<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-3571
LONG ISLAND LIGHTING COMPANY
Incorporated pursuant to the Laws of New York State
Internal Revenue Service - Employer Identification No. 11-1019782
175 East Old Country Road, Hicksville, New York 11801
(516) 755-6650
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 total number of shares of the registrant's Common Stock, $5 par value,
outstanding on March 31, 1994, was 112,550,193.
<PAGE> 2
LONG ISLAND LIGHTING COMPANY
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Income 3
Balance Sheet 4
Statement of Cash Flows 6
Notes to Financial Statements 7
Item 2. Management's Discussion and 10
Analysis of Financial Condition and
Results of Operations
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote 17
of Security Holders
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signature 20
</TABLE>
2
<PAGE> 3
LONG ISLAND LIGHTING COMPANY
STATEMENT OF INCOME
(UNAUDITED)
(Thousands of Dollars - except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1994 1993
----------------------
<S> <C> <C>
REVENUES
Electric $587,266 $536,342
Gas 284,877 224,109
-------- --------
Total Revenues 872,143 760,451
-------- --------
EXPENSES
Operations - fuel and purchased power 298,920 253,158
Operations - other 114,053 114,421
Maintenance 27,858 30,645
Depreciation, depletion and amortization 31,681 30,012
Base financial component amortization 25,243 25,243
Regulatory liability component amortization (22,143) (22,143)
Other regulatory amortizations 10,014 (18,331)
Rate moderation component 48,627 16,152
Operating taxes 109,640 92,791
Federal income tax - current 2,341 1,066
Federal income tax - deferred and other 42,044 45,046
-------- --------
Total Expenses 688,278 568,060
-------- --------
OPERATING INCOME 183,865 192,391
-------- --------
OTHER INCOME AND (DEDUCTIONS)
Rate moderation component carrying charges 8,979 10,878
Class Settlement (5,701) (5,814)
Other income and (deductions) 9,496 6,800
Allowance for other funds used during construction 717 49
Federal income tax credit (charge) - deferred and other 915 (448)
-------- --------
Total Other Income and (Deductions) 14,406 11,465
-------- --------
INCOME BEFORE INTEREST CHARGES 198,271 203,856
-------- --------
INTEREST CHARGES AND (CREDITS)
Interest on long-term debt 112,779 118,643
Other interest 17,075 17,589
Allowance for borrowed funds used during construction (1,203) (237)
-------- --------
Total Interest Charges and (Credits) 128,651 135,995
-------- --------
NET INCOME 69,620 67,861
Preferred stock dividend requirements 13,272 14,575
-------- --------
EARNINGS FOR COMMON STOCK $ 56,348 $ 53,286
======== ========
AVERAGE COMMON SHARES OUTSTANDING (000) 112,536 111,779
EARNINGS PER COMMON SHARE $0.50 $0.48
DIVIDENDS DECLARED PER COMMON SHARE $ 0.445 $ 0.435
======== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- 3 -
<PAGE> 4
LONG ISLAND LIGHTING COMPANY
BALANCE SHEET
(Thousands of Dollars)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1994 1993
ASSETS (UNAUDITED) (AUDITED)
-------------- -------------
<S> <C> <C>
UTILITY PLANT
Electric $ 3,577,040 $ 3,544,569
Gas 905,941 860,899
Common 211,941 201,418
Construction work in progress 94,003 176,504
Nuclear fuel in process and in reactor 16,532 16,533
----------- -----------
4,805,457 4,799,923
----------- -----------
Less - Accumulated depreciation and
amortization 1,477,493 1,452,366
----------- -----------
Total Net Utility Plant 3,327,964 3,347,557
----------- -----------
REGULATORY ASSETS
Base financial component (less accumulated
amortization of $479,612 and $454,369) 3,559,218 3,584,461
Rate moderation component 571,189 609,827
Shoreham post settlement costs 817,351 777,103
Shoreham nuclear fuel 74,966 75,497
Postretirement benefits other than pensions 406,479 402,921
Regulatory tax asset 1,846,285 1,848,998
Other 311,459 311,832
----------- -----------
Total Regulatory Assets 7,586,947 7,610,639
----------- -----------
NONUTILITY PROPERTY & OTHER INVESTMENTS 23,722 23,029
----------- -----------
CURRENT ASSETS
Cash and cash equivalents 241,935 248,532
Special deposits 24,938 23,439
Customer accounts receivable (less allowance
for doubtful accounts of $21,875 and $23,889) 324,309 249,074
Other accounts receivable 9,669 12,199
Accrued unbilled revenues 171,304 170,042
Materials and supplies at average cost 71,429 68,882
Fuel oil at average cost 46,860 35,857
Gas in storage at average cost 17,432 75,182
Prepayments and other current assets 41,147 41,652
----------- -----------
Total Current Assets 949,023 924,859
----------- -----------
DEFERRED CHARGES
Unamortized cost of issuing securities 337,654 350,239
Accumulated deferred income taxes 1,118,865 1,157,009
Other 40,924 42,705
----------- -----------
Total Deferred Charges 1,497,443 1,549,953
----------- -----------
TOTAL ASSETS $13,385,099 $13,456,037
=========== ===========
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE> 5
