SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 31, 1994
PSI ENERGY, INC.
(Exact name of registrant as specified in its charter)
Indiana 1-3543 35-0594457
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1000 East Main Street, Plainfield, Indiana 46168
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (317) 839-9611
<PAGE>
PSI ENERGY, INC.
FORM 8-K
TABLE OF CONTENTS
Item Page
Number Number
1. Changes in Control of Registrant . . . . . . . . . 3
2. Acquisition or Disposition of Assets . . . . . . . 3
3. Bankruptcy or Receivership . . . . . . . . . . . . 3
4. Changes in Registrant's Certifying Accountant . . 3
5. Other Events . . . . . . . . . . . . . . . . . . . 3
6. Resignations of Registrant's Directors . . . . . . 3
7. Financial Statements and Exhibits . . . . . . . . 3
Index to Financial Statements and Exhibits . . . . 3
8. Change in Fiscal Year. . . . . . . . . . . . . . . 3
Signatures . . . . . . . . . . . . . . . . . . . . 4
<PAGE>
1. Changes in Control of Registrant
None
2. Acquisition or Disposition of Assets
None
3. Bankruptcy or Receivership
None
4. Changes in Registrant's Certifying Accountant
None
5. Other Events
None
6. Resignations of Registrant's Directors
None
7. Financial Statements and Exhibits
Index to Financial Statements and Exhibits
Exhibits
99-a The Cincinnati Gas & Electric Company's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994.
8. Change in Fiscal Year
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 hereunto duly authorized.
PSI ENERGY, INC.
Registrant
Date: August 31, 1994
By: Charles J. Winger
Comptroller and Principal
Accounting Officer
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-1232
THE CINCINNATI GAS & ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
OHIO 31-0240030
(State of incorporation) (I.R.S. Employer Identification No.)
139 EAST FOURTH STREET, CINCINNATI, OHIO 45202
(Address of principal executive offices) (Zip Code)
513-381-2000
(Registrant's telephone number)
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
----- -----
Common Shares, Par Value $8.50 Per Share
89,205,205 Shares Outstanding as of July 31, 1994
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
and Subsidiary Companies
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
1994 1993 1994 1993 1994 1993
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Electric........................................... $329,675 $297,875 $663,065 $598,708 $1,346,801 $1,193,418
Gas................................................ 61,565 69,595 290,716 262,238 497,774 440,073
-------- -------- -------- -------- ---------- ----------
Total operating revenues......................... 391,240 367,470 953,781 860,946 1,844,575 1,633,491
-------- -------- -------- -------- ---------- ----------
OPERATING EXPENSES
Gas purchased...................................... 31,021 38,297 173,046 160,760 293,123 266,295
Fuel used in electric production................... 79,548 72,319 161,429 151,926 342,781 309,496
Other operation.................................... 73,035 65,367 148,984 133,327 295,523 263,822
Maintenance........................................ 26,859 30,535 52,802 51,604 110,055 102,164
Provision for depreciation......................... 39,050 37,307 77,820 74,473 155,407 147,391
Post-in-service deferred operating expenses--net... 823 (2,856) 1,645 (5,611) 785 (9,881)
Phase-in deferred depreciation..................... (847) (2,131) (2,161) (5,306) (5,379) (11,697)
Taxes other than income taxes...................... 49,204 45,322 99,137 92,564 189,940 178,393
Income taxes....................................... 10,675 7,261 52,752 38,856 82,905 63,928
Deferred income taxes--net......................... 11,550 12,397 11,917 15,018 36,859 33,089
-------- -------- -------- -------- ---------- ----------
Total operating expenses......................... 320,918 303,818 777,371 707,611 1,501,999 1,343,000
-------- -------- -------- -------- ---------- ----------
OPERATING INCOME..................................... 70,322 63,652 176,410 153,335 342,576 290,491
-------- -------- -------- -------- ---------- ----------
OTHER INCOME AND DEDUCTIONS
Allowance for other funds used during construction. 433 1,375 892 2,349 1,696 4,374
Post-in-service carrying costs..................... -- 4,028 -- 8,028 4,072 12,885
Phase-in deferred return........................... 3,838 8,833 11,458 20,498 26,294 40,490
Write-off of a portion of Zimmer Station........... -- -- -- -- (234,844) --
Income taxes--credit
Related to the write-off of a portion of Zimmer
Station.......................................... -- -- -- -- 12,085 --
Other............................................. 1,677 1,653 3,533 3,000 9,937 10,845
Other--net......................................... 119 (1,419) 134 (1,943) (7,474) (1,600)
-------- -------- -------- -------- ---------- ----------
Total other income and deductions................ 6,067 14,470 16,017 31,932 (188,234) 66,994
-------- -------- -------- -------- ---------- ----------
INCOME BEFORE INTEREST CHARGES....................... 76,389 78,122 192,427 185,267 154,342 357,485
-------- -------- -------- -------- ---------- ----------
INTEREST CHARGES
Interest on long-term debt......................... 35,485 38,201 73,991 76,463 151,219 156,696
Other interest..................................... 821 409 1,702 1,163 2,989 2,327
Amortization of debt discount, premium and other... 1,270 809 2,387 1,619 4,119 3,478
Allowance for borrowed funds used during
construction--credit.............................. (653) (1,225) (1,310) (2,307) (2,589) (4,471)
-------- -------- -------- -------- ---------- ----------
Net interest charges............................. 36,923 38,194 76,770 76,938 155,738 158,030
-------- -------- -------- -------- ---------- ----------
NET INCOME (LOSS).................................... 39,466 39,928 115,657 108,329 (1,396) 199,455
Preferred dividends................................ 5,362 6,290 11,652 12,580 24,233 26,243
-------- -------- -------- -------- ---------- ----------
EARNINGS (LOSS) ON COMMON SHARES..................... $ 34,104 $ 33,638 $104,005 $ 95,749 $ (25,629) $ 173,212
======== ======== ======== ======== ========== ==========
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (000).................................. 88,895 87,143 88,630 86,932 88,184 86,478
EARNINGS (LOSS) PER COMMON SHARE..................... $ .38 $ .38 $ 1.17 $ 1.10 $ (.29) $ 2.00
DIVIDENDS DECLARED PER COMMON SHARE.................. $ .43 $.41-1/2 $ .86 $ .83 $ 1.70-1/2 $ 1.65-2/3
</TABLE>
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
- - ---------------------
Electric operating revenues increased $32 million,
$64 million and $153 million for the three, six and twelve month
periods ended June 30, 1994, respectively, over the comparable
periods of 1993, due to rate increases which became effective in
August 1993 and May 1994 and to increases in electric sales
volumes of 3.6%, 2.4% and 4.7%.
