THE CONSOLIDATED 10-Q FOR AMERICAN ELECTRIC POWER CO., INC, AND
SUBSIDIARIES IS REQUESTED TO BE INCLUDED AS PART OF THE FILING.
<PAGE>
<TABLE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period from to
<CAPTION>
Commission Registrant; State of Incorporation; I. R. S. Employer
File Number Address; and Telephone Number Identification No.
<C> <S> <C>
1-3525 AMERICAN ELECTRIC POWER COMPANY, INC. 13-4922640
(A New York Corporation)
1 Riverside Plaza, Columbus, Ohio 43215
Telephone (614) 223-1000
0-18135 AEP GENERATING COMPANY (An Ohio Corporation) 31-1033833
1 Riverside Plaza, Columbus, Ohio 43215
Telephone (614) 223-1000
1-3457 APPALACHIAN POWER COMPANY (A Virginia Corporation) 54-0124790
40 Franklin Road, Roanoke, Virginia 24011
Telephone (540) 985-2300
1-2680 COLUMBUS SOUTHERN POWER COMPANY (An Ohio Corporation) 31-4154203
215 North Front Street, Columbus, Ohio 43215
Telephone (614) 464-7700
1-3570 INDIANA MICHIGAN POWER COMPANY (An Indiana Corporation) 35-0410455
One Summit Square
P.O. Box 60, Fort Wayne, Indiana 46801
Telephone (219) 425-2111
1-6858 KENTUCKY POWER COMPANY (A Kentucky Corporation) 61-0247775
1701 Central Avenue, Ashland, Kentucky 41101
Telephone (800) 572-1141
1-6543 OHIO POWER COMPANY (An Ohio Corporation) 31-4271000
301 Cleveland Avenue S.W., Canton, Ohio 44702
Telephone (330) 456-8173
AEP Generating Company, Columbus Southern Power Company and Kentucky Power Company meet
the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are
therefore filing this Form 10-Q with the reduced disclosure format specified in General
Instruction H(2) to Form 10-Q.
Indicate by check mark whether the registrants (1) have filed all reports required to
be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrants were required to
file such reports), and (2) have been subject to such filing requirements for the past
90 days.
Yes X No
The number of shares outstanding of American Electric Power Company, Inc. Common Stock,
par value $6.50, at April 30, 1996 was 186,998,152.
/TABLE
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<TABLE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q
For The Quarter Ended March 31, 1996
INDEX
<CAPTION>
Page
Part I. FINANCIAL INFORMATION
<S> <C>
American Electric Power Company, Inc. and Subsidiary Companies:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . A-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . A-2 - A-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . A-4
Notes to Consolidated Financial Statements . . . . . . . . . A-5 - A-6
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . A-7 - A-9
AEP Generating Company:
Statements of Income and Statements of Retained Earnings . . B-1
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . B-2 - B-3
Statements of Cash Flows . . . . . . . . . . . . . . . . . . B-4
Notes to Financial Statements. . . . . . . . . . . . . . . . B-5
Management's Narrative Analysis of Results of Operations . . B-5 - B-6
Appalachian Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . C-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . C-2 - C-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . C-4
Notes to Consolidated Financial Statements . . . . . . . . . C-5 - C-6
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . C-7 - C-9
Columbus Southern Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . D-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . D-2 - D-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . D-4
Notes to Consolidated Financial Statements . . . . . . . . . D-5
Management's Narrative Analysis of Results of Operations . . D-6 - D-7
Indiana Michigan Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . E-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . E-2 - E-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . E-4
Notes to Consolidated Financial Statements . . . . . . . . . E-5
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . E-6 - E-8
Kentucky Power Company:
Statements of Income and Statements of Retained Earnings . . F-1
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . F-2 - F-3
Statements of Cash Flows . . . . . . . . . . . . . . . . . . F-4
Notes to Financial Statements. . . . . . . . . . . . . . . . F-5
Management's Narrative Analysis of Results of Operations . . F-6 - F-7
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q
For The Quarter Ended March 31, 1996
INDEX
Page
Ohio Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . G-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . G-2 - G-3
Consolidated Statements of Cash Flows. . . . . . . . . . . G-4
Notes to Consolidated Financial Statements . . . . . . . . G-5 - G-6
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . G-7 - G-9
Part II. OTHER INFORMATION
Item 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
Item 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1 - II-2
Item 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . II-2 - II-3
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-4
This combined Form 10-Q is separately filed by American Electric Power Company,
Inc., AEP Generating Company, Appalachian Power Company, Columbus Southern Power
Company, Indiana Michigan Power Company, Kentucky Power Company and Ohio Power Company.
Information contained herein relating to any individual registrant is filed by such
registrant on its own behalf. Each registrant makes no representation as to
information relating to the other registrants.
</TABLE>
<PAGE>
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<TABLE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . $1,517,781 $1,416,169
OPERATING EXPENSES:
Fuel and Purchased Power . . . . . . . . . . . . . . . . 440,977 411,987
Other Operation. . . . . . . . . . . . . . . . . . . . . 303,708 261,952
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 105,423 130,608
Depreciation and Amortization. . . . . . . . . . . . . . 149,114 147,177
Taxes Other Than Federal Income Taxes. . . . . . . . . . 127,626 129,473
Federal Income Taxes . . . . . . . . . . . . . . . . . . 98,811 77,416
TOTAL OPERATING EXPENSES. . . . . . . . . . . . . 1,225,659 1,158,613
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . 292,122 257,556
NONOPERATING INCOME (LOSS) . . . . . . . . . . . . . . . . (1,127) 4,798
INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS . . 290,995 262,354
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . 100,025 100,474
PREFERRED STOCK DIVIDEND REQUIREMENTS OF SUBSIDIARIES. . . 10,958 14,030
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . $ 180,012 $ 147,850
AVERAGE NUMBER OF SHARES OUTSTANDING . . . . . . . . . . . 186,723 185,318
EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . $0.96 $0.80
CASH DIVIDENDS PAID PER SHARE. . . . . . . . . . . . . . . $0.60 $0.60
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . $1,409,645 $1,325,581
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . 180,012 147,850
DEDUCTIONS:
Cash Dividends Declared. . . . . . . . . . . . . . . . . 111,983 111,143
Other. . . . . . . . . . . . . . . . . . . . . . . . . . (178) 118
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . $1,477,852 $1,362,170
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $ 9,257,733 $ 9,238,843
Transmission . . . . . . . . . . . . . . . . . . . . 3,329,719 3,316,664
Distribution . . . . . . . . . . . . . . . . . . . . 4,217,602 4,184,251
General (including mining assets and nuclear fuel) . 1,489,894 1,442,086
Construction Work in Progress. . . . . . . . . . . . 293,901 314,118
Total Electric Utility Plant . . . . . . . . 18,588,849 18,495,962
Accumulated Depreciation and Amortization. . . . . . 7,232,739 7,111,123
NET ELECTRIC UTILITY PLANT . . . . . . . . . 11,356,110 11,384,839
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 838,245 825,781
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 189,421 79,955
Accounts Receivable (net). . . . . . . . . . . . . . 546,047 492,283
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 246,217 271,933
Materials and Supplies . . . . . . . . . . . . . . . 247,949 251,051
Accrued Utility Revenues . . . . . . . . . . . . . . 163,533 207,919
Prepayments and Other. . . . . . . . . . . . . . . . 150,671 98,717
TOTAL CURRENT ASSETS . . . . . . . . . . . . 1,543,838 1,401,858
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 1,948,635 1,979,446
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 298,978 310,377
TOTAL. . . . . . . . . . . . . . . . . . . $15,985,806 $15,902,301
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock-Par Value $6.50:
1996 1995
Shares Authorized . . . .300,000,000 300,000,000
Shares Issued . . . . . .195,976,110 195,634,992
(8,999,992 shares were held in treasury) . . . . . $ 1,273,845 $ 1,271,627
Paid-in Capital. . . . . . . . . . . . . . . . . . . 1,671,237 1,658,524
Retained Earnings. . . . . . . . . . . . . . . . . . 1,477,852 1,409,645
Total Common Shareholders' Equity. . . . . . 4,422,934 4,339,796
Cumulative Preferred Stocks of Subsidiaries:
Not Subject to Mandatory Redemption. . . . . . . . 118,240 148,240
Subject to Mandatory Redemption. . . . . . . . . . 515,085 515,085
Long-term Debt . . . . . . . . . . . . . . . . . . . 4,811,799 4,920,329
TOTAL CAPITALIZATION . . . . . . . . . . . . 9,868,058 9,923,450
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 932,343 884,707
CURRENT LIABILITIES:
Preferred Stock and Long-term Debt
Due Within One Year. . . . . . . . . . . . . . . . 368,467 144,597
Short-term Debt. . . . . . . . . . . . . . . . . . . 165,176 365,125
Accounts Payable . . . . . . . . . . . . . . . . . . 185,525 220,142
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 471,034 420,192
Interest Accrued . . . . . . . . . . . . . . . . . . 124,840 80,848
Obligations Under Capital Leases . . . . . . . . . . 98,568 89,692
Other. . . . . . . . . . . . . . . . . . . . . . . . 309,557 304,466
TOTAL CURRENT LIABILITIES. . . . . . . . . . 1,723,167 1,625,062
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 2,640,925 2,656,651
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 424,117 430,041
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2. . . . . . . . . . . . . . . . 247,556 249,875
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 149,640 132,515
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . $15,985,806 $15,902,301
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . $ 180,012 $ 147,850
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . 146,776 142,564
Deferred Federal Income Taxes. . . . . . . . . . . . . (8,519) (6,326)
Deferred Investment Tax Credits. . . . . . . . . . . . (5,878) (5,945)
Amortization of Operating Expenses and
Carrying Charges (net) . . . . . . . . . . . . . . . 15,411 19,083
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . (53,764) (8,395)
Fuel, Materials and Supplies . . . . . . . . . . . . . 28,818 (14,228)
Accrued Utility Revenues . . . . . . . . . . . . . . . 44,386 27,550
Prepayments and Other Current Assets . . . . . . . . . (51,954) (52,632)
Accounts Payable . . . . . . . . . . . . . . . . . . . (34,617) (55,071)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . 50,842 37,645
Interest Accrued . . . . . . . . . . . . . . . . . . . 43,992 38,126
Rent Accrued - Rockport Plant Unit 2 . . . . . . . . . 36,928 37,076
Other (net). . . . . . . . . . . . . . . . . . . . . . . 20,742 27,540
Net Cash Flows From Operating Activities . . . . . 413,175 334,837
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . (90,517) (132,092)
Proceeds from Sale of Property and Other . . . . . . . . 2,788 2,821
Net Cash Flows Used For Investing Activities . . . (87,729) (129,271)
FINANCING ACTIVITIES:
Issuance of Common Stock . . . . . . . . . . . . . . . . 14,573 11,301
Issuance of Long-term Debt . . . . . . . . . . . . . . . 256,845 49,653
Change in Short-term Debt (net). . . . . . . . . . . . . (199,949) (129,410)
Retirement of Cumulative Preferred Stock . . . . . . . . (7,500) -
Retirement of Long-term Debt . . . . . . . . . . . . . . (167,966) (1,335)
Dividends Paid on Common Stock . . . . . . . . . . . . . (111,983) (111,143)
Net Cash Flows Used For Financing Activities . . . (215,980) (180,934)
Net Increase in Cash and Cash Equivalents. . . . . . . . . 109,466 24,632
Cash and Cash Equivalents at Beginning of Period . . . . . 79,955 62,866
Cash and Cash Equivalents at End of Period . . . . . . . . $ 189,421 $ 87,498
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $52,763,000 and $59,189,000
and for income taxes was $9,074,000 and $4,498,000 in 1996 and 1995, respectively.
