7, 1995.
5. COMMITMENTS AND CONTINGENCIES (See Item 1. Legal Proceedings of Part
II -- Other Information)
-5-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Overview
- --------
The Board of Directors of Indianapolis Power & Light Company (IPL)
on August 30, 1994, declared a quarterly dividend on common stock of
$20,010,662. The dividend was paid by IPL to IPALCO Enterprises, Inc. in
October, 1994.
Internally generated cash provided by IPL's operations and the
issuance of long-term debt were used primarily for construction
expenditures and the repayment of short-term and long-term debt during
the first nine months of 1994.
On February 3, 1994, IPL issued First Mortgage Bonds, 6.05% Series,
due 2004, in the principal amount of $80 million. The net proceeds were
used to redeem on March 1, 1994, IPL's $33.2 million First Mortgage
Bonds, 7.40% Series, due 2002, at a redemption price of 101.79%, and to
redeem on March 15, 1994, IPL's $19.75 million First Mortgage Bonds, 7
1/8% Series, due 1998, at a redemption price of 101.20% and IPL's $25.2
million First Mortgage Bonds, 7.65% Series, due 2003, at a redemption
price of 102.11%. Accrued interest was also paid at the time of
redemption.
Also, on February 3, 1994, IPL issued First Mortgage Bonds, 7.05%
Series, due 2024, in the principal amount of $100 million. The net
proceeds were used in part to repay outstanding unsecured promissory
notes, and the remaining amount will be used to finance future
construction costs.
On August 1, 1994, IPL retired First Mortgage Bond, 4.50% Series,
due August 1, 1994, in the principal amount of $7.5 million.
Future Rate Relief
- ------------------
IPL has asked the Indiana Utility Regulatory Commission (IURC) to
approve increases in its electric rates. IPL is requesting approval of
an overall rate increase of about 13.9 percent to generate additional
annual revenues of $87.7 million. Under IPL's proposal, the percent of
increase will vary for different customer classes. The IURC has
scheduled hearings on IPL's request to begin in February of 1995. IPL
last received an order from the IURC authorizing an increase in electric
basic rates and charges in August, 1986.
Construction Program
- --------------------
IPALCO announced on September 28 that IPL will further delay the
construction of a new, base-load power plant in Switzerland County in
Southern Indiana to a date beyond the Company's current five-year
construction program. Due to this action, IPL will be reducing the cost of
the construction program for the five years, 1994-1998, by $217.2 million
for the base-load units and by $29.0 million for projects related to the
base-load units.
-6-
Voluntary Employees' Beneficiary Association (VEBA) Trust Agreement
- -------------------------------------------------------------------
On September 27, the Board of Directors adopted a VEBA for the funding
of post-retirement health and life insurance benefits for retirees and their
eligible dependents and beneficiaries. Annual funding is discretionary
and is based on the projected cost over time of benefits to be provided
to covered persons consistent with acceptable actuarial methods. To the
extent these postretirement benefits are funded, the benefits will not be
shown as a liability on the Corporation's financial statements. The VEBA
Trust Agreement provides for full funding of the Corporation's
accumulated post-retirement benefit obligation in the event of certain
change of control transactions.
RESULTS OF OPERATIONS
Comparison of Quarters Ended September 30, 1994 and September 30, 1993
----------------------------------------------------------------------
Income applicable to common stock decreased $1.7 million during the
third quarter of 1994 from the comparable 1993 period. The following
discussion highlights the factors contributing to this result.
Operations
- ----------
The increase in electric operating revenues of $.1 million this
quarter compared to the same period one year ago is due to the following:
Fuel cost adjustment recoveries increased $3.3 million, and sales for
resale also increased $.1 million, due to increased energy sales to
neighboring utilities. These increases were offset by decreased retail
electric kilowatthour (KWH) sales of $2.9 million due to milder weather
during the third quarter of 1994 compared to the same period one year
ago, and decreased miscellaneous revenues of $.4 million. The following
table is a summary of KWH sales to each customer class:
Retail KWH Sales By Customer Class
In Millions of KWHs
Three Months Ended September 30,
1994 1993 % Change
------- ------- --------
Residential 1,102.6 1,168.8 (5.7)%
Commercial 583.6 600.7 (2.8)
Industrial 1,722.7 1,717.6 0.3
Other 16.2 16.2 0.0
------- -------
Total Retail 3,425.1 3,503.3 (2.2)
======= =======
Fuel costs increased $2.2 million due to increased deferred fuel
costs of $3.1 million and increased prices of $.4 million; offset by a
decrease in fuel consumption of $1.3 million. Other operating expenses
increased $1.9 million primarily due to increased administrative and
general expenses of $.8 million, increased electric distribution expenses
of $.6 million, and increased other production expenses of $.5 million.
Power purchased decreased $1.0 million primarily due to decreased firm
peaking-energy payments and decreased non-displacement purchases for
1994.
Maintenance expenses decreased $2.1 million, reflecting decreased
expenditures for unit overhaul costs at the Petersburg plant of $2.0
million and decreased expenditures for general maintenance at the Perry K
plant of $.4 million. These expenses were partially offset by increased
expenditures at the Stout plant of $.3 million for general maintenance.
Depreciation expense increased $4.4 million primarily due to an
adjustment to property held for future use and as a result of an increase
in the utility plant balance.
-7-
Income taxes - net decreased $4.1 million primarily due to the
decrease in pretax utility operating income, and a reduction in deferred
income taxes, as well as an adjustment for additional tax recorded in the
third quarter of 1993 to reflect the change in the corporate income tax
rate from 34% to 35%.
As a result of the foregoing, utility operating income decreased
3.8% over last year, to $42.8 million.
Other Income and Deductions
- ---------------------------
Allowance for equity funds used during construction increased $.6
million due to an increased construction base.
