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, 1995
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 13,653,132 Shares
(Class) (Outstanding at April 30, 1995)<PAGE>
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
at March 31, 1995 and December 31, 1994 1
Consolidated Statements of Income (Unaudited)
for the three months ended March 31, 1995
and March 31, 1994. 3
Consolidated Cash Flow Statements (Unaudited)
for the three months ended March 31, 1995 and
March 31, 1994 4
Notes to Consolidated Financial Statements 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 13
ITEM 4. Submission of Matters to a Vote
of Security Holders 14
ITEM 6. Exhibits and Reports on Form 8-K 15
Signatures 16
<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,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Utility Plant:
Electric $ 955,356 $ 951,019
Gas 199,898 198,755
Common 55,537 55,445
Utility Plant in Service 1,210,791 1,205,219
Less accumulated depreciation 407,411 398,584
Net Utility Plant in Service 803,380 806,635
Construction work in progress 50,229 49,654
Net Utility Plant 853,609 856,289
Non-utility Property:
Non-utility property 34,670 34,585
Less accumulated depreciation, depletion and amortization 14,214 13,977
Net Non-utility Property 20,456 20,608
Current Assets:
Cash and cash equivalents 21,196 16,081
Temporary cash investments 604 1,839
Customer accounts receivable, less allowance for
uncollectible accounts of $2,206 and $2,200 49,792 44,105
Accrued utility revenue 20,338 27,273
Other accounts receivable, less allowance for
uncollectible accounts of $222 and $209 12,566 17,384
Gas marketing accounts receivable, less allowance
for uncollectible accounts of $343 and $327 52,479 58,470
Materials and supplies (at average cost) 29,610 37,836
Prepaid property taxes 21,243 19,327
Prepayments and other current assets 23,707 28,877
Total Current Assets 231,535 251,192
Deferred Debits:
Income tax recoverable in future rates 72,424 73,261
Extraordinary property loss - Sterling nuclear project 8,667 10,139
Deferred Order No. 636 transition costs 11,860 13,480
Deferred revenue taxes 16,469 16,888
Deferred pension and other postretirement benefits 10,599 10,505
IPP settlements 17,722 17,821
Unamortized debt expense (amortized over
term of securities) 10,171 10,493
Other deferred debits 37,089 32,328
Total Deferred Debits 185,001 184,915
Total $1,290,601 $1,313,004
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,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Capitalization:
Common stock (13,653,100 and 13,652,913 shares
outstanding) $ 68,266 $ 68,265
Premium on capital stock 133,598 133,595
Capital stock expense (6,118) (6,116)
Retained earnings 189,458 183,659
Total Common Stock Equity 385,204 379,403
Non-redeemable preferred stock (428,443 shares
outstanding) 42,844 42,844
Non-redeemable cumulative preference stock (12,896
and 13,025 shares outstanding) 420 424
Total Non-Redeemable Stock 43,264 43,268
Redeemable preferred stock (27,738 shares outstanding) 2,774 2,774
Long-term debt 359,531 359,622
Total Capitalization 790,773 785,067
Non-current Liabilities:
Reserve for claims and damages 4,954 4,713
Postretirement benefits 11,838 15,625
Pension costs 40,661 39,854
Obligation under capital leases 137 275
Total Non-current Liabilities 57,590 60,467
Current Liabilities:
Lease obligations due within one year 529 518
Long-term debt due within one year 19,350 19,392
Preferred stock to be redeemed within one year 1,384 1,384
Notes payable 8,480 -
Commercial paper 31,250 29,400
Accounts payable 36,923 63,855
Gas marketing accounts payable 49,781 71,913
Dividends payable 725 725
Customer deposits 5,490 5,669
Accrued Federal income and other taxes 12,239 5,949
Accrued interest 5,229 8,608
Refundable gas costs 8,878 7,554
Refunds to customers 10,209 10,265
Other current liabilities 16,008 16,127
Total Current Liabilities 206,475 241,359
Deferred Taxes and Other:
Deferred Federal income taxes 175,047 173,317
Deferred investment tax credits 16,902 17,109
Accrued Order No. 636 transition costs 11,860 13,480
Accrued IPP settlement agreements 8,000 8,000
Minority interest in non-utility subsidiary 1,986 -
Refundable fuel costs 18,141 10,366
Other deferred credits 3,827 3,839
Total Deferred Taxes and Other 235,763 226,111
Total $1,290,601 $1,313,004
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,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Operating Revenues:
Electric $107,186 $111,145
