SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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ORANGE AND ROCKLAND UTILITIES, INC.
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(Name of Registrant as Specified In Its Charter)
ORANGE AND ROCKLAND UTILITIES, INC.
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O&R
Orange and
Rockland
Utilities, Inc. 1
First
Quarter
Report
1994
Dear Shareholders:
I am pleased to enclose for shareholders of record on April
18, 1994, the quarterly dividend check for 63 cents per share of
common stock, payable on May 1, 1994. The current dividend is
equivalent to an annual dividend rate of $2.52 per share.
This is Orange and Rockland's 332nd consecutive quarterly
dividend payment, and it demonstrates the fundamental strength of
the Company as it continues to provide shareholders with 83 years
of uninterrupted investment income.
Holders of Series A preferred and preference stock will be
paid their dividends on May 1 and May 2, respectively. If you
are a participant in the Company's Dividend Reinvestment and
Stock Purchase Plan, your dividend payments have been applied
directly to your account.
Net Income
The Company's net income from electric, natural gas and
diversified activities during the first quarter of 1994 was
$14.1 million, or $.98 per share, compared with $15.1
million, or $1.05 per share, in 1993. These results reflect
the expenses associated with the continuing investigation
and litigation described below. 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 Revenues
As a result of the unusually cold first quarter, total sales
of electric energy to retail customers during the period
were 1,086,738 megawatt hours (Mwh), compared with 1,051,758
Mwh during the same period a year ago. During the bitterly
stormy first quarter, winter peak demand for electricity hit
a record high, and, unlike several other utilities in the
region which were forced to implement rolling blackouts,
Orange and Rockland's service was uninterrupted by the heavy
demand.
Electric revenues associated with these sales -- after
accounting for the effect of the Company's revenue
decoupling mechanism agreement -- were $110.8 million,
compared with $108.4 million for the first quarter of 1993.
Under the Company's RDM agreement, New York electric revenue
targets are established in a base rate case, and any revenue
below or above the target is recovered from -- or returned
to -- customers. The Company's electric revenues therefore
reflect New York's RDM sales forecast and demand-side
management incentives. However, because the Company's New
Jersey and Pennsylvania electric sales are not governed by a
revenue decoupling mechanism, results in those states are
affected by weather-related sales.
First quarter 1994 revenues from sales to other utilities
amounted to $3.1 million, versus $1.7 million a year ago.
Sales to these utilities totaled 104,512 Mwh, compared with
59,856 Mwh in the first quarter of 1993. 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 Revenues
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
for the first quarter were $77.5 million, compared with
$67.9 million in the first quarter of 1993. This increase
reflects higher sales associated with the unusually cold
winter weather than experienced during the same period a
year ago. As in the case with electric energy, winter gas
demand, too, broke previous records on several occasions,
and hit an all-time high of 191.3 million cubic feet during
the quarter while customers were provided with uninterrupted
service.
Utility Expenses
For the first quarter of 1994, the costs of fuel, purchased
power, gas purchased for resale and reconcilable demand-side
management costs were $91.6 million, compared with $81.1
million a year ago. Other expenses amounted to $96.3
million during the first quarter, compared with $91.3
million in 1993, primarily reflecting the increase in
maintenance costs, taxes and the legal and accounting
expenses associated with the ongoing investigation. These
increases were somewhat offset by lower operating interest
costs.
<PAGE>
Diversified Activities
Sales from diversified activities -- almost entirely the
result of the Company's gas marketing subsidiary -- were
$97.0 million in the first quarter of 1994, compared with
$82.4 million in the prior year. These results reflect the
subsidiary's success in adding customers and increasing its
sales volume. While the gas marketing subsidiary made a
modest contribution to earnings during the first quarter,
its business is characterized by an extremely competitive
market and narrow profit margins, and future results cannot
be predicted from this quarter's achievements.
Update on Recent Events
Since I last reported to shareholders on the investigation
being conducted by the Special Committee of the Board of
Directors, James F. Smith, the Company's former chairman and
chief executive officer, was indicted on eight felony counts
of grand larceny and two misdemeanor counts of petit larceny
as a result of an investigation conducted by the Rockland
County District Attorney. The charges involve allegations
very similar to claims made in the Company's civil suit
brought against Mr. Smith following his dismissal for cause.
Mr. Smith has pleaded not guilty to the criminal charges and
is contesting the civil suit.
During the course of the Special Committee's investigation,
the financial controls area came under especially rigorous
scrutiny, and during the first quarter two officers of the
Company with controller responsibilities at one time or
another were dismissed.
