<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 June 30, 1995
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 June 30, 1995, was 119,045,099.
<PAGE> 2
LONG ISLAND LIGHTING COMPANY
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Income 3
Balance Sheet 5
Statement of Cash Flows 7
Notes to Financial Statements 8
Item 2. Management's Discussion and 11
Analysis of Financial Condition and
Results of Operations
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote 20
of Security Holders
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signature 22
</TABLE>
-2-
<PAGE> 3
LONG ISLAND LIGHTING COMPANY
STATEMENT OF INCOME
(UNAUDITED)
(Thousands of Dollars - except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
June 30
-----------------------------
1995 1994
-----------------------------
<S> <C> <C>
REVENUES
Electric $561,285 $531,715
Gas 92,539 94,595
-------- --------
Total Revenues 653,824 626,310
-------- --------
EXPENSES
Operations - fuel and purchased power 175,608 178,962
Operations - other 96,662 97,250
Maintenance 35,646 33,696
Depreciation and amortization 36,190 32,223
Base financial component amortization 25,243 25,243
Rate moderation component amortization (22,244) 47,530
Regulatory liability component amortization (22,143) (22,143)
Other regulatory amortization 46,691 (20,118)
Operating taxes 105,142 92,708
Federal income tax - current 3,615 2,176
Federal income tax - deferred and other 30,168 19,305
-------- --------
Total Expenses 510,578 486,832
-------- --------
OPERATING INCOME 143,246 139,478
-------- --------
OTHER INCOME AND (DEDUCTIONS)
Rate moderation component carrying charges 6,630 8,485
Class Settlement (5,433) (5,664)
Other income and deductions, net 17,285 6,754
Allowance for other funds used during construction 675 485
Federal income tax credit (charge) - deferred and other (2,267) 2,729
-------- --------
Total Other Income and (Deductions) 16,890 12,789
-------- --------
INCOME BEFORE INTEREST CHARGES 160,136 152,267
-------- --------
INTEREST CHARGES AND (CREDITS)
Interest on long-term debt 103,577 112,268
Other interest 16,075 16,018
Allowance for borrowed funds used during construction (908) (806)
-------- --------
Total Interest Charges and (Credits) 118,744 127,480
-------- --------
NET INCOME 41,392 24,787
Preferred stock dividend requirements 13,172 13,271
-------- --------
Earnings for Common Stock $28,220 $11,516
======== ========
AVERAGE COMMON SHARES OUTSTANDING (000) 119,045 114,457
EARNINGS PER COMMON SHARE $0.24 $0.10
Dividends Declared per Common Share $0.445 $0.445
</TABLE>
See Notes to Financial Statements.
- 3 -
<PAGE> 4
LONG ISLAND LIGHTING COMPANY
STATEMENT OF INCOME
(UNAUDITED)
(Thousands of Dollars - except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------------------------------
1995 1994
-------------------------------
<S> <C> <C>
REVENUES
Electric $1,107,172 $1,118,982
Gas 337,840 379,472
---------- ----------
Total Revenues 1,445,012 1,498,454
---------- ----------
EXPENSES
Operations - fuel and purchased power 432,302 477,882
Operations - other 192,672 211,303
Maintenance 69,902 61,555
Depreciation and amortization 71,824 63,904
Base financial component amortization 50,485 50,485
Rate moderation component amortization (10,757) 96,157
Regulatory liability component amortization (44,286) (44,286)
Other regulatory amortization 60,350 (10,105)
Operating taxes 216,749 202,348
Federal income tax - current 6,228 4,517
Federal income tax - deferred and other 75,420 61,349
---------- ----------
Total Expenses 1,120,889 1,175,109
---------- ----------
OPERATING INCOME 324,123 323,345
---------- ----------
OTHER INCOME AND (DEDUCTIONS)
Rate moderation component carrying charges 13,472 17,464
Class Settlement (10,900) (11,366)
Other income and deductions, net 20,788 16,251
Allowance for other funds used during construction 1,389 1,202
Federal income tax credit (charge) - deferred and other (58) 3,644
---------- ----------
Total Other Income and (Deductions) 24,691 27,195
---------- ----------
INCOME BEFORE INTEREST CHARGES 348,814 350,540
---------- ----------
INTEREST CHARGES AND (CREDITS)
Interest on long-term debt 206,637 225,047
Other interest 32,419 33,093
Allowance for borrowed funds used during construction (1,933) (2,009)
---------- ----------
Total Interest Charges and (Credits) 237,123 256,131
---------- ----------
NET INCOME 111,691 94,409
Preferred stock dividend requirements 26,343 26,543
---------- ----------
Earnings for Common Stock $85,348 $67,866
========== ==========
AVERAGE COMMON SHARES OUTSTANDING (000) 118,878 113,496
EARNINGS PER COMMON SHARE $0.72 $0.60
Dividends Declared per Common Share $0.89 $0.89
</TABLE>
See Notes to Financial Statements.
