UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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 1-9052
------
DPL INC.
(Exact name of registrant as specified in its charter)
OHIO 31-1163136
- - ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Courthouse Plaza Southwest
Dayton, Ohio 45402
----------------------------------------
(Address of principal executive offices)
(937) 224-6000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 (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 of the issuer's classes of common stock,
as of the latest practicable date.
Common Stock, $.01 par value
and Preferred Share Purchase Rights 161,026,378 Shares
- - ----------------------------------- -----------------------------------
(Title of each class) (Outstanding at September 30, 1998)
<PAGE>
DPL INC.
INDEX
Page No.
Part I - Financial Information --------
Item 1. Financial Statements
Consolidated Statement of Results of Operations 1
Consolidated Statement of Cash Flows 2
Consolidated Balance Sheet 3
Notes to Consolidated Financial Statements 5
Operating Statistics 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - Other Information 11
Signatures 12
i
<PAGE>
CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
DPL INC.
Three Months Nine Months
Ended Ended
September 30 September 30
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
--millions-- --millions--
Income
- - ------
Utility service revenues $318.6 $283.4 $ 963.5 $909.3
Other income 19.3 14.5 66.4 68.9
------ ------ -------- ------
Total Income 337.9 297.9 1,029.9 978.2
------ ------ -------- ------
Expenses
- - --------
Fuel and purchased power 71.1 59.5 198.9 165.7
Gas purchased for resale 18.2 21.1 127.5 144.5
Operation and maintenance 71.9 53.6 167.6 164.8
Depreciation and amortization 32.8 31.9 98.1 95.4
Amortization of regulatory assets, net 5.3 4.6 14.2 12.6
General taxes 33.9 33.6 102.2 100.6
Interest expense 24.3 20.5 69.6 64.7
------ ------ -------- ------
Total Expenses 257.5 224.8 778.1 748.3
------ ------ -------- ------
Income Before Income Taxes 80.4 73.1 251.8 229.9
Income taxes 32.9 28.2 98.8 83.7
------ ------ -------- ------
Net Income $ 47.5 $ 44.9 $ 153.0 $146.2
====== ====== ======== ======
Average Number of Common Shares
Outstanding (millions) 153.0 151.6 152.7 151.2
Earnings Per Share of Common Stock $ 0.31 $ 0.30 $ 1.00 $ 0.97
Dividends Paid Per Share of Common Stock $0.235 $0.227 $ 0.705 $0.681
Comprehensive Income $ 32.5 $ 55.2 $ 168.5 $163.6
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-1-
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
DPL INC.
Nine Months Ended
September 30
-----------------
1998 1997
---- ----
--millions--
Operating Activities
- - --------------------
Cash received from utility customers $964.5 $939.0
Other operating cash receipts 58.8 61.2
Cash paid for:
Fuel and purchased power (204.1) (173.2)
Purchased gas (152.2) (175.7)
Operation and maintenance labor (61.9) (61.7)
Nonlabor operating expenditures (114.9) (82.6)
Interest (72.6) (70.4)
Income taxes (80.6) (60.9)
Property, excise and payroll taxes (112.8) (109.2)
------ ------
Net cash provided by operating activities 224.2 266.5
Investing Activities
- - --------------------
Property expenditures (72.5) (77.5)
Other activities (224.4) (95.9)
------ ------
Net cash used for investing activities (296.9) (173.4)
Financing Activities
- - --------------------
Dividends paid on common stock (107.6) (102.8)
Issuance of long-term debt 98.5 -
Issuance (retirement) of short-term debt 50.6 (4.0)
Issuance of common stock 14.9 14.8
Retirement of long-term debt (3.4) (42.4)
------ ------
Net cash provided by (used for) financing activities 53.0 (134.4)
Cash and temporary cash investments--
- - -----------------------------------
Net change (19.7) (41.3)
Balance at beginning of period 26.1 72.8
------ ------
Balance at end of period $ 6.4 $ 31.5
====== ======
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-2-
<PAGE>
CONSOLIDATED BALANCE SHEET
DPL INC.