Noncash acquisitions under capital leases were $50,899,000 and $24,725,000 in 1996
and 1995, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial state-ments
should be read in conjunction with the 1995 Annual Report as
incorporated in and filed with the Form 10-K. Certain prior-period
amounts have been reclassified to conform to current-period
presentation. Effective January 1, 1996 the Company adopted
Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to Be
Disposed Of" with no significant impact on the financial statements.
2. FINANCING AND RELATED ACTIVITIES
During the first three months of 1996, subsidiaries issued $260
million principal amount of long-term debt: two series of first
mortgage bonds totaling $200 million at 6-3/8% and 6.8% due in 2001
and 2006, respectively; $40 million of junior subordinated
deferrable interest debentures at 8% due in 2026; and two 6.75% term
loans totaling $20 million due in 2001.
The proceeds were used during the first quarter to redeem 75,000
shares of 9.5% cumulative preferred stock at the $100 par value and
to retire $167 million principal amount of long-term debt: five
series of first mortgage bonds totaling $108 million with interest
rates ranging from 5% to 9-7/8% and due dates ranging from 1996 to
2022; five series of sinking fund debentures totaling $31 million
with interest rates ranging from 5-1/8% to 7-7/8% and due dates
ranging from 1996 to 1999; and three series of term loans totaling
$28 million with interest rates ranging from 5.79% to 10.78% all at
maturity.
In April 1996, subsidiaries issued two term loans totaling $50
million at 6.42% and 6.57% due in 1999 and 2000, respectively,
retired six series of first mortgage bonds totaling $222 million
with interest rates ranging from 7-1/2% to 9-7/8% and due dates
ranging from 1998 to 2020 and redeemed 300,000 shares of $100 par
value 7.08% Cumulative Preferred Stock.
The redemption of two series of first mortgage bonds in April
1996, a 7-7/8% series and a 7-1/2% series both due in 2002, reduced
the restriction on subsidiaries use of retained earnings for the
payment of cash dividends on their common stock from $230 million
to $162 million.
<PAGE>
<PAGE>
3. CONTINGENCIES
On April 24, 1996 the Federal Energy Regulatory Commission
(FERC) issued two Final Rules regarding open access transmission and
stranded cost recovery in the wholesale market. In the open access
final rule, all public utilities with transmission lines are
required to file non-discriminatory open access tariffs that offer
non-affiliated wholesale customers the same transmission service at
the same terms and costs as they provide to themselves and their
affiliates. The Company adopted an open access transmission tariff
in 1995 under the provisions of a proposed FERC rule. The open
access final rule also provides for the recovery of stranded costs
from a utility's departing wholesale customers -- that is costs that
were prudently incurred to serve departing wholesale customers and
that would go unrecovered if these customers use open access to move
to another supplier. The other final rule provides for the manner
in which the open access rule will be administered. Management does
not expect these final rules to adversely impact financial
condition; however, management continues to review the voluminous
document for its potential impact.
The Company continues to be involved in certain other matters
discussed in the 1995 Annual Report.
<PAGE>
<PAGE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FIRST QUARTER 1996 vs. FIRST QUARTER 1995
RESULTS OF OPERATIONS
Net income increased 22% or $32.2 million due primarily to a 5% rise
in retail energy sales, reflecting the effect of a colder winter in 1996
and growth in the number of customers, and higher wholesale sales due
mainly to the colder weather.
Income statement lines which changed significantly were:
Increase (Decrease)
(in millions) %
Operating Revenues . . . . . . . . . . $101.6 7
Fuel and Purchased Power Expense . . . 29.0 7
Other Operation Expense. . . . . . . . 41.8 16
Maintenance Expense. . . . . . . . . . (25.2) (19)
Federal Income Taxes . . . . . . . . . 21.4 28
Operating revenues increased predominantly due to a 5% increase in
energy sales to retail customers and a 46% increase in wholesale sales.
Retail revenues rose 6% during the first quarter of 1996 as a result of
a 9% increase in energy sales to weather-sensitive residential
customers, and a 6% and 2% increase in energy sales to commercial and
industrial customers, largely due to increased usage. In 1996 the
number of residential and commercial customers increased 1% and 2%,
respectively, and industrial customers increased slightly.
Wholesale revenues increased 18% reflecting the significant increase
in wholesale energy sales to unaffiliated utilities in 1996 as a result
of the colder weather and an increase in other service revenues from
wholesale customers.
Fuel expense increased mainly due to increased generation resulting
from the higher demand for energy in 1996.
The increase in other operation expense in 1996 was primarily due
to rent and other operating costs of the recently installed Gavin Plant
scrubbers and the amortization of previously deferred Gavin expenses.
In 1995, the Public Utilities Commission of Ohio (PUCO) approved the
deferral of the Ohio retail jurisdictional share of the Gavin Plant's
scrubber rent for future recovery. In March 1995, the PUCO approved
recovery of current and deferred rent expense and authorized the
<PAGE>
amortization of the previously deferred Gavin expenses over four years.
Also contributing to the increase in other operation expense was the
write-off of previously deferred research costs related to pressurized
fluidized bed combustion technology and the expensing of previously
capitalized software costs as a result of a Hearing Examiner's Report in
a pending Virginia retail rate case.
Maintenance expense declined due to the reversal of a loss
contingency recorded in March 1995 for deferred Virginia retail
incremental storm damage expenses as a result of the above noted Hearing
Examiner's Report and decreased boiler plant maintenance during the
first quarter of 1996 largely as a result of significant maintenance
performed on certain generating units in 1995.
The increase in federal income tax expense attributable to
operations was primarily due to an increase in pre-tax operating income.
FINANCIAL CONDITION
Total plant and property additions including capital leases for the
current period were $142 million.
During the quarter subsidiaries issued $260 million principal amount
of long-term debt at interest rates ranging from 6-3/8% to 8%, retired
$167 million principal amount of long-term debt at interest rates
ranging from 5% to 10.78%, redeemed 75,000 shares of 9.5% cumulative
preferred stock at the $100 par value and decreased short-term debt by
$200 million. In April 1996, subsidiaries issued $50 million of term
loans at interest rates ranging from 6.42% to 6.57%, retired $222
million principal amount of first mortgage bonds with interest rates
ranging from 7-1/2% to 9-7/8% and redeemed 300,000 shares of $100 par
value 7.08% cumulative preferred stock.
NEW FERC RULES
On April 24, 1996 the Federal Energy Regulatory Commission (FERC)
issued two Final Rules regarding open access transmission and stranded
cost recovery in the wholesale market. In the open access final rule,
all public utilities with transmission lines are required to file non-
discriminatory open access tariffs that offer non-affiliated wholesale
customers the same transmission service at the same terms and costs as
they provide to themselves and their affiliates. The Company adopted an
open access transmission tariff in 1995 under the provisions of a
<PAGE>
proposed FERC rule. The open access final rule also provides for the
recovery of stranded costs from a utility's departing wholesale
customers -- that is costs that were prudently incurred to serve
departing wholesale customers and that would go unrecovered if these
customers use open access to move to another supplier. The other final
rule provides for the manner in which the open access rule will be
administered. Management does not expect these final rules to adversely
impact financial condition; however, management continues to review the
voluminous document for its potential impact.
<PAGE>
<PAGE>
<TABLE>
AEP GENERATING COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . . $57,484 $60,175
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,532 26,562
Rent - Rockport Plant Unit 2 . . . . . . . . . . . . . . . 17,077 17,145
Other Operation. . . . . . . . . . . . . . . . . . . . . . 3,149 2,672
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . 3,493 2,883
Depreciation . . . . . . . . . . . . . . . . . . . . . . . 5,413 5,417
Taxes Other Than Federal Income Taxes. . . . . . . . . . . 975 979
Federal Income Taxes . . . . . . . . . . . . . . . . . . . 1,051 817
TOTAL OPERATING EXPENSES . . . . . . . . . . . . . 54,690 56,475
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . 2,794 3,700
NONOPERATING INCOME. . . . . . . . . . . . . . . . . . . . . 790 829
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . . . . 3,584 4,529
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . . 1,086 2,410
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,498 $ 2,119
</TABLE>
<TABLE>
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . $1,955 $4,268
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . 2,498 2,119
CASH DIVIDENDS DECLARED. . . . . . . . . . . . . . . . . . . 2,500 2,000
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . . $1,953 $4,387
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
AEP GENERATING COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production. . . . . . . . . . . . . . . . . . . . . . $627,706 $627,298
General . . . . . . . . . . . . . . . . . . . . . . . 2,954 2,919
Construction Work in Progress . . . . . . . . . . . . 1,303 1,397
Total Electric Utility Plant. . . . . . . . . 631,963 631,614
Accumulated Depreciation. . . . . . . . . . . . . . . 223,546 218,055
NET ELECTRIC UTILITY PLANT. . . . . . . . . . 408,417 413,559
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . . . 13 22
Accounts Receivable . . . . . . . . . . . . . . . . . 18,390 19,028
Fuel. . . . . . . . . . . . . . . . . . . . . . . . . 21,516 19,008
Materials and Supplies. . . . . . . . . . . . . . . . 4,812 4,820
Prepayments . . . . . . . . . . . . . . . . . . . . . 656 673
TOTAL CURRENT ASSETS. . . . . . . . . . . . . 45,387 43,551
REGULATORY ASSETS . . . . . . . . . . . . . . . . . . . 6,021 6,076
DEFERRED CHARGES. . . . . . . . . . . . . . . . . . . . 3,999 1,693
TOTAL . . . . . . . . . . . . . . . . . . . $463,824 $464,879
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AEP GENERATING COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - Par Value $1,000:
Authorized and Outstanding - 1,000 Shares . . . . . $ 1,000 $ 1,000
Paid-in Capital . . . . . . . . . . . . . . . . . . . 47,235 47,735
Retained Earnings . . . . . . . . . . . . . . . . . . 1,953 1,955
Total Common Shareholder's Equity . . . . . . 50,188 50,690
Long-term Debt. . . . . . . . . . . . . . . . . . . . 89,542 89,538
TOTAL CAPITALIZATION. . . . . . . . . . . . . 139,730 140,228
OTHER NONCURRENT LIABILITIES. . . . . . . . . . . . . . 1,745 1,830
CURRENT LIABILITIES:
Short-term Debt - Notes Payable . . . . . . . . . . . 175 21,725
Accounts Payable. . . . . . . . . . . . . . . . . . . 9,309 9,094
Taxes Accrued . . . . . . . . . . . . . . . . . . . . 6,452 2,997
Rent Accrued - Rockport Plant Unit 2. . . . . . . . . 23,427 4,963
Other . . . . . . . . . . . . . . . . . . . . . . . . 4,449 4,508
TOTAL CURRENT LIABILITIES . . . . . . . . . . 43,812 43,287
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2 . . . . . . . . . . . . . . . . 148,650 150,043
REGULATORY LIABILITIES:
Deferred Investment Tax Credits . . . . . . . . . . . 76,105 76,949
Amounts Due to Customers for Income Taxes . . . . . . 36,194 36,517
Other . . . . . . . . . . . . . . . . . . . . . . . . 207 201
TOTAL REGULATORY LIABILITIES. . . . . . . . . 112,506 113,667
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . 17,381 15,824
TOTAL . . . . . . . . . . . . . . . . . . . $463,824 $464,879
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AEP GENERATING COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 2,498 $ 2,119
Adjustments for Noncash Items:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 5,413 5,417
Deferred Federal Income Taxes. . . . . . . . . . . . . . 1,234 1,187
Deferred Investment Tax Credits. . . . . . . . . . . . . (844) (846)
Amortization of Deferred Gain on Sale and Leaseback -
Rockport Plant Unit 2. . . . . . . . . . . . . . . . . (1,393) (1,392)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable. . . . . . . . . . . . . . . . . . . 638 263
Fuel, Materials and Supplies . . . . . . . . . . . . . . (2,500) 833
Accounts Payable . . . . . . . . . . . . . . . . . . . . 215 (3,475)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 3,455 2,590
Rent Accrued - Rockport Plant Unit 2 . . . . . . . . . . 18,464 18,538
Other (net). . . . . . . . . . . . . . . . . . . . . . . . (2,280) (5,946)
Net Cash Flows From Operating Activities . . . . . . 24,900 19,288
INVESTING ACTIVITIES - Construction Expenditures . . . . . . (359) (1,066)
FINANCING ACTIVITIES:
Capital Contributions Returned to Parent Company . . . . . (500) -
Change in Short-term Debt (net). . . . . . . . . . . . . . (21,550) (7,200)
Dividends Paid . . . . . . . . . . . . . . . . . . . . . . (2,500) (2,000)
Net Cash Flows Used For Financing Activities . . . . (24,550) (9,200)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . (9) 9,022
Cash and Cash Equivalents at Beginning of Period . . . . . . 22 7
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 13 $ 9,029
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $1,095,000 and
$4,538,000 and for income taxes was ($491,000) and $175,000 in 1996 and 1995,
respectively.