- 4 -
<PAGE> 5
LONG ISLAND LIGHTING COMPANY
BALANCE SHEET
(Thousands of Dollars)
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
ASSETS (unaudited) (audited)
---------- -----------
<S> <C> <C>
UTILITY PLANT
Electric $3,735,531 $3,657,178
Gas 1,040,162 994,742
Common 238,721 232,346
Construction work in progress 94,799 129,824
Nuclear fuel in process and in reactor 16,676 23,251
----------- -----------
5,125,889 5,037,341
----------- -----------
Less - Accumulated depreciation and
amortization 1,601,538 1,538,995
----------- -----------
Total Net Utility Plant 3,524,351 3,498,346
----------- -----------
REGULATORY ASSETS
Base financial component (less accumulated
amortization of $605,824 and $555,340) 3,433,005 3,483,490
Rate moderation component 420,342 463,229
Shoreham post settlement costs 954,638 922,580
Shoreham nuclear fuel 72,307 73,371
Postretirement benefits other than pensions 402,585 412,727
Regulatory tax asset 1,818,363 1,831,689
Other 339,077 354,524
----------- -----------
Total Regulatory Assets 7,440,317 7,541,610
----------- -----------
Nonutility Property and Other Investments 14,745 24,043
----------- -----------
CURRENT ASSETS
Cash and cash equivalents 191,036 185,451
Special deposits 55,147 27,614
Customer accounts receivable (less allowance
for doubtful accounts of $21,371 and $23,365) 246,149 245,125
Other accounts receivable 90,145 14,030
Accrued unbilled revenues 148,403 164,379
Materials and supplies at average cost 64,485 74,777
Fuel oil at average cost 33,037 37,723
Gas in storage at average cost 41,624 68,447
Prepayments and other current assets 65,576 33,878
----------- -----------
Total Current Assets 935,602 851,424
----------- -----------
DEFERRED CHARGES
Deferred federal income tax 889,990 951,766
Unamortized cost of issuing securities 293,019 313,207
Other 9,476 36,284
----------- -----------
Total Deferred Charges 1,192,485 1,301,257
----------- -----------
Total Assets $13,107,500 $13,216,680
=========== ===========
</TABLE>
See Notes to Financial Statements.
- 5 -
<PAGE> 6
LONG ISLAND LIGHTING COMPANY
BALANCE SHEET
(Thousands of Dollars)
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
CAPITALIZATION AND LIABILITIES (unaudited) (audited)
---------- -----------
<S> <C> <C>
CAPITALIZATION
Long-term debt $4,672,675 $5,162,675
Unamortized discount on debt (16,670) (17,278)
----------- -----------
4,656,005 5,145,397
----------- -----------
Preferred stock - redemption required 644,350 644,350
Preferred stock - no redemption required 63,947 63,957
----------- -----------
Total Preferred Stock 708,297 708,307
----------- -----------
Common stock 595,226 592,083
Premium on capital stock 1,107,560 1,101,240
Capital stock expense (51,452) (52,175)
Retained earnings 732,019 752,480
----------- -----------
Total Common Shareowners' Equity 2,383,353 2,393,628
----------- -----------
Total Capitalization 7,747,655 8,247,332
----------- -----------
REGULATORY LIABILITIES
Regulatory liability component 317,437 357,117
1989 Settlement credits 141,261 145,868
Regulatory tax liability 114,403 111,218
Other 137,165 143,611
----------- -----------
Total Regulatory Liabilities 710,266 757,814
----------- -----------
CURRENT LIABILITIES
Current maturities of long-term debt 490,000 25,000
Current redemption requirements of preferred stock 4,800 4,800
Accounts payable and accrued expenses 237,795 241,775
Accrued taxes 23,023 58,133
Accrued interest 155,412 149,929
Dividends payable 57,647 57,367
Class Settlement 40,833 35,833
Customer deposits 29,035 28,474
----------- -----------
Total Current Liabilities 1,038,545 601,311
----------- -----------
DEFERRED CREDITS
Deferred federal income tax 2,938,970 2,941,793
Class Settlement 144,050 151,604
Other 13,001 13,204
----------- -----------
Total Deferred Credits 3,096,021 3,106,601
----------- -----------
OPERATING RESERVES
Pension and other postretirements benefits 455,396 453,016
Claims and damages 59,617 50,606
----------- -----------
Total Operating Reserves 515,013 503,622
----------- -----------
Commitments and Contingencies -- --
----------- -----------
Total Capitalization and Liabilities $13,107,500 $13,216,680
=========== ===========
</TABLE>
See Notes to Financial Statements.