Gas operating revenues decreased $8 million for the three
month period ended June 30, 1994, from the comparable period of
1993, due to a 7.2% decrease in total volumes sold and
transported and the operation of adjustment clauses reflecting
decreases in the average cost of gas purchased. Gas operating
revenues increased $28 million and $58 million for the six and
twelve month periods ended June 30, 1994, respectively, over the
comparable periods of 1993, due to the operation of adjustment
clauses reflecting increases in the average cost of gas
purchased, to rate increases which became effective in April and
August 1993 and to increases in total volumes sold and
transported of 3.7% and 4.9%.
Gas purchased expense decreased $7 million for the three
month period ended June 30, 1994, from the comparable period of
1993, due to a 14.7% decrease in the average cost per Mcf
purchased and to a 5.1% decrease in volumes purchased. Gas
purchased expense increased $12 million and $27 million for the
six and twelve month periods ended June 30, 1994, respectively,
over the comparable periods of 1993, due to increases in the
average cost per Mcf purchased of 3.7% and 6.6% and to increases
in volumes purchased of 3.8% and 3.2%.
Fuel used in electric production increased $7 million,
$10 million and $33 million for the three, six and twelve month
periods ended June 30, 1994, respectively, over the comparable
periods of 1993, primarily due to increases in the amount of
electricity generated of 10.7%, 8.5% and 10.1%.
Other operation expense increased $8 million, $16 million
and $32 million for the three, six and twelve month periods ended
June 30, 1994, respectively, over the comparable periods of 1993,
due to a number of factors, including wage increases, the
adoption of an accounting standard involving postretirement
benefits and increased demand side management programs. Also
contributing to the increases in other operation expense for the
six and twelve month periods were increases in gas production
expenses.
<PAGE>
Maintenance expense decreased $4 million for the three month
period ended June 30, 1994, from the comparable period of 1993,
primarily due to decreased maintenance on electric generating
units. Maintenance expense increased $8 million for the twelve
month period ended June 30, 1994, over the comparable period of
1993, primarily due to increased maintenance on electric
distribution facilities and electric generating units.
Depreciation expense increased $8 million for the twelve
month period ended June 30, 1994, primarily due to an increase in
depreciable plant in service.
Post-in-service deferred operating expenses (net) increased
$4 million, $7 million and $11 million for the three, six and
twelve month periods ended June 30, 1994, respectively, because
the amortization of deferred depreciation, operation and
maintenance expenses (exclusive of fuel costs), and property
taxes related to Woodsdale Station and Zimmer Station exceeded
deferrals of these expenses made in accordance with orders of The
Public Utilities Commission of Ohio (PUCO). CG&E had been
deferring these costs until they were reflected in rates and
ceased deferrals in August 1993 on Woodsdale and May 1992 on
Zimmer. CG&E is amortizing the deferred expenses over 10-year
periods.
Phase-in deferred depreciation was $1 million, $2 million
and $5 million for the three, six and twelve month periods ended
June 30, 1994, respectively, as a result of a PUCO ordered
phase-in plan, in which rates charged to customers in the early
years of the plan are less than that required to fully recover
the depreciation expenses related to Zimmer Station (see "Future
Outlook" herein).
Taxes other than income taxes increased $4 million,
$7 million and $12 million for the three, six and twelve month
periods ended June 30, 1994, respectively, over the comparable
periods of 1993, primarily due to higher public utilities gross
receipts taxes resulting from increased revenues and to increased
property taxes resulting from a greater investment in taxable
property (including Woodsdale Station) and higher property tax
rates.
Allowance for funds used during construction (AFC) decreased
$5 million for the twelve month period ended June 30, 1994, from
the comparable period of 1993, primarily due to a decrease in
construction work in progress resulting from Woodsdale Station
being placed in commercial operation.
Post-in-service carrying costs decreased $4 million,
$8 million and $9 million for the three, six and twelve month
periods ended June 30, 1994, respectively, from the comparable
periods of 1993, as a result of discontinuing the accrual of
carrying costs on the first five units of Woodsdale Station
between the time it began commercial operation in mid-1992 until
<PAGE>
the August 1993 effective date of new rates which reflect
Woodsdale Station.