LONG ISLAND LIGHTING COMPANY
BALANCE SHEET
(Thousands of Dollars)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1994 1993
CAPITALIZATION AND LIABILITIES (UNAUDITED) (AUDITED)
-------------- -------------
<S> <C> <C>
CAPITALIZATION
Long-term debt $ 4,887,733 $ 4,887,733
Unamortized premium and (discount) on debt (17,091) (17,393)
----------- -----------
4,870,642 4,870,340
----------- -----------
Preferred stock - redemption required 649,150 649,150
Preferred stock - no redemption required 64,005 64,038
----------- -----------
Total Preferred Stock 713,155 713,188
----------- -----------
Common stock 562,751 561,662
Premium on capital stock 1,014,106 1,010,283
Capital stock expense (50,002) (50,427)
Retained earnings 717,704 711,432
----------- -----------
Total Common Shareowners' Equity 2,244,559 2,232,950
----------- -----------
Total Capitalization 7,828,356 7,816,478
----------- -----------
REGULATORY LIABILITIES
Regulatory liability component 416,636 436,476
1989 Settlement credits 152,778 155,081
Regulatory tax liability 175,634 177,669
Other 148,260 138,612
----------- -----------
Total Regulatory Liabilities 893,308 907,838
----------- -----------
CURRENT LIABILITIES
Current maturities of long-term debt 600,000 600,000
Current redemption requirements of preferred stock 4,800 4,800
Accounts payable and accrued expenses 206,863 277,519
Accrued taxes 38,521 52,656
Accrued interest 148,336 142,409
Dividends payable 54,768 54,542
Class Settlement 30,000 30,000
Customer deposits 27,259 27,046
----------- -----------
Total Current Liabilities 1,110,547 1,188,972
----------- -----------
DEFERRED CREDITS
Class Settlement 163,511 164,942
Accumulated deferred income taxes 2,934,298 2,932,029
Other 11,919 12,622
----------- -----------
Total Deferred Credits 3,109,728 3,109,593
----------- -----------
RESERVES FOR CLAIMS AND DAMAGES 11,877 8,714
----------- -----------
PENSIONS AND OTHER POSTRETIREMENT BENEFITS 431,283 424,442
----------- -----------
COMMITMENTS AND CONTINGENCIES - -
----------- -----------
TOTAL CAPITALIZATION AND LIABILITIES $13,385,099 $13,456,037
=========== ===========
</TABLE>
See Notes to Financial Statements.
-5-
<PAGE> 6
LONG ISLAND LIGHTING COMPANY
STATEMENT OF CASH FLOWS
(UNAUDITED)
(Thousands of Dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
1994 1993
-----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $69,620 $67,861
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 31,681 30,012
Provision for doubtful accounts 5,282 10,672
Base financial component amortization 25,243 25,243
Regulatory liability component amortization (22,143) (22,143)
Rate moderation component 48,627 16,152
Rate moderation component carrying charges (8,979) (10,878)
Other regulatory amortizations 10,014 (18,331)
Class Settlement 5,701 5,814
Amortization of cost of issuing and redeeming securities 12,795 13,324
Federal income taxes - deferred and other 41,129 45,494
Allowance for other funds used during construction (717) (49)
Other 799 1,224
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable (77,987) (55,392)
Accrued unbilled revenues (1,262) (15,157)
Materials and supplies, fuel oil and gas in storage 44,200 56,675
Prepayments and other current assets 506 (2,878)
Accounts payable and accrued expenses (80,356) (50,032)
Accrued taxes (14,135) (42,332)
Accrued interest 5,927 13,281
Other 14,439 (11,195)
-------- ---------
Net Cash Provided by Operating Activities 110,384 57,365
-------- ---------
INVESTING ACTIVITIES
Construction and nuclear fuel expenditures (12,434) (52,865)
Shoreham post settlement costs (45,721) (50,666)
Other (783) (356)
-------- ---------
Net Cash Used in Investing Activities (58,938) (103,887)
-------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt - 650,241
Redemption of long-term debt - (645,000)
Proceeds from sale of common stock 4,877 4,909
Proceeds from sale of preferred stock - 60,356
Redemption of preferred stock - (57,000)
Preferred stock dividends paid (13,133) (14,945)
Common stock dividends paid (49,988) (48,542)
Cost of issuing and redeeming securities (10) (12,151)
Other 211 677
-------- ---------
Net Cash Used in Financing Activities (58,043) (61,455)
-------- ---------
Net Decrease in Cash and Cash Equivalents ($6,597) ($107,977)
======== =========
Cash and cash equivalents at beginning of period $248,532 $309,485
Net decrease in cash and cash equivalents (6,597) (107,977)
-------- ---------
Cash and Cash Equivalents at end of period $241,935 $201,508
======== =========
SUPPLEMENTARY INFORMATION
Interest Paid, before reduction for the allowance
for borrowed funds used during constuction $111,133 $109,463
Federal income taxes - refunded - $1,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
-6-
<PAGE> 7
Notes to Financial Statements
For the Quarter Ended March 31, 1994
(Unaudited)
These Notes to Financial Statements reflect events subsequent to February
4, 1994, the date of the most recent Report of Independent Auditors, through
