UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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
For the transition period from to
Commission file number 1-4315
ORANGE AND ROCKLAND UTILITIES, INC.
(Exact name of registrant as specified in its charter)
New York 13-1727729
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Blue Hill Plaza, Pearl River, New York 10965
(Address of principal executive offices) (Zip Code)
(914) 352-6000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (l) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
class of common stock, as of the close of the latest practicable date.
Common Stock - $5 Par Value 13,532,446 Shares
(Class) (Outstanding at April 30, 1994)
<PAGE>
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
at March 31, 1994
and December 31, 1993 2
Consolidated Statements of Income (Unaudited)
for the three months ended
March 31, 1994 and March 31, 1993 4
Consolidated Cash Flow Statements (Unaudited)
for the three months ended March 31, 1994 and
March 31, 1993 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 14
ITEM 6. Exhibits and Reports on Form 8-K 17
Signatures 18
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Assets
<CAPTION>
March 31, December 31,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Utility Plant:
Electric $ 935,099 $ 931,827
Gas 190,430 189,000
Common 52,570 52,525
Utility Plant in Service 1,178,099 1,173,352
Less accumulated depreciation 380,203 372,279
Net Utility Plant in Service 797,896 801,073
Construction work in progress 31,675 30,907
Net Utility Plant 829,571 831,980
Non-utility Property:
Non-utility property 35,144 35,049
Less accumulated depreciation, depletion and amortization 13,288 13,041
Net Non-utility Property 21,856 22,008
Current Assets:
Cash and cash equivalents 3,298 14,256
Temporary cash investments 1,454 1,447
Customer accounts receivable, less allowance for
uncollectible accounts of $2,020 and $2,026 74,998 60,289
Accrued utility revenue 20,302 23,017
Other accounts receivable, less allowance for
uncollectible accounts of $170 and $60 11,679 11,619
Gas marketing accounts receivable, less allowance
for uncollectible accounts of $533 and $513 51,712 49,206
Materials and supplies (at average cost) 27,745 39,062
Prepayments and other current assets 61,003 40,626
Total Current Assets 252,191 239,522
Deferred Debits:
Income tax recoverable in future rates 75,095 75,468
Extraordinary property loss - Sterling nuclear project 14,146 15,481
Deferred Order No. 636 transition costs 17,680 21,500
Deferred revenue taxes 17,753 17,588
Deferred pension and other postretirement benefits 9,111 7,277
Unamortized debt expense (amortized over
term of securities) 8,286 8,565
Other deferred debits 37,178 41,584
Total Deferred Debits 179,249 187,463
Total $1,282,867 $1,280,973
__________ __________
The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
<TABLE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Capitalization and Liabilities
<CAPTION>
March 31, December 31,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Capitalization:
Common stock (13,532,446 and 13,532,055 shares outstanding)$ 67,662 $ 67,660
Premium on capital stock 130,320 130,313
Capital stock expense (6,107) (6,108)
Retained earnings 188,908 184,179
Total Common Stock Equity 380,783 376,044
Non-redeemable preferred stock (428,443 shares
outstanding) 42,844 42,844
Non-redeemable cumulative preference stock (13,321
and 13,590 shares outstanding) 434 443
Total Non-Redeemable Stock 43,278 43,287
Redeemable preferred stock (41,580 shares outstanding) 4,158 4,158
Long-term debt 380,093 380,266
Total Capitalization 808,312 803,755
Non-current Liabilities:
Reserve for claims and damages 4,068 3,830
Postretirement benefits 9,165 6,719
Pension costs 35,442 34,275
Obligation under capital leases 666 793
Total Non-current Liabilities 49,341 45,617
Current Liabilities:
Lease obligations due within one year 489 479
Long-term debt due within one year 990 984
Preferred stock to be redeemed within one year 1,384 1,384
Notes payable 3,100 1,200
Commercial paper 36,250 45,000
Accounts payable 55,403 57,359
Gas marketing accounts payable 52,796 54,247
Dividends payable 3 752
Customer deposits 5,780 5,807
Accrued Federal income and other taxes 18,331 9,586
Accrued interest 4,192 9,877
Refundable gas costs 3,755 8,967
Other current liabilities 17,095 17,114
Total Current Liabilities 199,568 212,756
Deferred Taxes and Other:
Deferred Federal income taxes 170,100 172,672
Deferred investment tax credits 17,796 18,004
Accrued Order No. 636 transition costs 17,680 21,500
Refundable fuel costs 17,299 4,405
Other deferred credits 2,771 2,264
Total Deferred Taxes and Other 225,646 218,845