Phase-in deferred return was $4 million, $11 million and
$26 million for the three, six and twelve month periods ended
June 30, 1994, respectively, as a result of the PUCO ordered
phase-in plan, in which rates charged to customers in the early
years of the plan will be less than that required to provide the
authorized return on investment (see "Future Outlook" herein).
In November 1993, CG&E wrote off costs associated with
Zimmer Station of approximately $223 million, net of taxes. The
write-off represents amounts disallowed from rate base by the
PUCO in its May 1992 rate order. CG&E had appealed the rate
order to the Supreme Court of Ohio; however, in November 1993,
the Supreme Court upheld the PUCO on the issue of the
disallowance, ruling that the PUCO properly excluded costs
related to nuclear fuel, nuclear wind-down activities and AFC
from CG&E's rate base.
Other (net) decreased $6 million for the twelve month period
ended June 30, 1994 due to a number of factors, including costs
associated with IPALCO Enterprises, Inc.'s intervention in the
proposed merger between CG&E and PSI Resources.
Interest on long-term debt decreased $5 million for the
twelve month period ended June 30, 1994, primarily due to
refinancing of first mortgage bonds or pollution control revenue
bonds at lower rates in November 1993, February 1994 and March
1994.
FUTURE OUTLOOK
- - --------------
Merger Agreement
- - ----------------
CG&E has entered into a merger agreement with PSI Resources,
Inc. (PSI) and PSI Energy, Inc., PSI's principal subsidiary, an
Indiana electric utility (PSI Energy) with a service area
contiguous to that of CG&E. Under the merger agreement, CG&E and
PSI will become subsidiaries of a newly formed corporation named
CINergy Corp., which will be a registered holding company under
the Public Utility Holding Company Act of 1935 (PUHCA). In order
to effect the merger, each share of CG&E common stock will be
converted into one share of CINergy common stock, and each share
of PSI common stock will be converted into that number of shares
of CINergy common stock obtained by dividing $30.69 by the
average closing sale price of CG&E common stock for the 15
consecutive trading days preceding the fifth trading day prior to
consummation of the merger, provided that the number of shares of
CINergy stock to be exchanged for each share of PSI will be no
greater than 1.023 and no less than .909. At June 30, 1994, CG&E
and PSI had 89.1 million and 57.4 million common shares
<PAGE>
outstanding, respectively. The merger will be accounted for as a
"pooling-of-interests", and will be tax-free for shareholders.
The merger is subject to approval by the Securities and
Exchange Commission (SEC) and the Federal Energy Regulatory
Commission (FERC). Shareholders of each company have already
approved the CINergy merger at special meetings held in
November 1993. CG&E believes it is possible that all approvals
needed for the merger may be received by the end of the third
quarter of 1994.
FERC issued conditional approval of the CINergy merger in
August 1993, but several intervenors, including the PUCO and the
Kentucky Public Service Commission (KPSC), filed for rehearing of
that order. On January 12, 1994, FERC withdrew its conditional
approval of the merger and ordered the setting of FERC-sponsored
settlement procedures to be held.
On March 4, 1994, CG&E reached a settlement agreement with
the PUCO and the Ohio Office of Consumers' Counsel (OCC) on
merger issues identified by FERC. On March 2, PSI Energy and
Indiana's consumer representatives had reached a similar
agreement. Both settlement agreements have been filed with FERC.
These documents address, among other things, the coordination of
state and federal regulation and the commitment that neither CG&E
nor PSI electric base rates, nor CG&E's gas base rates, will rise
because of the merger, except to reflect any effects that may
result from the divestiture of CG&E's gas operations if ordered
by the SEC in accordance with the requirements of PUHCA discussed
below.
CG&E also filed with FERC a unilateral offer of settlement
addressing all issues raised in the KPSC's application for
rehearing with FERC. The settlement offer commits CG&E's
Kentucky subsidiary, The Union Light, Heat and Power Company
(Union Light), among other things, to "hold harmless" its retail
gas customers from the effects of the merger on Union Light's
retail gas base rates that become effective on or after the date
of the merger and prior to January 1, 2003. However, Union
Light's offer will not apply to any effects that may result from
the divestiture of Union Light's gas operations, discussed below.
Although it is the belief of CG&E and PSI that no state
utility commissions have jurisdiction over approval of the
proposed merger, an application was filed with the KPSC to comply
with the Staff of the KPSC's position that the KPSC's
authorization is required for the indirect acquisition of control
of Union Light by CINergy. A hearing on the KPSC application was
held on May 10, 1994. In testimony filed in the hearing, CG&E
and Union Light made, in addition to other commitments, an offer
to the KPSC that Union Light would also "hold harmless" retail
electric customers through January 1, 2003 and would agree to an
electric rate moratorium commencing after Union Light's next
retail rate case and extending to January 1, 2000. On May 13,
1994, the KPSC issued an order approving the merger, subject to
<PAGE>
the condition that CG&E and Union Light must agree that, for 12
months from consummation of the merger, no filings will be made
to adjust CG&E's base purchase power rate and Union Lights's base
electric rates. On May 19, 1994, CINergy, CG&E and Union Light
submitted letters to the KPSC accepting the commitments and
condition set forth in its May 13, 1994 order approving the
merger.
Also included in the filings with FERC were settlement
agreements with the city of Hamilton, Ohio, and the Wabash Valley
Power Association in Indiana. These agreements resolve issues
related to the transmission of power in Ohio and Indiana.