Gas 59,121 81,403
Electric sales to other utilities 718 3,141
Total Utility Revenues 167,025 195,689
Diversified activities 144,822 96,094
Total Operating Revenues 311,847 291,783
Operating Expenses:
Operations:
Fuel used in electric production 18,018 25,055
Electricity purchased for resale 11,460 10,972
Gas purchased for resale 30,332 50,166
Non-utility gas marketing purchases 142,125 91,075
Other expenses of operation 36,030 35,047
Maintenance 9,471 10,072
Depreciation and amortization 9,051 8,609
Amortization of property losses 1,540 1,416
Taxes other than income taxes 25,226 26,148
Federal income taxes 7,913 11,201
Deferred Federal income taxes 196 (2,230)
Amortization of investment tax credit (30) (30)
Total Operating Expenses 291,332 267,501
Income from Operations 20,515 24,282
Other Income and (Deductions):
Allowance for other funds used
during construction 11 30
Investigation costs (381) (3,212)
Other - net 5,073 170
Taxes other than income taxes (438) (26)
Federal income taxes 523 1,080
Deferred Federal income taxes (2,152) (39)
Amortization of investment tax credit 177 178
Total Other Income and (Deductions) 2,813 (1,819)
Income Before Interest Charges 23,328 22,463
Interest Charges:
Interest on long-term debt 6,926 7,492
Other interest 1,201 684
Amortization of debt premium and expense-net 340 301
Allowance for borrowed funds used during
construction (460) (82)
Total Interest Charges 8,007 8,395
Net Income 15,321 14,068
Dividends on preferred and preference stock,
at required rates 784 813
Earnings applicable to common stock $ 14,537 $ 13,255
Avg. number of common shares outstanding (000's) 13,653 13,532
Earnings per average common share outstanding $ 1.06 $ .98
Dividends declared per common share outstanding $ .64 $ .63
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,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Cash Flow from Operations:
Net income $15,321 $14,068
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 9,384 8,865
Deferred Federal income taxes 2,348 2,269
Deferred investment tax credit (207) (208)
Deferred and refundable fuel and gas costs 9,099 7,682
Allowance for funds used during construction (471) (112)
Other non-cash charges 1,891 1,170
Changes in certain current assets and liabilities:
Accounts and gas marketing accounts receivable,
net and accrued utility revenues 12,057 (14,560)
Materials and supplies 8,226 11,317
Prepaid property taxes (1,916) (1,910)
Prepayments and other current assets 5,170 (18,467)
Operating and gas marketing accounts payable (49,064) (3,407)
Accrued Federal Income and other taxes 6,290 8,745
Accrued interest (3,379) (5,685)
Refunds to customers (56) (67)
Other current liabilities (298) 21
Other-net (4,905) 3,225
Net Cash Provided from Operations 9,490 12,946
Cash Flow from Investing Activities:
Additions to plant (6,610) (6,766)
Temporary cash investments 1,235 (7)
Allowance for funds used during construction 471 112
Net Cash Used in Investing Activities (4,904) (6,661)
Cash Flow from Financing Activities:
Proceeds from:
Issuance of common stock - -
Issuance of long-term debt - -
Retirements of:
Long-term debt (150) (189)
Capital lease obligations (127) (117)
Net borrowings (repayments) under
short-term debt arrangements* 10,330 (6,850)
Dividends on preferred and common stock (9,524) (10,087)
Net Cash Provided From (Used in) Financing Activities 529 (17,243)
Net Change in Cash and Cash Equivalents 5,115 (10,958)
Cash and Cash Equivalents at Beginning of Period 16,081 14,256
Cash and Cash Equivalents at End of Period $21,196 $ 3,298
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $11,019 $13,972
Federal income taxes $ - $ -
* 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, 1995, the consolidated
statements of income for the three month periods ended March 31, 1995 and
1994, 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, 1995, and for all periods presented, have been made. The
amounts in the consolidated balance sheet as of December 31, 1994 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, 1994 Annual Report to Shareholders. The results of
operations for the period ended March 31, 1995 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, 1995 are substantially the same as the
contingencies described in the "Notes to Consolidated Financial
Statements" included in the Company's December 31, 1994 Annual Report to
Shareholders, which material is incorporated by reference to the
Company's December 31, 1994 Form 10-K Annual Report.