Total $1,282,867 $1,280,973
__________ __________
The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
<TABLE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months
Ended March 31,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Operating Revenues:
Electric $111,146 $109,156
Gas 81,403 70,782
Electric sales to other utilities 3,141 1,740
Total Utility Revenues 195,690 181,678
Diversified activities 96,985 82,352
Total Operating Revenues 292,675 264,030
Operating Expenses:
Operations:
Fuel used in electric production 25,055 16,298
Electricity purchased for resale 10,972 17,225
Gas purchased for resale 50,166 41,997
Non-utility gas marketing purchases 91,075 78,418
Other expenses of operation 36,051 35,671
Maintenance 10,072 9,057
Depreciation and amortization 8,711 8,476
Amortization of property losses 1,416 1,304
Taxes other than income taxes 26,155 24,404
Federal income taxes 11,097 11,879
Deferred Federal income taxes (2,230) (4,350)
Deferred investment tax credit (30) (80)
Total Operating Expenses 268,510 240,299
Income from Operations 24,165 23,731
Other Income and (Deductions):
Allowance for other funds used during construction 30 (1)
Investigation costs (3,212) -
Other - net 399 (189)
Taxes other than income taxes (26) (27)
Federal income taxes 1,080 195
Deferred Federal income taxes (39) (34)
Deferred investment tax credit 178 197
Total Other Income and (Deductions) (1,590) 141
Income Before Interest Charges 22,575 23,872
Interest Charges:
Interest on long-term debt 7,492 7,885
Other interest 796 717
Amortization of debt premium and expense-net 301 218
Allowance for borrowed funds used during
construction (82) (32)
Total Interest Charges 8,507 8,788
Net Income 14,068 15,084
Dividends on preferred and preference stock,
at required rates 813 841
Earnings applicable to common stock $ 13,255 $ 14,243
________ ________
Avg. number of common shares outstanding (000's) 13,532 13,531
________ ________
Earnings per average common share outstanding $ .98 $ 1.05
________ ________
Dividends declared per common share outstanding $ .63 $ .62
________ ________
The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
<TABLE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Cash Flow Statements (Unaudited)
<CAPTION>
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Cash Flow from Operations:
Net income $14,068 $15,084
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 8,865 8,502
Deferred Federal income taxes (2,198) (4,326)
Deferred investment tax credit (208) (277)
Deferred and refundable fuel and gas costs 7,682 12,045
Allowance for funds used during construction (112) (31)
Changes in certain current assets and liabilities:
Temporary cash investments (7) 878
Accounts and gas marketing accounts receivable,
net and accrued utility revenues (14,560) (15,468)
Materials and supplies 11,317 10,338
Prepayments and other current assets (20,377) (4,419)
Operating and gas marketing accounts payable (3,407) (12,088)
Accrued Federal Income and other taxes 8,745 16,785
Accrued interest (5,685) (868)
Other current liabilities (46) 3,915
Other-net 8,862 (2,148)
Net Cash Provided from Operations 12,939 27,922
Cash Flow from Investing Activities:
Additions to plant (6,766) (8,332)
Allowance for funds used during construction 112 31
Net Cash Used in Investing Activities (6,654) (8,301)
Cash Flow from Financing Activities:
Proceeds from:
Issuance of long-term debt - 75,000
Retirements of:
Long-term debt (189) (74,516)
Capital lease obligations (117) (108)
Net repayments under short-term debt
arrangements* (6,850) (250)
Dividends on preferred and common stock (9,338) (9,163)
Change in dividends payable (749) 1
Net Cash Used in Financing Activities (17,243) (9,036)
Net Change in Cash and Cash Equivalents (10,958) 10,585
Cash and Cash Equivalents at Beginning of Period 14,256 15,378
Cash and Cash Equivalents at End of Period $ 3,298 $25,963
_______ _______
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $13,972 $ 9,334
Federal income taxes $ - $ 1,050
* Debt with maturities of 90 days or less.
The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of March 31, 1994, the consolidated
statements of income for the three month periods ended March 31, 1994 and
1993, and the consolidated cash flow statements for the three month
periods then ended have been prepared by Orange and Rockland Utilities,
Inc. (the "Company") without an audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position and results of operations at
March 31, 1994, and for all periods presented, have been made. The
amounts in the consolidated balance sheet as of December 31, 1993 are
from audited financial statements.
2. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
unaudited consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
December 31, 1993 Annual Report to Shareholders. The results of
operations for the period ended March 31, 1994 are not necessarily
indicative of the results of operations for the full year.
3. The consolidated financial statements include the accounts of the
Company, all subsidiaries and the Company's pro rata share of an
unincorporated joint venture. All significant intercompany balances and
transactions have been eliminated.
4. Contingencies at March 31, 1994 are substantially the same as the
contingencies described in the "Notes to Consolidated Financial
Statements" included in the Company's December 31, 1993 Annual Report to
Shareholders, which material is incorporated by reference to the
Company's December 31, 1993 Form 10-K Annual Report.
5. Certain amounts from prior years have been reclassified to conform with
the current year presentation.
6. Effective January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 112 "Employers'
Accounting for Postretirement Benefits" which required the recording of a
liability of approximately $.8 million. The adoption of Statement No.
112 did not have a significant impact on the results of current
operations because of the recording of offsetting regulatory assets.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition:
Financial Performance
The Company's consolidated earnings per average common share outstanding for
the first quarter of 1994 were $.98 as compared to $1.05 for the first quarter
of 1993. Fluctuations within the components of earnings are discussed in the
"Results of Operations". The average number of common shares outstanding for
both the first quarter of 1994 and 1993 were 13.5 million.
The current quarterly dividend rate of $.63 is equivalent to an annual
dividend rate of $2.52 per share. Dividends declared during the twelve months
ended March 31, 1994 amounted to $2.51 with a dividend payout ratio of 84.0%
as compared to $2.45 a year ago with a payout ratio of 72.6%.
The return on average common equity for the twelve months ended March 31, 1994
was 10.85%, as compared to 12.58% for the twelve months ended March 31, 1993.
Allowance for Funds Used During Construction ("AFDC") amounted to less than 1%
of earnings applicable to common stock for both the first quarter of 1994 and
1993.
Capital Resources and Liquidity
At March 31, 1994, the Company and its utility subsidiaries had unsecured bank
lines of credit totaling $59 million. The Company may borrow under the lines
of credit through the issuance of promissory notes to the banks. The Company,
however, utilizes such lines of credit to fully support commercial paper
borrowings. The aggregate amount of borrowings through the issuance of
promissory notes and commercial paper cannot exceed the aggregate lines of
credit. In addition, non-utility lines of credit amounted to $15.0 million at
March 31, 1994, and the non-utility subsidiaries may undertake short-term
borrowings or make short-term investments. The average daily balance of
short-term borrowings for the three months ended March 31, 1994 amounted to
$44.3 million at an effective interest rate of 3.5% as compared to $34.3
million at 3.2% for the same period of 1993. The level of temporary cash
investments for the three months ended March 31, 1994 increased to an average
daily balance of $14.6 million from $9.1 million for the same period of 1993.
Effective May 1, 1994, all shares of common stock purchased under the
Company's Dividend Reinvestment and Stock Purchase Plan (DRP) and the Employee
Stock Purchase and Dividend Reinvestment Plan (ESPP) with reinvested dividends
and optional cash payments, will be original issue shares purchased from the
Company. At the option of the Company, however, common stock purchased under
the DRP and ESPP may again or periodically be purchased on the open market.
The New York Public Service Commission has authorized the Company to issue up
to 750,000 shares under the DRP and ESPP. Under the original issue option,
the Company expects to raise $38 million of equity capital over the next five
years.
<PAGE>
Rate Activities
New York
On February 4, 1993 (revised April 8, 1993), the Company filed with the New
York State Public Service Commission ("NYPSC") the second adjustment to
electric rates pursuant to the Revenue Decoupling Mechanism ("RDM") which
amounted to an increase in annual revenues of $11.3 million, or 3.5%,
including the maximum allowable incentive award of 1.06% on common equity.
This second adjustment was approved by the NYPSC on April 21, 1993, with new
rates effective May 1, 1993.
The RDM procedures were approved by the NYPSC on August 29, 1990, in a rate
agreement which provided, among other things, for annual rate adjustments
during the three years covered by the agreement (1991-1993). These procedures
provide for the reconciliation of revenue deviations between forecasted sales
and actual sales. In addition, the RDM provides for the opportunity to
recover changes in the cost of providing service such as wages, property
taxes, inflation, capacity purchases, major maintenance costs, rate base
additions and the cost of capital.