On April 7, 1994, CG&E and the City of Cincinnati reached
settlement in support of the merger and filed a Joint Stipulation
and Agreement with FERC. CG&E has guaranteed, among other
things, that its electric retail customer rates will not rise
because of the merger and the City has agreed to support the
merger and CG&E's efforts to retain its gas operations before the
SEC.
The 30-day period for commenting on settlements and
agreements filed with FERC ended on April 21, 1994. During that
period, the FERC trial staff filed comments with the commission
recommending that FERC approve the settlements. However, the
merger is still being opposed by various other parties. If the
settlement agreements are not acceptable, FERC could set issues
for hearing. If a hearing is held by FERC, the consummation of
the merger would likely be extended beyond the third quarter of
1994.
CG&E and PSI also submitted to FERC the operating agreement
among CINergy Services, Inc., a subsidiary of CINergy, and CG&E
and PSI Energy that provides for the coordinated planning and
operation of the electric generation and transmission and other
facilities of CG&E and PSI as an integrated utility system. It
also establishes a framework for the equitable sharing of the
benefits and costs of such coordinated operations between CG&E
and PSI. The parties to the Ohio and Indiana FERC settlements
have agreed to support or not oppose the operating agreement, and
the settlements are conditioned upon FERC approving the filed
operating agreement without material changes.
CG&E's filing with FERC also references a separate agreement
among CG&E, the Staff of the PUCO, the OCC, and other parties
settling issues raised by a November 1993 ruling of the Supreme
Court of Ohio on the phased-in electric rate increase ordered by
the PUCO in May 1992. The agreement includes a moratorium on
increases in base electric rates prior to January 1, 1999 (except
under certain circumstances), authorization for CG&E to retain
all non-fuel merger savings until 1999, and a commitment by the
PUCO that it will support CG&E's efforts to retain CG&E's gas
operations in its PUHCA filing with the SEC (see below). The
PUCO approved this separate agreement on April 14, 1994.
Reference is made to "Rate Matters" for additional information.
<PAGE>
On May 23, 1994, CINergy filed an application seeking
approval by the SEC under PUHCA of the acquisition by CINergy of
the common stock of CG&E and PSI Energy. PUHCA imposes
restrictions on the operations of registered holding company
systems. Among these are requirements that securities issuances,
sales and acquisitions of utility assets or of securities of
utility companies and acquisitions of interests in any other
business be approved by the SEC. PUHCA also limits the ability
of registered holding companies to engage in non-utility ventures
and regulates the rendering of services by holding company
affiliates to the system's utilities. PUHCA has been interpreted
to preclude the ownership of both electric and gas utility
systems. As a result, the SEC may require divestiture of the
Company's gas properties within a reasonable time after the
merger. CG&E believes good arguments exist to allow retention of
its gas assets and CINergy has requested that it be allowed to do
so.
Intervention papers and hearing requests were filed by a
number of parties during the period allowed by the SEC, which
ended on July 1, 1994. Three of the filings raise a number of
objections to the merger and request that the merger be
disapproved or that approval be subject to a number of
conditions, including, among other things, divestiture of the gas
assets. CG&E has responded to arguments raised in the
intervention papers and believes that good arguments exist in
support of CINergy's request for authorization to retain the gas
assets; however, the outcome of the proceedings cannot be
predicted.
Originally, the merger agreement provided that CG&E and PSI
would be merged into CINergy as an Ohio corporation. Under this
structure CG&E and PSI would have become operating divisions of
CINergy, ceasing to exist as separate corporations, and CINergy
would not have been subject to the restrictions imposed by PUHCA.
However, The Indiana Utility Regulatory Commission (IURC)
dismissed PSI's application for approval of the transfer of its
license or property to a non-Indiana corporation. The IURC s
decision has been appealed and the original merger structure
could be reinstated if the appeal is successful.
Unless otherwise noted, the following discussion pertains
solely to CG&E and its subsidiary companies, and any projections
or estimates contained therein do not reflect the pending merger.
Liquidity and Capital Resources
- - -------------------------------
The construction expenditures for CG&E and its subsidiaries
for the first six months of 1994 were approximately $80 million
(including $2 million of AFC) and are expected to be $192 million
for the year 1994. Over the next five years, 1994-1998,
construction expenditures are expected to be $1,343 million
(including AFC of $54 million). These estimates are under
<PAGE>
continuing review and subject to adjustment. During the five
year period, a total of $142 million will be required for the
redemption of long-term debt and cumulative preferred stock at
maturity or in compliance with mandatory redemption requirements.
CG&E contemplates future debt and equity financings in the
capital markets and the issuance of additional shares of common
stock through its employee stock purchase plans and Dividend
Reinvestment and Stock Purchase Plan. Short-term indebtedness
will be used to supplement internal sources of funds for the
interim financing of the construction program. The Company may
continue to sell additional securities, from time to time, beyond
what is needed for capital requirements to allow the early
refinancing of existing securities.
Under the terms of CG&E's first mortgage indenture, at
June 30, 1994, CG&E would have been able to issue approximately
$880 million of additional first mortgage bonds.
As a result of the write-off of a portion of Zimmer Station
in November 1993, CG&E will have inadequate coverage to meet the
requirements of its articles of incorporation for issuing
additional shares of preferred stock until late December 1994.
CG&E has a $200 million bank revolving credit agreement that
will expire in September 1996. The agreement provides a back-up
source of funds for CG&E's commercial paper program. CG&E has
not made any borrowings under this agreement.