At At
September 30, December 31,
1998 1997
------------- ------------
--millions--
ASSETS
Property $3,708.1 $3,642.8
Less--
Accumulated depreciation and amortization (1,477.1) (1,386.6)
-------- --------
Net property 2,231.0 2,256.2
-------- --------
Current Assets
- - --------------
Cash and temporary cash investments 6.4 26.1
Accounts receivable, less provision for
uncollectible accounts 196.7 211.4
Inventories, at average cost 94.9 87.5
Deferred property and excise taxes 49.7 91.9
Other 22.1 54.2
-------- --------
Total current assets 369.8 471.1
-------- --------
Other Assets
- - ------------
Financial assets 636.1 384.0
Income taxes recoverable through future revenues 197.3 208.2
Regulatory assets 102.7 116.7
Other 145.4 149.0
-------- --------
Total other assets 1,081.5 857.9
-------- --------
Total Assets $3,682.3 $3,585.2
======== ========
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-3-
<PAGE>
CONSOLIDATED BALANCE SHEET
(continued)
DPL INC.
At At
September 30, December 31,
1998 1997
------------- ------------
--millions--
CAPITALIZATION AND LIABILITIES
Capitalization
- - --------------
Common shareholders' equity--
Common stock $ 1.6 $ 1.6
Other paid-in capital 793.3 777.3
Common stock held by employee plans (95.7) (98.0)
Accumulated other comprehensive income 35.5 19.9
Earnings reinvested in the business 594.3 585.2
------- --------
Total common shareholders' equity 1,329.0 1,286.0
Preferred stock 22.9 22.9
Long-term debt 1,065.8 971.0
-------- --------
Total capitalization 2,417.7 2,279.9
-------- --------
Current Liabilities
- - -------------------
Short-term debt 166.3 115.7
Accounts payable 70.1 129.8
Dividends payable 36.5 -
Accrued taxes 101.6 158.5
Accrued interest 18.6 24.2
Other 36.1 49.7
-------- --------
Total current liabilities 429.2 477.9
-------- --------
Deferred Credits and Other
- - --------------------------
Deferred taxes 460.7 464.9
Unamortized investment tax credit 70.2 72.4
Insurance and claims costs 163.5 151.6
Other 141.0 138.5
-------- --------
Total deferred credits and other 835.4 827.4
-------- --------
Total Capitalization and Liabilities $3,682.3 $3,585.2
======== ========
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-4-
<PAGE>
Notes to Consolidated Financial Statements
1. Reclassifications have been made in certain prior years' amounts
to conform to the current reporting presentation of DPL Inc.
2. DPL Inc., has prepared the consolidated financial statements in
this report without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto in
DPL Inc.'s 1997 Annual Report on Form 10-K.
The information included in this Form 10-Q reflects all
adjustments which are, in the opinion of management, necessary for a
fair statement of the results of operations for the periods presented.
Any adjustments are of a normal recurring nature.