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
AEP GENERATING COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
The accompanying unaudited financial statements should be read
in conjunction with the 1995 Annual Report as incorporated in and
filed with the Form 10-K. Certain prior-period amounts have been
reclassified to conform to current-period presentation. Effective
January 1, 1996 the Company adopted Statement of Financial
Accounting Standards No. 121 "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to Be Dispoed Of" with
no significant impact on the financial statements.
AEP GENERATING COMPANY
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
FIRST QUARTER 1996 vs. FIRST QUARTER 1995
Operating revenues are derived from the sale of Rockport Plant
energy and capacity to two affiliated companies and one
unaffiliated utility pursuant to Federal Energy Regulatory
Commission (FERC) approved long-term unit power agreements. The
unit power agreements provide for recovery of costs including a
FERC approved rate of return on common equity and a return on other
capital net of temporary cash investments.
Net income increased $0.4 million or 18% resulting from the
full recovery of interest expense through the return on other
capital component of the unit power bills compared with 1995 when
the unit power agreement mechanism prevented the Company from
recovering all interest costs in the unit power bills.
Income statement items which changed significantly were as
follows: Increase (Decrease)
(in millions) %
Operating Revenues. . . . . . . . . . . . $(2.7) (4)
Fuel Expense. . . . . . . . . . . . . . . (3.0) (11)
Other Operation Expense . . . . . . . . . 0.5 18
Maintenance Expense . . . . . . . . . . . 0.6 21
Federal Income Taxes. . . . . . . . . . . 0.2 29
Interest Charges. . . . . . . . . . . . . (1.3) (55)
<PAGE>
The decrease in operating revenues reflects the decrease in
billable operating expenses primarily fuel and interest costs.
The decline in fuel expense is mainly attributable to an 11%
reduction in generation due to Rockport Plant Unit 2 being out-of-service for
planned general boiler inspection and repair from mid-March of 1996 through
the end of the first quarter.
Other operation expense increased mainly due to increased AEP
Service Corporation billings for engineering and other professional
services and increased employee benefits expenses.
The increase in maintenance expense resulted from the general
boiler inspection and repairs being performed on Rockport Unit 2.
Federal income tax expense attributable to operations increased
primarily due to an increase in pre-tax operating income.
Interest charges declined primarily due to refinancing of $90
million of long-term debt at lower variable rates and the
retirement of $20 million of long-term debt in the third quarter of
1995.
<PAGE>
<PAGE>
<TABLE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . $440,972 $407,516
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 89,596 99,893
Purchased Power. . . . . . . . . . . . . . . . . . . 91,127 63,958
Other Operation. . . . . . . . . . . . . . . . . . . 62,743 49,973
Maintenance. . . . . . . . . . . . . . . . . . . . . 23,151 36,464
Depreciation and Amortization. . . . . . . . . . . . 32,873 33,090
Taxes Other Than Federal Income Taxes. . . . . . . . 31,302 31,729
Federal Income Taxes . . . . . . . . . . . . . . . . 26,543 23,265
TOTAL OPERATING EXPENSES . . . . . . . . . . 357,335 338,372
OPERATING INCOME . . . . . . . . . . . . . . . . . . . 83,637 69,144
NONOPERATING INCOME (LOSS) . . . . . . . . . . . . . . 597 (835)
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . 84,234 68,309
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . 28,610 26,372
NET INCOME . . . . . . . . . . . . . . . . . . . . . . 55,624 41,937
PREFERRED STOCK DIVIDEND REQUIREMENTS. . . . . . . . . 4,101 4,104
EARNINGS APPLICABLE TO COMMON STOCK. . . . . . . . . . $ 51,523 $ 37,833
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . $199,021 $206,361
NET INCOME . . . . . . . . . . . . . . . . . . . . . . 55,624 41,937
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . . . . . . . . 27,075 26,709
Cumulative Preferred Stock . . . . . . . . . . . . 3,917 3,919
Capital Stock Expense. . . . . . . . . . . . . . . . 184 185
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . $223,469 $217,485
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . $1,859,516 $1,857,621
Transmission . . . . . . . . . . . . . . . . . . 1,046,880 1,041,415
Distribution . . . . . . . . . . . . . . . . . . 1,426,870 1,409,407
General. . . . . . . . . . . . . . . . . . . . . 180,327 169,602
Construction Work in Progress. . . . . . . . . . 63,686 80,391
Total Electric Utility Plant . . . . . . 4,577,279 4,558,436
Accumulated Depreciation and Amortization. . . . 1,716,577 1,694,746
NET ELECTRIC UTILITY PLANT . . . . . . . 2,860,702 2,863,690
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . 30,786 31,523
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . 103,138 8,664
Accounts Receivable (net). . . . . . . . . . . . 171,182 140,158
Fuel . . . . . . . . . . . . . . . . . . . . . . 58,920 69,037
Materials and Supplies . . . . . . . . . . . . . 54,097 55,756
Accrued Utility Revenues . . . . . . . . . . . . 55,059 65,078
Prepayments. . . . . . . . . . . . . . . . . . . 18,878 8,579
TOTAL CURRENT ASSETS . . . . . . . . . . 461,274 347,272
REGULATORY ASSETS. . . . . . . . . . . . . . . . . 443,149 435,352
DEFERRED CHARGES . . . . . . . . . . . . . . . . . 64,553 57,541
TOTAL. . . . . . . . . . . . . . . . . $3,860,464 $3,735,378
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 30,000,000 Shares
Outstanding - 13,499,500 Shares. . . . . . . $ 260,458 $ 260,458
Paid-in Capital. . . . . . . . . . . . . . . . 525,235 525,051
Retained Earnings. . . . . . . . . . . . . . . 223,469 199,021
Total Common Shareholder's Equity. . . 1,009,162 984,530
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . 55,000 55,000
Subject to Mandatory Redemption. . . . . . . 190,085 190,085
Long-term Debt . . . . . . . . . . . . . . . . 1,301,679 1,278,433
TOTAL CAPITALIZATION . . . . . . . . . 2,555,926 2,508,048
OTHER NONCURRENT LIABILITIES . . . . . . . . . . 116,598 102,178
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . 159,812 7,251
Short-term Debt. . . . . . . . . . . . . . . . - 125,525
Accounts Payable . . . . . . . . . . . . . . . 91,251 82,224
Taxes Accrued. . . . . . . . . . . . . . . . . 81,535 48,666
Customer Deposits. . . . . . . . . . . . . . . 14,242 14,411
Interest Accrued . . . . . . . . . . . . . . . 35,022 19,057
Other. . . . . . . . . . . . . . . . . . . . . 56,736 75,303
TOTAL CURRENT LIABILITIES. . . . . . . 438,598 372,437
DEFERRED INCOME TAXES. . . . . . . . . . . . . . 653,843 656,006
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . 88,287 89,682
DEFERRED CREDITS . . . . . . . . . . . . . . . . 7,212 7,027
CONTINGENCIES (Note 4)
TOTAL. . . . . . . . . . . . . . . . $3,860,464 $3,735,378
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . $ 55,624 $ 41,937
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . 33,199 33,506
Deferred Federal Income Taxes. . . . . . . . . . (2,689) (1,823)
Deferred Investment Tax Credits. . . . . . . . . (1,205) (1,215)
Provision for Rate Refunds . . . . . . . . . . . 15,869 4,722
Storm Damage Expense Amortization (Deferrals). . (7,303) 9,926
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . (31,024) (6,396)
Fuel, Materials and Supplies . . . . . . . . . . 11,776 (2,586)
Accrued Utility Revenues . . . . . . . . . . . . 10,019 11,035
Prepayments. . . . . . . . . . . . . . . . . . . (10,299) (13,572)
Accounts Payable . . . . . . . . . . . . . . . . 9,027 (13,879)
Taxes Accrued. . . . . . . . . . . . . . . . . . 32,869 27,172
Interest Accrued . . . . . . . . . . . . . . . . 15,965 17,792
Other (net). . . . . . . . . . . . . . . . . . . . (26,474) (11,566)
Net Cash Flows From Operating Activities . . 105,354 95,053
INVESTING ACTIVITIES - Construction Expenditures . . (29,069) (44,452)
FINANCING ACTIVITIES:
Capital Contributions From Parent Company. . . . . - 15,000
Issuance of Long-term Debt . . . . . . . . . . . . 198,266 49,564
Change in Short-term Debt (net). . . . . . . . . . (125,525) (83,100)
Retirement of Long-term Debt . . . . . . . . . . . (23,560) (1,102)
Dividends Paid on Common Stock . . . . . . . . . . (27,075) (26,709)
Dividends Paid on Cumulative Preferred Stock . . . (3,917) (3,919)
Net Cash Flows From (Used For) Financing
Activities . . . . . . . . . . . . . . . . 18,189 (50,266)
Net Increase in Cash and Cash Equivalents. . . . . . 94,474 335
Cash and Cash Equivalents at Beginning of Period . . 8,664 5,297
Cash and Cash Equivalents at End of Period . . . . . $ 103,138 $ 5,632
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $11,902,000
and $7,977,000 and for income taxes was $(506,000) and $562,000 in 1996 and
1995, respectively. Noncash acquisitions under capital leases were
$2,699,000 and $4,572,000 in 1996 and 1995, respectively.
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial
statements should be read in conjunction with the 1995 Annual
Report as incorporated in and filed with the Form 10-K.
Effective January 1, 1996 the Company adopted Statement of
Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to
Be Disposed Of" with no significant impact on the financial
statements.
2. RATE MATTERS
Virginia
On March 28, 1996 a report from a Virginia State
Corporation Commission (Virginia SCC) Hearing Examiner was
issued in the Company's pending Virginia retail rate case. The
Company filed an application in September 1994 seeking an
increase in annual base rates of $15.7 million which was
implemented, subject to refund, on November 15, 1994. The
Hearing Examiner's recommendations included no rate increase,
recovery and amortization of deferred 1994 incremental storm
damages over 5 years and the reversal of capitalized software
costs incurred prior to May 1993. The Company has provided for
a revenue refund liability of $24.2 million, including interest
of $1.2 million which is expected to provide for the ultimate
refund to customers.