CG&E and its subsidiaries had lines of credit at June 30,
1994, of $123 million, of which $118 million remained unused.
CG&E and its subsidiaries are currently authorized to have a
maximum of $235 million of short-term notes outstanding.
Rate Matters
- - ------------
Over the past two years, the Company has received a number
of electric and gas rate increases that will positively impact
future earnings. The primary reasons for the electric rate
increases were recovery of CG&E's investment in Zimmer Station,
Woodsdale Station and other facilities used to serve customers.
The gas rate increases reflect investments in new and replacement
gas mains and facilities. As part of an August 1993 stipulation,
CG&E has agreed not to increase electric or gas base rates prior
to June 1, 1995, excluding rate filings made under certain
circumstances, such as to address financial emergencies or to
reflect savings associated with the merger with PSI.
<PAGE>
In August 1993, the PUCO approved a stipulation authorizing
CG&E to increase annual electric revenues by $41.1 million and
increase annual gas revenues by $19.1 million. In May 1992, the
PUCO authorized CG&E to increase electric revenues by
$116.4 million to be phased in over a three-year period through
annual increases beginning each May of $37.8 million in 1992,
$38.8 million in 1993 and $39.8 million in 1994.
In response to an appeal by CG&E of the PUCO's May 1992 rate
order, the Supreme Court of Ohio ruled, in November 1993, that
the PUCO did not have authority to order the phased-in rate
increase, and remanded the case to the PUCO to set rates that
provide the gross annual revenues determined in accordance with
Ohio statutes. The Court also said the PUCO must provide a
mechanism which allows CG&E to recover costs being deferred under
the phase-in plan through the date of the order on remand. At
June 30, 1994, CG&E had deferred $81 million of costs, net of
taxes, related to the phase-in plan.
In April 1994, the PUCO approved a settlement agreement
among CG&E, the PUCO Staff, the OCC and other intervenors
addressing the November 1993 ruling by the Supreme Court of Ohio.
As part of the settlement, CG&E has agreed not to seek early
implementation of the third phase of the May 1992 rate increase,
which means the $39.8 million increase became effective in
May 1994 as originally scheduled. CG&E also agreed that it would
not seek accelerated recovery of deferrals related to the phase-
in plan. These deferrals will be recovered over the remaining
seven year period contemplated in the May 1992 PUCO order. In
addition, if the merger with PSI is consummated, CG&E has agreed
not to increase base electric rates prior to January 1, 1999,
except for increases in taxes, changes in federal or state
environmental laws, PUCO actions affecting electric utilities in
general and financial emergencies.
The settlement agreement also permits CG&E to retain all
non-fuel savings from the merger until 1999 and calls for merger-
related transaction costs to be amortized by January 1, 1999.
Other provisions of the agreement are: (i) if the merger is
not completed by April 30, 1995, CG&E can raise electric rates in
May 1995 by $21 million to provide accelerated recovery of phase-
in deferrals; (ii) the PUCO and OCC will have access to
information about CINergy and affiliated companies; (iii) the
PUCO will support, before the SEC, CG&E's efforts to retain its
gas operations and the other parties will not oppose efforts to
retain the gas properties; and (iv) contracts of CG&E with
affiliated companies under the merger that are to be filed with
the SEC must first be filed with the PUCO for its review and
copies provided to the OCC.
<PAGE>
Voluntary Workforce Reduction
- - -----------------------------
In June 1994, CG&E and its subsidiaries initiated a
voluntary early retirement program for those management,
supervisory, administrative and professional employees who are
vested in its pension plan and are age 54 or older on or before
December 31, 1994. There are approximately 160 employees who are
eligible to participate in the program. In accordance with
Statement of Financial Accounting Standards No. 88 "Employers'
Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," the one-time cost of
termination benefits associated with the program will be
recognized in the third quarter of 1994. The amount of such cost
will depend on the number of employees who accept early
retirement under the program.
