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Previous: MONARCH CEMENT CO, 10-Q, 1996-08-13 |
Next: MONSANTO CO, 10-Q, 1996-08-13 |
Page 1 of 13
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996
Commission File Number 1-5164
MONONGAHELA POWER COMPANY
(Exact name of registrant as specified in its charter)
Ohio 13-5229392
(State of Incorporation) (I.R.S. Employer Identification No.)
1310 Fairmont Avenue, Fairmont, West Virginia 26554
Telephone Number - 304-366-3000
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 and (2) has been subject to such filing requirements for
the past 90 days.
At August 13, 1996, 5,891,000 shares of the Common Stock ($50 par
value) of the registrant were outstanding, all of which are held by Allegheny
Power System, Inc., the Company's parent.
<PAGE>
- 2 -
MONONGAHELA POWER COMPANY
Form 10-Q for Quarter Ended June 30, 1996
Index
Page
No.
PART I--FINANCIAL INFORMATION:
Statement of income - Three and six months ended
June 30, 1996 and 1995 3
Balance sheet - June 30, 1996
and December 31, 1995 4
Statement of cash flows - Six months ended
June 30, 1996 and 1995 5
Notes to financial statements 6-8
Management's discussion and analysis of financial
condition and results of operations 9-12
PART II--OTHER INFORMATION 13
<PAGE>
<TABLE>
<CAPTION>
- 3 -
MONONGAHELA POWER COMPANY
Statement of Income
Three Months Ended Six Months Ended
June 30 June 30
1996** 1995 1996** 1995
(Thousands of Dollars)
ELECTRIC OPERATING REVENUES:
<S> <C> <C> <C> <C>
Residential $ 46,293 $ 44,787 $ 107,613 $ 101,605
Commercial 28,800 29,084 60,306 60,820
Industrial 50,411 53,445 104,202 107,931
Wholesale and other, including affiliates* 21,289 19,612 46,238 40,876
Bulk power transactions, net* 5,333 3,058 9,384 6,746
Total Operating Revenues 152,126 149,986 327,743 317,978
OPERATING EXPENSES:
Operation:
Fuel 34,508 29,717 72,195 64,952
Purchased power and exchanges* 24,340 27,681 51,076 53,121
Deferred power costs, net 580 3,753 3,837 10,265
Other 15,713 19,459 51,285 38,240
Maintenance 18,467 17,729 38,001 36,559
Depreciation 13,779 14,950 27,708 29,438
Taxes other than income taxes 10,053 8,605 20,471 18,422
Federal and state income taxes 9,951 8,044 17,535 20,257
Total Operating Expenses 127,391 129,938 282,108 271,254
Operating Income 24,735 20,048 45,635 46,724
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 79 123 88 162
Other income, net 1,382 2,714 3,310 4,893
Total Other Income and Deductions 1,461 2,837 3,398 5,055
Income Before Interest Charges 26,196 22,885 49,033 51,779
INTEREST CHARGES:
Interest on long-term debt 9,123 9,608 18,411 18,496
Other interest 448 621 1,022 1,371
Allowance for borrowed funds used during
construction (87) (230) (101) (444)
Total Interest Charges 9,484 9,999 19,332 19,423
NET INCOME $ 16,712 $ 12,886 $ 29,701 $ 32,356
* Prior period amounts have been reclassified for comparative purposes to reflect
a change in 1996 in reporting certain bulk power transmission transactions with
nonaffiliated utilities. See Note 3 on page 6.