5. Certain amounts from prior years have been reclassified to conform with
the current year presentation.
6. On September 8, 1994 the Company adopted a formal plan to sell the six
radio broadcasting properties operated by a wholly owned indirect
subsidiary, Atlantic Morris Broadcasting, Inc. ("AMB"). Agreements to
sell five of these stations were entered into during the fourth quarter
of 1994 and during the first quarter of 1995, AMB signed an agreement to
sell the sixth and final radio station. Final closure of all the sales
awaits FCC approvals. The sale of the stations will not have a material
effect on the Company's Consolidated Financial Statements.
7. On January 23, 1995, O&R Energy, Inc. (now NORSTAR Holdings, Inc.) a
wholly owned indirect subsidiary of the Company, joined with Shell Gas
Trading Co. to create a new full service natural gas services and
marketing company called NORSTAR Energy Limited Partnership ("NORSTAR
Partnership"). During the first quarter of 1995, the Company realized a
gain on the formation of the NORSTAR Partnership of $2.9 million. The
gain resulted from the effective sale of a 26.9% minority interest in the
gas marketing business. This net gain has been recorded in the
Consolidated Statements of Income under the title Other Income and
(Deductions) as follows: Other-Net, $5.0 million; Taxes other than
income taxes, ($.4) million and Federal income taxes, ($1.7) million. <PAGE>
8. The financial statements of the Company are based on generally accepted
accounting principles, including the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types
of Regulation" ("SFAS No. 71"), which gives recognition to the rate-
making and accounting practices of the regulatory agencies. The
principal effect of the rate-making process on the Company's financial
statements is that of the timing of the recognition of incurred costs.
If rate regulation provides reasonable assurance that an incurred cost
will be recovered in a future period by inclusion of that cost in rates,
SFAS No. 71 requires the capitalization of the cost. Regulatory assets
represent probable future revenue associated with certain incurred costs,
as these costs are recovered through the rate-making process.
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of". This Statement imposes criteria for the
continued recognition of regulatory assets by requiring that such assets
be probable of future recovery at each balance sheet date. The Company
anticipates adopting this standard on January 1, 1996 and does not expect
that adoption will have a material impact on the financial position or
results of operations of the Company based on the current regulatory
structure in which the Company operates. This conclusion may change in
the future as competitive factors influence wholesale and retail pricing
in this industry. <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 1995 were $1.06 as compared to $.98 for the first quarter
of 1994. Fluctuations within the components of earnings are discussed in the
"Results of Operations". The average number of common shares outstanding was
13.7 million for the first quarter of 1995 and 13.5 million for the first
quarter of 1994.
The current quarterly dividend rate of $.64 is equivalent to an annual
dividend of $2.56 per share. Dividends declared during the twelve months
ended March 31, 1995 amounted to $2.55 with a dividend payout ratio of 98.5%
as compared to $2.51 a year ago with a payout ratio of 84.0%.
The return on average common equity for the twelve months ended March 31, 1995
was 9.33%, as compared to 10.85% for the twelve months ended March 31, 1994.
Capital Resources and Liquidity
At March 31, 1995, 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 $25.0 million at
March 31, 1995, 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, 1995 amounted to
$38.6 million at an effective interest rate of 6.4% as compared to $44.5
million at an effective interest rate of 3.5% for the same period of 1994.
The level of temporary cash investments for the three months ended March 31,
1995 increased to an average daily balance of $17.1 million from $14.6 million
for the same period of 1994.
The New York Public Service Commission ("NYPSC") has authorized the Company to
issue up to 750,000 shares of common stock under its Dividend Reinvestment and
Stock Purchase Plan ("DRP") and its Employee Stock Purchase and Dividend
Reinvestment Plan ("ESPP"). At the option of the Company, however, common
stock used to satisfy the requirements of the DRP and ESPP may be purchased on
the open market. Effective November 1, 1994, common stock needed to satisfy
the DRP and ESPP requirements is being purchased on the open market.