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended Twelve Months Ended
June 30 June 30
1994 1993 1994 1993
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Cash Flows From Operations:
Net Income (Loss)..................................... $ 115,657 $ 108,329 $ (1,396) $ 199,455
Adjustments to reconcile net income to net cash:
Deferred gas and electric fuel costs--net......... (3,831) 12,234 (12,152) (8,561)
Depreciation...................................... 77,820 74,473 155,407 147,391
Post-in-service deferred operating expenses--net.. 1,645 (5,611) 785 (9,881)
Phase-in deferred depreciation.................... (2,161) (5,306) (5,379) (11,697)
Allowance for other funds used during
construction................................... (892) (2,349) (1,696) (4,374)
Post-in-service carrying costs.................... -- (8,028) (4,072) (12,885)
Phase-in deferred return.......................... (11,458) (20,498) (26,294) (40,490)
Deferred income taxes and investment tax
credits--net................................... 12,570 14,966 33,324 36,744
Write-off of a portion of Zimmer Station.......... -- -- 234,844 --
Deferred income taxes and investment tax credits
related to write-off of a portion of
Zimmer Station................................. -- -- (12,085) --
Other--net........................................ 20,485 (1,367) 41,270 6,765
Change in current assets and liabilities:
Receivables and unbilled revenues.............. 54,430 18,512 (2,122) (30,345)
Materials and supplies......................... 30,208 12,157 21,618 (1,928)
Other current assets........................... (11,738) (14,844) (1,437) (11,400)
Accounts payable and other current liabilities. (40,015) (46,751) 27,300 24,505
---------- ---------- ---------- ----------
Total adjustments........................... 127,063 27,588 449,311 83,844
---------- ---------- ---------- ----------
Net cash provided by operations............. 242,720 135,917 447,915 283,299
---------- ---------- ---------- ----------
Cash Flows From Investing:
Construction expenditures (less allowance for other
funds used during construction)..................... (79,011) (80,312) (197,422) (197,952)
---------- ---------- ---------- ----------
Cash Flows From Financing:
Common stock proceeds................................. 23,505 22,289 45,201 43,577
Preferred stock proceeds.............................. -- -- -- 79,300
Long-term debt proceeds............................... 311,957 -- 608,957 359,614
Retirement of long-term debt and cumulative
preferred stock..................................... (353,647) (13) (648,089) (377,979)
Net short-term borrowings............................. (25,500) 5,080 (46,080) (25,420)
Dividends paid on common shares....................... (75,999) (71,976) (149,964) (142,893)
Dividends paid on preferred shares.................... (12,580) (12,580) (25,160) (26,652)
---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities..................... (132,264) (57,200) (215,135) (90,453)
---------- ---------- ---------- ----------
Net increase (decrease) in cash and
temporary cash investments............... 31,445 (1,595) 35,358 (5,106)
Cash and temporary cash investments--beginning
of period............................................. 4,570 2,252 657 5,763
---------- ---------- ---------- ----------
Cash and temporary cash investments--end of period....... $ 36,015 $ 657 $ 36,015 $ 657
========== ========== ========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest (net of allowance for borrowed funds
used during construction)........................... $ 71,805 $ 75,087 $ 148,584 $ 151,734
Income taxes.......................................... $ 46,397 $ 28,457 $ 71,726 $ 42,567
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
and Subsidiary Companies
CONSOLIDATED BALANCE SHEET
ASSETS
June 30 December 31
1994 1993
(Thousands of Dollars)
<S> <C> <C>
UTILITY PLANT
In service............................................ $5,256,910 $5,188,602
Less--Accumulated provisions for depreciation......... 1,538,172 1,472,313
---------- ----------
3,718,738 3,716,289
Construction work in progress......................... 65,675 69,351
---------- ----------
3,784,413 3,785,640
---------- ----------
CURRENT ASSETS
Cash.................................................. 876 4,570
Short-term investments................................ 35,139 --
Accounts receivable--net.............................. 192,727 206,210
Accrued unbilled revenues............................. 65,008 105,955
Materials and supplies................................ 122,309 152,517
Prepayments........................................... 35,380 29,053
Other................................................. 112,954 107,543
---------- ----------
564,393 605,848
---------- ----------
OTHER ASSETS
Post-in-service carrying costs and deferred operating
expenses............................................ 151,377 154,636
Phase-in deferred return and depreciation............. 97,050 83,431
Amounts due from customers-income taxes............... 381,377 387,748
Other................................................. 145,084 126,220
---------- ----------
774,888 752,035
---------- ----------
$5,123,694 $5,143,523
========== ==========
LIABILITIES
CAPITALIZATION
Common shares......................................... $ 757,084 $ 748,528
Additional paid-in capital............................ 329,712 314,218
Retained earnings..................................... 483,564 456,511
Preferred shares--
Not subject to mandatory redemption................. 80,000 120,000
Subject to mandatory redemption..................... 210,000 210,000
Long-term debt........................................ 1,837,520 1,829,061
---------- ----------
3,697,880 3,678,318
---------- ----------
CURRENT LIABILITIES
Notes payable......................................... 5,500 31,013
Accounts payable...................................... 98,695 122,620
Dividends payable on preferred shares ................ 5,362 6,290
Accrued taxes......................................... 199,110 222,219
Accrued interest on debt.............................. 31,701 29,123
Other................................................. 33,937 29,496
---------- ----------
374,305 440,761
---------- ----------
DEFERRED CREDITS AND OTHER
Deferred income taxes................................. 743,097 733,224
Investment tax credits................................ 138,534 141,520
Accrued pension cost.................................. 45,923 41,826
Other................................................. 123,955 107,874
---------- ----------
1,051,509 1,024,444
---------- ----------
$5,123,694 $5,143,523
========== ==========
</TABLE>
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
and Subsidiary Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying information reflects, in the opinion of the
management of the Company, all adjustments necessary to present
fairly the results for the interim periods. All such adjustments
are of a normal recurring nature. Reference should be made to
the Company's Form 10-K for the year 1993 for additional footnote
disclosure, including a summary of significant accounting
policies.
Reference is made to "Management's Discussion and Analysis
of Financial Condition and Results of Operations" herein for
information regarding the Company's merger with PSI Resources,
Inc. (PSI) and a voluntary early retirement program.
In April 1994, The Public Utilities Commission of Ohio
(PUCO) approved a settlement agreement among CG&E, the PUCO
Staff, the Ohio Office of Consumers' Counsel (OCC) and other
intervenors addressing the November 1993 ruling by the Supreme
Court of Ohio. As part of the settlement, CG&E has agreed not to
seek early implementation of the third phase of the May 1992 rate
increase, which means the $39.8 million increase became effective
in May 1994 as originally scheduled. CG&E also agreed that it
would not seek accelerated recovery of deferrals related to the
phase-in plan. These deferrals will be recovered over the
remaining seven year period contemplated in the May 1992 PUCO
order. In addition, if the merger with PSI is consummated, CG&E
has agreed not to increase base electric rates prior to
January 1, 1999, except for increases in taxes, changes in
federal or state environmental laws, PUCO actions affecting
electric utilities in general and financial emergencies.
