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) May 20, 1994
PSI RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Indiana 1-9941 35-1724168
(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 RESOURCES, 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 March 31, 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 RESOURCES, INC.
Registrant
Date: May 20, 1994
By: /s/ Charles J. Winger
(Charles J. Winger)
Comptroller and Principal
Accounting Officer
EXHIBIT 99-A
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 March 31, 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
88,603,748 Shares Outstanding as of April 30, 1994
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
and Subsidiary Companies
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Twelve Months Ended
March 31 March 31
1994 1993 1994 1993
(Thousands of Dollars)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric........................................... $333,390 $300,833 $1,315,002 $1,172,676
Gas................................................ 229,151 192,643 505,804 427,697
-------- -------- ---------- ----------
Total operating revenues......................... 562,541 493,476 1,820,806 1,600,373
-------- -------- ---------- ----------
OPERATING EXPENSES
Gas purchased...................................... 142,025 122,463 300,399 257,063
Fuel used in electric production................... 81,881 79,607 335,552 314,937
Other operation.................................... 75,949 67,960 287,855 263,154
Maintenance........................................ 25,942 21,069 113,731 98,148
Provision for depreciation......................... 38,769 37,166 153,664 141,942
Post-in-service deferred operating expenses--net... 823 (2,755) (2,894) (13,436)
Phase-in deferred depreciation..................... (1,313) (3,175) (6,662) (11,643)
Taxes other than income taxes...................... 49,933 47,242 186,059 176,900
Income taxes....................................... 42,077 31,595 79,490 66,751
Deferred income taxes--net......................... 367 2,621 37,707 29,506
-------- -------- ---------- ----------
Total operating expenses......................... 456,453 403,793 1,484,901 1,323,322
-------- -------- ---------- ----------
OPERATING INCOME..................................... 106,088 89,683 335,905 277,051
-------- -------- ---------- ----------
OTHER INCOME AND DEDUCTIONS
Allowance for other funds used during construction. 458 974 2,638 6,637
Post-in-service carrying costs..................... -- 4,000 8,100 22,077
Phase-in deferred return........................... 7,621 11,664 31,290 38,274
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............................................. 1,856 1,347 9,914 17,849
Other--net......................................... 15 (523) (9,013) (32)
-------- -------- ---------- ----------
Total other income and deductions................ 9,950 17,462 (179,830) 84,805
-------- -------- ---------- ----------
INCOME BEFORE INTEREST CHARGES....................... 116,038 107,145 156,075 361,856
-------- -------- ---------- ----------
INTEREST CHARGES
Interest on long-term debt......................... 38,505 38,263 153,935 157,921
Other interest..................................... 881 754 2,576 2,562
Amortization of debt discount, premium and other... 1,118 809 3,659 3,700
Allowance for borrowed funds used during
construction--credit.............................. (657) (1,082) (3,161) (5,903)
-------- -------- ---------- ----------
Net interest charges............................. 39,847 38,744 157,009 158,280
-------- -------- ---------- ----------
NET INCOME (LOSS).................................... 76,191 68,401 (934) 203,576
Preferred dividends................................ 6,290 6,290 25,160 26,652
-------- -------- ---------- ----------
EARNINGS (LOSS) ON COMMON SHARES..................... $ 69,901 $ 62,111 $ (26,094) $ 176,924
======== ======== ========== ==========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (000 omitted)................... 88,365 86,722 87,746 86,037
EARNINGS (LOSS) PER COMMON SHARE..................... $ .79 $ .71 $ (.29) $ 2.05
DIVIDENDS DECLARED PER COMMON SHARE.................. $ .43 $.41-1/2 $ 1.69 $ 1.65-1/2
</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 $33 million and
$142 million for the three and twelve month periods ended
March 31, 1994, respectively, over the comparable periods of
1993, primarily due to rate increases granted by regulatory
bodies in 1993 and to increases in electric sales volumes of 1.3%
and 5.2%.
Gas operating revenues increased $37 million and $78 million
for the three and twelve month periods ended March 31, 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 granted by
regulatory bodies in 1993 and to increases in total volumes sold
and transported of 8.5% and 7.1%.
Gas purchased expense increased $20 million and $43 million
for the three and twelve month periods ended March 31, 1994,
respectively, over the comparable periods of 1993, due to
increases in the average cost per Mcf purchased of 9.1% and 13.3%
and to increases in volumes purchased of 6.3% and 3.2%.
Fuel used in electric production increased $21 million for
the twelve month period ended March 31, 1994, over the comparable
period of 1993, due to a 7.8% increase in the amount of
electricity generated.
Other operation expense increased $8 million and $25 million
for the three and twelve month periods ended March 31, 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
increases in gas production expenses.