Rate Activities
New York
Gas:
On January 16, 1992, the Company filed an application for an increase in gas
rates with the NYPSC. The Settlement Agreement in that case, which was
<PAGE>
approved by the NYPSC on September 30, 1992 provided, among other things, for
multi-year rate adjustments through 1996 and for certain gas incentives. The
second adjustment to gas rates under the Settlement Agreement, which amounted
to an increase of $3.8 million or 2.5%, was to become effective on January 1,
1994. As a result of the ongoing investigation of alleged financial
improprieties, however, the increase was first extended to June 30, 1994 and
then further extended to December 30, 1994. On November 4, 1994, the NYPSC
issued an Order terminating the Settlement Agreement effective December 31,
1994. The Order denies the Company the opportunity for rate adjustments in
the third and fourth years (1995 and 1996) of the four-year Settlement
Agreement. However, the Order authorizes the Company to defer the second-
stage rate adjustment and all previously authorized reconciliations pertaining
to periods prior to December 31, 1994, pending review and audit by the NYPSC
staff and the conclusion of the NYPSC's investigation of alleged financial
improprieties. In addition, on February 7, 1995, the Accounting and Finance
Division of the NYPSC issued an interpretation of the November 4, 1994
termination order which stated that the gas incentive mechanism related to the
attainment of certain goals are no longer available. The Company will not
contest this interpretation.
Electric:
On June 10, 1994, the NYPSC issued an Order ("the June Order") which
terminated the Company's January, 1993 electric rate increase application.
The June Order provided, among other things, for a reduction in the threshold
for measuring excess earning from 12.0% to 10.6% effective retroactively to
January 1, 1994. All earnings in excess of 10.6% are to be deferred for
future disposition pending the conclusion of the ongoing investigation.
On September 19, 1994, the Company filed an appeal with the Supreme Court of
New York challenging the legality of the June Order. The appeal argues that
by changing the excess earnings threshold from 12.0% to 10.6% for the first
six months of 1994, the NYPSC engaged in retroactive ratemaking. The appeal
also argues that there is no evidence in the record to support a determination
that the cost of equity is 10.6%. The Company and the NYPSC have agreed to
stay the briefings in this appeal until after the NYPSC has issued its final
report on its investigation of the Company.
On February 17, 1995, O&R submitted a compliance filing regarding the
operation of the Revenue Decoupling Mechanism ("RDM"). The filing included
a proposal to reduce the RDM Adjustment Factor from $7.7 million to $0
effective May 1, 1995 reflecting the completion of the recovery of an RDM
undercollection applicable to the year 1993. This equates to a 2.3% annual
reduction in revenue. In addition, the filing requested that a net RDM
overcollection of $0.7 million for the year 1994 be retained by the Company as
a future rate moderator, subject to NYPSC verification. On April 19, 1995,
the NYPSC approved the proposals, and the reduction of $7.7 million in the RDM
Adjustment Factor became effective on May 1, 1995.
Other:
On November 10, 1994, the Company filed with the NYPSC, a quantification of
the rate-making effects of its ongoing investigation into prior financial
improprieties. The Company requested that the NYPSC approve an additional
refund of approximately $3.4 million to its New York electric and gas <PAGE>
customers. Although the NYPSC has not acted on this request, this amount was
charged to operations in the fourth quarter of 1994. The NYPSC has instituted
a proceeding (Case 93-M-0849) to provide the opportunity for other parties,
including NYPSC Staff who are conducting an independent investigation of the
Company, to be heard on this matter. On November 18, 1994, NYPSC Staff
submitted to the Company a draft report of its investigation of the Company
for factual verification. This draft report does not include the NYPSC
Staff's estimate of the inappropriate costs that have been borne by the
Company's ratepayers. Such an estimate will be included in the final version
of the report. On January 11, 1995, the Company submitted its response to the
draft report. The Company is unable to predict the final results of this
proceeding and what modification, if any, will be made to the amount proposed
to be refunded.