The settlement agreement also permits CG&E to retain all
non-fuel savings from the merger until 1999 and calls for merger-
related transaction costs to be amortized by January 1, 1999.
Other provisions of the agreement are: (i) if the merger is
not completed by April 30, 1995, CG&E can raise electric rates in
May 1995 by $21 million to provide accelerated recovery of phase-
in deferrals; (ii) the PUCO and OCC will have access to
information about CINergy and affiliated companies; (iii) the
PUCO will support, before the Securities and Exchange Commission
(SEC), CG&E's efforts to retain its gas operations and the other
parties will not oppose efforts to retain the gas properties; and
(iv) contracts of CG&E with affiliated companies under the merger
that are to be filed with the SEC must first be filed with the
PUCO for its review and copies provided to the OCC.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
- - ------- ---------------------------------------------------
(a) The annual meeting of shareholders of The Cincinnati
Gas & Electric Company was held on May 18, 1994.
(c) At the meeting, five directors were elected, as set
forth below:
<TABLE>
<CAPTION>
Votes Votes Term
For Withheld Expiring
----- -------- --------
<S> <C> <C> <C>
Phillip R. Cox 76,208,866 1,615,373 1996
Neil A. Armstrong 76,314,975 1,509,264 1997
C. Robert Everman 76,568,833 1,255,406 1997
John J. Schiff, Jr. 76,594,276 1,229,963 1997
Dudley S. Taft 76,458,263 1,365,976 1997
</TABLE>
Also, at the meeting, the appointment of Arthur Andersen
& Co. as auditors of CG&E was approved by shareholders. There
were 76,109,282 common shares for the appointment, 1,176,610
against the appointment, and 538,347 abstentions. In addition, a
shareholder proposal, intended to prohibit properly executed but
unmarked proxies from being counted in voting for any matter
described in the Company's proxy statement, was defeated. There
were 8,121,398 common shares for the proposal, 58,297,969 against
the proposal, and 2,576,594 abstentions.
Item 5. Other Information.
- - ------- -----------------
Employee Relations
- - ------------------
A new three-year contract has been negotiated with the
United Steelworkers of America, representing approximately 500
employees in gas operations. In addition to benefit
improvements, the contract provides for wage increases of 3.5% in
1994 and 1995 and 3% in 1996.
A new four-year contract has been negotiated with the
Independent Utilities Union representing approximately 1,200
clerical and technical employees. In addition to benefit
improvements, the contract provides for annual increases
averaging 3.1% and lump sum adjustments.
<PAGE>
Unaudited Pro Forma Condensed Consolidated Financial Information:
- - -----------------------------------------------------------------
The following pro forma condensed consolidated financial
information combines the historical consolidated statements of
income and consolidated balance sheets of CG&E and PSI after
giving effect to the merger. The unaudited Pro Forma Condensed
Consolidated Statements of Income for the three, six and twelve
month periods ended June 30, 1994, give effect to the merger as
if it had occurred at July 1, 1993. The unaudited Pro Forma
Condensed Consolidated Balance Sheet at June 30, 1994, gives
effect to the merger as if it had occurred at June 30, 1994.
These statements are prepared on the basis of accounting for the
merger as a pooling of interests and are based on the assumptions
set forth in the notes thereto. In addition, the following pro
forma condensed consolidated financial information should be read
in conjunction with the historical consolidated financial
statements and related notes thereto of CG&E and PSI. The
following information is not necessarily indicative of the
operating results or financial position that would have occurred
had the merger been consummated at the beginning of the periods,
or on the date, for which the merger is being given effect, nor
is it necessarily indicative of future operating results or
financial position.