-5-
<PAGE>
OPERATING STATISTICS
The Dayton Power and Light Company
Three Months Nine Months
Ended Ended
September 30 September 30
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Electric
- - --------
Sales (millions of kWh)--
Residential 1,361 1,141 3,689 3,551
Commercial 982 953 2,688 2,604
Industrial 1,202 1,244 3,500 3,526
Other 1,130 968 3,466 2,611
------- ------- ------- -------
Total 4,675 4,306 13,343 12,292
Revenues (thousands of dollars)--
Residential 121,273 102,024 323,317 304,323
Commercial 64,264 59,801 182,444 174,188
Industrial 60,253 59,633 172,171 167,462
Other 50,490 39,134 143,922 102,430
------- ------- ------- -------
Total 296,280 260,592 821,854 748,403
Other Electric Statistics--
Average price per kWh-retail and
wholesale customers (cents) 6.23 5.97 6.05 6.01
Fuel cost per net kWh generated (cents) 1.25 1.27 1.27 1.27
Electric customers at end of period 488,110 481,200 488,110 481,200
Average kWh use per residential customer 3,127 2,654 8,481 8,260
Peak demand-maximum one hour use
use (mw), (net) 3,007 2,848 3,007 2,848
-6-
<PAGE>
OPERATING STATISTICS
(continued)
The Dayton Power and Light Company
Three Months Nine Months
Ended Ended
September 30 September 30
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Gas
- - ---
Sales (millions of MCF)--
Residential 2,056 2,006 16,119 19,035
Commercial 798 835 4,894 6,039
Industrial 159 164 1,329 1,729
Transported gas and other 3,197 3,305 14,601 15,418
------- ------- ------- -------
Total 6,210 6,310 36,943 42,221
Revenues (thousands of dollars)--
Residential 15,132 15,074 92,610 106,540
Commercial 4,498 4,601 25,516 30,824
Industrial 797 725 6,525 8,092
Transported gas and other 2,498 2,940 18,763 16,384
------- ------- ------- -------
Total 22,925 23,340 143,414 161,840
Other Gas Statistics--
Average price MCF-retail customers
(dollars) 6.80 6.74 5.55 5.39
Gas customers at end of period 302,628 297,458 302,628 297,458
Degree Days (based on calendar month)--
Heating 29 111 2,905 3,729
Cooling 724 486 1,070 669
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
DPL Inc.'s earnings for the third quarter of 1998 were $0.31 per
share, up from $0.30 per share in the third quarter a year ago.
Earnings were $1.00 per share year-to-date, an increase of 3% over
earnings of $0.97 per share for the same period in 1997. Retail sales
of electricity increased 6% for the quarter due to the healthy West
Central Ohio economy as well as more normal summer temperatures.
The financial condition and results of operations for the third
quarter and nine months ended September 30, 1998 and 1997 are
discussed below.
Financial Condition
- - -------------------
Construction plans are subject to continuing review and are
expected to be revised in light of changes in financial and economic
conditions, load forecasts, legislative and regulatory developments
and changing environmental standards, among other factors. DP&L's
ability to complete its capital projects and the reliability of future
service will be affected by its financial condition, the availability
of external funds at reasonable cost and adequate and timely rate
increases.
As of September 30, 1998, DPL Inc.'s cash and temporary cash
investment balance was $6.4 million. In addition, $636.1 million was
invested in debt and equity financial assets.
DPL Inc. and its subsidiaries have $200 million available through
a Revolving Credit Agreement ("Credit Agreement"). As of September
30, 1998, DPL Inc. had no outstanding borrowings under this Credit
Agreement. DP&L has authority from the Public Utilities Commission of
Ohio ("PUCO") to issue short-term debt up to $200 million with a
maximum debt limit of $300 million including loans from DPL Inc. under
the terms of the Credit Agreement. DP&L also has $97 million
available in short-term informal lines of credit. As of September 30,
1998, DP&L had $79.0 million of these informal lines outstanding and
$87.3 million in commercial paper outstanding.
DP&L anticipates that it has sufficient capacity to issue First
Mortgage Bonds to satisfy its requirements in connection with the
financing of its construction and refinancing programs during the five
year period 1998-2002.
-8-
<PAGE>
Results of Operations
- - ---------------------
Utility service revenues increased by $35.2 million and
$54.2 million, respectively, for the third quarter and nine months
ended September 30, 1998. Electric revenues were higher due to
increased sales to residential customers and other utilities. Gas
revenues were lower year-to-date due to mild weather.
Other income was $4.8 million higher compared to the third
quarter 1997 and $2.5 million lower than year-to-date 1997.
Increased investment income was the primary cause of the quarterly
variation. A gain on an investment sale in the first quarter 1997
contributed to the year-to-date variation.
Fuel and purchased power increased $11.6 million and
$33.2 million, respectively, from the third quarter and year-to-date
last year as a result of increased retail and wholesale sales.
Gas purchased for resale in the third quarter 1998 decreased
$2.9 million compared to the same quarter 1997 and $17.0 million
compared to year-to-date 1997. Lower sales due to milder weather
caused the variations.