On September 1, 1993, the Company filed with the NYPSC the first adjustment to
gas rates pursuant to a settlement agreement that the Company and the NYPSC
Staff entered into regarding an application the Company filed with the NYPSC
on January 16, 1992. The agreement, approved by the NYPSC on September 30,
1992, contains a weather adjustment clause which automatically adjusts rates
to offset the effects of variations in weather from that assumed for setting
rates. The four-year agreement provides for an overall rate of return of
10.26%, with a return on common equity of 12.15% including incentives of 50
basis points. The total increase in annual gas revenues is $2.7 million or
1.8%. Although the settlement provides for an effective date for this
adjustment of January 1, 1994, the Company has agreed to extend the effective
date until June 30, 1994, in connection with the Order described below, which
was issued in the Company's electric rate case on October 4, 1993. The
Company has requested an additional extension until December 31, 1994.
On January 29, 1993, the Company filed with the NYPSC for an increase in
electric rates of $17.1 million to be effective January 1, 1994. The rate
application seeks a three-year (1994-1996) extension of the RDM revenue
reconciliation and operating cost adjustment procedures currently in place.
Continuation of the modified energy efficiency and customer service incentive
programs is also requested. In addition, the Company is requesting
implementation of a new power plant efficiency incentive. The rate increase
request includes a 12.25% return on equity. On October 4, 1993, the NYPSC, as
a result of the investigation into alleged financial improprieties, issued an
Order in this case (the "Order") which provided that, subject to certain
conditions, the Company could agree to a six-month extension of the NYPSC's
statutory suspension period to June 30, 1994. Reference is made to Item 1,
"Legal Proceedings", for a discussion of ongoing investigations of the Company
in connection with the arrest in August, 1993 of then Vice President Linda
Winikow and her subsequent guilty plea to a felony and two misdemeanor
charges. The Company has agreed to the extension of the suspension period and
the associated conditions. A condition of the Order is that the Company
continue existing rate-making mechanisms, prescribed under the RDM procedure,
for the duration of the suspension period. In addition, the Order specified
that up to $3.0 million of revenue be made subject to refund pending final
resolution of the ongoing investigation. A request for further extension
through December 31, 1994, under the same conditions, was made by the Company
<PAGE>
on December 17, 1993. The NYPSC staff has submitted comments opposing some of
the terms of the Company's extension. On May 11, 1994, the NYPSC terminated
the Company's rate increase application. The NYPSC determined that current
rates offer the Company a reasonable opportunity to earn a fair return as
required by law. In addition, the NYPSC ordered a reduction in the RDM
surcharge mechanism of approximately $3.9 million effective July 1, 1994. The
reduction reflects the lower results of the RDM reconciliation provisions for
1993 as compared to 1992. Further details of the NYPSC's action will not be
available until an order is issued.
As part of the Order, the NYPSC accepted the Company's proposal for a
two-month temporary rate reduction of $115,000 per month related to the
misappropriation of funds. The Company voluntarily extended the temporary
rate reduction for a third month, through January 1994, bringing the total
amount refunded to New York ratepayers to $345,000. It is not possible to
predict at this time the extent of additional refunds that may be required by
the NYPSC, if any.
New Jersey
In January 1992, an increase in electric rates of $5.1 million was granted by
the New Jersey Board of Regulatory Commissioners ("NJBRC") in response to
Rockland Electric Company's ("RECO's") March 18, 1991 petition requesting a
$12.9 million increase in base rates. This increase includes a 12% rate of
return on common equity. In addition, the NJBRC initiated a Phase II
proceeding in this case to address the effect of the State of New Jersey's
June 1, 1991 tax legislation. That legislation changed the procedure under
which certain taxes are collected from the State's utilities. Previously,
utilities had been subject to a 12.5% gross receipts and franchise tax, which
the utilities paid in lieu of property taxes; however, the new tax is based
upon the number of units of energy (kwh or therms) delivered by a utility
rather than revenues. The legislation also requires that utilities accelerate
payment to the State of the taxes collected. As a result, RECO is required to
make additional tax payments of approximately $16 million during the period
1993-1994. On November 12, 1992, the NJBRC issued a Decision and Order
approving the recovery of the additional tax over a ten-year period. A
carrying charge of 7.5% on the unamortized balance was also approved. The
amount of unrecovered accelerated payments is included in Deferred Revenue
Taxes.