West Virginia
Under the terms of a 1993 settlement agreement in the West
Virginia jurisdiction, the Company agreed to a 3-year base rate
freeze and suspension of the Public Service Commission of West
Virgina (WVPSC) Expanded Net Energy Cost (ENEC) recovery
mechanism until October 31, 1996. The Company has been engaged
in negotiations with the interested parties and in April 1996
filed a Joint Petition with the WVPSC to initiate a proceeding
to determine rates for the period subsequent to October 31,
1996.
3. FINANCING ACTIVITIES
In February 1996 the Company redeemed $16 million of first
mortgage bonds with interest rates ranging from 8.75% to 9-7/8%
due 2020 through 2022. In March 1996 the Company issued $100
million of 6-3/8% Series First Mortgage Bonds due in 2001 and
$100 million of 6.80% Series First Mortgage Bonds due in 2006.
The proceeds were used to reduce outstanding short-term debt
and in April 1996 to redeem $160 million of first mortgage
bonds with interest rates ranging from 7-1/2% to 9-7/8% due
1998 through 2020. The April redemption of these first
mortgage bonds removed the restriction on the use of retained
earnings for common stock dividends.
<PAGE>
4. CONTINGENCIES
On April 24, 1996 the Federal Energy Regulatory Commission
(FERC) issued two Final Rules regarding open access
transmission and stranded cost recovery in the wholesale
market. In the open access final rule, all public utilities
with transmission lines are required to file non-discriminatory
open access tariffs that offer non-affiliated wholesale
customers the same transmission service at the same terms and
costs as they provide to themselves and their affiliates. The
Company adopted an open access transmission tariff in 1995
under the provisions of a proposed FERC rule. The open access
final rule also provides for the recovery of stranded costs
from a utility's departing wholesale customers -- that is costs
that were prudently incurred to serve departing wholesale
customers and that would go unrecovered if these customers use
open access to move to another supplier. The other final rule
provides for the manner in which the open access rule will be
administered. Management does not expect these final rules to
adversely impact financial condition; however, management
continues to review the voluminous document for its potential
impact.
The Company continues to be involved in certain other
matters discussed in its 1995 Annual Report.
<PAGE>
<PAGE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FIRST QUARTER 1996 vs. FIRST QUARTER 1995
RESULTS OF OPERATIONS
An increase in energy sales to wholesale, residential and
commercial customers due mainly to colder winter weather resulted
in a 33% increase in net income of $13.7 million.
Income statement line items which changed significantly were:
Increase (Decrease)
(in millions) %
Operating Revenues. . . . . . . . . . $ 33.5 8
Fuel Expense. . . . . . . . . . . . . (10.3) (10)
Purchased Power Expense . . . . . . . 27.2 42
Other Operation Expense . . . . . . . 12.8 26
Maintenance Expense . . . . . . . . . (13.3) (37)
Federal Income Taxes. . . . . . . . . 3.3 14
Operating revenues increased due to a 72% increase in energy
sales to wholesale customers and an 8% increase in retail sales
partly offset by an $8.7 million provision for revenue refund
recorded as a result of a Hearing Examiner's report on the
Company's pending Virginia retail base rate case. Wholesale energy
sales rose mainly due to an increase in energy sales by the AEP
System Power Pool (Power Pool) reflecting increased weather-related
energy demand of unaffiliated utilities. Energy sales to retail
customers rose as consumption by all customer classes increased
reflecting the effects of colder winter weather and growth in the
number of customers. Sales to residential, commercial and
industrial customers increased 13%, 7% and 2%, respectively,
reflecting increased usage and growth in the number of customers in
all retail categories.
A decrease in coal-fired net generation was responsible for the
decrease in fuel expense. The Company increased its purchases of
energy from the Power Pool to meet the increased demand for energy
accounting for the rise in purchased power expense.
<PAGE>
<PAGE>
Other operation expense increased primarily due to the write-off of
$3.9 million of previously deferred research costs related
to pressurized fluidized bed combustion technology and the
expensing of $2.8 million of capitalized software costs as a result
of the Hearing Examiner's report.
The reversal in March 1996 of a $7.8 million loss provision for
deferred Virginia retail incremental storm damage expenses recorded
in March 1995 accounted for the decrease in maintenance expense.
The provision was reversed as a result of the Hearing Examiner's
report.
The increase in federal income tax expense was primarily due
to an increase in pre-tax operating income offset in part by
changes in certain book/tax differences accounted for on a flow-through basis.
FINANCIAL CONDITION
Total plant and property additions including capital leases for
the first three months of 1996 were $32 million.
In March 1996, the Company issued $100 million of 6-3/8% Series
First Mortgage Bonds due in 2001 and $100 million of 6.80% Series
First Mortgage Bonds due in 2006. The proceeds were used to reduce
outstanding short-term debt and in April 1996 redeem $160 million
of first mortgage bonds with interest rates ranging from 7-1/2% to
9-7/8% due 1998 through 2020. The redemption of these first
mortgage bonds removed the restriction on the use of retained
earnings for common stock dividends.
NEW FERC RULES
On April 24, 1996 the Federal Energy Regulatory Commission
(FERC) issued two Final Rules regarding open access transmission
and stranded cost recovery in the wholesale market. In the open
access final rule, all public utilities with transmission lines are
required to file non-discriminatory open access tariffs that offer
non-affiliated wholesale customers the same transmission service at
the same terms and costs as they provide to themselves and their
affiliates. The Company adopted an open access transmission tariff
in 1995 under the provisions of a proposed FERC rule. The open
access final rule also provides for the recovery of stranded costs
<PAGE>
from a utility's departing wholesale customers -- that is costs
that were prudently incurred to serve departing wholesale customers
and that would go unrecovered if these customers use open access to
move to another supplier. The other final rule provides for the
manner in which the open access rule will be administered.
Management does not expect these final rules to adversely impact
financial condition; however, management continues to review the
voluminous document for its potential impact.
<PAGE>
<PAGE>
<TABLE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . $271,040 $257,005
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . 47,506 51,306
Purchased Power. . . . . . . . . . . . . . . . . . 43,469 31,919
Other Operation. . . . . . . . . . . . . . . . . . 44,164 45,062
Maintenance. . . . . . . . . . . . . . . . . . . . 13,923 15,403
Depreciation . . . . . . . . . . . . . . . . . . . 21,791 21,147
Amortization of Zimmer Plant Phase-in Costs. . . . 8,448 8,051
Taxes Other Than Federal Income Taxes. . . . . . . 28,107 27,031
Federal Income Taxes . . . . . . . . . . . . . . . 15,206 12,649
TOTAL OPERATING EXPENSES. . . . . . . . . . 222,614 212,568
OPERATING INCOME . . . . . . . . . . . . . . . . . . 48,426 44,437
NONOPERATING INCOME (LOSS) . . . . . . . . . . . . . (2,905) 1,366
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . 45,521 45,803
INTEREST CHARGES . . . . . . . . . . . . . . . . . . 20,395 20,278
NET INCOME . . . . . . . . . . . . . . . . . . . . . 25,126 25,525
PREFERRED STOCK DIVIDEND REQUIREMENTS. . . . . . . . 1,670 3,203
EARNINGS APPLICABLE TO COMMON STOCK. . . . . . . . . $ 23,456 $ 22,322
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . $74,320 $46,976
NET INCOME . . . . . . . . . . . . . . . . . . . . . . 25,126 25,525
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . . . . . . . . 18,969 17,975
Cumulative Preferred Stock . . . . . . . . . . . . 1,422 3,203
Capital Stock Expense. . . . . . . . . . . . . . . . 71 35
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . $78,984 $51,288
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . $1,489,949 $1,481,309
Transmission . . . . . . . . . . . . . . . . . . 315,659 314,413
Distribution . . . . . . . . . . . . . . . . . . 853,236 843,228
General. . . . . . . . . . . . . . . . . . . . . 118,797 117,185
Construction Work in Progress. . . . . . . . . . 55,345 64,073
Total Electric Utility Plant . . . . . . 2,832,986 2,820,208
Accumulated Depreciation . . . . . . . . . . . . 971,689 953,170
NET ELECTRIC UTILITY PLANT . . . . . . . 1,861,297 1,867,038
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . 25,337 25,950
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . 11,366 10,577
Accounts Receivable (net). . . . . . . . . . . . 66,618 65,853
Fuel . . . . . . . . . . . . . . . . . . . . . . 20,293 24,316
Materials and Supplies . . . . . . . . . . . . . 24,018 23,519
Accrued Utility Revenues . . . . . . . . . . . . 31,701 40,389
Prepayments and Other. . . . . . . . . . . . . . 41,241 32,116
TOTAL CURRENT ASSETS . . . . . . . . . . 195,237 196,770
REGULATORY ASSETS. . . . . . . . . . . . . . . . . 428,452 438,005
DEFERRED CHARGES . . . . . . . . . . . . . . . . . 50,691 66,363
TOTAL. . . . . . . . . . . . . . . . . $2,561,014 $2,594,126
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 24,000,000 Shares
Outstanding - 16,410,426 Shares. . . . . . . $ 41,026 $ 41,026
Paid-in Capital. . . . . . . . . . . . . . . . 574,497 574,427
Retained Earnings. . . . . . . . . . . . . . . 78,984 74,320
Total Common Shareholder's Equity. . . 694,507 689,773
Cumulative Preferred Stock - Subject to
Mandatory Redemption . . . . . . . . . . . . 75,000 75,000
Long-term Debt . . . . . . . . . . . . . . . . 940,922 990,796
TOTAL CAPITALIZATION . . . . . . . . . 1,710,429 1,755,569
OTHER NONCURRENT LIABILITIES . . . . . . . . . . 31,280 34,571
CURRENT LIABILITIES:
Preferred Stock Due Within One Year. . . . . . - 7,500
Long-term Debt Due Within One Year . . . . . . 50,000 -
Short-term Debt. . . . . . . . . . . . . . . . 18,275 34,325
Accounts Payable . . . . . . . . . . . . . . . 39,721 52,029
Taxes Accrued. . . . . . . . . . . . . . . . . 109,849 120,093
Interest Accrued . . . . . . . . . . . . . . . 29,724 17,016
Other. . . . . . . . . . . . . . . . . . . . . 28,907 30,955
TOTAL CURRENT LIABILITIES. . . . . . . 276,476 261,918
DEFERRED INCOME TAXES. . . . . . . . . . . . . . 460,916 464,413
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . 60,098 61,010
DEFERRED CREDITS . . . . . . . . . . . . . . . . 21,815 16,645
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . $2,561,014 $2,594,126
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . .$ 25,126 $ 25,525
Adjustments for Noncash Items:
Depreciation . . . . . . . . . . . . . . . . . . . 21,697 21,052
Deferred Federal Income Taxes. . . . . . . . . . . (1,988) (3,064)
Deferred Investment Tax Credits. . . . . . . . . . (912) (917)
Deferred Fuel Costs (net). . . . . . . . . . . . . (838) 3,539
Amortization of Zimmer Plant Operating
Expenses and Carrying Charges. . . . . . . . . . 7,776 6,819
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . (765) 4,290
Fuel, Materials and Supplies . . . . . . . . . . . 3,524 5,520
Accrued Utility Revenues . . . . . . . . . . . . . 8,688 2,090
Prepayments and Other Current Assets . . . . . . . (9,125) (1,908)
Accounts Payable . . . . . . . . . . . . . . . . . (12,308) (6,451)
Taxes Accrued. . . . . . . . . . . . . . . . . . . (10,244) (10,097)
Interest Accrued . . . . . . . . . . . . . . . . . 12,708 11,528
Other (net). . . . . . . . . . . . . . . . . . . . . 15,741 7,415
Net Cash Flows From Operating Activities . . . 59,080 65,341
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . (15,127) (21,251)
Other. . . . . . . . . . . . . . . . . . . . . . . . 955 966
Net Cash Flows Used For Investing Activities . (14,172) (20,285)
FINANCING ACTIVITIES:
Change in Short-term Debt (net). . . . . . . . . . . (16,050) -
Retirement of Cumulative Preferred Stock . . . . . . (7,500) -
Dividends Paid on Common Stock . . . . . . . . . . . (18,969) (17,975)
Dividends Paid on Cumulative Preferred Stock . . . . (1,600) (3,203)
Net Cash Flows Used For Financing Activities . (44,119) (21,178)
Net Increase in Cash and Cash Equivalents. . . . . . . 789 23,878
Cash and Cash Equivalents at Beginning of Period . . . 10,577 14,065
Cash and Cash Equivalents at End of Period . . . . . .$ 11,366 $ 37,943
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $6,717,000
and $7,688,000 and for income taxes was $(2,110,000) and $61,000 in 1996
and 1995, respectively. Noncash acquisitions under capital leases were
$1,723,000 and $2,013,000 in 1996 and 1995, respectively.