Maintenance expense increased $5 million and $16 million for
the three and twelve month periods ended March 31, 1994,
respectively, over the comparable periods of 1993, primarily due
to increased maintenance on electric generating units and
electric distribution facilities.
Depreciation expense increased $12 million for the twelve
month period ended March 31, 1994, primarily due to an increase
in depreciable plant in service, including Woodsdale Generating
Station.
<PAGE>
Post-in-service deferred operating expenses (net) of
$3 million for the twelve month period ended March 31, 1994
reflects the deferral of depreciation, operation and maintenance
expenses (exclusive of fuel costs), and property taxes related to
the first five units of Woodsdale Station between the time the
units began commercial operation and the effective date of new
rates which reflect these costs, in accordance with a stipulation
approved by The Public Utilities Commission of Ohio (PUCO) in
August 1993. CG&E is amortizing these deferred expenses, as well
as similar deferrals associated with Zimmer Station, over 10-year
periods.
Phase-in deferred depreciation was $7 million for the twelve
month period ended March 31, 1994, 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 $9 million for the
twelve month period ended March 31, 1994, over the comparable
period of 1993, primarily due to increased property taxes
resulting from a greater investment in taxable property
(including Woodsdale Station) and higher property tax rates, and
to higher public utilities gross receipts taxes resulting from
increased revenues.
Allowance for funds used during construction (AFC) decreased
$7 million for the twelve month period ended March 31, 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 for the
three month period ended March 31, 1994, from the comparable
period 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
the August 1993 effective date of new rates which reflect
Woodsdale Station. Post-in-service carrying costs decreased
$14 million for the twelve month period ended March 31, 1994,
from the comparable period of 1993, as a result of discontinuing
the accrual of carrying costs on Zimmer and Woodsdale Stations
when they were reflected in rates in May 1992 and August 1993,
respectively.
Phase-in deferred return was $8 million and $31 million for
the three and twelve month periods ended March 31, 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).
<PAGE>
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 $9 million for the twelve month period
ended March 31, 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 $4 million for the
twelve month period ended March 31, 1994, primarily due to
refinancing $270 million and $280 million of first mortgage bonds
at lower rates in October 1992 and November 1993, respectively.
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 price of CG&E common stock for the 15 trading
days preceding the fifth 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 March 31, 1994, CG&E and PSI had
88.5 million and 57.2 million common shares 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 presently anticipates that all approvals needed for
the merger will be received by the end of the third quarter of
1994.
<PAGE>
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 and would agree to an electric rate moratorium
commencing after Union Light's next retail rate case and
extending to January 1, 2000. An order on the application is
expected in mid-May.
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.
<PAGE>
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. 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, 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>
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 will request that it be
allowed to do so.
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 quarter of 1994 were approximately $35 million
(including $.9 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 continuing review and subject to adjustment. During the
next five years, 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.
Reference is made to Notes to Consolidated Financial Statements
herein for information regarding the refinancing of long-term
debt and cumulative preferred stock.
<PAGE>
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
March 31, 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 March 31,
1994, of $123 million, of which $110 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.
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.
<PAGE>
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
March 31, 1994, CG&E had deferred $79 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 will take effect 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, or any other accounting deferrals, to
be amortized over a period ending by January 1, 1999.
Other provisions of the agreement are: (i) if the merger is
not completed, 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>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended Twelve Months Ended
March 31 March 31
1994 1993 1994 1993
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Cash Flows From Operations:
Net Income............................................ $ 76,191 $ 68,401 $ (934) $203,576
Adjustments to reconcile net income to net cash:
Deferred gas and electric fuel costs--net......... 7,604 18,988 (7,469) (6,192)
Depreciation...................................... 38,769 37,166 153,664 141,942
Post-in-service deferred operating expenses--net.. 823 (2,755) (2,894) (13,436)
Phase-in deferred depreciation.................... (1,313) (3,175) (6,662) (11,643)
Allowance for other funds used during
construction................................... (458) (974) (2,638) (6,637)
Post-in-service carrying costs.................... -- (4,000) (8,100) (22,077)
Phase-in deferred return.......................... (7,621) (11,664) (31,290) (38,274)
Deferred income taxes and investment tax
credits--net................................... 652 2,600 33,772 33,614
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........................................ (4,001) 1,123 14,286 13,280
Change in current assets and liabilities:
Receivables and unbilled revenues.............. (8,613) (17,999) (28,654) (32,836)