the date of this Quarterly Report on Form 10-Q for the quarter ended March 31,
1994. These Notes to Financial Statements should be read in conjunction with
both Part I - Financial Information and Part II - Other Information required to
be furnished as part of this Quarterly Report, in particular, (1) Management's
Discussion and Analysis of Financial Condition and Results of Operations for
the three months ended March 31, 1994, respecting the Company's capital
requirements and liquidity, and (2) Part II, Item 6, Reports on Form 8-K.
These Notes to Financial Statements should also be read in conjunction with
Notes to Financial Statements contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1993, incorporated herein by reference.
The financial statements furnished are unaudited. However, in the opinion
of management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the interim
periods presented. Operating results for these interim periods are not
necessarily indicative of results to be expected for the entire year, due to
seasonal, operating and other factors.
Certain amounts from prior year financial statements have been
reclassified to conform to the current year presentation.
7
<PAGE> 8
Note 1. EXCESS EARNINGS - GAS
In December 1993, the Public Service Commission of the State of New York
(PSC) approved a three-year gas rate settlement between the Company and the
Staff of the PSC, effective December 1, 1993. This gas rate settlement
provides, among other matters, that earnings in excess of a 10.6% rate of
return on common equity in any of the three years covered by the settlement be
shared equally between the Company's firm gas customers and its shareowners.
For a further discussion of the gas rate settlement, see Note 3 of Notes to
Financial Statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
In March 1994, to reflect the firm gas customer's portion of estimated gas
earnings in excess of the 10.6% return on common equity for the rate year
ending November 30, 1994, the Company recorded a $4.8 million, net of tax
effects, reduction to earnings. The Company computed this amount based upon
the aggregate of actual operating gas income for the four month period ended
March 31, 1994 and forecasted gas operating income for the eight month period
ending November 30, 1994. Based upon this computation, the Company estimates
that it will earn approximately $9.6 million, net of tax effects, in excess of
the 10.6% rate of return on common equity for the rate year ending November 30,
1994. However, since the actual amount of earnings in excess of its allowed
rate of return on common equity will not be determined until the completion of
the rate year, amounts charged to earnings during the year will be subject to
adjustments as actual financial data replaces forecasted data in the Company's
excess earnings calculation.
Note 2. ENVIRONMENT
The Company is the owner of six pieces of property on which the Company or
certain of its predecessor companies produced manufactured gas. The Company
has investigated two of these sites for possible environmental contamination
caused by these prior operations and plans to submit the findings to the
appropriate regulatory agencies in 1994. Although the Company's clean-up
costs, if any, cannot be determined until the remediation alternatives have
been reviewed by the regulatory agencies and negotiations with such agencies
have been completed, based on the findings of the aforementioned
investigations, clean-up costs for the sites located in Hempstead and Bay
Shore, Long Island are estimated to be $4 million and $6 million, respectively.
Accordingly, the Company has recorded a $10 million liability for the estimated
clean-up of these sites. The Company has also recorded a $10 million
regulatory asset to reflect its belief that the PSC will provide for the future
recovery of these costs through rates as it has for other New York State
utilities.
8
<PAGE> 9
The Company will conduct similar investigations of the remaining four
sites over the next several years, the total cost of which cannot be determined
at this time. However, the cost of investigating the site located in Far
Rockaway, one of the four remaining sites, is approximately $750,000. The
Company cannot determine the costs of remediation for these four sites until
the investigations have been completed and the results reviewed by the
appropriate regulatory agencies. The Company believes that the costs for the
remediation of these sites will not be material and will be recoverable through
rates.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1994
RESULTS OF OPERATIONS
EARNINGS
Earnings for common stock for the quarter ended March 31, 1994 were $56.3
million or 50 cents per common share, compared to $53.3 million or 48 cents per
common share for the same period last year. Quarterly earnings are not
necessarily indicative of earnings in other quarters.