New Jersey
Under an agreement with the New Jersey Board of Public Utility Commissioners
("NJBPU") to return to customers any funds found to be misappropriated as a
result of an ongoing investigation of certain officers and former employees,
Rockland Electric Company ("RECO"), a wholly-owned utility subsidiary of the
Company, refunded to New Jersey ratepayers $93,000 through reductions in the
applicable fuel adjustment charges in February and March 1994. In December
1994, RECO submitted a proposal to the NJBPU to refund an additional $0.7
million. By order dated January 27, 1995, the NJBPU approved this proposal
ordering the refund to be made in February 1995. The NJBPU investigation into
these matters is continuing and the Company is unable to predict what
modification, if any, will be made to the amount refunded.
On November 3, 1993, the NJBPU commenced its periodic management audit of
RECO. As a result of the events and investigations described above, the NJBPU
audit included, in addition to a standard review of operating procedures,
policies and practices, a review of the posture of RECO management regarding
business ethics and a determination regarding the effect of such events on
RECO ratepayers. The audit findings are contained in its "Final Report on An
Ethics Review of Rockland Electric Company" (Docket No. EA900302-48) dated
December 1, 1994, a copy of which was provided to the Company for comment. On
January 11, 1995, the Company submitted its comments to this audit report to
the NJBPU. The NJBPU has not yet issued its final report.
Results of Operations:
QUARTERLY COMPARISON
Earnings per average common share outstanding for the first quarter of 1995
amounted to $1.06 per share as compared to $.98 per share for the first
quarter of 1994. This increase reflects the impact of the gain realized on
the formation of NORSTAR Energy Limited Partnership and the diminishing costs
associated with the litigation involving improprieties of former officers and
others. While these items had a favorable impact on first quarter earnings,
lower utility revenue and other diversified operations partially offset their
effect on earnings.
<PAGE>
Electric and Gas Revenues
Electric and gas operating revenues, including fuel cost and purchased gas
cost recoveries, decreased by $28.7 million in the first quarter of 1995 as
compared to the same quarter of 1994.
Electric operating revenues during the current quarter were $107.9 million as
compared to $114.3 million for the first quarter of 1994, a decrease of $6.4
million. The components of the changes in electric operating revenues for the
quarter ended March 31, 1995 as compared to the same quarter of 1994 are as
follows:
(Millions of Dollars)
Retail sales:
Base Revenues* $ (2.9)
Fuel cost recoveries (3.4)
Sales volume changes (1.1)
Subtotal (7.4)
Sales for resale (2.4)
Other operating revenue:
RDM revenue reconciliation
and DSM incentives 1.8
Other 1.6
Total $(6.4)
*Includes miscellaneous surcharges and revenue tax recoveries.
Actual total sales of electric energy to retail customers during the first
quarter of 1995 were 1,072,163 megawatt hours ("Mwh"), compared with 1,086,738
Mwh during the comparable period a year ago. This decrease is the result of a
decrease in the average usage per customer when compared to the same period a
year ago. Before reflecting the effect of the RDM and the DSM incentives in
the Company's New York jurisdiction, electric revenues associated with these
sales were $105.2 million during the current quarter compared to $112.7
million during the first quarter of 1994, a decrease of $7.5 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 $49.7 million for the first
quarter of 1995. In accordance with 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 $49.6 million for the first quarter of
1995 was $.1 million, which was recorded as an increase in revenue. In the
first quarter of 1994, the Company recorded $1.9 million as a reduction to
revenue.
With regard to the DSM goal achievement incentives, the Company's performance
during the first quarter of 1995 and 1994 did not allow it to record any
incentive related revenues.
The Company's performance during the remainder of 1995 will determine what, if
any, RDM revenue adjustments may be recorded.<PAGE>
Revenues from sales to other utilities in the first quarter of 1995 amounted
to $.7 million, a decrease of $2.4 million from a year ago. Sales to such
utilities totaled 41,595 Mwh, compared with 104,512 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 $59.1 million compared to $81.4
million for the first quarter of 1994, a decrease of $22.3 million. The
components of the changes in gas operating revenues for the quarter ended
March 31, 1995 as compared to the same quarter of 1994 are as follows:
(Millions of Dollars)
Sales to firm customers:
Base revenues* $ 3.2
Gas cost recoveries (19.0)
Sales volume changes (5.5)
Subtotal (21.3)
Sales to interruptible customers (1.5)
Other operating revenue .5
Total $ (22.3)
* Includes miscellaneous surcharges and revenue tax recoveries.