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial
statements should be read in conjunction with the 1995 Annual
Report as incorporated in and filed with the Form 10-K.
Effective January 1, 1996 the Company adopted Statement of
Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to
Be Disposed Of" with no significant impact on the financial
statements.
2. FINANCING ACTIVITIES
The Company announced that on June 12, 1996 it will redeem
the entire $50 million outstanding principal amount of its
9.625% Series First Mortgage Bonds Due 2021 at the regular
redemption price of 107.22%. Therefore at March 31, 1996 this
debt is classified as a current liability.
3. CONTINGENCIES
On April 24, 1996 the Federal Energy Regulatory Commission
(FERC) issued two Final Rules regarding open access
transmission and stranded cost recovery in the wholesale
market. In the open access final rule, all public utilities
with transmission lines are required to file non-discriminatory
open access tariffs that offer non-affiliated wholesale
customers the same transmission service at the same terms and
costs as they provide to themselves and their affiliates. The
Company adopted an open access transmission tariff in 1995
under the provisions of a proposed FERC rule. The open access
final rule also provides for the recovery of stranded costs
from a utility's departing wholesale customers -- that is costs
that were prudently incurred to serve departing wholesale
customers and that would go unrecovered if these customers use
open access to move to another supplier. The other final rule
provides for the manner in which the open access rule will be
administered. Management does not expect these final rules to
adversely impact financial condition; however, management
continues to review the voluminous document for its potential
impact.
The Company continues to be involved in certain other
matters discussed in its 1995 Annual Report.
<PAGE>
<PAGE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
FIRST QUARTER 1996 vs. FIRST QUARTER 1995
Net income decreased 2% in the first quarter of 1996 mainly due
to nonoperating loss provisions for certain demand side management
programs and for environmental remediation costs.
Income statement lines which changed significantly were as
follows:
Increase (Decrease)
(in millions) %
Operating Revenues . . . . . . . . . . . $14.0 5
Fuel Expense . . . . . . . . . . . . . . (3.8) (7)
Purchased Power Expense. . . . . . . . . 11.6 36
Maintenance Expense. . . . . . . . . . . (1.5) (10)
Federal Income Taxes . . . . . . . . . . 2.6 20
Nonoperating Income. . . . . . . . . . . (4.3) N.M.
N.M. = Not Meaningful
Operating revenues increased due to increased energy sales to
retail and wholesale customers. Energy sales to all classes of
retail customers increased over the previous year due to colder
winter weather and growth in the number of retail customers. The
number of residential and commercial customers increased by 1.8%
and 2.5%, respectively. Sales volume to wholesale customers
increased 103% primarily due to an increase in wholesale energy
sales made by the AEP System Power Pool (Power Pool) to
unaffiliated utilities mainly as a result of the colder weather.
The decline in fuel expense was due to the operation of the
fuel clause adjustment mechanism primarily reflecting the
amortization of previously overrecovered fuel costs. Under the
fuel clause adjustment mechanism the Company defers fuel expense to
the extent it varies from the allowed electric fuel component rate
until such deferrals are amortized to expense commensurate with
their inclusion in fuel rates in later months. Purchased power
expense rose due to increased energy purchases from the Power Pool
to supply increased energy demands of retail and wholesale
customers.
<PAGE>
Maintenance expense decreased due to a staffing reduction at
the Company's power plants in the fourth quarter of 1995 as part of
an AEP restructuring program to functionally realign operations.
The increase in federal income tax expense attributable to
operations was primarily due to an increase in pre-tax operating
income.
Nonoperating income declined due to an after tax provision of
$2.2 million for certain demand side management program costs, a
$0.9 million after tax provision for clean-up of underground
storage tanks at one of the Company's facilities and a decline in
the return on unrecovered Zimmer deferrals due to the declining
balance of unamortized phase-in plan deferrals.
<PAGE>
<PAGE>
<TABLE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . $329,883 $327,177
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . 60,023 62,754
Purchased Power. . . . . . . . . . . . . . . . . 34,663 27,629
Other Operation. . . . . . . . . . . . . . . . . 78,810 73,633
Maintenance. . . . . . . . . . . . . . . . . . . 26,442 32,472
Depreciation and Amortization. . . . . . . . . . 34,892 34,431
Amortization of Rockport Plant Unit 1
Phase-in Plan Deferrals. . . . . . . . . . . . 3,911 3,911
Taxes Other Than Federal Income Taxes. . . . . . 19,921 19,600
Federal Income Taxes . . . . . . . . . . . . . . 18,203 16,436
TOTAL OPERATING EXPENSES . . . . . . . . 276,865 270,866
OPERATING INCOME . . . . . . . . . . . . . . . . . 53,018 56,311
NONOPERATING INCOME (LOSS) . . . . . . . . . . . . (637) 101
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . 52,381 56,412
INTEREST CHARGES . . . . . . . . . . . . . . . . . 16,614 18,024
NET INCOME . . . . . . . . . . . . . . . . . . . . 35,767 38,388
PREFERRED STOCK DIVIDEND REQUIREMENTS. . . . . . . 2,948 2,898
EARNINGS APPLICABLE TO COMMON STOCK. . . . . . . . $ 32,819 $ 35,490
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . $235,107 $216,658
NET INCOME . . . . . . . . . . . . . . . . . . . . 35,767 38,388
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . . . . . . 28,127 27,713
Cumulative Preferred Stock . . . . . . . . . . 2,890 2,890
Capital Stock Expense. . . . . . . . . . . . . . 58 58
BALANCE AT END OF PERIOD . . . . . . . . . . . . . $239,799 $224,385
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . $2,514,067 $2,507,667
Transmission . . . . . . . . . . . . . . . . 870,509 867,541
Distribution . . . . . . . . . . . . . . . . 672,275 666,810
General (including nuclear fuel) . . . . . . 212,011 186,959
Construction Work in Progress. . . . . . . . 81,161 90,587
Total Electric Utility Plant . . . . 4,350,023 4,319,564
Accumulated Depreciation and Amortization. . 1,781,456 1,751,965
NET ELECTRIC UTILITY PLANT . . . . . 2,568,567 2,567,599
NUCLEAR DECOMMISSIONING AND SPENT NUCLEAR FUEL
DISPOSAL TRUST FUNDS . . . . . . . . . . . . 449,319 433,619
OTHER PROPERTY AND INVESTMENTS . . . . . . . . 148,038 150,994
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . 16,104 13,723
Accounts Receivable. . . . . . . . . . . . . 120,782 115,765
Allowance for Uncollectible Accounts . . . . (463) (334)
Fuel . . . . . . . . . . . . . . . . . . . . 29,334 29,093
Materials and Supplies . . . . . . . . . . . 73,267 72,861
Accrued Utility Revenues . . . . . . . . . . 30,112 43,937
Prepayments. . . . . . . . . . . . . . . . . 17,504 10,191
TOTAL CURRENT ASSETS . . . . . . . . 286,640 285,236
REGULATORY ASSETS. . . . . . . . . . . . . . . 436,218 458,525
DEFERRED CHARGES . . . . . . . . . . . . . . . 45,414 32,364
TOTAL. . . . . . . . . . . . . . . $3,934,196 $3,928,337
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 2,500,000 Shares
Outstanding - 1,400,000 Shares . . . . . . . $ 56,584 $ 56,584
Paid-in Capital. . . . . . . . . . . . . . . . 731,160 731,102
Retained Earnings. . . . . . . . . . . . . . . 239,799 235,107
Total Common Shareholder's Equity. . . 1,027,543 1,022,793
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . 22,000 52,000
Subject to Mandatory Redemption. . . . . . . 135,000 135,000
Long-term Debt . . . . . . . . . . . . . . . . 1,035,002 1,034,048
TOTAL CAPITALIZATION . . . . . . . . . 2,219,545 2,243,841
OTHER NONCURRENT LIABILITIES:
Nuclear Decommissioning. . . . . . . . . . . . 281,657 269,392
Other. . . . . . . . . . . . . . . . . . . . . 196,405 184,103
TOTAL OTHER NONCURRENT LIABILITIES . . 478,062 453,495
CURRENT LIABILITIES:
Cumulative Preferred Stock Due Within One Year 30,000 -
Long-term Debt Due Within One Year . . . . . . 40,000 6,053
Short-term Debt. . . . . . . . . . . . . . . . - 89,975
Accounts Payable . . . . . . . . . . . . . . . 44,715 60,706
Taxes Accrued. . . . . . . . . . . . . . . . . 101,348 71,696
Interest Accrued . . . . . . . . . . . . . . . 20,238 16,158
Rent Accrued - Rockport Plant Unit 2 . . . . . 23,427 4,963
Obligations Under Capital Leases . . . . . . . 38,018 31,776
Other. . . . . . . . . . . . . . . . . . . . . 68,737 69,500
TOTAL CURRENT LIABILITIES. . . . . . . 366,483 350,827
DEFERRED INCOME TAXES. . . . . . . . . . . . . . 602,976 612,147
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . 153,220 155,202
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2. . . . . . . . . . . . . 98,906 99,832
DEFERRED CREDITS . . . . . . . . . . . . . . . . 15,004 12,993
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . $3,934,196 $3,928,337
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . $ 35,767 $ 38,388
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . 36,813 36,878
Amortization of Incremental Nuclear
Refueling Outage Expenses (net). . . . . . . . 3,724 8,353
Deferred Federal Income Taxes. . . . . . . . . . (6,607) (6,834)
Deferred Investment Tax Credits. . . . . . . . . (1,982) (1,997)
Deferred Property Taxes. . . . . . . . . . . . . (12,323) (12,440)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . (4,888) 5,056
Fuel, Materials and Supplies . . . . . . . . . . (647) 3,099
Accrued Utility Revenues . . . . . . . . . . . . 13,825 3,583
Prepayments. . . . . . . . . . . . . . . . . . . (7,313) (9,111)
Accounts Payable . . . . . . . . . . . . . . . . (15,991) (26,272)
Taxes Accrued. . . . . . . . . . . . . . . . . . 29,652 34,384
Rent Accrued - Rockport Plant Unit 2 . . . . . . 18,464 18,538
Other (net). . . . . . . . . . . . . . . . . . . . 20,352 6,026
Net Cash Flows From Operating Activities . . 108,846 97,651
INVESTING ACTIVITIES - Construction Expenditures . . (17,961) (25,897)
FINANCING ACTIVITIES:
Issuance of Long-term Debt . . . . . . . . . . . . 38,579 -
Retirement of Long-term Debt . . . . . . . . . . . (6,091) -
Change in Short-term Debt (net). . . . . . . . . . (89,975) (45,475)
Dividends Paid on Common Stock . . . . . . . . . . (28,127) (27,713)
Dividends Paid on Cumulative Preferred Stock . . . (2,890) (2,890)
Net Cash Flows Used For Financing Activities (88,504) (76,078)
Net Increase (Decrease) in Cash and Cash Equivalents 2,381 (4,324)
Cash and Cash Equivalents at Beginning of Period . . 13,723 9,907
Cash and Cash Equivalents at End of Period . . . . . $ 16,104 $ 5,583
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $11,859,000 and
$15,006,000 and for income taxes was $6,817,000 and $1,362,000 in 1996 and
1995, respectively. Noncash acquisitions under capital leases were
$31,719,000 and $5,256,000 in 1996 and 1995, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements
should be read in conjunction with the 1995 Annual Report as
incorporated in and filed with the Form 10-K. Certain prior-period
amounts have been reclassified to conform to current-period
presentation. Effective January 1, 1996 the Company adopted
Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to Be
Disposed Of" with no significant impact on the financial
statements.