- 6 -
<PAGE> 7
LONG ISLAND LIGHTING COMPANY
STATEMENT OF CASH FLOWS
(UNAUDITED)
(Thousands of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30
---------------------------------
1995 1994
---------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $111,691 $94,409
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for doubtful accounts 8,614 9,429
Depreciation and amortization 71,824 63,904
Base financial component amortization 50,485 50,485
Rate moderation component amortization (10,757) 96,157
Regulatory liability component amortization (44,286) (44,286)
Other regulatory amortization 60,350 (10,105)
Rate moderation component carrying charges (13,472) (17,464)
Class Settlement 10,900 11,366
Amortization of cost of issuing and redeeming securities 20,604 25,195
Federal income taxes - deferred and other 75,478 57,705
Allowance for other funds used during construction (1,389) (1,202)
Gas Cost Adjustment 13,344 20,744
Other 11,578 20,324
Changes in operating assets and liabilities
Accounts receivable (6,777) (16,263)
Accrued unbilled revenues 15,976 32,277
Materials and supplies, fuel oil and gas in storage 41,801 11,801
Prepayments and other current assets (31,698) (819)
Accounts payable and accrued expenses (3,980) (73,273)
Accrued taxes (35,110) (59,521)
Special Deposits (27,533) 152
Class Settlement (14,287) (13,713)
Other (8,347) (5,745)
-------- ---------
Net Cash Provided by Operating Activities 295,009 251,557
-------- ---------
INVESTING ACTIVITIES
Construction and nuclear fuel expenditures (106,196) (83,095)
Shoreham post settlement costs (45,429) (108,730)
Other 9,185 (1,072)
-------- ---------
Net Cash Used in Investing Activities (142,440) (192,897)
-------- ---------
FINANCING ACTIVITIES
Proceeds from sale of common stock 9,453 108,162
Proceeds from issuance of long-term debt -- 281,992
Redemption of long-term debt (25,000) (425,000)
Preferred stock dividends paid (26,343) (26,405)
Common stock dividends paid (105,529) (100,073)
Cost of issuing and redeeming securities (21) (3,695)
Other 456 401
-------- ---------
Net Cash Used in Financing Activities (146,984) (164,618)
-------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents $5,585 ($105,958)
======== =========
Cash and cash equivalents at January 1 $185,451 $248,532
Net increase (decrease) in cash and cash equivalents 5,585 (105,958)
-------- ---------
Cash and Cash Equivalents at June 30 $191,036 $142,574
======== =========
SUPPLEMENTARY INFORMATION
Interest paid, before reduction for the allowance
for borrowed funds used during construction $212,965 $229,761
Federal income taxes - paid $5,400 $3,550
Federal income taxes - refunded -- --
</TABLE>
See Notes to Financial Statements.
- 7 -
<PAGE> 8
Notes to Financial Statements
For the Quarter Ended June 30, 1995
(Unaudited)
Note 1. BASIS OF PRESENTATION
These Notes to Financial Statements reflect events subsequent to February 3,
1995, 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 June 30, 1995.
These Notes to Financial Statements should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the six months ended June 30, 1995, Part II, Item 6b, of this
report, the Company's quarterly report on Form 10-Q for the quarter ended March
31, 1995 and the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
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 prior year amounts have been reclassified to be consistent with current
year presentations.
8
<PAGE> 9
Note 2. RATE MATTERS
In December 1993, the Company filed a three-year electric rate plan (Plan), with
the Public Service Commission of the State of New York (PSC). The PSC issued a
short order and a full order (Orders) on the Company's Plan on April 7, 1995 and
July 3, 1995, respectively. These Orders provide, among other things: that the
Company's current electric rates shall remain in effect for the first rate year
of the Plan which began on December 1, 1994; that the Company begin collection
of previously deferred revenues provided for under the LILCO Ratemaking and
Performance Plan (LRPP); that the LRPP mechanisms remain in effect with certain
modifications; and that the rate proceeding be continued to determine the
appropriate level of rates for the next several years, in order to, among other
things, provide for the continuing recovery of the Shoreham-related assets.