While additional investigation and litigation expenses will
be incurred during the second quarter of 1994, the
investigation is drawing to a conclusion and a full report
is scheduled to be released by the Special Committee on or
about May 31, 1994. Litigation related to the suits brought
by the Company to recover misappropriated funds and against
the Company by some shareholders and customers is
continuing.
Cost-Reduction Measures
In order to further enhance our ability to meet the
competitive challenges in the years ahead, and to offset
some of the expenses associated with the special
investigation and litigation, management accelerated its
cost-reduction program during the first quarter of 1994. As
a result of this effort, the Company's 1994 budget has been
reduced by $5.7 million. The cost reductions will not
diminish the Company's operating ability and the quality of
our service will be unimpaired. We will continue to
aggressively pursue other avenues of cost reduction.
A Look Ahead
I continue to be confident that by applying the lessons
learned from the events of the past year -- events now
nearly behind us -- Orange and Rockland will emerge this
year as an even stronger Company. Those lessons, coupled
with the fundamentals already in place, will enable us to
even better achieve our mission for customers and
shareholders.
/s/ Victor J. Blanchet, Jr.
President, Chief Operating Officer
and Acting Chief Executive Officer
May 1, 1994<TABLE>
FINANCIAL HIGHLIGHTS
Orange and Rockland Utilities, Inc. and Subsidiaries
<CAPTION>
1994 1993 % Change
There Months Ended March 31, (Thousands of Dollars)
<S> <C> <C> <C>
Operating Revenues $ 292,675 $ 264,030 10.8
Operating Income $ 24,165 $ 23,731 1.8
Net Income $ 14,068 $ 15,084 (6.7)
Earnings per Average Common Share $ 0.98 $ 1.05 (6.7)
Electric Sales to Ultimate Customers(Mwh) 1,086,738 1,051,758 3.3
Electric Sales to Other Utilities(Mwh) 104,512 59,856 74.6
Gas Sales to Firm Customers(Mmcf) 10,528 9,674 8.8
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended March 31, 1994 1993 % Change
(Thousands of Dollars)
<S> <C> <C> <C>
Operating Revenues $ 1,000,016 $ 868,096 15.2
Operating Income $ 82,967 $ 82,992 -
Net Income $ 43,799 $ 48,850 (10.3)
Earnings per Average Common Share $ 2.99 $ 3.37 (11.3)
Electric Sales to Ultimate Customers(Mwh) 4,392,508 4,231,037 3.8
Electric Sales to Other Utilities(Mwh) 279,408 253,788 10.1
Gas Sales to Firm Customers(Mmcf) 21,410 21,053 1.7
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended March 31, 1994 1993
<S> <C> <C>
Selected Financial Ratios:
Dividends Declared* $ 2.51 $ 2.45
Return on Average Common Equity 10.85% 12.58%
Ratio of Earnings to Fixed Charges(Times) 3.02 3.08
Dividend Payout Ratio 83.95% 72.70%
Book Value per Common Share $ 28.14 $ 27.65
*At the current rate of 63.0 cents per share, this is equivalent to $2.52 on an annual basis.