The Company experienced an increase in earnings for the electric business,
partially offset by lower earnings for the gas business for the three months
ended March 31, 1994 compared to the same period in 1993. The increase in
electric earnings reflects lower operations and maintenance expenses resulting
from the Company's continuing efforts to control costs. Gas revenues continued
to increase as a result of the Company's aggressive gas expansion program.
However, gas earnings declined primarily due to the recognition of previously
deferred storm costs affecting gas operations and a lower allowed rate of
return on common equity as determined by the PSC.
Although earnings cannot be predicted with certainty, the Company
currently anticipates that its earnings for the first six months of 1994 will
be significantly less than earnings for the same period in 1993. While the
Company can give no assurances, it is expecting that the items described below,
affecting the comparability of earnings between the six-month period ended June
30, 1994 and June 30, 1993 should be offset during the balance of the year by
certain positive factors. These factors include a continuation of reductions
in operations and maintenance expenses and the impact of improved cash flow
from operations.
Comparative earnings for the six-month period are expected to be affected
by certain factors including: (1) the recognition in 1993 of the benefits
associated with certain tax credits that the Company does not anticipate in
1994; (2) the recognition of previously deferred storm costs, mentioned above;
(3) a provision in the Company's gas rate structure that was not in effect
prior to December 1, 1993 that requires earnings in excess of a 10.6% rate of
return on common equity to be shared equally between the Company's firm gas
customers and its shareowners; (4) a lower allowed rate of return on common
equity for the Company's gas business; and (5) lower gas revenues for the three
months ended June 30, 1994, resulting from a refinement in the Company's
procedures used to estimate revenues not yet billed, which will in turn
increase gas revenues in the second six-month period of 1994.
10
<PAGE> 11
REVENUES
Total revenues for the quarter ended March 31, 1994, were $872.1 million,
representing an increase of $111.7 million, or 14.7% over total revenues for
the quarter ended March 31, 1993. Electric revenues increased by $50.9
million, or 9.5%, while gas revenues were up $60.8 million, or 27.1%, when
compared to the same period of the prior year.
The increase in electric revenues for the quarter ended March 31, 1994
when compared to the same period in 1993, is primarily the result of an
electric rate increase of 4.0% effective December 1, 1993 and the current
recovery of $2.8 million per month of certain deferrals relating to the rate
year that ended November 30, 1992. The Public Service Commission of the State
of New York (PSC) has authorized the Company to recover these net deferrals
through the Company's fuel cost adjustment clause over a twelve-month period
which began in August 1993. For a further discussion of the Company's rate
matters, see Note 3 of Notes to Financial Statements included in the Annual
Report on Form 10-K for the year ended December 31, 1993.
The Company's current electric rate structure provides for a revenue
reconciliation mechanism which mitigates the impact on earnings of experiencing
electric sales that are above or below levels reflected in rates. For the
quarters ended March 31, 1994 and 1993, the Company recorded non-cash income,
which is included in "Other Regulatory Amortizations" on the Company's
Statement of Income, of $10.6 million and $20.7 million, respectively, as a
result of electric sales that were lower than those that were adjudicated by
the PSC.
The increase in gas revenues for the quarter ended March 31, 1994 when
compared to the same period in 1993, is attributable to a 4.7% gas rate
increase effective December 31, 1993, the addition of approximately 7,700 new
gas space heating customers, and the recovery of higher fuel costs, resulting
from an increase in the average price per decatherm.
The Company's current gas rate structure provides for a weather
normalization adjustment, which minimizes the impact on revenues of
experiencing weather that is warmer or colder than normal. As a result of the
operation of this mechanism, the increase in gas revenues attributable to
weather for the quarter ended March 31, 1994, was less than $2 million, despite
experiencing an increase in consumption associated with an abnormally cold
heating season.
11
<PAGE> 12
FUELS AND PURCHASED POWER
Expenses for fuels and purchased power for electric operations and for gas
used in gas operations amounted to $298.9 million for the quarter ended March
31, 1994, representing an increase of $45.8 million when compared to the
comparable period in 1993.
Fuels and purchased power expenses for the quarter ended March 31, 1994
and 1993 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
3/31/94 3/31/93
------- -------
(In Millions)
<S> <C> <C>
Fuels for Electric Operations
Oil $ 57 $ 50
Gas 11 16
Nuclear 3 4
Purchased Power 76 75
---- ----
Total 147 145
Gas Fuels 152 108
---- ----
Total $299 $253
==== ====
</TABLE>
For the quarter ended March 31, 1994 the increase in gas fuel expenses was
primarily due to higher sales volumes and higher gas prices.