Operation and maintenance expense increased from last year by
$18.3 million for the third quarter and $2.8 million year-to-date.
For the quarter, the increase was due to higher benefit costs,
software development costs, and production expenditures, which were
partially offset by lower insurance and claims costs. The year-to-
date variation was due to higher benefit costs and software
development costs. Lower insurance and claims costs as well as
company-wide cost containment efforts offset the year-to-date
variation.
Income taxes increased $4.7 million and $15.1 million,
respectively, from the third quarter and year-to-date 1997 primarily
due to higher taxable income.
Issues and Financial Risks
- - --------------------------
This report contains forward-looking statements under the Private
Securities Litigation Reform Act of 1995 that involved risks and
uncertainties. Although DP&L believes that the forward-looking
statements are based upon reasonable assumptions, there can be no
assurance that the forward-looking statements will prove to be
accurate. DP&L undertakes no obligation to re-publish forward-looking
statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.
The information systems of DP&L, like those of most companies,
will be affected to some extent by the year 2000 ("Y2K"). DP&L has
implemented a plan to remediate Y2K problems in critical areas by the
end of the second quarter, 1999. This includes all information
technology systems, as well as embedded technology. DP&L has
inventoried its applications and equipment, is determining which of
-9-
<PAGE>
those are non-compliant, and is simultaneously remediating those
situations. The four phases of DP&L's plan - inventory, assess for
compliance, remediate and test - are in various stages of completion.
DP&L does not have to complete one phase to begin the next. Remediation
is being accomplished by a combination of methods. In some cases
equipment or software is being modified while in others it is being
replaced.
DP&L estimates that the cost of remediation for Y2K issues
including hardware and software modifications and consultant
expenditures is $15,000,000. Some of DP&L's information technology
systems were already scheduled for replacement and are not
included in this amount, since the scheduled replacement was not
accelerated to allow compliance with Y2K needs.
DP&L is working closely with other members of the utility
industry to assure the smooth transition. Telecommunications are
needed for monitoring and control of power systems. Also, the
extent of interdependence among electrical systems creates
uncertainty. These issues affect each utility in the industry and
DP&L is working with other utilities, as well as industry and
regulatory groups to ensure that problems are understood and solutions
are shared. Among other groups, DP&L is involved with the Y2K efforts
of the Electric Power Research Institute, the North American
Reliability Council, and the Edison Electric Institute.
-10-
<PAGE>
Part II. Other Information
Item 5. Other Information.
-----------------
Rate Regulation and Government Legislation
- - ------------------------------------------
In January 1997, a twelve member Joint Committee of the Ohio
Senate and House of Representatives was created to explore and
possibly draft retail wheeling legislation. The Committee has
conducted hearings to gather information from energy companies,
regulators, customers and industry experts. The Committee co-chairs
issued a draft report on January 6, 1998 recommending opening the
electric generation market, in the future, to competition for all Ohio
consumers. On March 26, 1998, the Committee co-chairs introduced an
electric deregulation Bill that reflected the recommendations
contained in their report. On September 16, 1998, DP&L and the three
other major investor owned utilities in Ohio presented a comprehensive
electric utility restructuring Bill to a working group of the
Committee. DP&L is participating in the Committee's working group to
discuss the restructuring process. Due to the prospects for
legislation that would restructure the electric utility industry, the
Company will continue to evaluate its portfolio of assets to prepare
for opportunities in the deregulated environment.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(b) Reports on Form 8-K
No reports on Form 8-K were filed by DPL Inc. during the quarter
ended September 30, 1998.
-11-
<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.
DPL INC.
----------------------------------
(Registrant)
Date: November 16, 1998 /s/James P. Torgerson
----------------- ----------------------------------
James P. Torgerson
Vice President, CFO and Treasurer
Date: November 16, 1998 /s/Stephen F. Koziar Jr.
----------------- ----------------------------------
Stephen F. Koziar, Jr.
Group Vice President and Secretary
-12-
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