Interest and Other Charges
- --------------------------
Allowance for borrowed funds used during construction increased $.3
million due to an increased construction base.
Comparison of Nine Months Ended September 30, 1994 and September 30, 1993
-------------------------------------------------------------------------
Income applicable to common stock increased $1.5 million during the
first nine months of 1994 from the comparable 1993 period. The following
discussion highlights the factors contributing to this result.
Operations
- ----------
The increase in electric operating revenues of $18.5 million was the
result of a combination of colder weather during the first quarter of
1994 and warmer weather during the second quarter of 1994 compared to the
same period one year ago. Contributing to the higher revenues was an
increase in retail electric KWH sales of $10.8 million, and higher fuel
cost adjustment recoveries of $5.4 million. Sales for resale also
increased $2.7 million, due to increased energy sales to neighboring
utilities. Miscellaneous revenues decreased $.4 million. The following
table is a summary of KWH sales to each customer class:
Retail KWH Sales By Customer Class
In Millions of KWHs
Nine Months Ended September 30,
1994 1993 % Change
------- ------- --------
Residential 3,230.5 3,128.3 3.3%
Commercial 1,714.2 1,689.7 1.4
Industrial 4,769.9 4,683.8 1.8
Other 54.8 52.4 4.6
------- -------
Total Retail 9,769.4 9,554.2 2.3
======= =======
Fuel costs increased $11.1 million due to increased deferred fuel
costs of $4.6 million and increased fuel consumption of $3.4 million as
well as increased prices of $3.1 million. Other operating expenses
increased $4.7 million primarily due to increased administrative and
general expenses of $2.4 million of which $1.8 million is due to
increased employee benefit costs and salaries and $.6 million is due to
increased outside services and property insurance costs, increased
electric and steam distribution expenses of $1.1 million, increased
miscellaneous steam power station expenses and operation supervision
expenses at Petersburg plant of $.9 million, and increased miscellaneous
operating expenses at Stout plant of $.3 million. Purchased steam
decreased $.3 million due to a decrease in prices for purchases from an
independent resource recovery system located within the city of
Indianapolis.
-8-
Depreciation expense increased $6.5 million primarily due to an
adjustment to property held for future use and as a result of an increase
in the utility plant balance.
Income taxes - net decreased $3.8 million primarily due to an
increase in interest expenses and a decrease in deferred taxes.
As a result of the foregoing, utility operating income increased
1.7% over last year, to $113.8 million.
Other Income and Deductions
- ---------------------------
Allowance for equity funds used during construction increased $1.3
million due to an increased construction base.
Interest and Other Charges
- --------------------------
Interest expense increased $2.6 million primarily due to the
issuance of $180 million long-term debt on February 3, 1994. The
increase in interest expense for year-to-date 1994 was partially offset
by decreased expense as a result of refinancing certain first mortgage
bonds during 1994 and 1993 with more favorable terms.
Allowance for borrowed funds used during construction increased $.9
million due to an increased construction base.
-9-
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- --------------------------
There were no further changes to the Legal Proceedings as set forth in
IPL's Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the
period ended June 30, 1994, except as follows:
With respect to the appeal of the Indiana Utility Regulatory Commission's
(IURC) order approving IPL's Environmental Compliance Plan now pending in
the Indiana Court of Appeals, on June 17, 1994, the Office of Utility
Consumer Counselor (OUCC), the Citizens Action Coalition and the
Industrial Intervenors Group filed their respective appellants' briefs.
IPL filed its appellee's brief on September 6, 1994 and the State of
Indiana filed an amicus brief on October 3, 1994 in support of the
constitutionality of the Indiana law that governs the Environmental
Compliance proceedings before the IURC. On October 24, 1994 appellants
filed their reply briefs.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits
--------
None.
b) Reports on Form 8-K
-------------------
A report on Form 8-K, dated September 27, 1994, reporting
Item 5, "Other Event" and Item 7, "Exhibits", with respect to the
announced delay of IPL's proposed Patriot electric generating unit.
-10-
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.
INDIANAPOLIS POWER & LIGHT COMPANY
----------------------------------
(Registrant)
Date: November 14, 1994 /s/ John R. Brehm
----------------- ----------------------------------
John R. Brehm
Senior Vice President
Finance and Information Services
Date: November 14, 1994 /s/ Stephen J. Plunkett
----------------- ----------------------------------
Stephen J. Plunkett
Controller
-11-
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000050217
<NAME> INDIANAPOLIS POWER & LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,681,398
<OTHER-PROPERTY-AND-INVEST> 2,879
<TOTAL-CURRENT-ASSETS> 148,134
<TOTAL-DEFERRED-CHARGES> 110,548
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,942,959
<COMMON> 324,537
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 400,266
<TOTAL-COMMON-STOCKHOLDERS-EQ> 726,166
0
51,898
<LONG-TERM-DEBT-NET> 634,114
<SHORT-TERM-NOTES> 32,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 350
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 497,931
<TOT-CAPITALIZATION-AND-LIAB> 1,942,959
<GROSS-OPERATING-REVENUE> 525,981
<INCOME-TAX-EXPENSE> 45,510
<OTHER-OPERATING-EXPENSES> 366,679
<TOTAL-OPERATING-EXPENSES> 412,189
<OPERATING-INCOME-LOSS> 113,792
<OTHER-INCOME-NET> 2,128
<INCOME-BEFORE-INTEREST-EXPEN> 115,920
<TOTAL-INTEREST-EXPENSE> 32,515
<NET-INCOME> 83,405
2,386
<EARNINGS-AVAILABLE-FOR-COMM> 81,019
<COMMON-STOCK-DIVIDENDS> 59,229
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 149,298
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