</TABLE>
<TABLE>
CONSOLIDATED COMPARATIVE INCOME STATEMENTS
Orange and Rockland Utilities, Inc. and Subsidiaries
<CAPTION>
Three Months Twelve Months
Ended March 31, Ended March 31,
1994 1993 1994 1993
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $111,146 $109,156 $482,543 $461,042
Gas 81,403 70,782 167,878 152,112
Electric sales to other utilities 3,141 1,740 7,815 6,933
------- ------- ------- -------
Total Utility Revenues 195,690 181,678 658,236 620,087
Diversified activities 96,985 82,352 341,780 248,009
------- ------- ------- -------
Total Operating Revenues 292,675 264,030 1,000,016 868,096
Operating Expenses: ------- ------- ------- -------
Operations:
Fuel used in electric production 25,055 16,298 83,237 78,408
Electricity purchased for resale 10,972 17,225 56,716 55,074
Gas purchased for resale 50,166 41,997 98,153 86,500
Non-Utility gas marketing purchases 91,075 78,418 323,124 233,540
Other expenses of operation 37,467 36,975 154,565 141,278
Maintenance 10,072 9,057 43,876 40,895
Depreciation and amortization 8,711 8,476 34,755 34,102
Taxes other than income taxes 26,155 24,404 95,366 91,241
Federal income taxes 8,837 7,449 27,257 24,066
------- ------- ------- -------
Total Operating Expenses 268,510 240,299 917,049 785,104
------- ------- ------- -------
Income From Operations 24,165 23,731 82,967 82,922
------- ------- ------- -------
Other Income and Deductions:
Allowance for other funds used
during construction 30 (1) 71 334
Investigation costs (3,212) - (9,351) -
Other--net 399 (189) (349) (116)
Taxes other than income taxes (26) (27) (93) (101)
Federal income taxes 1,219 358 4,386 1,253
------- ------- ------- -------
Total Other Income and Deductions (1,590) 141 (5,336) 1,370
------- ------- ------- -------
Income Before Interest Charges 22,575 23,872 77,631 84,362
------- ------- ------- -------
Interest Charges:
Interest on long-term debt 7,492 7,885 29,991 32,045
Other interest 796 717 2,928 2,955
Amortization of debt premium and expense--net 301 218 1,199 504
Allowance for borrowed funds used
during construction (82) (32) (286) 8
------- ------- ------- -------
Total Interest Charges 8,507 8,788 33,832 35,512
------- ------- ------- -------
Net Income 14,068 15,084 43,799 48,850
Dividends on preferred and preference stock, at
required rates 813 841 3,336 3,449
------- ------- ------- -------
Earnings applicable to common stock $13,255 $14,243 $40,463 $45,401
======= ======= ======= =======
Average number of common shares outstanding(000's) 13,532 13,531 13,532 13,481
======= ======= ======= =======
Earnings per average common share outstanding $0.98 $1.05 $2.99 $3.37
======= ======= ======= =======
This is an interim statement of income and should not be taken as a basis
for predicting results for the calendar year.
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Orange and Rockland Utilities, Inc. and Subsidiaries
<CAPTION>
March 31,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Assets
Utility Plant:
Electric $935,099 $909,285
Gas 190,430 179,675
Common 52,570 50,368
--------- ---------
1,178,099 1,139,328
Less accumulated
depreciation 380,203 355,680
--------- ---------
797,896 783,648
Construction work in --------- ---------
progress 31,675 28,098
--------- ---------
Net Utility Plant 829,571 811,746
--------- ---------
Nonutility Property(Net) 21,856 22,028
--------- ---------
Current Assets:
Cash and Cash Equivalents 4,752 25,963
Other 247,439 210,296
--------- ---------
Total Current Assets 252,191 236,259
--------- ---------
Deferred Debits:
Extraordinary property loss
Sterling nuclear project 14,146 18,678
Other deferred debits 165,103 141,362
--------- ---------
Total Deferred Debits 179,249 160,040
--------- ---------
Total $1,282,867 $1,230,073
========== ==========
Capitalization and Liabilities:
Capitalization:
Common stock $67,662 $67,657
Premium on capital stock 130,320 130,301
Capital stock expense (6,107) (6,092)
Retained earnings 188,908 182,343
--------- ---------
Total Common Stock
Equity 380,783 374,209
--------- ---------
Non-redeemable preferred
stock 42,844 42,844
Non-redeemable preference
stock 434 459
--------- ---------
Total Non-Redeemable Stock 43,278 43,303
--------- ---------
Redeemable preferred stock 4,158 5,542
--------- ---------
Long-term debt 380,093 380,972
--------- ---------
Total Capitalization 808,312 804,026
--------- ---------
Noncurrent Liabilities 49,341 35,818
--------- ---------
Current Liabilities:
Long-term debt due within
one year 2,863 2,622
Commercial paper 39,350 41,250
Other current liabilities 157,355 150,002
--------- ---------
Total Current
Liabilities 199,568 193,874
--------- ---------
Deferred Taxes and Other:
Deferred Federal income taxes 170,100 162,799
Other Deferred Credits 55,546 33,556
--------- ---------
Total Deferred Taxes
and Other 225,646 196,355
--------- ---------
Total $1,282,867 $1,230,073
========== ==========
Note: All figures reported are subject to such adjustments
as the annual audit by independent accounts may disclose
to be necessary.
</TABLE>
Figures appearing in this report are presented as general
information and not in connection with any sale or offer to
sell or solicitation of an offer to buy any securities. All figures
reported are subject to such adjustments as the annual audit
by independent accountants may disclose to be necessary.
ORANGE AND ROCKLAND
Orange and Rockland Utilities, Inc. and Subsidiaries
One Blue Hill Plaza
Pearl River, NY 10965