On February 26, 1993 the New Jersey Department of Public Advocate, Division of
Rate Counsel ("Rate Counsel") filed a Notice of Appeal from the NJBRC Decision
and Order with the Superior Court of New Jersey, Appellate Division, stating
as grounds for the appeal that the Decision is arbitrary and capricious and
would result in unjust and unreasonable rates. Rate Counsel's brief and
RECO's brief in response were filed in October 1993. On March 21, 1994, the
Superior Court of New Jersey, Appellate Division, upheld the NJBRC Decision,
stating the NJBRC used proper rate-making principles and utilized its
expertise.
Under an agreement with the NJBRC to return to customers funds misappropriated
by certain former employees (Reference is made to Item 1, "Legal Proceedings"
for a discussion of ongoing investigations of the Company in connection with
the arrest in August, 1993 of then Vice President Linda Winikow and her
subsequent guilty plea to a felony and two misdemeanor charges), RECO has
refunded to New Jersey ratepayers $94,100 through reductions in the applicable
<PAGE>
fuel adjustment charges in February and March 1994. The Company has also
pledged to return any other funds that are discovered to have been
misappropriated.
Pennsylvania
On November 19, 1992, Pike County Light & Power Company ("Pike") filed with
the Pennsylvania Public Utility Commission ("PPUC") for a $497,000 increase in
electric rates and a $36,300 increase in gas rates. The proposed rates apply
to all residential, commercial, industrial and municipal customers. During
April 1993, the Company and the other parties involved in this proceeding
signed a stipulated agreement providing for an increase of $270,000, or
6.6% for electric rates and $12,000, or 1.5% for gas rates. On June 10, 1993,
the PPUC approved the electric rate settlement with rates effective
June 11, 1993. On June 24, 1993, the PPUC approved the gas rate settlement
with rates effective June 25, 1993. With regard to the ongoing investigation
into the alleged financial improprieties, Pike has pledged to return to
ratepayers any funds discovered to have been misappropriated.
Results of Operations:
QUARTERLY COMPARISON
The earnings per share for the first quarter of 1994 were $.98 as compared to
$1.05 for the first quarter of 1993. The decrease reflects the expenses
associated with the continuing investigation and litigation involving the
Company's former chairman and chief executive officer as well as other former
employees. The costs were offset in part by the improved operating results of
the Company's gas marketing subsidiary and higher utility gas sales as
compared with the same period a year ago.
Electric and Gas Revenues
Electric and gas operating revenues, including fuel cost and purchased gas
cost recoveries, increased by $14.0 million in the first quarter of 1994 as
compared to the same quarter of 1993.
Electric operating revenues during the current quarter were $114.3 million as
compared to $110.9 million for the first quarter of 1993, an increase of $3.4
million. The components of the changes in electric operating revenues for the
quarter ended March 31, 1994 as compared to the same quarter of 1993 are as
follows:
(Millions of Dollars)
Retail sales:
Base Revenues* $ 1.9
Fuel cost recoveries -
Sales volume changes 2.6
Subtotal 4.5
Sales for resale 1.4
Other operating revenue:
RDM revenue reconciliation
and DSM incentives (1.9)
Other (.6)
Total $ 3.4
_____
*Includes miscellaneous surcharges and revenue tax recoveries.
<PAGE>
Actual total sales of electric energy to retail customers during the first
quarter of 1994 were 1,086,738 megawatt hours ("Mwh"), compared with 1,051,758
Mwh during the comparable period a year ago. This increase is the result of
increases in usage and the average number of customers when compared to the
same period a year ago. Before reflecting the effect of the RDM and the
Demand-Side Management ("DSM") incentives in the Company's New York
jurisdiction, electric revenue associated with these sales was $112.7 million
during the current quarter compared to $108.2 million during the first quarter
of 1993, an increase of $4.5 million.
New York electric revenue targets under the Company's RDM, as established in a
base rate case, net of fuel and taxes, amounted to $50.4 million for the first
quarter of 1994. Per RDM procedures, deviations between revenue targets and
actual sales revenue are deferred and either recovered from or returned to
customers. The variation between the target revenue and the Company's actual
sales revenue of $52.3 million for the first quarter of 1994 was $1.9 million,
which is recorded as a reduction to revenue. In the first quarter of 1993,
the Company recorded .6 million as a reduction to revenue.