The mix of fuels and purchases of power for providing the Company's
electric system energy requirements during the three months ended March 31,
1994 and 1993 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
3/31/94 3/31/93
------- -------
<S> <C> <C>
Oil 40% 37%
Purchases 44 41
Nuclear 8 9
Gas 8 13
---- ----
Total 100% 100%
==== ====
</TABLE>
OPERATIONS AND MAINTENANCE EXPENSES
Total operations and maintenance expenses, exclusive of fuels and
purchased power, amounted to $141.9 million for the quarter ended March 31,
1994, representing a decrease of $3.2 million, or 2.2%, from the comparable
quarter of 1993.
12
<PAGE> 13
RATE MODERATION COMPONENT
For the quarters ended March 31, 1994 and 1993, the Company recorded
non-cash charges to income of approximately $48.6 million and $16.2 million,
respectively, reflecting the amortization of the Rate Moderation Component
(RMC). The RMC reflects the difference between the Company's revenue
requirements under conventional ratemaking and revenues resulting from the
implementation of the rate moderation plan provided for in the Rate Moderation
Agreement (RMA). At March 31, 1994 and 1993, the unamortized RMC balance was
$571 million and $646 million, respectively.
OPERATING TAXES
Operating taxes for the quarter ended March 31, 1994 amounted to $109.6
million, representing an increase of $16.8 million, or 18.2%, from the
comparable quarter of 1993. This increase in operating taxes is attributable
to increases in property and payroll taxes and increases in gross receipts
taxes attributable to higher electric and gas revenues. In addition, 1993
operating taxes reflect a $4.8 million adjustment related to an
over-amortization in 1992 of the New York State Corporate Tax Surcharge.
INTEREST EXPENSE
For the quarter ended March 31, 1994, interest expense amounted to $129.9
million, representing a decrease of $6.4 million when compared to the same
period of 1993. The decrease in interest expense is principally due to lower
interest rates on the Company's outstanding debt, primarily resulting from the
Company's aggressive refinancing efforts in 1993.
13
<PAGE> 14
FINANCIAL CONDITION
LIQUIDITY
At March 31, 1994, the Company's cash and cash equivalents amounted to
approximately $242 million, compared to $249 million at December 31, 1993. The
Company also has a $300 million revolving line of credit through October 1,
1995, provided by its 1989 Revolving Credit Agreement (RCA). At March 31,
1994, no amounts were outstanding under the RCA. This line of credit is
secured by a first lien upon the Company's accounts receivable and fuel oil
inventories.
FINANCING PROGRAMS
The Company has a total of approximately $1.1 billion of debt securities
maturing during the three-year period beginning January 1, 1994. Subject to
market conditions, the Company currently intends to fund this requirement with
the proceeds from the sale of equity and debt securities in addition to the use
of cash. The Company's maturing debt in the years 1994, 1995, and 1996 is as
follows:
<TABLE>
<CAPTION>
1994 1995 1996
(In Millions of Dollars)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
First Mortgage Bonds $ 25 $ 25 $ 40
General and Refunding - - 415
Debentures 575 - -
- ------------------------------------------------------------------------------------
$ 600 $ 25 $ 455
====================================================================================
</TABLE>
The $600 million of debt maturing in 1994 consists of (i) $25 million
First Mortgage Bonds, 4 5/8% Series N Due June 1, 1994, (ii) $400 million
Debentures 10.25% Series Due June 15, 1994 and (iii) $175 million Debentures
11.75% Series Due November 15, 1994. The Company plans, subject to market
conditions, to issue $100 million of common stock and up to $350 million of
long-term debt during the second quarter of 1994 to satisfy the securities
maturing in June 1994. The Company is currently planning to issue long-term
debt or equity during the latter part of 1994 to satisfy all or a portion of
the $175 million of debentures maturing in November 1994.
The issuance of common stock will represent the first time in
approximately ten years that the Company has issued common equity, other than
through its Automatic Dividend Reinvestment Plan and Employee Stock Purchase
Plan. The Company is committed to improving its debt-to-equity ratio through
the issuance of common equity, growth in retained earnings and debt reduction
from the use of internally generated funds. In this respect, subject to market
conditions, the Company currently plans to issue an additional $225 million of
common stock during the next four years.