**The three and six month 1996 periods include a credit of $3.5 million and a charge of $13.8 million,
respectively, for restructuring. See Note 4 on page 6.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- 4 -
MONONGAHELA POWER COMPANY
Balance Sheet
June 30, December 31,
1996 1995
ASSETS: (Thousands of Dollars)
Property, Plant, and Equipment:
At original cost, including $23,036,000
<S> <C> <C>
and $29,443,000 under construction $ 1,842,329 $ 1,821,613
Accumulated depreciation (770,039) (747,013)
1,072,290 1,074,600
Investments:
Allegheny Generating Company - common stock at equity 56,704 57,821
Other 379 422
57,083 58,243
Current Assets:
Cash and temporary cash investments 2,833 117
Accounts receivable:
Electric service, net of $2,142,000 and $2,267,000
uncollectible allowance 61,302 71,759
Affiliated and other 11,356 11,577
Materials and supplies--at average cost:
Operating and construction 20,437 21,297
Fuel 14,032 20,305
Prepaid taxes 10,636 17,778
Deferred income taxes 10,024 7,972
Other 4,813 4,857
135,433 155,662
Deferred Charges:
Regulatory assets 163,391 164,900
Unamortized loss on reacquired debt 15,715 16,174
Other 11,264 11,012
190,370 192,086
Total Assets $ 1,455,176 $ 1,480,591
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common stock $ 294,550 $ 294,550
Other paid-in capital 2,441 2,441
Retained earnings 211,261 208,761
508,252 505,752
Preferred stock 74,000 74,000
Long-term debt and QUIDS 489,668 489,995
1,071,920 1,069,747
Current Liabilities:
Short-term debt 7,696 29,868
Long-term debt due within one year 500 18,500
Accounts payable 21,953 24,582
Accounts payable to affiliates 7,913 6,500
Taxes accrued:
Federal and state income 10,337 8,068
Other 11,683 20,749
Deferred power costs 18,624 14,202
Interest accrued 8,964 8,577
Restructuring liabilities 8,630 3,693
Other 18,035 15,940
114,335 150,679
Deferred Credits and Other Liabilities:
Unamortized investment credit 21,518 22,590
Deferred income taxes 207,326 206,616
Regulatory liabilities 19,138 20,183
Restructuring liabilities 4,130 -
Other 16,809 10,776
268,921 260,165
Total Capitalization and Liabilities $ 1,455,176 $ 1,480,591
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- 5 -
MONONGAHELA POWER COMPANY
Statement of Cash Flows
Six Months Ended
June 30
1996 1995
(Thousands of Dollars)
CASH FLOWS FROM OPERATIONS:
<S> <C> <C>
Net income $29,701 $32,356
Depreciation 27,708 29,438
Deferred investment credit and income taxes, net (3,133) 1,545
Deferred power costs, net 3,837 10,265
Unconsolidated subsidiaries' dividends in excess of earnings 1,160 1,189
Allowance for other than borrowed funds used
during construction (88) (162)
Restructuring charges 12,032 -
Changes in certain current assets and
liabilities:
Accounts receivable, net 10,678 3,791
Materials and supplies 7,133 (277)
Other current assets 7,186 6,956
Accounts payable (1,216) (11,597)
Taxes accrued (6,797) 2,084
Interest accrued 387 (1,666)
Other, net 8,743 3,277
97,331 77,199
CASH FLOWS FROM INVESTING:
Construction expenditures (26,829) (38,111)
Allowance for other than borrowed funds used
during construction 88 162
(26,741) (37,949)
CASH FLOWS FROM FINANCING:
Issuance of long-term debt - 132,137
Retirement of long-term debt (18,500) (99,403)
Short-term debt, net (22,172) (39,470)
Notes receivable from affiliates - (4,100)
Dividends on capital stock:
Preferred stock (2,519) (4,037)
Common stock (24,683) (24,389)
(67,874) (39,262)
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS 2,716 (12)
Cash and Temporary Cash Investments at January 1 117 132
Cash and Temporary Cash Investments at June 30 $ 2,833 $ 120
Supplemental cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $18,088 $20,801
Income taxes 18,360 9,199
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- 6 -
MONONGAHELA POWER COMPANY
Notes to Financial Statements
1. The Company's Notes to Financial Statements in the Allegheny
Power System companies' combined Annual Report on Form 10-K for
the year ended December 31, 1995, should be read with the
accompanying financial statements and the following notes.