With regard to the DSM goal achievement incentives, the Company's performance
during the first quarter of 1994 did not allow it to record any incentive
related revenue. The incentive revenue recorded in 1993 was $.8 million.
The Company's performance during the remainder of 1994 will determine what, if
any, incentive revenue or RDM revenue adjustments may be earned.
Revenues from sales to other utilities in the first quarter of 1994 amounted
to $3.1 million, an increase of $1.4 million from a year ago. Sales to such
utilities totaled 104,512 Mwh, compared with 59,856 Mwh in the first quarter a
year ago. Because revenues from these sales are primarily a recovery of costs
in accordance with applicable tariff regulations, they have little impact on
the Company's annual earnings.
Gas operating revenues during the quarter were $81.4 million compared to $70.8
million for the first quarter of 1993, an increase of $10.6 million. The
components of the changes in gas operating revenues for the quarter ended
March 31, 1994 as compared to the same quarter of 1993 are as follows:
(Millions of Dollars)
Sales to firm customers:
Base revenues $ (1.6)
Gas cost recoveries 8.7
Sales volume changes 2.5
Subtotal 9.6
Sales to interruptible 1.3
Other operating revenues (.3)
Total $ 10.6
________
Gas sales to firm customers during the first quarter of 1994 totaled 10,528
million cubic feet ("Mmcf"), compared with 9,674 Mmcf during the same period a
year ago. Gas revenues from firm customers were $77.5 million, compared with
$67.9 million in the first quarter of 1993.
<PAGE>
Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas
Marketing
The cost of fuel used in the production of electricity and purchased
electricity costs increased by $2.5 million during the first quarter of 1994
when compared to the same quarter of 1993. The components of the change are
as follows:
(Millions of Dollars)
Prices paid for fuel and purchased power $ .1
Changes in kilowatt-hours generated
or purchased 2.8
Deferred fuel charge (.4)
Total $ 2.5
______
The average cost per kilowatt-hour generated and purchased was 2.77 cents for
the quarters ended March 31, 1994 and 1993.
Purchased gas costs for utility operations were $50.2 million in the first
quarter of 1994 compared to $42.0 million in 1993, an increase of $8.2
million. The components of the changes in purchased gas costs are as follows:
(Millions of Dollars)
Prices paid for gas supplies* $ 5.8
Gas sendout volume 3.6
Deferred fuel charges (1.2)
Total $ 8.2
_____
*Net of refunds received from gas suppliers.
The average cost per thousand cubic feet ("Mcf") purchased for the first
quarter of 1994 including transportation and storage costs, was $3.04 compared
to $2.56 in the first quarter of 1993.
Other Operating and Maintenance Expenses
The Company's total operating and maintenance expenses excluding fuel,
purchased power and gas purchased for resale for the first quarter, increased
by $4.9 million compared with a year ago. The increase in expenses associated
with utility operations was $3.7 million.
This increase is primarily due to an increase of $2.6 million in revenue taxes
associated with sales and Federal income taxes, while maintenance costs
increased $1.0 million due to the timing of maintenance requirements.
Expenses from diversified activities, excluding gas purchases, amounted to an
increase of $1.2 million, as discussed below.
<PAGE>
Diversified Activities
The Company's diversified activities consist of gas marketing, gas production,
land development and communications businesses conducted by its wholly owned
non-utility subsidiaries.
Revenues from diversified activities increased by $14.6 million for the first
quarter of 1994 as compared to the same quarter of 1993, as a result of the
gas marketing subsidiary's success in adding customers while increasing its
sales volume. These revenues were offset by increases in operating expenses
for all diversified activities of $13.9 million, which is the result of
increased gas purchases of $12.7 and increases in maintenance, depreciation,
taxes, and other operating expenses of $1.2 million.