The PSC stated in its Orders that its decision to continue the rate proceeding
reaffirms its commitment to allow the Company to recover its Shoreham-related
assets, stating that it is a crucial factor in the Company's ability to maintain
its investment grade bond rating and to secure reasonably priced capital. The
continuation of the rate proceeding would also enable the PSC to consider the
Company's operations and its opportunities for greater efficiency over the next
several years. Toward this end, the PSC encouraged the parties to the proceeding
to negotiate a multi-year electric rate settlement to address rate levels for
the remaining recovery period of the Rate Moderation Component (RMC). If a
settlement is not reached by November 30, 1995, rates for the rate year
beginning December 1, 1995 will remain at the current level.
For the rate year beginning December 1, 1994, the Orders authorize an allowed
return on common equity of 11% as requested by the Company, stipulate that any
earnings in excess of 11% be applied to reduce the RMC and modify the LRPP
demand side management, customer service, and transmission and distribution
reliability performance incentive programs. Under the revised programs, the
Company is subject to a maximum penalty of 38 basis points of the allowed return
on common equity and can earn up to 4 basis points under the customer service
program. These 4 basis points can only be used to offset a penalty under the
transmission and distribution reliability program. The Company can continue to
earn or forfeit up to 20 basis points of the allowed return on common equity,
under the partial pass through fuel incentive program which was unchanged.
Also, in accordance with the PSC's Orders, the Company, in June 1995, recognized
as income approximately $7.6 million, representing the shareowners' portion of
the net proceeds from certain litigation related to the construction of the
Shoreham Nuclear Power Station. The ratepayers' portion of these net proceeds,
amounting to $29.6 million, has been credited to the RMC.
9
<PAGE> 10
Note 3. CAPITALIZATION
On June 1, 1995, the Company retired, at maturity, $25 million First Mortgage
Bonds with cash on hand. In addition, the Company has called for redemption on
September 1, 1995 the remaining two series of First Mortgage Bonds currently
outstanding: $40 million aggregate principal amount Series P, 5 1/4% due March
1, 1996 and $35 million aggregate principal amount Series Q, 5 1/2% due April 1,
1997. Upon the retirement of these series of First Mortgage Bonds, the lien of
the First Mortgage will be discharged and the Company's General and Refunding
Bonds will be the Company's only secured debt.
10
<PAGE> 11
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Six Months Ended June 30, 1995
RESULTS OF OPERATIONS
EARNINGS
Earnings for common stock for the three months ended June 30, 1995 were $28.2
million or $.24 per share. This compares with $11.5 million or $.10 per share
for the same period last year. For the six months ended June 30, 1995, earnings
amounted to $85.3 million or $.72 per common share, compared with $67.9 million
or $.60 per common share for the same period last year.
Earnings for the electric business increased primarily as a result of lower
operations and maintenance expenses and the recognition of certain litigation
proceeds related to the construction of the Shoreham Nuclear Power Station. The
increase in earnings occurred despite the recent electric rate order issued July
3, 1995 by the Public Service Commission of the State of New York (PSC)
providing for a lower allowed return on common equity and eliminating the
Company's ability to earn rewards with respect to certain performance incentives
previously established by the PSC.
Earnings for the gas business increased, despite an unusually warm heating
season, as a result of the Company's continuing effort to reduce operating costs
and a write-off in 1994 of previously deferred storm costs of approximately $6.6
million.
The Company anticipates that its 1995 annual earnings will be lower than 1994
earnings due to the PSC's electric rate order, as more fully discussed in Note 2
of the accompanying Notes to Financial Statements. While no assurances can be
given, the Company will continue its cost containment efforts in an attempt to
mitigate the impact of the rate order on annual earnings and to keep electric
rates as low as possible.
11
<PAGE> 12
REVENUES
Total revenues for the quarter ended June 30, 1995 were $653.8 million, an
increase of $27.5 million or 4.4% over the comparable period last year. Electric
revenues were up $29.6 million, while gas revenues declined by $2.1 million
compared with the same period last year.
For the six months ended June 30, 1995, revenues totaled $1.4 billion, a decline
of $53.4 million or 3.6% compared with the same period last year. Electric
revenues were lower by $11.8 million, and gas revenues by $41.6 million, when
compared with the same period in 1994.
Electric
The increase in electric revenues for the quarter ended June 30, 1995, when
compared to the same period in 1994, was the result of a refinement in the
Company's method for estimating the accrual for unbilled sales which became
effective January 1, 1995. This refinement has no impact on annual revenues and
no effect on earnings as a result of the net margin mechanism, which eliminates
the impact on earnings due to changes in sales above or below the level
reflected in rates.
For the six months ended June 30, 1995, electric revenues declined when compared
with the same period in 1994, despite the refinement in the Company's method for
estimating the accrual for unbilled sales. This decrease is primarily the result
of lower sales volumes associated with the mild 1995 heating season when
compared to the unusually cold 1994 heating season. Also contributing to the
decline was the loss of load resulting from the commencement of operation in
April 1995, of a newly constructed generating facility owned by the State
University of New York at Stony Brook.