14
<PAGE> 15
CAPITAL REQUIREMENTS AND CAPITAL PROVIDED
Capital requirements and capital provided for the three months ended March 31,
1994 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Capital Requirements Three Months Ended
March 31, 1994
- --------------------------------------------------------------------
(In Millions of Dollars)
<S> <C>
Total Construction $ 12
- --------------------------------------------------------------------
Dividends
Preferred stock 13
Common stock 50
- --------------------------------------------------------------------
Total Dividends 63
- --------------------------------------------------------------------
Shoreham post settlement costs 46
- --------------------------------------------------------------------
Total Capital Requirements $121
====================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Capital Provided Three Months Ended
March 31, 1994
- --------------------------------------------------------------------
(In Millions of Dollars)
<S> <C>
Decrease in cash $ 7
Common stock issued 5
Other financing activities (1)
Internal cash generation from
operations 110
- --------------------------------------------------------------------
Total Capital Provided $121
====================================================================
</TABLE>
For further information, see the Statement of Cash Flows.
15
<PAGE> 16
RATE MATTERS
ELECTRIC
In December 1993, the Company filed a three-year electric rate plan with
the PSC for the period beginning December 1, 1994 that minimizes future
electric rate increases while retaining consistency with the RMA's objective of
continuing the restoration of the Company's financial health. The filing
provides for zero percentage base rate increases in years one and two of the
plan and a rate increase of 4.3% in the third year. Although base electric
rates would be frozen during the first two years of the plan, annual rate
increases of approximately 1% to 2% are expected to result in these years from
the operation of the Company's fuel cost adjustment clause. The electric rate
plan requests an allowed rate of return on common equity of 11.0%. The
Company's rate filing reflects four underlying objectives: (i) to limit the
balance of the RMC during the three-year period to no more than its 1992 peak
balance of $652 million; (ii) to recover the RMC within no more than thirteen
years of its 1989 inception; (iii) to minimize the final three rate increases
that will follow the two-year base rate freeze period; and (iv) to continue the
Company's gradual return to financial health. The Company's electric rate plan
is subject to approval by the PSC.
For a further discussion see Note 3 of Notes to Financial Statements
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
GAS
In December 1993, the PSC approved a three-year gas rate settlement
between the Company and the staff of the PSC. The gas rate settlement provides
that the Company receive, for the rate years beginning December 1, 1993, 1994
and 1995, annual gas rate increases of 4.7%, 3.8% and 2.8%, respectively. In
the determination of the revenue requirements for the first year of the gas
rate settlement, an allowed rate of return on common equity of 10.1% was used.
The gas rate decision also provides that earnings in excess of a 10.6% return
on common equity in any of the three rate years covered by the settlement be
shared equally between the Company's firm gas customers and its shareowners.
In March 1994, the Company recorded a reduction to earnings of $4.8 million,
net of tax effects, representing the estimate of the firm gas customers'
portion of earnings in excess of the 10.6% allowed rate of return on common
equity for the rate year ending November 30, 1994. See Note 1 of Notes to
Financial Statements for a further discussion of the treatment of gas excess
earnings.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 28, 1994, the New York State Court of Appeals denied Mayflower
Energy Partners, L.P.'s (Mayflower) motion for leave to appeal a lower court
decision which annulled a PSC order requiring the Company to enter into an
agreement with Mayflower to purchase, on an energy-only basis, power for 15
years from a 300 MW facility (Long Island Lighting Company v. Public Service
Commission of the State of New York and Mayflower Energy Partners, L.P.). In
addition, on May 4, 1994, the Company notified Mayflower that it was exercising
its right to terminate the agreement as a result of Mayflower's failure to meet
the construction commencement milestone date.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareowners was held on April 12, 1994.
The persons named below were elected as Directors by holders of the Company's
Common Stock, voting cumulatively, casting votes in favor or withholding votes
as indicated:
<TABLE>
<CAPTION>
IN FAVOR WITHHELD
-------- --------
<S> <C> <C>
William J. Catacosinos 96,074,868 1,018,578
Phyllis S. Vineyard 96,016,245 1,077,201
John H. Talmage 96,137,527 955,919
Basil A. Paterson 96,064,463 1,028,983
George Bugliarello 96,124,807 968,639
George J. Sideris 96,162,464 930,982
A. James Barnes 96,151,494 941,952
Richard L. Schmalensee 96,077,232 1,016,214
Renso L. Caporali 96,114,113 979,333
Peter O. Crisp 96,181,393 912,053
Katherine D. Ortega 96,094,768 998,678
Vicki L. Fuller 95,876,369 1,217,077
</TABLE>
17
<PAGE> 18
The shareowners also ratified the appointment of Ernst & Young as
independent auditors with 95,814,042 votes cast for ratification, 520,297 votes
against and 759,107 votes abstaining.
Of the shares held by brokers and nominees, 211,386 and 5,050,474,
respectively, were not voted.