2. FINANCING ACTIVITIES
In March 1996 the Company redeemed $6,053,000 of 7-1/4% Sinking
Fund Debentures due 1998. Also in March 1996 $40 million of 8%
Junior Subordinated Deferrable Interest Debentures due 2026 were
issued.
In April 1996 the Company redeemed 300,000 shares of 7.08%
Cumulative Preferred Stock, par value $100, at $101.85.
The Company called for redemption, in May and June 1996, $40
million of its 9.50% First Mortgage Bonds due 2021. Therefore the
bonds were classified as a current liability on the balance sheet.
3. CONTINGENCIES
On April 24, 1996 the Federal Energy Regulatory Commission
(FERC) issued two Final Rules regarding open access transmission
and stranded cost recovery in the wholesale market. In the open
access final rule, all public utilities with transmission lines are
required to file non-discriminatory open access tariffs that offer
non-affiliated wholesale customers the same transmission service at
the same terms and costs as they provide to themselves and their
affiliates. The Company adopted an open access transmission tariff
in 1995 under the provisions of a proposed FERC rule. The open
access final rule also provides for the recovery of stranded costs
from a utility's departing wholesale customers -- that is costs
that were prudently incurred to serve departing wholesale customers
and that would go unrecovered if these customers use open access to
move to another supplier. The other final rule provides for the
manner in which the open access rule will be administered.
Management does not expect these final rules to adversely impact
financial condition; however, management continues to review the
voluminous document for its potential impact.
The Company continues to be involved in certain other matters
discussed in its 1995 Annual Report.
<PAGE>
<PAGE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FIRST QUARTER 1996 vs. FIRST QUARTER 1995
RESULTS OF OPERATIONS
Net income decreased 7% or $2.6 million as a modest revenue
increase was more than offset by increased operating expenses.
Income statement line items which changed significantly were:
Increase (Decrease)
(in millions) %
Operating Revenues. . . . . . . . . . . . $ 2.7 1
Fuel Expense. . . . . . . . . . . . . . . (2.7) (4)
Purchased Power Expense . . . . . . . . . 7.0 25
Other Operation Expense . . . . . . . . . 5.2 7
Maintenance Expense . . . . . . . . . . . (6.0) (19)
Federal Income Taxes. . . . . . . . . . . 1.8 11
Interest Charges. . . . . . . . . . . . . (1.4) (8)
Operating revenues increased 1% as a 4% increase in retail sales
was offset, in part, by a reduction in wholesale sales. The
increase in retail sales and revenues was due primarily to
increased demand by weather-sensitive residential customers
reflecting colder winter weather and the addition of a major new
industrial customer. The decrease in wholesale sales and revenues
reflects reduced energy deliveries to the AEP System Power Pool
(Power Pool) partially offset by increased sales to unaffiliated
entities. Sales to the Company's municipal and cooperative
customers and to unaffiliated utilities by the Power Pool which are
shared by the Company increased largely due to the colder winter
weather.
The decline in fuel expense was attributable to an 8% reduction
in fossil generation due to Rockport Plant Unit 2 being out-of-service for
general boiler inspection and repairs from mid-March
through the end of the quarter and slightly lower nuclear
generation as Cook Plant Unit 2 began a scheduled refueling outage
in late March.
<PAGE>
<PAGE>
Purchased power expense increased primarily due to increased
purchases from the Power Pool and the Ohio Valley Electric
Corporation, an affiliated company which is not a member of the
Power Pool. The increased purchases from the Power Pool were
needed to replace the above noted unavailability of certain
generating capacity.
The increase in other operation expense reflects an increase in
the comsumption of emission allowances, increased engineering and
other professional services billed from AEP Service Corporation,
and increased employee benefits.
Maintenance expense decreased as a result of reductions in the
number of employees and lower payments for contract labor at the
Company's nuclear power plant.
The increase in federal income taxes attributable to operations
was due to changes in certain book/tax timing differences accounted
for on a flow-through basis for ratemaking and financial reporting
purposes.
Interest charges decreased due to the refinancing of certain
fixed rate long-term debt at lower variable interest rates.
FINANCIAL CONDITION
Total plant and property additions including capital leases for
the first quarter were $50.6 million.
During the first quarter the Company redeemed $6 million of
Sinking Fund Debentures due 1998 and issued $40 million of 8%
Junior Subordinated Debentures due 2026. The proceeds were used to
reduce outstanding short-term debt, which declined $90 million from
year-end levels. On April 1, 1996 the Company redeemed 300,000
shares of 7.08% Cumulative Preferred Stock, par value $100, at
$101.85.
On April 30, 1996, $40 million was deposited with a trustee
under mortgage maintenance provisions for redemption in late May
and early June of the 9.50% Series First Mortgage Bonds due 2021
which were called on April 23.
<PAGE>
<PAGE>
NEW FERC RULES
On April 24, 1996 the Federal Energy Regulatory Commission
(FERC) issued two Final Rules regarding open access transmission
and stranded cost recovery in the wholesale market. In the open
access final rule, all public utilities with transmission lines are
required to file non-discriminatory open access tariffs that offer
non-affiliated wholesale customers the same transmission service at
the same terms and costs as they provide to themselves and their
affiliates. The Company adopted an open access transmission tariff
in 1995 under the provisions of a proposed FERC rule. The open
access final rule also provides for the recovery of stranded costs
from a utility's wholesale departing customers -- that is costs
that were prudently incurred to serve departing wholesale customers
and that would go unrecovered if these customers use open access to
move to another supplier. The other final rule provides for the
manner in which the open access rule will be administered.
Management does not expect these final rules to adversely impact
financial condition; however, management continues to review the
voluminous document for its potential impact.
<PAGE>
<PAGE>
<TABLE>
KENTUCKY POWER COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . $88,589 $85,302
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . 21,680 21,361
Purchased Power. . . . . . . . . . . . . . . . . . 22,519 22,290
Other Operation. . . . . . . . . . . . . . . . . . 12,356 10,293
Maintenance. . . . . . . . . . . . . . . . . . . . 7,720 7,151
Depreciation and Amortization. . . . . . . . . . . 6,254 6,032
Taxes Other Than Federal Income Taxes. . . . . . . 2,374 2,494
Federal Income Taxes . . . . . . . . . . . . . . . 2,528 2,038
TOTAL OPERATING EXPENSES . . . . . . . . . 75,431 71,659
OPERATING INCOME . . . . . . . . . . . . . . . . . . 13,158 13,643
NONOPERATING LOSS. . . . . . . . . . . . . . . . . . (334) (68)
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . 12,824 13,575
INTEREST CHARGES . . . . . . . . . . . . . . . . . . 6,068 5,760
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 6,756 $ 7,815
</TABLE>
<TABLE>
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . $91,381 $89,173
NET INCOME . . . . . . . . . . . . . . . . . . . . . 6,756 7,815
CASH DIVIDENDS DECLARED. . . . . . . . . . . . . . . 6,066 5,730
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . $92,071 $91,258
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
KENTUCKY POWER COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . $230,020 $230,054
Transmission . . . . . . . . . . . . . . . . 263,334 261,619
Distribution . . . . . . . . . . . . . . . . 313,817 313,783
General. . . . . . . . . . . . . . . . . . . 60,196 59,611
Construction Work in Progress. . . . . . . . 18,557 14,590
Total Electric Utility Plant . . . . 885,924 879,657
Accumulated Depreciation and Amortization. . 273,221 270,590
NET ELECTRIC UTILITY PLANT . . . . . 612,703 609,067
OTHER PROPERTY AND INVESTMENTS . . . . . . . . 6,415 6,438
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . 961 1,031
Accounts Receivable (net). . . . . . . . . . 32,125 29,913
Fuel . . . . . . . . . . . . . . . . . . . . 6,323 3,526
Materials and Supplies . . . . . . . . . . . 12,348 12,481
Accrued Utility Revenues . . . . . . . . . . 8,316 13,500
Prepayments. . . . . . . . . . . . . . . . . 1,205 1,701
TOTAL CURRENT ASSETS . . . . . . . . 61,278 62,152
REGULATORY ASSETS. . . . . . . . . . . . . . . 82,651 82,388
DEFERRED CHARGES . . . . . . . . . . . . . . . 10,009 12,153
TOTAL. . . . . . . . . . . . . . . $773,056 $772,198
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
KENTUCKY POWER COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - Par Value $50:
Authorized - 2,000,000 Shares
Outstanding - 1,009,000 Shares . . . . . . $ 50,450 $ 50,450
Paid-in Capital. . . . . . . . . . . . . . . 88,750 78,750
Retained Earnings. . . . . . . . . . . . . . 92,071 91,381
Total Common Shareholder's Equity. . 231,271 220,581
First Mortgage Bonds. . . . . . . . . . . . . 224,260 224,235
Subordinated Debentures . . . . . . . . . . . 38,864 38,854
TOTAL CAPITALIZATION . . . . . . . . 494,395 483,670
OTHER NONCURRENT LIABILITIES . . . . . . . . . 15,263 15,031
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . - 29,436
Short-term Debt. . . . . . . . . . . . . . . 48,250 27,050
Accounts Payable . . . . . . . . . . . . . . 19,664 21,766
Customer Deposits. . . . . . . . . . . . . . 3,592 3,704
Taxes Accrued. . . . . . . . . . . . . . . . 9,286 7,972
Interest Accrued . . . . . . . . . . . . . . 5,824 5,853
Other. . . . . . . . . . . . . . . . . . . . 10,326 13,283
TOTAL CURRENT LIABILITIES. . . . . . 96,942 109,064
DEFERRED INCOME TAXES. . . . . . . . . . . . . 145,589 145,005
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . 18,086 18,397
DEFERRED CREDITS . . . . . . . . . . . . . . . 2,781 1,031
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . $773,056 $772,198
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
KENTUCKY POWER COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . $ 6,756 $ 7,815
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . 6,273 6,051
Deferred Federal Income Taxes. . . . . . . . . . (148) (997)
Deferred Investment Tax Credits. . . . . . . . . (311) (314)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . (2,212) (5,123)
Fuel, Materials and Supplies . . . . . . . . . . (2,664) (1,819)
Accrued Utility Revenues . . . . . . . . . . . . 5,184 4,322
Accounts Payable . . . . . . . . . . . . . . . . (2,102) (3,048)
Taxes Accrued. . . . . . . . . . . . . . . . . . 1,314 2,802
Other (net). . . . . . . . . . . . . . . . . . . . 506 155
Net Cash Flows From Operating Activities . . 12,596 9,844
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . (8,614) (7,637)
Proceeds from Sales of Property. . . . . . . . . . 250 -
Net Cash Flows Used For Investing Activities (8,364) (7,637)
FINANCING ACTIVITIES:
Capital Contributions from Parent Company. . . . . 10,000 -
Change in Short-term Debt (net). . . . . . . . . . 21,200 3,700
Retirement of Long-term Debt . . . . . . . . . . . (29,436) -
Dividends Paid . . . . . . . . . . . . . . . . . . (6,066) (5,730)
Net Cash Flows Used For Financing Activities (4,302) (2,030)
Net Increase (Decrease) in Cash and Cash Equivalents (70) 177
Cash and Cash Equivalents at Beginning of Period . . 1,031 879
Cash and Cash Equivalents at End of Period . . . . . $ 961 $ 1,056
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $6,028,000
and $6,119,000 and for income taxes was $1,152,000 and $(108,000) in 1996
and 1995, respectively. Noncash acquisitions under capital leases were
$1,054,000 and $1,034,000 in 1996 and 1995, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
KENTUCKY POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited financial statements should be
read in conjunction with the 1995 Annual Report as incorporated
in and filed with the Form 10-K. Effective January 1, 1996 the
Company adopted Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to Be Disposed Of" with no significant impact
on the financial statements.