Materials and supplies......................... 43,148 26,704 20,011 2,630
Other current assets........................... (6,863) (6,427) (4,979) (10,526)
Accounts payable and other current liabilities. 2,412 7,197 15,779 31,068
-------- -------- -------- --------
Total adjustments........................... 64,539 46,784 367,585 80,913
-------- -------- -------- --------
Net cash provided by operations............. 140,730 115,185 366,651 284,489
-------- -------- -------- --------
Cash Flows From Investing:
Construction expenditures (less allowance for other
funds used during construction).................... (34,956) (36,160) (197,513) (206,198)
-------- -------- -------- --------
Cash Flows From Financing:
Common stock proceeds................................. 11,092 11,422 43,655 43,251
Preferred stock proceeds.............................. -- -- -- 79,300
Long-term debt proceeds............................... 311,957 -- 608,957 359,614
Retirement of long-term debt and cumulative
preferred stock.................................... (313,247) (13) (607,689) (402,979)
Net short-term borrowings............................. (17,500) (42,425) 9,425 (21,425)
Dividends paid on common shares....................... (37,899) (35,902) (147,938) (142,013)
Dividends paid on preferred shares.................... (6,290) (6,290) (25,160) (27,289)
-------- -------- -------- --------
Net cash provided by (used in)
financing activities..................... (51,887) (73,208) (118,750) (111,541)
-------- -------- -------- --------
Net increase (decrease) in cash and
temporary cash investments............... 53,887 5,817 50,388 (33,250)
Cash and temporary cash investments--beginning
of period............................................. 4,570 2,252 8,069 41,319
-------- -------- -------- --------
Cash and temporary cash investments--end of period....... $ 58,457 $ 8,069 $ 58,457 $ 8,069
======== ======== ======== ========
Supplemental Disclosure Of Cash Flow Information:
Cash paid during the period for:
Interest (net of allowance for borrowed funds
used during construction).......................... $ 26,552 $ 16,521 $161,896 $159,676
Income taxes.......................................... $ 9,033 $ 6,120 $ 56,699 $ 36,998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
and Subsidiary Companies
CONSOLIDATED BALANCE SHEET
ASSETS
March 31 December 31
1994 1993
(Thousands of Dollars)
<S> <C> <C>
UTILITY PLANT
In service............................................ $5,219,397 $5,188,602
Less--Accumulated provisions for depreciation......... 1,506,213 1,472,313
---------- ----------
3,713,184 3,716,289
Construction work in progress......................... 69,369 69,351
---------- ----------
3,782,553 3,785,640
---------- ----------
CURRENT ASSETS
Cash.................................................. 1,302 4,570
Short-term investments................................ 57,155 --
Accounts receivable--net.............................. 246,645 206,210
Accrued unbilled revenues............................. 74,133 105,955
Materials and supplies................................ 109,369 152,517
Prepayments........................................... 33,224 29,053
Other................................................. 110,235 107,543
---------- ----------
632,063 605,848
---------- ----------
OTHER ASSETS
Post-in-service carrying costs and deferred operating
expenses............................................ 153,006 154,636
Phase-in deferred return and depreciation............. 92,365 83,431
Amounts due from customers-income taxes............... 393,412 387,748
Other................................................. 143,022 126,220
---------- ----------
781,805 752,035
---------- ----------
$5,196,421 $5,143,523
========== ==========
LIABILITIES
CAPITALIZATION
Common shares......................................... $ 752,236 $ 748,528
Additional paid-in capital............................ 321,593 314,218
Retained earnings..................................... 488,513 456,511
Preferred shares--
Not subject to mandatory redemption................. 80,000 120,000
Subject to mandatory redemption..................... 210,000 210,000
Long-term debt........................................ 1,837,265 1,829,061
---------- ----------
3,689,607 3,678,318
---------- ----------
CURRENT LIABILITIES
Current portion of preferred stock.................... 40,000 --
Notes payable......................................... 13,500 31,013
Accounts payable...................................... 91,378 122,620
Dividends payable on preferred shares ................ 6,290 6,290
Accrued taxes......................................... 234,129 222,219
Accrued interest on debt.............................. 41,301 29,123
Other................................................. 39,062 29,496
---------- ----------
465,660 440,761
---------- ----------
DEFERRED CREDITS AND OTHER
Deferred income taxes.................................. 741,720 733,224
Investment tax credits................................. 140,055 141,520
Accrued pension cost................................... 43,874 41,826
Other.................................................. 115,505 107,874
---------- ----------
1,041,154 1,024,444
---------- ----------
$5,196,421 $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).
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 will take effect
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, or any other accounting deferrals, to
be amortized over a period ending by January 1, 1999.
Other provisions of the agreement are: (i) if the merger is
not completed, 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>
In January 1994, the Company issued $94.7 million principal
amount of pollution control revenue refunding bonds at interest
rates of 5.45% and 5 1/2%, the proceeds from which were used to
refund six different series of pollution control revenue bonds
with interest rates ranging from 6.70% to 9 5/8%.
In February 1994, the Company issued $220 million principal
amount of first mortgage bonds with interest rates of 5.80% and
6.45%, the proceeds from which were used to refund $210 million
principal amount of First Mortgage Bonds, consisting of the
8 5/8% Series due 2000, 8.55% Series due 2006 and 9 1/8% Series
due 2008.