Gas
For the six months ended June 30, 1995, the decline in gas revenues, when
compared to the same period in 1994, was primarily the result of lower sales
volumes accompanied by lower fuel expense recoveries caused by the unusually
warm heating season. Partially offsetting this decrease was a rate increase of
3.8% effective December 1, 1994 and the addition of approximately 7,000 gas
space heating customers.
12
<PAGE> 13
FUELS AND PURCHASED POWER
Fuels and purchased power expenses for the three and six months ended June 30,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
6/30/95 6/30/94 6/30/95 6/30/94
------- ------- ------- -------
(In Millions)
<S> <C> <C> <C> <C>
Fuels for Electric Operations
Oil $ 20 $ 33 $ 57 $ 90
Gas 36 24 63 35
Nuclear 2 4 6 7
Purchased Power 77 73 151 149
---- ---- ---- ----
Total for Electric Operations 135 134 277 281
Fuels for Gas Operations 41 45 155 197
---- ---- ---- ----
Total $176 $179 $432 $478
==== ==== ==== ====
</TABLE>
The mix of fuels and purchases of power for providing the Company's electric
system energy requirements during the three and six months ended June 30, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
6/30/95 6/30/94 6/30/95 6/30/94
------- ------- ------- -------
<S> <C> <C> <C> <C>
Oil 15% 25% 21% 33%
Gas 36 24 30 15
Nuclear 3 10 6 9
Purchases 46 41 43 43
--- --- --- ---
Total 100% 100% 100% 100%
=== === === ===
</TABLE>
For the six months ended June 30, 1995, electric fuel costs were lower when
compared to the same period of the prior year primarily as a result of lower
sales volumes. Partially offsetting the effects of lower sales volumes was the
increased per unit cost purchased power. The per unit cost of purchased power
increased as a result of extended outages at certain upstate nuclear generating
facilities which ordinarily supply power at more economical rates.
The use of natural gas as an electric fuel increased as the Company completed
the conversion of an oil fired generator to a dual fuel unit earlier this year
and the continuing decline of the cost of natural gas.
Gas fuel costs for operating the gas business decreased for the quarter and six
months ended June 30, 1995 when compared to the same periods last year as a
result of lower firm sales volumes and lower gas prices.
13
<PAGE> 14
OPERATIONS AND MAINTENANCE EXPENSES
For the quarter ended June 30, 1995, total operations and maintenance (O&M)
expenses, excluding fuels and purchased power, amounted to $132.3 million, an
increase of $1.4 million or 1.1% over the comparable period last year. For the
six months ended June 30, 1995, these expenses totaled $262.6 million, a
decrease of $10.3 million or 3.8% when compared to the same period last year.
The decrease for the six month period reflects in part, the continuation of the
Company's efforts to reduce its operations and maintenance expenditures. Also,
in 1994, the Company recognized $6.6 million of previously deferred storm costs
associated with gas operations.
RATE MODERATION COMPONENT
For the quarter ended June 30, 1995, the Company recorded income of $22.2
million, reflecting the difference between the Company's revenue requirements
under conventional ratemaking and the revenues resulting from the implementation
of the rate moderation plan provided for in the Rate Moderation Agreement (RMA).
For the same quarter in 1994, the Company had recorded a charge to income of
$47.5 million. For the six months ended June 30, 1995, the Company recorded
income of $10.8 million, and a charge to income of $96.2 million for the same
period last year.
As a result of the PSC rate order, the Company has credited to the RMC
approximately $69 million of deferred ratepayer benefits. The deferred ratepayer
benefits consist primarily of: the overrecovery of certain production O&M costs;
litigation proceeds related to the construction of the Shoreham Nuclear Power
Station; and proceeds from the sale of sulfur dioxide emissions credits. At June
30, 1995 and December 31, 1994, the unamortized RMC balance was $420 million and
$463 million, respectively.
OTHER REGULATORY AMORTIZATION
For the quarter ended June 30, 1995, other regulatory amortization amounted to a
charge of $46.7 million, compared with a credit to income of $20.1 million for
the same period in 1994. Included are the effects of an electric ratemaking
mechanism which provides for a revenue reconciliation (net margin) to eliminate
the impact on earnings of experiencing sales that are above or below adjudicated
levels. As a result of actual sales for the second quarter of 1995 being above
the adjudicated level, the Company recorded a non-cash charge to income of $6.5
million, compared to a $36.8 million credit to income for the same quarter last
year, when sales were below the adjudicated level. Also contributing to the
change was the amortization of the LRPP deferral which reduced income by $28.0
million for the quarter ended June 30, 1995, compared with $8.0 million for the
same period last year.