With the exception of the December 31, 1995, balance sheet in
the aforementioned annual report on Form 10-K, the accompanying
financial statements appearing on pages 3 through 5 and these
notes to financial statements are unaudited. In the opinion of
the Company, such financial statements together with these
notes thereto contain all adjustments (which consist only of
normal recurring adjustments) necessary to present fairly the
Company's financial position as of June 30, 1996, the results
of operations for the three and six months ended June 30, 1996
and 1995, and cash flows for the six months ended June 30, 1996
and 1995.
2. The Statement of Income reflects the results of past operations
and is not intended as any representation as to future results.
For purposes of the Balance Sheet and Statement of Cash Flows,
temporary cash investments with original maturities of three
months or less, generally in the form of commercial paper,
certificates of deposit, and repurchase agreements, are
considered to be the equivalent of cash.
3. Effective in 1996 the Company changed its method of reporting
certain bulk power transmission transactions with nonaffiliated
utilities, and reclassified prior year's bulk power revenues
and operation expenses to achieve a consistent presentation.
In prior years, some use of the Company's transmission system
was recorded as purchased power from selling utilities and as
sales of power to buying utilities. The benefit to the Company
was the difference between the two. Because of new Federal
Energy Regulatory Commission requirements, the Company
predominantly does not "buy" and "sell" such energy, but rather
a transmission fee is charged.
Under the new reporting method all such transactions are
recorded on a net revenue basis. The effect of the
reclassification was to reduce amounts reported for bulk power
transaction revenues and operation expenses by $17.7 million
and $37.5 million for the three and six months ended June 1995,
respectively, with no change in operating income or
consolidated net income.
4. As previously announced, the System is undergoing a
reorganization and reengineering process (restructuring) to
simplify its management structure and to increase efficiency.
In March 1996, the Company and its affiliates announced
additional restructuring plans which included consolidating
operating divisions, and centralizing and changing many
accounting, customer services, and other functions. Effective
July 1996, the Company and its affiliates reduced their work
force by about 570 employees. The reductions were accomplished
through an enhanced separation plan,
<PAGE>
- 7 -
attrition, and layoffs. An additional reduction of about 500
employees during the next two or three years will occur
primarily through attrition and, in the union workforce,
pursuant to appropriate contract terms.
Restructuring charges previously recorded were adjusted in the
second quarter to reflect current estimates. Restructuring
charges reflect estimated liabilities for severance, employee
termination costs, and other restructuring costs. Estimated
additional restructuring charges of about $9 million will be
recorded as the liabilities are incurred. A summary of
restructuring liabilities is provided below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 1996 June 1996
(Millions of Dollars)
Restructuring liability (before tax):
<S> <C> <C>
Balance at beginning of period $16.9 $ 3.7
Accruals/adjustments (3.5) 13.8
Benefit plans curtailment
liabilities/adjustments* .2 (3.0)
Less payments (.8) (1.7)
Balance at end of period $12.8 $12.8
*Primarily recorded in other deferred credits.
</TABLE>
5. The Company owns 27% of the common stock of Allegheny
Generating Company (AGC), and affiliates of the Company own the
remainder. AGC owns an undivided 40% interest, 840 MW, in the
2,100-MW pumped-storage hydroelectric station in Bath County,
Virginia, operated by the 60% owner, Virginia Power Company, a
nonaffiliated utility. Following is a summary of income
statement information for AGC:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Electric operating revenues $21,023 $22,061 $41,932 $44,157
Operation & maintenance expense 1,215 1,571 2,334 3,367
Depreciation 4,290 4,224 8,580 8,448
Taxes other than income taxes 1,198 1,248 2,408 2,547
Federal income taxes 3,362 3,502 6,706 6,725
Interest charges 4,181 4,432 8,409 9,417
Other income, net - (9) (3) (9)
Net income $ 6,777 $ 7,093 $13,498 $13,662
</TABLE>
The Company's share of the equity in earnings above was $1.8
million and $1.9 million for the three months ended June 30,
1996 and 1995, respectively, and $3.6 million and $3.7 million
for the six months ended June 30, 1995 and 1994, respectively,
and was included in other income, net, on the Statement of
Income.