Gas sales to firm customers during the first quarter of 1995 totaled 8,802
million cubic feet ("Mmcf"), compared with 10,528 Mmcf during the same period
a year ago. Gas revenues from firm customers were $56.1 million, compared
with $77.5 million in the first quarter of 1994.
Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas
Marketing
The cost of fuel used in the production of electricity and purchased
electricity costs decreased by $6.5 million during the first quarter of 1995
when compared to the same quarter of 1994. The components of the change are
as follows:
(Millions of Dollars)
Prices paid for fuel and purchased power $ (4.7)
Changes in kilowatt-hours generated
or purchased (2.7)
Deferred fuel charge .9
Total $ (6.5)
The average cost per kilowatt-hour generated and purchased was 2.39 cents for
the quarter ended March 31, 1995 compared to 2.77 for the same quarter of
1994.
Purchased gas costs for utility operations were $30.3 million in the first
quarter of 1995 compared to $50.2 million in 1994, a decrease of $19.9
million.
<PAGE>
The components of the changes in purchased gas costs are as follows:
(Millions of Dollars)
Prices paid for gas supplies* $ (6.3)
Gas sendout volume (7.4)
Deferred fuel charges (6.2)
Total $(19.9)
*Net of refunds received from gas suppliers.
The average cost per thousand cubic feet ("Mcf") purchased for the first
quarter of 1995 including transportation and storage costs, was $2.49 compared
to $3.19 in the first quarter of 1994.
Other Operating and Maintenance Expenses
The Company's total operating and maintenance expenses excluding fuel,
purchased power and gas purchased for resale during first quarter of 1995,
decreased by $.8 million compared with the same period in 1994. The decrease
in expenses associated with utility operations accounted for $.4 million of
this decrease.
The decrease in other utility operation and maintenance expense is the result
of an increase in depreciation and amortization expense of $.3 million and
operation and maintenance expense of $.2 million offset by decreases in
Federal income taxes of $.1 and other taxes of $.8 million.
Diversified Activities
The Company's diversified activities consist of gas marketing, gas production,
land development and communications businesses conducted by wholly owned non-
utility subsidiaries.
Revenues from diversified activities increased by $48.7 million for the first
quarter of 1995 as compared to the same quarter of 1994, as a result of the
gas marketing subsidiary's success in adding customers and increasing its
sales volume. As previously noted, the first quarter diversified earnings
were enhanced by a $2.9 million gain realized as a result of the sale of
a 26.9% minority interest in the Company's gas marketing subsidiary and
the subsequent formation of the NORSTAR Partnership. This gain was offset
by increases in operating expenses for all diversified activities of
$50.6 million, which is the result of increased gas purchases of $51.0 and
decreases in other operating expenses of $.4 million.
Other Income, Deductions and Interest Charges - Net
Other income, net of interest charges and other deductions, increased by $5.0
million during the first quarter of 1995 when compared to the same quarter of
1994. This increase is the result of the impact of the gain realized on the
formation of the NORSTAR Partnership and a decrease in outside professional
and consulting services related to the investigations of alleged financial
improprieties.<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Investigation and 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, 1994 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 against Linda Winikow, a former Company Vice
President, three other former Company employees and two vendors. As reported
there, the Company alleged that the defendants engaged in a conspiracy to
divert monies from the Company through the submission of false and fraudulent
invoices in order to pay personal expenses of and/or to provide personal
services to the defendants. In addition, the Company alleged that the
defendants made various contributions to political candidates consisting of
money and services diverted from the Company. On May 10, 1995, the Company
filed a stipulation terminating the case against the last remaining defendant,
Ms. Winikow, in return for her agreement to pay the Company $100,000,
surrender her rights to approximately $75,000 worth of deferred compensation,
and arrange for a contribution of $25,000 of leftover campaign funds to the
United Way of Orange and Rockland Counties.