For the six months ended June 30, 1995, other regulatory amortization amounted
to a charge to income of $60.4 million compared with a credit
14
<PAGE> 15
to income of $10.1 million for the same period last year. The net margin
adjustment was a charge to income of $14.1 million this year compared with a
$47.4 million credit to income last year. The amortization of the LRPP deferral
which reduced income by $28.0 million this year, compared with $16.0 million
last year.
OPERATING TAXES
For the quarter ended June 30, 1995, operating taxes totaled $105.1 million, an
increase of $12.4 million or 13.4% over the comparable period last year. For the
six months ended June 30, 1995, these taxes amounted to $216.7 million, an
increase of $14.4 million or 7.1% over the same period in 1994.
The increase in the second quarter was attributable to higher property and
revenue taxes, while the increase for the six months was primarily due to higher
property taxes, partially offset by lower revenue taxes.
INTEREST EXPENSE
Interest expense for the quarter ended June 30, 1995 was $119.7 million, a
decrease of $8.6 million or 6.7% when compared to the same quarter in 1994. For
the six months ended June 30, 1995, this expense amounted to $239.1 million, a
decrease of $19.1 million or 7.4% compared with the same period last year. These
decreases are due to lower debt levels and lower average borrowing costs.
15
<PAGE> 16
FINANCIAL CONDITION
LIQUIDITY
At June 30, 1995, the Company's cash and cash equivalents amounted to
approximately $191 million, compared to $185 million at December 31, 1994. The
Company also has available for its use a $300 million revolving line of credit
through October 1, 1996, provided by its 1989 Revolving Credit Agreement (1989
RCA). At June 30, 1995, no amounts were outstanding under the 1989 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 satisfied the maturity of $25 million of First Mortgage Bonds on
June 1, 1995 with cash on hand. In addition, the Company has called for
redemption on September 1, 1995, the $75 million remaining series of First
Mortgage Bonds currently outstanding. The Company will use cash on hand to
accomplish these redemptions.
Upon the retirement of the First Mortgage Bonds, the lien of the First Mortgage
will be discharged and the Company's General and Refunding Bonds will be the
Company's only secured debt.
The Company has maturing debt of $415 million, $251 million and $101 million in
1996, 1997 and 1998 respectively. The Company intends to use cash generated from
operations to the maximum extent practicable to satisfy these maturities. Any
balance necessary to satisfy the obligations is expected to be obtained from the
issuance of debt and/or equity securities.
The New York State Energy Research and Development Authority (NYSERDA) has been
authorized by New York State to sell, on behalf of the Company, $50 million of
Electric Facilities Revenue Bonds for the construction of facilities for the
furnishing of electric energy. The Company currently anticipates NYSERDA will
sell these bonds in August 1995. Proceeds from the sale of these bonds will be
used to replenish the Treasury for previously incurred construction
expenditures.
16
<PAGE> 17
CAPITAL REQUIREMENTS AND CAPITAL PROVIDED
Capital requirements and capital provided for the three and six months ended
June 30, 1995 were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Capital Requirements Three Months Ended Six Months Ended
June 30, 1995 June 30, 1995
--------------------------------------------------------------------------------
(In Millions of Dollars)
<S> <C> <C>
Total Construction $ 68 $106
--------------------------------------------------------------------------------
Refundings and Dividends
Long-term debt 25 25
Preferred stock dividends 13 26
Common stock dividends 53 106
--------------------------------------------------------------------------------
Total Refundings and Dividends 91 157
--------------------------------------------------------------------------------
Shoreham post settlement costs 21 45
--------------------------------------------------------------------------------
Total Capital Requirements $180 $308
================================================================================
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Capital Provided Three Months Ended Six Months Ended
June 30, 1995 June 30, 1995
--------------------------------------------------------------------------------
(In Millions of Dollars)
<S> <C> <C>
Cash generated from
operations $133 $295
(Increase) decrease in cash 32 (6)
Common stock issued 4 9
Other investing activities 11 10
--------------------------------------------------------------------------------
Total Capital Provided $180 $308
================================================================================
</TABLE>
For further information, see the Statement of Cash Flows.
17
<PAGE> 18
LIPA PROPOSAL
In June 1995, the Long Island Power Authority (LIPA) invited the Company to
enter into negotiations with it regarding a recent proposal to convert the
Company into a state owned utility. Under this new proposal, which differs
significantly from the October 1994 proposal that LIPA did not pursue, LIPA and
an unidentified utility partner and prospective management operator of the
utility system contemplated a business combination in which holders of the
Company's common stock would receive $17.50 per share in cash. This transaction
would be subject to, among other things, verification by LIPA and its utility
partner that the venture would result in electric rate reductions of 7.5%, the
availability of a sufficient amount of tax-exempt financing and the requisite
federal and state approvals.