Item 5. OTHER INFORMATION
In March 1989, the Company was notified that it is a potentially
responsible party for the investigation and remediation of the Port Washington
Landfill in Hempstead, New York, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act. The Company does not believe that it
has contributed to the contamination of the site and has declined the
Environmental Protection Agency's requests to participate in the investigation
and remediation activities at the site. The Company has not received further
communications regarding this site.
Item 6. Exhibits and Reports on Form 8-K
a. EXHIBITS
Computation of Ratio of Earnings to Fixed Charges filed as Exhibit 11.1
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends filed as Exhibit 11.2
b. REPORTS ON FORM 8-K
In its Report on Form 8-K dated January 21, 1994, the Company stated that:
1. The Company has announced the resignation of its President and Chief
Operating Officer, Anthony F. Earley, Jr., effective March 1, 1994.
2. On December 31, 1993, the Company filed a three-year electric rate
plan with the PSC for the period beginning December 1, 1994 that
proposes no base electric rate increases in years one and two of the
plan and an overall increase of 4.3% in the third year.
3. On January 12, 1994, the Company filed comments in response to the
November 2, 1993 Petition filed by the New York State Consumer
Protection Board and the Long Island Power Authority (LIPA) with the
PSC asking the PSC to hold a proceeding on freezing or possibly
reducing the Company's electric rates for the period December 1994 to
November 1997.
18
<PAGE> 19
4. In December 1993, the PSC approved, with an effective date of
December 31, 1993, the Company's negotiated three-year gas rate
settlement with the Staff of the PSC which provided for a first year
increase of $26.6 million and two subsequent increases of $23 million
and $20 million to be effective on December 1, 1995 and 1996,
respectively.
5. On December 30, 1993, the Appellate Division, Third Judicial
Department, affirmed the Supreme Court of the State of New York
Special Term's decision in Long Island Lighting Company v. Public
Service Commission of the State of New York and Mayflower Energy
Partners, L.P., which held that the PSC had violated the federal
Public Utility Regulatory Policies Act and the New York Public
Service Law and had acted arbitrarily when it ordered the Company to
sign a power purchase contract with Mayflower Energy Partners, L.P.
incorporating the PSC's 1989 Long Run Avoided Cost estimates.
6. On December 13, 1993, the United States District Court for the
Eastern District of New York issued an opinion in LILCO v. Stone &
Webster Engineering Corp. granting a motion by Stone & Webster
Engineering Corp. (SWEC) to dismiss the Company's complaint in this
action which had sought to recover damages against SWEC for breach of
contract, negligence, professional malpractice and gross negligence
in connection with SWEC's work as architect-engineer and construction
manager for Shoreham.
7. Pursuant to the LIPA Act, LIPA is required to make payments
in-lieu-of-taxes (PILOTS) to the municipalities that impose real
property taxes on Shoreham. On January 10, 1994, the Appellate
Division, Second Department, affirmed Nassau County Supreme Court's
March 29, 1993 decision in LIPA, et al, v. Shoreham-Wading River
Central School District, et al. holding, in major part, that the
Company is not obligated for any real property taxes that accrued
after February 28, 1992, attributable to property that it conveyed to
LIPA, that PILOTS commence on March 1, 1992, that PILOTS are subject
to refunds and that the LIPA Act does not provide for the termination
of PILOTS.
In its Report on Form 8-K dated February 7, 1994, the Company reported
earnings of $2.15 per common share on revenues of $2,880,995,000 for the year
ended December 31, 1993.
No other reports on Form 8-K were filed in the first quarter of 1994.
19
<PAGE> 20
SIGNATURE
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.
LONG ISLAND LIGHTING COMPANY
(Registrant)
By /s/ Anthony Nozzolillo
---------------------------
ANTHONY NOZZOLILLO
Senior Vice President and
Principal Financial Officer
Dated: May 6, 1994
20
<PAGE> 21
EXHIBIT INDEX
-------------
Exhibit Page
No. Description No.
- ------- ----------- -----
11.1 Computation of Ratio of Earnings to Fixed Charges
filed as Exhibit a.
11.2 Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends filed as
Exhibit b.