Other Income, Deductions and Interest Charges - Net
Other income, net of interest charges and other deductions, decreased by $1.5
million during the first quarter of 1994 when compared to the first quarter of
1993. This decrease is primarily the result of an increase in outside
professional and consultative services related to the previously referenced
ongoing investigation, partially offset by a decrease in interest expense on
long term debt resulting from lower interest rates on debt refinancings.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Investigation Related Litigation:
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of an action entitled Orange and Rockland Utilities, Inc. v. Smith
("Smith"), which was filed by the Company in New York State Supreme Court. As
stated therein, the complaint alleges, among other things, that
James F. Smith, currently a Director of the Company and formerly Chief
Executive Officer of the Company and Chairman of the Board (1) intentionally
misappropriated and converted Company funds, assets and services to his own
use by causing the Company to pay, through the submission of false and
inaccurate expense reports, for personal expenses associated with his travel,
entertainment, purchases of merchandise, use of Company vendors and use of the
Company's conference center facilities; (ii) engaged in a pattern of excessive
and extravagant expenditures of Company funds in connection with purported
business travel, entertainment and Company-sponsored events that had no
legitimate business purpose or conferred little or no benefit to the Company's
business, and constituted waste of corporate assets; and (iii) failed to
institute and maintain adequate internal controls, failed to supervise
subordinate employees including former Company Vice President Linda Winikow,
and knowingly permitted, induced and authorized the personal use of Company
funds, assets and services by other Company officers. Mr. Smith has received
an extension to May 12, 1994 to file a motion or answer in this action.
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of the termination for cause of the employment of James F. Smith
as Chief Executive Officer of the Company and his removal as Chairman of the
Board of Directors. As stated therein, Mr. Smith has the right under his
employment agreement with the Company to contest his termination for cause in
an arbitration proceeding. By letter to the Company dated May 5, 1994,
Mr. Smith, through his attorney, has indicated his intention to seek
arbitration of his termination for cause and the Company's claims asserted
against him in the Smith litigation. The Company does not believe that the
claims asserted in its lawsuit should be subject to arbitration.
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of an action entitled Orange and Rockland Utilities, Inc. v.
Winikow et al., which was filed under the Federal Racketeer Influenced and
Corrupt Organizations Act ("RICO") by the Company in the United States
District Court, Southern District of New York. As reported there, the Company
alleges that the defendants - a former Company Vice President, three other
former Company employees and two vendors - engaged in a conspiracy to divert
monies from the Company through the submission of false and fraudulent
invoices totaling approximately $155,000 in order to pay personal expenses of
and/or to provide personal services to the defendants. In addition, the
Company alleges that the defendants made various contributions to political
candidates consisting of money and services diverted from the Company.
Accordingly, the Company seeks treble damages as called for by the RICO
statute, punitive damages, attorney's fees, interest and court costs. At a
status conference held on April 22, 1994, Judge Brieant scheduled a further
conference with regard to this action on July 22, 1994.
<PAGE>
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of a criminal action brought against Linda Winikow, a former Vice
President of the Company, by the Rockland County (New York) District Attorney
and her subsequent guilty pleas to charges of grand larceny (a class D
felony), commercial bribery (a class A misdemeanor), and making a campaign
contribution under a false name (an unclassified misdemeanor), which pleas
were entered in the Supreme Court of the State of New York. Ms. Winikow's
sentencing on these pleas, originally scheduled for April 7, 1994, has been
rescheduled to the Fall of 1994.
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of an action entitled Feiner v. Orange and Rockland Utilities,
Inc., et al., a purported ratepayer class action complaint against the Company
which was filed in the United States District Court, Southern District of New
York. As stated therein, the complaint alleges that the defendants violated
RICO and New York common law by using false and misleading testimony to obtain
rate increases from the NYPSC and used funds obtained from ratepayers in
furtherance of an alleged scheme to make illegal campaign contributions and
other illegal payments. Plaintiffs seek damages in the amount of $900 million
(which they seek to treble pursuant to the RICO statute). On
February 18, 1994, the Company filed a motion to dismiss this action. On
April 11, 1994, plaintiff filed its opposition to this motion and on
April 21, 1994, the Company filed its reply. A hearing on the motion to
dismiss was held before Judge Brieant on April 22, 1994.
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of an action entitled Patents Management Corporation v. Orange and
Rockland Utilities, Inc., et al. ("Patents Management"), a purported
shareholder derivative complaint filed in the Supreme Court of the State of
New York, County of New York, and Gross v. Orange and Rockland Utilities, Inc.
("Gross"), a purported shareholder class action complaint, filed in the United
States District Court, Southern District of New York. At a status conference
held on April 22, 1994, Judge Brieant scheduled a further conference with
regard to the Gross litigation on July 22, 1994. Plaintiff's attorney in
Patents Management has agreed to proceed in this litigation according to the
schedule set by Judge Brieant with regard to the Gross suit.