In its response, the Company's Board of Directors stated that the proposal did
not warrant further review at this time because of the numerous contingencies
and uncertainties associated with it, such as the unwillingness of LIPA to
disclose the identity of its utility partner and the lack of support from the
Governor of the State of New York.
While it did not believe it was appropriate to pursue LIPA's proposal, the
Company is continuously assessing various strategies in an effort to provide the
greatest possible value to its shareowners and ratepayers in light of the
changing economic, regulatory and political circumstances affecting it. Such
strategies may include a review and modification of its operations to best meet
the challenges of a competitive environment, a possible reorganization of the
Company, possible joint ventures and possible business combinations with other
entities. The implementation of certain of these strategies would be subject to,
among other things, shareowner and regulatory approvals and could impact the
Company's future financial results and operations. Accordingly, no assurances
can be given that the Company will pursue any such strategies or that any
transaction will be consummated.
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In May 1995, eight participants of the Company's Retirement Income Plan (the
Plan) filed a lawsuit against the Company, the Plan and Robert X. Kelleher, the
Plan Administrator, in the United States District Court for the Eastern District
of New York (Becher, et al. v. Long Island Lighting Company, et al.). This
proceeding arose in connection with the plaintiffs' withdrawal, approximately
twenty-five years ago, of contributions made to the Plan, thereby resulting in
a reduction of their pension benefits. The plaintiffs are now seeking, among
other things, to have these reduced benefits restored to their pension
accounts. The Company's liability, if any, resulting from this proceeding
cannot yet be determined. However, the Company maintains that the plaintiffs'
claims are without merit and intends to vigorously defend such claims.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
19
<PAGE> 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareowners was held on May 24, 1995. 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 100,999,210 2,006,043
Phyllis S. Vineyard 100,934,317 2,070,936
John H. Talmage 100,994,241 2,011,012
Basil A. Paterson 100,997,217 2,008,036
George Bugliarello 100,909,960 2,095,293
George J. Sideris 101,057,605 1,947,648
A. James Barnes 101,041,584 1,963,669
Richard L. Schmalensee 100,917,549 2,087,704
Renso L. Caporali 101,063,820 1,941,433
Peter O. Crisp 101,100,183 1,905,070
Katherine D. Ortega 101,037,051 1,968,202
Vicki L. Fuller 100,954,604 2,050,649
</TABLE>
The shareowners also ratified the appointment of Ernst & Young LLP as
independent auditors for the year 1995 with 101,409,406 votes cast for
ratification, 673,557 votes against and 919,030 votes abstaining.
Of the shares held by brokers and nominees, 547,254 and 4,889,820 respectively,
were not voted.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
Computation of Ratio of Earnings to Fixed Charges filed as Exhibit a.
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends filed as Exhibit b.
20
<PAGE> 21
Financial Data Schedule UT filed as Exhibit 27
b. REPORTS ON FORM 8-K
In its Report on Form 8-K dated April 20, 1995, the Company reported that the
Public Service Commission of the State of New York had issued an Order Directing
Changes in Rate Design respecting the Company's three-year electric rate plan
filed in December 1993.
In its Report on Form 8-K dated April 28, 1995, the Company reported earnings
for the three months ended March 31, 1995.
No other reports on Form 8-K were filed in the second quarter of 1995.
21
<PAGE> 22
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: August 7, 1995
22
<PAGE> 23
EXHIBIT INDEX
12(a) - Computation of Ratio of Earnings to Fixed Charges
12(b) - Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
27 - Financial Data Schedule
<PAGE> 1
EXHIBIT (a)
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 ---------------------------------------------------------------
June 30,1995 1994 1993 1992 1991 1990
------------- -------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Income/(Loss)
per Statement of Income $319,134 $301,852 $296,563 $301,974 $305,538 $319,637(a)
Less:
Equity in earnings/loss of less
than 50% owned subsidiary
companies 117 89 77 93 85 83
Add:
Distributed income of less
than 50% owned subsidiary
companies 117 117 58 87 58 58
---------- -------- ---------- -------- ---------- ----------
319,134 301,880 296,544 301,968 305,511 319,612
Add:
Federal income tax 196,196 176,712 172,276 160,962 181,653 183,281
Appropriate portion of rentals 4,701 4,295 4,552 3,504 2,751 2,343
Interest on long term-debt 419,340 437,751 466,538 450,621 472,974 467,700
Other interest and amortization 61,751 62,433 67,582 62,165 50,881 40,610
---------- -------- ---------- -------- ---------- ----------
Net Income/(Loss) as adjusted $1,001,122 $983,071 $1,007,492 $979,220 $1,013,770 $1,013,546(a)
========== ======== ========== ======== ========== ==========
Fixed Charges:
Appropriate portion of rentals $4,701 $4,295 $4,552 $3,504 $2,751 $2,343
Interest on long term-debt 419,340 437,751 466,538 450,621 472,974 467,700
Other interest and amortizations 61,751 62,433 67,582 62,165 50,881 40,610
---------- -------- ---------- -------- ---------- ----------
Total $485,792 $504,479 $538,672 $516,290 $526,606 $510,653
========== ======== ========== ======== ========== ==========
Ratio of earnings to fixed
charges 2.06 1.95 1.87 1.90 1.93 1.98
</TABLE>
---------------
(a) Before cumulative effect of accounting change for unbilled gas revenue.
