Page 1 of 8
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996
Commission File Number 0-14688
ALLEGHENY GENERATING COMPANY
(Exact name of registrant as specified in its charter)
Virginia 13-3079675
(State of Incorporation) (I.R.S. Employer Identification No.)
10435 Downsville Pike, Hagerstown, Maryland 21740-1766
Telephone Number - 301-790-3400
The registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
At August 13, 1996, 1,000 shares of the Common Stock ($1.00 par
value) of the registrant were outstanding.
<PAGE>
- 2 -
ALLEGHENY GENERATING COMPANY
Form 10-Q for Quarter Ended June 30, 1996
Index
Page
No.
PART I--FINANCIAL INFORMATION:
Statement of income - Three and six months ended
June 30, 1996 and 1995 3
Balance sheet - June 30, 1996
and December 31, 1995 4
Statement of cash flows - Six months ended
June 30, 1996 and 1995 5
Notes to financial statements 6
Management's discussion and analysis of financial
condition and results of operations 7
PART II--OTHER INFORMATION 8
<PAGE>
<TABLE>
<CAPTION>
- 3 -
ALLEGHENY GENERATING COMPANY
Statement of Income
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
(Thousands of Dollars)
<S> <C> <C> <C> <C>
ELECTRIC OPERATING REVENUES $ 21,023 $ 22,061 $ 41,932 $ 44,157
OPERATING EXPENSES:
Operation and maintenance expense 1,215 1,571 2,334 3,367
Depreciation 4,290 4,224 8,580 8,448
Taxes other than income taxes 1,198 1,248 2,408 2,547
Federal income taxes 3,362 3,502 6,706 6,725
Total Operating Expenses 10,065 10,545 20,028 21,087
Operating Income 10,958 11,516 21,904 23,070
OTHER INCOME AND DEDUCTIONS - 9 3 9
Income Before Interest Charges 10,958 11,525 21,907 23,079
INTEREST CHARGES:
Interest on long-term debt 3,924 4,198 7,917 8,397
Other interest 257 234 492 1,020
Total Interest Charges 4,181 4,432 8,409 9,417
NET INCOME $ 6,777 $ 7,093 $ 13,498 $ 13,662
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- 4 -
ALLEGHENY GENERATING COMPANY
Balance Sheet
June 30 December 31
1996 1995
ASSETS: (Thousands of Dollars)
Property, Plant, and Equipment:
At original cost, including $490,000
<S> <C> <C>
and $412,000 under construction $ 836,977 $ 836,894
Accumulated depreciation (167,605) (159,037)
669,372 677,857
Current Assets:
Cash 111 31
Accounts receivable from parents 3,945 5,274
Materials and supplies - at average cost 2,193 2,049
Other 629 232
6,878 7,586
Deferred Charges:
Regulatory assets 14,617 14,617
Unamortized loss on reacquired debt 9,523 9,900
Other 291 327
24,431 24,844
Total Assets $ 700,681 $ 710,287
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common stock - $1.00 par value per share,
authorized 5,000 shares, outstanding
1,000 shares $ 1 $ 1
Other paid-in capital 209,999 209,999
Retained earnings 16 4,153
210,016 214,153
Long-term debt:
Debentures, net 148,594 148,548
Commercial paper 21,990 30,561
Medium-term notes 70,000 70,600
Notes payable to affiliates 2,350 -
452,950 463,862
Current Liabilities:
Long-term debt due within one year 4,600 6,375
Accounts payable 67 16
Interest accrued 5,065 5,151
Taxes accrued 15 113
Other - 237
9,747 11,892
Deferred Credits:
Unamortized investment credit 50,326 50,987
Deferred income taxes 160,203 156,091
Regulatory liabilities 27,455 27,455
237,984 234,533
Total Capitalization and Liabilities $ 700,681 $ 710,287
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- 5 -
ALLEGHENY GENERATING COMPANY
Statement of Cash Flows
Six Months Ended
June 30
1996 1995
(Thousands of Dollars)
CASH FLOWS FROM OPERATIONS:
<S> <C> <C>
Net income $13,498 $13,662
Depreciation 8,580 8,448
Deferred investment credit and income taxes, net 3,451 3,481
Changes in certain current assets and
liabilities:
Accounts receivable 1,329 (4,470)
Materials and supplies (144) 296
Accounts payable 51 (34)
Taxes accrued (98) (227)
Interest accrued (86) (10)
Other, net (59) 2,958
26,522 24,104
CASH FLOWS FROM INVESTING:
Construction expenditures (211) (2,208)
CASH FLOWS FROM FINANCING:
Retirement of long-term debt (8,596) (3,941)
Cash dividends on common stock (17,635) (17,900)
(26,231) (21,841)
NET CHANGE IN CASH 80 55
Cash at January 1 31 45
Cash at June 30 $ 111 $ 100
Supplemental cash flow information:
Cash paid during the period for:
Interest $8,029 $8,958
Income taxes 3,324 1,688
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- 6 -
ALLEGHENY GENERATING COMPANY
Notes to Financial Statements
1. The Company's Notes to Financial Statements in the Allegheny
Power System companies' combined Annual Report on Form 10-K for
the year ended December 31, 1995, should be read with the
accompanying financial statements and the following notes.