2. FINANCING ACTIVITIES
The Company received from its parent a cash capital
contribution of $10 million in March 1996 which was credited to
paid-in capital. In April 1996 the Company refinanced $45
million of 7-7/8% first mortgage bonds due in 2002 with the
proceeds of two $25 million term loan agreements due in 1999 and
2000 at 6.42% and 6.57% annual interest rates, respectively.
Therefore the first mortgage bonds are classified as long-term
debt on the balance sheet. The redemption of this series of
first mortgage bonds removed the restriction on the use of
retained earnings for common stock dividends.
3. CONTINGENCIES
On April 24, 1996 the Federal Energy Regulatory Commission
(FERC) issued two Final Rules regarding open access transmission
and stranded cost recovery in the wholesale market. In the open
access final rule, all public utilities with transmission lines
are required to file non-discriminatory open access tariffs that
offer non-affiliated wholesale customers the same transmission
service at the same terms and costs as they provide to
themselves and their affiliates. The Company adopted an open
access transmission tariff in 1995 under the provisions of a
proposed FERC rule. The open access final rule also provides
for the recovery of stranded costs from a utility's departing
wholesale customers -- that is costs that were prudently
incurred to serve departing wholesale customers and that would
go unrecovered if these customers use open access to move to
another supplier. The other final rule provides for the manner
in which the open access rule will be administered. Management
does not expect these final rules to adversely impact financial
condition; however, management continues to review the
voluminous document for its potential impact.
The Company continues to be involved in certain other
matters discussed in its 1995 Annual Report.
<PAGE>
<PAGE>
KENTUCKY POWER COMPANY
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
FIRST QUARTER 1996 vs. FIRST QUARTER 1995
Although operating revenues increased $3.3 million or 3.9%, net
income decreased $1.1 million or 14% from the prior period. The
decrease in net income was attributable to an increase in operation
and maintenance expenses, a write-down of certain demand side
management program equipment to estimated market value and higher
interest charges from additional long-term borrowings.
Income statement lines which changed significantly were:
Increase
(in millions) %
Operating Revenues. . . . . . . . . . . $3.3 3.9
Other Operation Expense . . . . . . . . 2.1 20.0
Maintenance Expense . . . . . . . . . . 0.6 8.0
Federal Income Taxes. . . . . . . . . . 0.5 24.0
Interest Charges. . . . . . . . . . . . 0.3 5.3
The increase in operating revenues was due to increased energy
sales to retail and wholesale customers, transmission service
revenues and the recovery of demand side management costs from
retail customers. Retail sales rose as a result of colder winter
weather in the first quarter of 1996 and growth in the number of
residential and commercial customers which led to a 12% and 8%
increase in residential and commercial energy sales, respectively.
Wholesale energy sales rose mainly due to an increase in energy
sales by the AEP System Power Pool reflecting increased weather-related energy
demand of unaffiliated utilities in the first
quarter. Transmission services provided to an unaffiliated utility
under a one year contract that began in January 1996 and open
access transmission services to other unaffiliated utilities
accounted for an increase in transmission service revenues.
Other operation expense increased mainly due to increased
accruals for incentive pay, demand side management program expenses
and increased AEP Service Corporation billings for engineering and
other professional services. The increase in maintenance expense
reflects an increased level of scheduled steam plant maintenance at
the Company's Big Sandy Plant.
<PAGE>
The increase in federal income tax expense was primarily due
to changes in certain book/tax differences accounted for on a flow-through
basis for ratemaking and financial reporting purposes.
The issuance of $40 million of Junior Subordinated Debentures
in April 1995 was the main reason for the increase in interest
charges.
<PAGE>
<PAGE>
<TABLE>
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . . . $504,741 $416,827
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,326 131,678
Purchased Power. . . . . . . . . . . . . . . . . . . . . . . 15,065 20,242
Other Operation. . . . . . . . . . . . . . . . . . . . . . . 82,891 59,700
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . 29,067 34,898
Depreciation and Amortization. . . . . . . . . . . . . . . . 34,274 33,890
Taxes Other Than Federal Income Taxes. . . . . . . . . . . . 42,203 45,337
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . 35,071 23,753
TOTAL OPERATING EXPENSES . . . . . . . . . . . . . . 416,897 349,498
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . 87,844 67,329
NONOPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 2,134 3,707
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . . . . . 89,978 71,036
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . . . 23,442 23,294
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . 66,536 47,742
PREFERRED STOCK DIVIDEND REQUIREMENTS. . . . . . . . . . . . . 2,240 3,825
EARNINGS APPLICABLE TO COMMON STOCK. . . . . . . . . . . . . . $ 64,296 $ 43,917
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . $518,029 $483,222
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . 66,536 47,742
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . . . . . . . . . . . . 35,714 34,857
Cumulative Preferred Stock . . . . . . . . . . . . . . . . 2,194 3,825
Capital Stock Expense. . . . . . . . . . . . . . . . . . . . 46 34
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $546,611 $492,248
The common stock of the Company is wholly owned by American Electric Power Company,
Inc.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $2,536,475 $2,534,893
Transmission . . . . . . . . . . . . . . . . . . . . 800,642 798,854
Distribution . . . . . . . . . . . . . . . . . . . . 833,848 833,944
General (including mining assets). . . . . . . . . . 693,778 688,253
Construction Work in Progress. . . . . . . . . . . . 69,123 59,278
Total Electric Utility Plant . . . . . . . . 4,933,866 4,915,222
Accumulated Depreciation and Amortization. . . . . . 2,130,168 2,091,148
NET ELECTRIC UTILITY PLANT . . . . . . . . . 2,803,698 2,824,074
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 108,345 107,510
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 56,379 44,000
Accounts Receivable (net). . . . . . . . . . . . . . 216,522 199,293
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 109,833 126,952
Materials and Supplies . . . . . . . . . . . . . . . 78,265 80,468
Accrued Utility Revenues . . . . . . . . . . . . . . 34,489 40,100
Prepayments. . . . . . . . . . . . . . . . . . . . . 63,111 42,286
TOTAL CURRENT ASSETS . . . . . . . . . . . . 558,599 533,099
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 556,620 562,329
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 106,878 129,552
TOTAL. . . . . . . . . . . . . . . . . . . $4,134,140 $4,156,564
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 40,000,000 Shares
Outstanding - 27,952,473 Shares. . . . . . . . . . $ 321,201 $ 321,201
Paid-in Capital. . . . . . . . . . . . . . . . . . . 459,520 459,474
Retained Earnings. . . . . . . . . . . . . . . . . . 546,611 518,029
Total Common Shareholder's Equity. . . . . . 1,327,332 1,298,704
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . . . . 41,240 41,240
Subject to Mandatory Redemption. . . . . . . . . . 115,000 115,000
Long-term Debt . . . . . . . . . . . . . . . . . . . 1,055,530 1,138,425
TOTAL CAPITALIZATION . . . . . . . . . . . . 2,539,102 2,593,369
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 223,012 214,726
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . . . . 83,505 89,207
Short-term Debt. . . . . . . . . . . . . . . . . . . 48,401 9,400
Accounts Payable . . . . . . . . . . . . . . . . . . 84,491 102,580
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 158,865 161,430
Interest Accrued . . . . . . . . . . . . . . . . . . 30,216 20,807
Obligations Under Capital Leases . . . . . . . . . . 25,030 25,172
Other. . . . . . . . . . . . . . . . . . . . . . . . 78,245 80,507
TOTAL CURRENT LIABILITIES. . . . . . . . . . 508,753 489,103
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 727,902 731,959
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 49,013 49,860
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 86,358 77,547
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . $4,134,140 $4,156,564
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 66,536 $ 47,742
Adjustments for Noncash Items:
Depreciation, Depletion and Amortization . . . . . . . . 41,119 37,448
Deferred Federal Income Taxes. . . . . . . . . . . . . . 245 5,620
Deferred Fuel Costs (net). . . . . . . . . . . . . . . . (2,754) (2,871)
Amortization of Deferred Property Taxes. . . . . . . . . 19,656 18,969
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (17,229) 4,680
Fuel, Materials and Supplies . . . . . . . . . . . . . . 19,322 (19,118)
Accrued Utility Revenues . . . . . . . . . . . . . . . . 5,611 5,262
Prepayments. . . . . . . . . . . . . . . . . . . . . . . (20,825) (21,770)
Accounts Payable . . . . . . . . . . . . . . . . . . . . (18,089) (25,956)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . (2,565) (17,416)
Interest Accrued . . . . . . . . . . . . . . . . . . . . 9,409 8,040
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 15,455 18,105
Net Cash Flows From Operating Activities . . . . . . 115,891 58,735
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (19,903) (28,825)
Proceeds from Sale of Property and Other . . . . . . . . . 4,177 1,305
Net Cash Flows Used For Investing Activities . . . . (15,726) (27,520)
FINANCING ACTIVITIES:
Change in Short-term Debt (net). . . . . . . . . . . . . . 39,001 1,140
Retirement of Long-term Debt . . . . . . . . . . . . . . . (88,879) -
Dividends Paid on Common Stock . . . . . . . . . . . . . . (35,714) (34,857)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (2,194) (3,825)
Net Cash Flows Used For Financing Activities . . . . (87,786) (37,542)
Net Increase (Decrease) in Cash and Cash Equivalents . . . . 12,379 (6,327)
Cash and Cash Equivalents at Beginning of Period . . . . . . 44,000 30,700
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 56,379 $ 24,373
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $13,325,000 and $14,585,000
and for income taxes was $2,599,000 and $985,000 in 1996 and 1995, respectively.
Noncash acquisitions under capital leases were $8,933,000 and $8,990,000 in
1996 and 1995, respectively.
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
OHIO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements
should be read in conjunction with the 1995 Annual Report as
incorporated in and filed with the Form 10-K. Effective January 1,
1996 the Company adopted Statement of Financial Accounting Standards
No. 121 "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to Be Disposed Of" with no significant impact on
the financial statements.