On March 31, 1994, Bernstein v. Orange and Rockland Utilities, Inc. and
James F. Smith, a purported shareholder class action complaint, was filed in
the United States District Court, Southern District of New York. Plaintiff
alleges that various Securities and Exchange Commission ("SEC") filings of the
Company during the period between March 2 and August 18, 1993 contained false
and misleading information or omitted to state material facts necessary to
make the statements therein not misleading, and thereby violated Section 10 of
the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5
promulgated thereunder, by failing to disclose what the plaintiff alleges was
a "scheme" by the Company to make illegal political payments and campaign
contributions to various public officials and politicians. As a result,
plaintiff claims, during such period persons who purchased the Company's stock
did so at artificially inflated prices. The Bernstein complaint seeks
<PAGE>
unspecified money damages. The Company intends to vigorously contest the
claims brought against it in this complaint. At a status conference held on
April 22, 1994, Judge Brieant scheduled a further conference with regard to
this action on July 22, 1994.
The Bernstein complaint also asserts a claim against Mr. Smith under
Section 20 of the Exchange Act. Plaintiff alleges that during the time period
in question, Mr. Smith, then the Chief Executive Officer of the Company and
Chairman of the Company's Board of Directors, was a controlling person of the
Company and thus should be held liable under Section 20 for causing, or
preventing the Company from engaging in, the wrongful acts alleged in the
complaint.
Other Litigation:
On March 29, 1994, the Company received a third party summons and
complaint naming it as one of 22 third party defendants in Carpenters Local
No. 964 Pension Fund v. DiGiacinto et al., filed in the Supreme Court of the
State of New York, County of New York. This complaint stems from an
underlying action, Guarino et al. v. Carpenters Local No. 964 Pension Fund
("Guarino"), brought by residents of a subdivision who allege that homes
developed and sold by the Carpenters Local No. 964 Pension Fund (the "Pension
Fund") were constructed on the site of a former landfill. Plaintiffs claim
that the deterioration of wallboard materials buried at the site has resulted
in a continuous release of hydrogen sulfide gas which has rendered the houses
unfit for dwelling. Plaintiffs seek damages in excess of $25,000,000.
The third party complaint, as it relates to the Company, alleges that (1)
the Company owned land that ultimately became part of the subdivision; (2) the
Company permitted the dumping of wallboard materials on its former property;
and (3) certain improvements constructed by the Company on property adjacent
to the subdivision altered the flow of ground and surface water, contributing
to the production of hydrogen sulfide gas. The third party complaint seeks to
hold the Company responsible for any liability incurred by the Pension Fund as
a result of the Guarino action. On April 26, 1994, a status and scheduling
conference was held before Judge Howard Miller pursuant to which an order was
issued establishing the procedural schedule for the case. The discovery phase
of the case is currently scheduled to be completed by August 15, 1995. On
April 27, 1994, the Company filed its answer denying the claims asserted
against it in this matter.
By letter dated April 11, 1994, the State of New York, Department of Law
has indicated that the Attorney General is contemplating the filing of a
public nuisance action against the defendant and all third party defendants
with regard to this matter.
Regulatory Matters:
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 for a
description of an electric rate case filed by the Company with the NYPSC on
January 29, 1993, (Case 93-E-0082) requesting a $17.1 million (4.8%) annual
increase in electric revenues. At its open session on May 11, 1994 the NYPSC
announced its decision to terminate the Company's electric rate case. Further
information regarding Case 93-E-0082 is contained under the caption "Rate
Activities" in Part I, Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
Reference is made to Item 14(b), Reports on Form 8-K, in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993, for a
description of (a) a Current Report on Form 8-K dated February 10, 1994, filed
by the Company with the SEC on February 17, 1994; (b) a Form 8-K/A dated
February 10, 1994, filed by the Company with the SEC on February 22, 1994; and
(c) a Current Report on Form 8-K dated March 14, 1994, filed by the Company
with the SEC on March 15, 1994.
On April 13, 1994, the Company filed with the SEC a Current Report on
Form 8-K dated March 31, 1994, disclosing the filing of the Bernstein suit.
Reference is made to Item 1, Part II, "Legal Proceedings", of this Form 10-Q
Quarterly Report for further description of this suit.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORANGE AND ROCKLAND UTILITIES, INC.
(Registrant)
Date: May 12, 1994 By TERRY L. DITTRICH
Terry L. Dittrich
Acting Controller
Date: May 12, 1994 By ROBERT J. McBENNETT
Robert J. McBennett
Treasurer