In April 1994, the Company redeemed all 400,000 shares of
its Cumulative Preferred Stock, 9.28% Series, $100 par value,
through internally generated funds.
PART II. OTHER INFORMATION
Item 5. Other Information.
- - ------- -----------------
Employee Relations
- - ------------------
A new three-year contract has been negotiated with the
International Brotherhood of Electrical Workers representing
approximately 1,600 employees. In addition to benefit
improvements, the contract provides for wage increases of 3.5% in
1994 and 3.25% in 1995 and 1996.
A wage reopener provision for the third and final year of
the existing contract with the Independent Utilities Union, which
represents approximately 1,200 clerical and technical employees,
is currently being negotiated.
A collective bargaining agreement with the United
Steelworkers of America, representing about 500 employees in gas
operations, expires on May 15, 1994, and presently is being
negotiated.
<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 and twelve month
periods ended March 31, 1994, give effect to the merger as if it
had occurred at April 1, 1993. The unaudited Pro Forma Condensed
Consolidated Balance Sheet at March 31, 1994, gives effect to the
merger as if it had occurred at March 31, 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 March 31, 1994
-----------------------------------
Pro
Historical Forma
--------------------- ----------
CG&E PSI CINergy
--------- --------- ----------
<S> <C> <C> <C>
Operating revenues.............................. $ 562 $ 303 $ 865
Operating expenses.............................. 456 256 712
--------- -------- ----------
Operating income................................ 106 47 153
Other income and deductions -- net.............. 10 2 12
Interest charges -- net......................... 40 17 57
Preferred dividend requirement.................. 6 3 9
--------- -------- ----------
Net income...................................... $ 70 $ 29 $ 99
========= ======== ==========
Average common shares outstanding (1)........... 88 56 139/146
Earnings per common share (1)................... $ .79 $ .52 $ .71/.68
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Twelve Months Ended March 31, 1994
-----------------------------------
Pro
Historical Forma
--------------------- ----------
CG&E PSI CINergy
--------- --------- ----------
<S> <C> <C> <C>
Operating revenues.............................. $ 1,821 $ 1,102 $ 2,923
Operating expenses.............................. 1,485 956 2,441
--------- -------- ----------
Operating income................................ 336 146 482
Other income and deductions -- net.............. (180)* 26 (154)
Interest charges -- net......................... 157 65 222
Preferred dividend requirement.................. 25 14 39
--------- -------- ----------
Net income (loss)............................... $ (26) $ 93 $ 67
========= ======== ==========
Average common shares outstanding (1)........... 88 56 138/145
Earnings (loss) per common share (1)............ $ (.29) $ 1.66 $ .48/.46
<FN>
*Reflects the write-off of a portion of Zimmer Station of approximately $223 million, net of taxes.
</TABLE>
Pro Forma Condensed Consolidated Balance Sheet (in millions):
<TABLE>
<CAPTION>
March 31, 1994
---------------------------------------
Historical Pro Forma
------------------------ ---------
CG&E PSI CINergy
--------- --------- ---------
<S> <C> <C> <C>
Assets
Utility plant -- original cost
In service...................................... $ 5,219 $ 3,480 $ 8,699
Accumulated depreciation........................ 1,506 1,483 2,989
--------- --------- ---------
3,713 1,997 5,710
Construction work in progress................... 69 266 335
--------- --------- ---------
Total utility plant........................... 3,782 2,263 6,045
Current assets.................................... 632 204 836
Other assets...................................... 782 270 1,052
--------- --------- ---------
Total assets.................................. $ 5,196 $ 2,737 $ 7,933
========= ========= =========
Capitalization and Liabilities
Common stock (2).................................. $ 752 $ 1 $ 1
Paid-in capital (2)............................... 322 256 1,330
Retained earnings................................. 488 463 951
--------- --------- ---------
Total common stock equity..................... 1,562 720 2,282
Cumulative preferred stock........................ 290 188 478
Long-term debt.................................... 1,837 865 2,702
--------- --------- ---------
Total capitalization.......................... 3,689 1,773 5,462
Current liabilities............................... 466 548 1,014
Deferred income taxes............................. 742 300 1,042
Other liabilities................................. 299 116 415
--------- --------- ---------
Total capitalization and other liabilities.... $ 5,196 $ 2,737 $ 7,933
========= ========= =========
</TABLE>
<PAGE>
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"
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, CG&E has agreed
to, among other things, amortize its portion of merger-
related transaction costs over a period ending 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.
- - ------- --------------------------------
(b) No reports on Form 8-K were filed during the three
months ended March 31, 1994.
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: May 11, 1994 /s/ Daniel R. Herche
-------------------------------------
Daniel R. Herche, Controller
(Duly Authorized Officer and Chief
Accounting Officer)
(Signature)