2. FINANCING ACTIVITY
In January 1996, the Company and a subsidiary retired three
series of long-term debt at maturity: $8 million of 5-1/8% Series
Sinking Fund Debentures, $39 million of 5% Series First Mortgage
Bonds and $8 million of 5.79% Notes Payable. In March 1996, the
Company retired the entire outstanding balances of three series of
long-term debt before maturity: $24 million of 7-3/4% Series First
Mortgage Bonds due in 2002, $5 million of 7-7/8% Series Sinking Fund
Debentures due in 1999 and $4 million of 6-5/8% Series Sinking Fund
Debentures due in 1997.
In April 1996, the Company retired the entire $17 million
outstanding balance of 7-5/8% Series First Mortgage Bonds due in
2002.
3. CONTINGENCIES
On April 24, 1996 the Federal Energy Regulatory Commission
(FERC) issued two Final Rules regarding open access transmission and
stranded cost recovery in the wholesale market. In the open access
final rule, all public utilities with transmission lines are
required to file non-discriminatory open access tariffs that offer
non-affiliated wholesale customers the same transmission service at
the same terms and costs as they provide to themselves and their
affiliates. The Company adopted an open access transmission tariff
in 1995 under the provisions of a proposed FERC rule. The open
access final rule also provides for the recovery of stranded costs
from a utility's departing wholesale customers -- that is costs that
were prudently incurred to serve departing wholesale customers and
that would go unrecovered if these customers use open access to move
to another supplier. The other final rule provides for the manner
in which the open access rule will be administered. Management does
not expect these final rules to adversely impact financial
condition; however, management continues to review the voluminous
document for its potential impact.
The Company continues to be involved in certain other matters
discussed in the 1995 Annual Report.
<PAGE>
OHIO POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FIRST QUARTER 1996 vs. FIRST QUARTER 1995
RESULTS OF OPERATIONS
Net income increased 39% or $18.8 million primarily due to a 37%
increase in energy sales mainly as a result of colder weather in 1996.
Income statement lines which changed significantly were:
Increase (Decrease)
(in millions) %
Operating Revenues. . . . . . . . . . . $87.9 21
Fuel Expense. . . . . . . . . . . . . . 46.6 35
Purchased Power Expense . . . . . . . . (5.2) (26)
Other Operation Expense . . . . . . . . 23.2 39
Maintenance Expense . . . . . . . . . . (5.8) (17)
Taxes Other Than Federal Income Taxes . (3.1) (7)
Federal Income Taxes. . . . . . . . . . 11.3 48
The significant increase in operating revenues was largely
attributable to increased energy sales and a retail rate increase.
Sales volume to wholesale customers is up 156% primarily due to an
increase in energy supplied to the AEP System Power Pool (Power Pool) as
a result of increased weather-related demand of affiliated members of
the Power Pool and the increased availability in 1996 of the Company's
two Gavin Plant generating units. The Gavin units had been out-of-service for
extended periods during the first three months of 1995 for
installation of flue gas desulfurization systems (scrubbers) and
maintenance. Wholesale energy sales by the Power Pool to unaffiliated
utilities increased in 1996 as a result of the colder weather.
Retail revenues rose 12% during the first quarter of 1996 as a
result of a March 1995 retail base rate increase, an 8% increase in
energy sales to weather sensitive residential customers, and a 6% and 1%
increase in energy sales to commercial and industrial customers,
respectively, largely due to increased usage. In 1996 there was a
slight increase in number of residential customers and a 2% increase in
commercial customers.
<PAGE>
<PAGE>
The substantial increase in fuel expense was due to increased
generation resulting from the higher demand for energy and availability
of the Gavin Plant units in 1996. The decline in purchased power
expense reflects the increased availability of the Company's generating
plants in 1996.
Other operation expense rose in 1996 primarily due to rent and other
operating costs of the recently installed Gavin Plant scrubbers and the
amortization of previously deferred Gavin expenses. In 1995, the Public
Utilities Commission of Ohio (PUCO) approved the deferral of the Ohio
retail jurisdictional share of the Gavin Plant's scrubber rent for
future recovery. In March 1995, the PUCO approved recovery of current
and deferred rent expense and authorized the amortization of the
previously deferred Gavin expenses over four years.
The decline in maintenance expense was due to decreased boiler plant
maintenance during the first quarter of 1996 largely as a result of
maintenance on the two Gavin units in 1995.
Taxes other than federal income taxes also decreased in 1996 mainly
due to a new Ohio excise tax credit based on the consumption of Ohio-mined coal
at the Company's Ohio generating plants and a decrease in the
West Virginia business and occupation tax. The West Virginia tax which
was based on West Virginia generation during the first quarter of 1995
was changed in June 1995 to a West Virginia generating capacity basis so
that the tax would be more constant in each comparable period. As a
result of extensive use of West Virginia generation in 1995, primarily
due to outages at the Gavin Plant, the generation based tax produced a
higher tax obligation in 1995 than the capacity based tax in 1996.
The increase in federal income tax expense attributable to
operations was primarily due to an increase in pre-tax operating income.
FINANCIAL CONDITION
Total plant and property additions including capital leases for the
current period were $29 million.
During the first quarter of 1996, the Company and a subsidiary
retired $88 million principal amount of long-term debt with interest
rates ranging from 5% to 7-7/8% and increased short-term debt by $39
million.
<PAGE>
<PAGE>
In April 1996, the Company retired the entire $17 million
outstanding balance of 7-5/8% Series First Mortgage Bonds due in 2002.
NEW FERC RULES
On April 24, 1996 the Federal Energy Regulatory Commission (FERC)
issued two Final Rules regarding open access transmission and stranded
cost recovery in the wholesale market. In the open access final rule,
all public utilities with transmission lines are required to file non-
discriminatory open access tariffs that offer non-affiliated wholesale
customers the same transmission service at the same terms and costs as
they provide to themselves and their affiliates. The Company adopted an
open access transmission tariff in 1995 under the provisions of a
proposed FERC rule. The open access final rule also provides for the
recovery of stranded costs from a utility's departing wholesale
customers -- that is costs that were prudently incurred to serve
departing wholesale customers and that would go unrecovered if these
customers use open access to move to another supplier. The other final
rule provides for the manner in which the open access rule will be
administered. Management does not expect these final rules to adversely
impact financial condition; however, management continues to review the
voluminous document for its potential impact.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
American Electric Power Company, Inc. ("AEP") and Ohio Power
Company ("OPCo")
Reference is made to pages 33 and 34 of the Annual Report on
Form 10-K for the year ended December 31, 1995 ("1995 10-K") for a
discussion of litigation regarding the Meigs 31 mine and the
settlement thereof. On March 22, 1996, the U.S. District Court for
the Southern District of Ohio issued an order approving the consent
decree.
Reference is made to pages 25, 26 and 34 of the 1995 10-K for
a discussion of proceedings instituted by the U.S. Environmental
Protection Agency ("Federal EPA") alleging that OPCo's Kammer Plant
has been operating in violation of applicable federally enforceable
air pollution control requirements for sulfur dioxide since January
1, 1989. OPCo has entered into a consent decree with Federal EPA
which was lodged with the U.S. District Court for the Northern
District of West Virginia on April 8, 1996 and noticed in the
Federal Register on April 12, 1996. The consent decree resolves
all disputes between OPCo and Federal EPA with respect to the
pending enforcement action without any admission of liability on
the part of OPCo. Under the terms of the consent decree, OPCo has
agreed to pay a civil penalty of $200,000 and to install low NOx
burner technology at two of the generating units at Philip Sporn
Plant in New Haven, West Virginia two years earlier than required
by the Clean Air Act. The decree extends the deadline for
compliance with the federally approved SO2 limit until at least
early 1999. The deadline is subject to further extension should
OPCo be successful in demonstrating that the burning of high sulfur
coal at Kammer Plant is appropriate under the Clean Air Act. The
deadline is also subject to acceleration if it is determined that
OPCo is responsible for delays in submission of the revised SO2
State Implementation Plan for Marshall County, West Virginia.
Item 5. Other Information.
AEP, AEP Generating Company ("AEGCo"), Appalachian Power Company
("APCo"), Columbus Southern Power Company ("CSPCo"), Indiana
Michigan Power Company ("I&M"), Kentucky Power Company ("KEPCo")
and OPCo
Reference is made to page 6 of the 1995 10-K for a discussion
of the Federal Energy Regulatory Commission's ("FERC") Notice of
Proposed Rulemaking ("Mega-NOPR"). The Mega-NOPR proposed to
require each public utility that owns or controls interstate
transmission facilities to file open access network and point-to-<PAGE>
<PAGE>
point transmission tariffs that offer services comparable to the
utility's own uses of its transmission system. The Mega-NOPR also
proposed to require utilities to functionally unbundle their
services, by requiring them to use their own tariffs in making off-system and
third-party sales. As part of the proposed rule, the
FERC issued recommended pro-forma tariffs which reflected the
Commission's preliminary views on the minimum non-price terms and
conditions for non-discriminatory transmission service. The Mega-NOPR also
proposed to allow a utility to seek recovery of certain
prudently-incurred stranded costs that result from unbundled
transmission service.
On April 24, 1996, the FERC issued Final Rules (Orders 888 and
889) adopting, with some minor changes, the proposals for open
access transmission and stranded cost recovery that it made in the
Mega-NOPR. In addition to requiring all utilities subject to its
regulation to file open-access tariffs (which are now unified in a
single point-to-point and network tariff), the new rules require
establishment of an Open Access Same-time Information System
("OASIS")- an electronic bulletin board-type system in which the
transmission provider must post information regarding available
transmission capacity, prices and other pertinent transmission
information. The rules also establish Standards of Conduct, which
require a separation of a transmitting utility's employees involved
in transmission functions from its merchant employees (those
involved in selling power). The transmission employees may not
extend any undue preference to the utility's merchant employees,
and the merchant employees are restricted from obtaining any
information regarding transmission that is not publicly available.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
OPCo
Exhibit 10 - Amendment No. 7, dated January 1, 1995,
to Station Agreement dated January 1, 1968, among
OPCo, Buckeye Power, Inc. and Cardinal Operating
Company.
APCo, CSPCo, I&M, KEPCo and OPCo
Exhibit 12 - Statement re: Computation of Ratios.
AEP, AEGCo, APCo, CSPCo, I&M, KEPCo and OPCo
Exhibit 27 - Financial Data Schedule.
II-2
<PAGE>
(b) Reports on Form 8-K:
Company Reporting Date of Report Items Reported
APCo March 19, 1996 Item 5. Other Events
Item 7. Financial
Statements and Ex-
hibits
AEP, AEGCo, CSPCo, I&M, KEPCo and OPCo
No reports on Form 8-K were filed during the quarter
ended March 31, 1996.
II-3<PAGE>
<PAGE>
In the opinion of the companies, the financial statements contained herein
reflect all adjustments (consisting of only normal recurring accruals) which are
necessary to a fair presentation of the results of operations for the interim
periods.
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 signatures for each undersigned
company shall be deemed to relate only to matters having reference to such
company and any subsidiaries thereof.
AMERICAN ELECTRIC POWER COMPANY, INC.
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Controller
and Secretary
AEP GENERATING COMPANY
G.P. Maloney P.J. DeMaria
G.P.Maloney, Vice President P.J. DeMaria, Vice President
and Controller
APPALACHIAN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
COLUMBUS SOUTHERN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
INDIANA MICHIGAN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
KENTUCKY POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
OHIO POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
Date: May 13, 1996
II-4