<PAGE>
- 8 -
6. Common stock dividends per share declared during the periods
for which income statements are included are as follows:
<TABLE>
<CAPTION>
1996 1995
1st 2nd 1st 2nd
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Number of Shares 5,891,000 5,891,000 5,891,000 5,891,000
Amount per Share $2.10 $2.09 $2.07 $2.07
</TABLE>
Earnings per share are not reported inasmuch as the common
stock of the Company is 100% owned by its parent, Allegheny
Power System, Inc.
<PAGE>
- 9 -
MONONGAHELA POWER COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
COMPARISON OF SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
WITH SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1995
Review of Operations
NET INCOME
Net income for the second quarter of 1996 was $16.7
million compared with $12.9 million for the corresponding 1995 period.
For the first six months of 1996, net income was $29.7 million compared
with $32.4 million for the corresponding 1995 period. The six-month
period ended June 1996 includes restructuring charges of $13.8 million
($8.3 million net of taxes). Restructuring activities reported in the
first quarter continued in the second quarter with adjustments to the
restructuring charges previously recorded (see Note 4 to the Financial
Statements). The increase in earnings for the second quarter and first
six months of 1996, excluding the restructuring charges, resulted
primarily from increased sales to retail customers.
SALES AND REVENUES
Retail kWh sales to both residential and commercial
customers in the second quarter increased 5%, and to industrial customers
decreased 2%. In the first six months, retail kWh sales to residential,
commercial and industrial customers increased 8%, 5%, and 1%,
respectively. Growth in the number of customers and increased weather-
related sales combined to cause the increase in residential and commercial
sales. The increase in kWh sales to industrial customers in the first six
months of 1996 resulted primarily from increased sales to primary metals
and wood and paper products customers. Revenues from sales to industrial
customers decreased in both periods due primarily to a decrease in the
fuel and energy cost component. The fluctuation in revenues from retail
customers resulted from the following:
<TABLE>
<CAPTION>
Change from Prior Periods
Quarter Six Months
(Millions of Dollars)
<S> <C> <C>
Change in kWh sales $ 1.4 $ 6.7
Fuel and energy cost adjustment clauses* (4.7) (8.1)
Rate increases 1.5 3.1
Other - .1
$(1.8) $ 1.8
</TABLE>
*Changes in revenues from fuel and energy cost adjustment
clauses have little effect on net income.
The increase in wholesale and other revenues resulted
primarily from continued increases in sales of capacity, energy, and
spinning reserve to other affiliated companies.
<PAGE>
- 10 -
KWh deliveries to and revenues from bulk power
transactions are comprised of the following items:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995* 1996 1995*
KWh deliveries (in billions):
<S> <C> <C> <C> <C>
From transmission services .9 .8 2.2 1.5
From sale of Company generation .1 - .1 .1
1.0 .8 2.3 1.6
Revenues (in millions):
From transmission services $3.2 $2.4 $6.6 $5.0
From sale of Company generation 2.1 .7 2.8 1.7
$5.3 $3.1 $9.4 $6.7
</TABLE>
Increased transmission services and sales of Company
generation resulted prige
Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MONONGAHELA POWER COMPANY
THOMAS J. KLOC
Thomas J. Kloc
Controller
(Chief Accounting Officer)
August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,803
<SECURITIES> 1,030
<RECEIVABLES> 74,800
<ALLOWANCES> 2,142
<INVENTORY> 34,469
<CURRENT-ASSETS> 135,433
<PP&E> 1,842,329
<DEPRECIATION> 770,039
<TOTAL-ASSETS> 1,455,176
<CURRENT-LIABILITIES> 114,335
<BONDS> 489,668
0
74,000
<COMMON> 294,550
<OTHER-SE> 213,702
<TOTAL-LIABILITY-AND-EQUITY> 1,455,176
<SALES> 327,743
<TOTAL-REVENUES> 327,743
<CGS> 216,394
<TOTAL-COSTS> 264,573
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,332
<INCOME-PRETAX> 47,236
<INCOME-TAX> 17,535
<INCOME-CONTINUING> 29,701
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,701
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
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