<PAGE> 1
EXHIBIT (b)
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 --------------------------------------------------------------------
June 30,1995 1994 1993 1992 1991 1990
------------- -------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Income/(Loss)
per Statement of Income $319,134 $301,852 $296,563 $301,974 $305,538 $319,637(a)
Less:
Equity in earnings/loss of less
than 50% owned subsidiary
companies 117 89 77 93 87 86
Add:
Distributed income of less
than 50% owned subsidiary
companies 117 117 58 87 58 58
---------- -------- ---------- -------- ---------- ----------
319,134 301,880 296,544 301,968 305,509 319,609
Add:
Federal income tax 196,196 176,712 172,276 160,962 181,653 183,281
Appropriate portion of rentals 4,701 4,295 4,552 3,504 2,751 2,343
Interest on long term-debt 419,340 437,751 466,538 450,621 472,974 467,700
Other interest and amortizations 61,751 62,433 67,582 62,165 50,881 40,610
---------- -------- ---------- -------- ---------- ----------
Net Income/(Loss) as adjusted $1,001,122 $983,071 $1,007,492 $979,220 $1,013,768 $1,013,543(a)
========== ======== ========== ======== ========== ==========
Fixed Charges:
Appropriate portion of rentals $4,701 $4,295 $4,552 $3,504 $2,751 $2,343
Interest on long term-debt 419,340 437,751 466,538 450,621 472,974 467,700
Other interest and amortizations 61,751 62,433 67,582 62,165 50,881 40,610
Preferred stock dividend
requirements 52,820 53,020 56,108 63,954 66,394 68,161
Tax effect for preferred stock
dividend requirements 32,470 31,045 32,600 34,090 39,481 39,078
---------- -------- ---------- -------- ---------- ----------
Total $571,082 $588,544 $627,380 $614,334 $632,481 $617,892
========== ======== ========== ======== ========== ==========
Ratio of earnings to combined
fixed charges and preferred
stock dividends 1.75 1.67 1.61 1.59 1.60 1.64
</TABLE>
---------------
(a) Before cumulative effect of accounting change for unbilled gas revenue.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Income, Balance Sheet and Statement of Cash Flows, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,524,351
<OTHER-PROPERTY-AND-INVEST> 14,745
<TOTAL-CURRENT-ASSETS> 935,602
<TOTAL-DEFERRED-CHARGES> 1,192,485
<OTHER-ASSETS> 7,440,317
<TOTAL-ASSETS> 13,107,500
<COMMON> 595,226
<CAPITAL-SURPLUS-PAID-IN> 1,056,108
<RETAINED-EARNINGS> 732,019
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,383,353
644,350
63,947
<LONG-TERM-DEBT-NET> 4,672,675
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 490,000
4,800
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,848,375
<TOT-CAPITALIZATION-AND-LIAB> 13,107,500
<GROSS-OPERATING-REVENUE> 1,445,012
<INCOME-TAX-EXPENSE> 81,648
<OTHER-OPERATING-EXPENSES> 1,039,241
<TOTAL-OPERATING-EXPENSES> 1,120,889
<OPERATING-INCOME-LOSS> 324,123
<OTHER-INCOME-NET> 24,691
<INCOME-BEFORE-INTEREST-EXPEN> 348,814
<TOTAL-INTEREST-EXPENSE> 237,123
<NET-INCOME> 111,691
26,343
<EARNINGS-AVAILABLE-FOR-COMM> 85,348
<COMMON-STOCK-DIVIDENDS> 105,529
<TOTAL-INTEREST-ON-BONDS> 206,637
<CASH-FLOW-OPERATIONS> 295,009
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
</TABLE>