<PAGE> 1
EXHIBIT 11.1
LONG ISLAND LIGHTING COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Twelve Months For the Year Ended December 31,
Ended ---------------------------------------------------------------
March 31, 1994 1993 1992 1991 1990 1989
-------------- ---------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Income/(Loss)
per Statement of Income $ 298,321 $ 296,563 $301,974 $ 305,538 $ 319,637 a ($95,803)
Less:
Equity in earnings/loss of less
than 50% owned subsidiary
companies (892) (731) (470) 87 86 80
Add:
Distributed income of less
than 50% owned subsidiary
companies 58 58 87 58 58 58
---------- ---------- -------- ---------- ---------- ---------
299,271 297,352 302,531 305,509 319,609 (95,825)
Add:
Federal income tax 169,187 172,276 160,962 181,653 183,281 (1,037,412)
Appropriate portion of rentals 4,552 4,552 3,504 2,751 2,343 2,730
Interest on long-term debt 460,674 466,538 450,621 472,974 467,700 453,267
Amortization of debt discount,
expense and premium 52,332 52,863 41,950 30,186 24,231 14,743
Other interest 14,729 14,719 20,215 20,695 16,379 17,040
---------- ---------- -------- ---------- ---------- ---------
NET INCOME/(LOSS) AS ADJUSTED $1,000,745 $1,008,300 $979,783 $1,013,768 $1,013,543 a ($645,457)b
========== ========== ======== ========== ========== ========
Fixed Charges:
Appropriate portion of rentals $4,552 $4,552 $3,504 $2,751 $2,343 $2,730
Interest on long-term debt 460,674 466,538 450,621 472,974 467,700 453,267
Amortization of debt discount,
expense and premium 52,332 52,863 41,950 30,186 24,231 14,743
Other interest 14,729 14,719 20,215 20,695 16,379 17,040
---------- ---------- -------- ---------- ---------- --------
TOTAL $ 532,287 $ 538,672 $516,290 $ 526,606 $ 510,653 $487,780
========== ========== ======== ========== ========== ========
Ratio of earnings to fixed
charges 1.88 1.87 1.90 1.93 1.98 b
</TABLE>
- --------------------------------------
a Before cumulative effect of accounting change for unbilled gas revenue.
b For the year ended December 31, 1989, earnings were inadequate to cover
fixed charges. To attain a one-to-one coverage, earnings were deficient by
approximately $1.1 billion, primarily due to the discontinuance of accruing
AFC and the loss in June 1989 resulting from the effectiveness of the 1989
settlement and the approval of the Class Settlement.
<PAGE> 1
EXHIBIT 11.2
LONG ISLAND LIGHTING COMPANY
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Twelve Months For the Year Ended December 31,
Ended --------------------------------------------------------------
March 31, 1994 1993 1992 1991 1990 1989
---------- ---------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Income/(Loss)
per Statement of Income $ 298,321 $ 296,563 $301,974 $ 305,538 $ 319,637 a ($95,803)
Less:
Equity in earnings/loss of less
than 50% owned subsidiary
companies (892) (731) (470) 87 86 80
Add:
Distributed income of less
than 50% owned subsidiary
companies 58 58 87 58 58 58
---------- ---------- -------- ---------- ---------- ---------
299,271 297,352 302,531 305,509 319,609 (95,825)
Add:
Federal income tax 169,187 172,276 160,962 181,653 183,281 (1,037,412)
Appropriate portion of rentals 4,552 4,552 3,504 2,751 2,343 2,730
Interest on long-term debt 460,674 466,538 450,621 472,974 467,700 453,267
Amortization of debt discount,
expense and premium 52,332 52,863 41,950 30,186 24,231 14,743
Other interest 14,729 14,719 20,215 20,695 16,379 17,040
---------- ---------- -------- ---------- ---------- ---------
NET INCOME/(LOSS) AS ADJUSTED $1,000,745 $1,008,300 $979,783 $1,013,768 $1,013,543 a ($645,457)
========== ========== ======== ========== ========== =========
Fixed Charges:
Appropriate portion of rentals $4,552 $4,552 $3,504 $2,751 $2,343 $2,730
Interest on long-term debt 460,674 466,538 450,621 472,974 467,700 453,267
Amortization of debt discount,
expense and premium 52,332 52,863 41,950 30,186 24,231 14,743
Other interest 14,729 14,719 20,215 20,695 16,379 17,040
Preferred stock dividend
requirements 54,779 56,108 63,954 66,394 68,161 79,232
Tax effect for preferred stock
dividend requirements 29,966 32,600 34,090 39,481 39,078 40,816
---------- ---------- -------- ---------- ---------- ---------
TOTAL $ 617,032 $ 627,380 $614,334 $ 632,481 $ 617,892 $ 607,828
========== ========== ======== ========== ========== =========
Ratio of earnings to combined
fixed charges and preferred
stock dividends 1.62 1.61 1.59 1.60 1.64 b
</TABLE>
- --------------------------------------
a Before cumulative effect of accounting change for unbilled gas revenue.
b For the year ended December 31, 1989, earnings were inadequate to cover
combined fixed charges and preferred stock dividends. To attain a
one-to-one coverage, earnings were deficient by approximately $1.3 billion,
primarily due to the discontinuence of accruing AFC and the loss recorded
in June 1989 resulting from the effectiveness of the 1989 Settlement and
the approval of the Class Settlement.