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, 1994 for a
description of a criminal action brought against Ms. Winikow 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. On April 6, 1995, Rockland County Court Judge
Robert R. Meehan sentenced Ms. Winikow to serve nine months in county jail
and to pay $70,019 in restitution to the Company. That amount is included in
the amount she has agreed to pay to settle the Company's civil lawsuit,
described above.
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, 1994 for a description of
a criminal action brought against James F. Smith, a former Director and former
Chief Executive Officer of the Company, by the Rockland County (New York)
District Attorney. As noted therein, a Rockland County Grand Jury indictment
charges Mr. Smith with 15 felony counts of grand larceny, seven counts of
falsifying business records and two misdemeanor counts of petit larceny. The
trial in this matter has been rescheduled to begin in June 1995 in the Supreme
Court of the State of New York, Rockland County.
<PAGE>
Other Litigation:
On March 28, 1995, a complaint was filed in the Supreme Court of the
State of New York, County of Rockland naming the Company as a defendant in
Payran v. Orange and Rockland Utilities, Inc. and James Donnery, a purported
personal injury action. Plaintiff in this suit seeks compensatory damages in
the amount of $100 million and punitive damages in the amount of $100 million
based on injuries he alleges were the result of actions by the defendants at
the Company's Lovett Power Plant. While plaintiff did suffer serious injuries
at the Lovett Plant, the Company believes it has a valid workers compensation
defense to all claims asserted against it by plaintiff in this suit.
Regulation:
On March 29, 1995, the Federal Energy Regulatory Commission ("FERC")
issued its Notice of Proposed Rulemaking ("NOPR") on Promoting Wholesale
Competition Through Open Access Non-Discriminatory Transmission Services by
Public Utilities (Docket No. RM95-8-000), by which the FERC proposes to
require public utilities that own or control interstate transmission
facilities to offer "open access" transmission service on a non-discriminatory
basis, and its Supplemental NOPR on Recovery of Stranded Costs by Public
Utilities and Transmitting Utilities (Docket No. RM-94-7-001), by which the
FERC proposes to allow in certain circumstances the recovery of stranded costs
when former wholesale or retail customers change power suppliers. The Company
is presently reviewing these NOPRs and cannot, at this time, predict what
effects the proposed rules will have, if any, on the future operations or
financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders was held on April 12,
1995.
(b) The following directors were elected at the Annual Meeting of
Shareholders on April 12, 1995: Frederic V. Salerno was elected for
a one-year term expiring at the Annual Meeting of Shareholders in
1996, and James F. O'Grady, Jr., D. Louis Peoples and H. Kent
Vanderhoef were elected for three-year terms expiring at the Annual
Meeting of Shareholders in 1998. The following Directors have
continued in office after the meeting: Ralph M. Baruch, J. Fletcher
Creamer, Michael J. Del Giudice, Kenneth D. McPherson, and Linda C.
Taliaferro.
(c) The following matters were submitted to a vote of security holders
at the Company's Annual Meeting of Shareholders held on April 12,
1995:
<PAGE>
1. The Company's nominees for election as Directors were elected by
the following vote:
Shares Shares Broker
For Withheld Non-Votes
Frederic V. Salerno 11,138,760 234,954 N/A
James F. O'Grady, Jr. 11,116,340 257,374 N/A
D. Louis Peoples 11,168,833 204,881 N/A
H. Kent Vanderhoef 11,103,222 270,492 N/A
Robert V. Citrolo was nominated for election as a Director by a
shareholder at the Annual Meeting, and 9,389 shares were cast
for Mr. Citrolo.
2. A proposal to appoint the firm of Arthur Andersen LLP,
independent public accountants, to audit the books, records and
accounts of the Company and its subsidiaries for the year 1995
was approved by the following vote:
Shares Shares Broker
Shares For Against Abstaining Non-Votes
10,979,376 158,365 245,362 N/A
Item 6. Exhibits and Reports on Form 8-K
None<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 11, 1995 By ROBERT J. McBENNETT
Robert J. McBennett
Treasurer and Controller
Date: May 11, 1995 By JOHN T. FINNEGAN
John T. Finnegan
Assistant Treasurer
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ORANGE AND
ROCKLAND UTILITIES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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<TOTAL-CURRENT-ASSETS> 231,535
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