Pro Forma Condensed Consolidated Statements of Income (in
millions, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended June 30, 1994
-----------------------------------
Pro
Historical Forma
--------------------- ----------
CG&E PSI CINergy
--------- --------- ----------
<S> <C> <C> <C>
Operating revenues.............................. $ 391 $ 282 $ 673
Operating expenses.............................. 321 246 567
--------- -------- ----------
Operating income................................ 70 36 106
Other income and deductions -- net.............. 6 1 7
Interest charges -- net......................... 37 19 56
Preferred dividend requirement.................. 5 3 8
--------- -------- ----------
Net income...................................... $ 34 $ 15 $ 49
========= ======== ==========
Average common shares outstanding (1)........... 89 56 140/146
Earnings per common share (1)................... $ .38 $ .27 $ .35/.33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1994
-----------------------------------
Pro
Historical Forma
--------------------- ----------
CG&E PSI CINergy
--------- --------- ----------
<S> <C> <C> <C>
Operating revenues.............................. $ 954 $ 585 $ 1,539
Operating expenses.............................. 778 502 1,280
--------- -------- ----------
Operating income................................ 176 83 259
Other income and deductions -- net.............. 16 3 19
Interest charges -- net......................... 77 35 112
Preferred dividend requirement.................. 11 7 18
--------- -------- ----------
Net income...................................... $ 104 $ 44 $ 148
========= ======== ==========
Average common shares outstanding (1)........... 89 56 140/146
Earnings per common share (1)................... $ 1.17 $ .79 $1.06/1.01
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended June 30, 1994
-----------------------------------
Pro
Historical Forma
--------------------- ----------
CG&E PSI CINergy
--------- --------- ----------
<S> <C> <C> <C>
Operating revenues.............................. $ 1,845 $ 1,161 $ 3,006
Operating expenses.............................. 1,502 994 2,496
--------- -------- ----------
Operating income................................ 343 167 510
Other income and deductions -- net.............. (189)* 13 (176)
Interest charges -- net......................... 156 68 224
Preferred dividend requirement.................. 24 14 38
--------- -------- ----------
Net income (loss)............................... $ (26) $ 98 $ 72
========= ======== ==========
Average common shares outstanding (1)........... 88 56 139/145
Earnings (loss) per common share (1)............ $ (.29) $ 1.74 $ .52/.49
<FN>
*Reflects the write-off of a portion of Zimmer Station of approximately $223 million, net of taxes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Condensed Consolidated Balance Sheet (in millions):
June 30, 1994
---------------------------------------
Historical Pro Forma
------------------------ ---------
CG&E PSI CINergy
--------- --------- ---------
<S> <C> <C> <C>
Assets
Utility plant -- original cost
In service...................................... $ 5,257 $ 3,514 $ 8,771
Accumulated depreciation........................ 1,538 1,510 3,048
--------- --------- ---------
3,719 2,004 5,723
Construction work in progress................... 65 305 370
--------- --------- ---------
Total utility plant........................... 3,784 2,309 6,093
Current assets.................................... 565 236 801
Other assets...................................... 775 293 1,068
--------- --------- ---------
Total assets.................................. $ 5,124 $ 2,838 $ 7,962
========= ========= =========
Capitalization and Liabilities
Common stock (2).................................. $ 757 $ 1 $ 1
Paid-in capital (2)............................... 330 259 1,346
Retained earnings................................. 483 460 943
--------- --------- ---------
Total common stock equity..................... 1,570 720 2,290
Cumulative preferred stock........................ 290 188 478
Long-term debt.................................... 1,838 877 2,715
--------- --------- ---------
Total capitalization.......................... 3,698 1,785 5,483
Current liabilities............................... 374 624 998
Deferred income taxes............................. 743 309 1,052
Other liabilities................................. 309 120 429
--------- --------- ---------
Total capitalization and other liabilities.... $ 5,124 $ 2,838 $ 7,962
========= ========= =========
</TABLE>
Notes to Pro Forma Condensed Consolidated Financial Information:
(1) The Pro Forma Condensed Consolidated Statements of Income
reflect the conversion of each share of CG&E common stock
outstanding into one share of CINergy common stock and each share
of PSI common stock outstanding into (a) .909 share and (b) 1.023
shares of CINergy common stock. The actual PSI conversion ratio
may be lower than 1.023 or higher than .909 depending upon the
closing sales price of CG&E common stock during a period prior to
the consummation of the merger.
(2) The pro forma "Common stock" and "Paid-in capital" amounts
reflected in the Pro Forma Condensed Consolidated Balance Sheet
are based on the conversion of each share of CG&E common stock
outstanding into one share of CINergy common stock ($.01 par
value) and each share of PSI common stock outstanding into 1.023
shares of CINergy common stock ($.01 par value). Any PSI
conversion ratio lower than 1.023 would result in a reallocation
of amounts between "Common stock"
<PAGE>
and "Paid-in capital". However, any such reallocation would
have no effect on "Total common stock equity".
(3) Intercompany transactions (including purchased and exchanged
power transactions) between CG&E and PSI during the periods
presented were not material and accordingly no pro forma
adjustments were made to eliminate such transactions.
(4) Transaction costs, estimated to be approximately
$47 million, are being deferred by CG&E and PSI. In a settlement
agreement approved by the PUCO (as more fully discussed in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations--Rate Matters" herein), CG&E has agreed to,
among other things, amortize its portion of merger-related
transaction costs by January 1, 1999. CG&E will also be
permitted to retain all of its non-fuel savings from the merger
until 1999. For additional information on the settlement
agreement, see Notes to the Consolidated Financial Statements.
PSI's portion of the costs are being deferred for post-merger
recovery through customer rates.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
- - ------- --------------------------------
(a) Exhibits:
2-A Amendment to Amended and Restated Agreement and
Plan of Reorganization (Amended Merger Agreement) by and among
CG&E, PSI Resources, Inc., PSI Energy, Inc., CINergy Corp., an
Ohio corporation, CINergy Corp., a Delaware corporation, and
CINergy Sub, Inc., dated as of December 11, 1992, as amended on
July 2, 1993, September 10, 1993 and as of June 20, 1994.
2-B Amendment to Amended and Restated Agreement and
Plan of Reorganization (Amended Merger Agreement) by and among
CG&E, PSI Resources, Inc., PSI Energy, Inc., CINergy Corp., an
Ohio corporation, CINergy Corp., a Delaware corporation, and
CINergy Sub, Inc., dated as of December 11, 1992, as amended on
July 2, 1993, September 10, 1993, June 20, 1994 and as of
July 26, 1994.
(b) Reports on Form 8-K filed:
Date of Report Items Reported
-------------- --------------
June 15, 1994 Item 7. Financial Statements
and Exhibits
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.
THE CINCINNATI GAS & ELECTRIC COMPANY
-------------------------------------
(Registrant)
Date: August 9, 1994 Daniel R. Herche
-------------------------------------
Daniel R. Herche, Controller
(Duly Authorized Officer and Chief
Accounting Officer)
(Signature)