With the exception of the December 31, 1995, balance sheet in
the aforementioned annual report on Form 10-K, the accompanying
financial statements appearing on pages 3 through 5 and these
notes to financial statements are unaudited. In the opinion of
the Company, such financial statements together with these
notes thereto contain all adjustments (which consist only of
normal recurring adjustments) necessary to present fairly the
Company's financial position as of June 30, 1996, the results
of operations for the three and six months ended June 30, 1996
and 1995, and cash flows for the six months ended June 30, 1996
and 1995.
2. The Statement of Income reflects the results of past operations
and is not intended as any representation as to future results.
For purposes of the Balance Sheet and Statement of Cash Flows,
temporary cash investments with original maturities of three
months or less, generally in the form of repurchase agreements,
are considered to be the equivalent of cash.
3. Common stock dividends per share declared and paid during the
periods for which income statements are included are as
follows:
<TABLE>
<CAPTION>
1996 1995
1st 2nd 1st 2nd
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Number of Shares 1 000 1 000 1 000 1 000
Amount per Share $9 225 $8 410 $8 950 $8 950
</TABLE>
Earnings per share are not reported inasmuch as the common
stock of the Company is 100% owned by its parents, Monongahela
Power Company (27%), The Potomac Edison Company (28%), and West
Penn Power Company (45%).
<PAGE>
- 7 -
ALLEGHENY GENERATING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
COMPARISON OF SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
WITH SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1995
The changes in revenues and net income are primarily
due to a continuing reduction in the Company's net plant (the major
component of rate base). As a result of the April 4, 1996 settlement
agreement which is described below, the Company's Return on Equity (ROE)
decreased from 11.2% to 11%, with resultant decreases in revenues and net
income.
The decrease in other interest for the six months ended
June 1996 was due to the prior year reflecting interest paid on the
revenue refund pursuant to the March 23, 1995 settlement agreement
described below.
LIQUIDITY AND CAPITAL RESOURCES
The Company's discussion on Liquidity and Capital
Resources and Results of Operations in the Allegheny Power System
companies' combined Annual Report on Form 10-K for the year ended December
31, 1995, should be read with the following information.
On December 21, 1995, the Company submitted a
negotiated settlement to the Federal Energy Regulatory Commission (FERC)
to address the Company's return on equity (ROE) effective after 1995.
Interested parties representing less than 2% of the Company's eventual
revenues filed exceptions. On February 20, 1996, the FERC instituted an
investigation of the proposed rate. Subsequently, the parties who filed
exceptions removed their exceptions and accepted the settlement agreement
provided for a 1996 return on equity of 11% and an ROE adjustment
mechanism for future years.
In July 1996, the Company filed a request with the
Securities and Exchange Commission for authority to pay common dividends
from time to time through December 31, 2001, out of capital or unearned
surplus, to the extent permitted under applicable corporation law and any
applicable financing agreements which restrict distributions to
shareholders. Due to the nature of being a single asset company with
declining capital needs, the Company systematically reduces capitalization
each year as its asset depreciates. This has resulted in the payment of
dividends in excess of current earnings and the reduction of retained
earnings. The Company's practice is to retire debt and pay dividends in
amounts necessary to maintain a 45% common equity position. The payment
of dividends out of capital surplus will not be detrimental to the
financial integrity or working capital of either the Company or its
parents, nor will it adversely affect the protections due debt security
holders.
<PAGE>
- 8 -
ALLEGHENY GENERATING COMPANY
Part II - Other Information to Form 10-Q
for Quarter Ended June 30, 1996
ITEM 5. OTHER INFORMATION
In June 1996, the Company moved its corporate
headquarters from New York City to Hagerstown, Maryland (Washington
County).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) (27) Financial Data Schedule
(b) As reported in the first quarter 1996 10-Q, on April
11, 1996 the Company filed a Form 8-K containing a Form
of Change in Control Employment Contract.
Signature
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ALLEGHENY GENERATING COMPANY
THOMAS J. KLOC
THOMAS J. KLOC
Controller
(Chief Accounting Officer)
August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 111
<SECURITIES> 0
<RECEIVABLES> 3,947
<ALLOWANCES> 0
<INVENTORY> 2,193
<CURRENT-ASSETS> 6,878
<PP&E> 836,977
<DEPRECIATION> 167,605
<TOTAL-ASSETS> 700,681
<CURRENT-LIABILITIES> 9,747
<BONDS> 242,934
0
0
<COMMON> 1
<OTHER-SE> 210,015
<TOTAL-LIABILITY-AND-EQUITY> 700,681
<SALES> 41,932
<TOTAL-REVENUES> 41,932
<CGS> 2,334
<TOTAL-COSTS> 13,322
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,409
<INCOME-PRETAX> 20,204
<INCOME-TAX> 6,706
<INCOME-CONTINUING> 13,498
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,498
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
