UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number 1-11377
CINERGY CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1385023
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
139 East Fourth Street
Cincinnati, Ohio 45202
(Address of principal executive offices)
Registrant`s telephone number: (513) 381-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
As of April 30, 1995, 155,988,650 shares of Common Stock, par value $.01 per
share, were outstanding.
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CINERGY CORP.
TABLE OF CONTENTS
Item
Number
PART I. FINANCIAL INFORMATION
1 Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Common
Stock Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
1 Legal Proceedings
4 Submission of Matters to a Vote of Security Holders
6 Exhibits and Reports on Form 8-K
Signatures
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<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31 December 31
1995 1994
(unaudited)
(dollars in thousands)
<S> <C> <C>
Utility Plant - original cost
In service
Electric. . . . . . . . . . . . . . . . . $8 345 876 $8 292 625
Gas . . . . . . . . . . . . . . . . . . . 654 905 645 602
Common. . . . . . . . . . . . . . . . . . 185 812 185 718
9 186 593 9 123 945
Accumulated depreciation. . . . . . . . . . 3 218 005 3 163 802
5 968 588 5 960 143
Construction work in progress . . . . . . . 234 816 238 750
Total utility plant . . . . . . . . . . 6 203 404 6 198 893
Current Assets
Cash and temporary cash investments . . . . 37 279 71 880
Restricted deposits . . . . . . . . . . . . 5 544 11 288
Accounts receivable less accumulated
provision of $10,949,000 at March 31,
1995 and $9,716,000 at December 31, 1994
for doubtful accounts . . . . . . . . . . 279 258 299 509
Materials, supplies, and fuel - at average
cost
Fuel for use in electric production . . 158 044 156 028
Gas stored for current use. . . . . . . 12 166 31 284
Other materials and supplies. . . . . . 93 152 92 880
Property taxes applicable to subsequent
year. . . . . . . . . . . . . . . . . . . 114 465 112 420
Prepayments and other . . . . . . . . . . . 40 421 36 416
740 329 811 705
Other Assets
Regulatory assets
Post-in-service carrying costs and
deferred operating expenses . . . . . . 188 937 185 280
Phase-in deferred return and
depreciation. . . . . . . . . . . . . . 103 076 100 943
Deferred demand-side management costs . . 113 076 104 127
Amounts due from customers - income
taxes . . . . . . . . . . . . . . . . . 397 228 408 514
Deferred merger costs . . . . . . . . . . 52 941 49 658
Unamortized costs of reacquiring debt . . 71 208 70 424
Other . . . . . . . . . . . . . . . . . . 75 531 86 017
Other . . . . . . . . . . . . . . . . . . . 140 968 134 281
1 142 965 1 139 244
$8 086 698 $8 149 842
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
CINERGY CORP.
CAPITALIZATION AND LIABILITIES
March 31 December 31
1995 1994
(unaudited)
(dollars in thousands)
<S> <C> <C>
Common Stock Equity
Common stock - $.01 par value;
authorized shares - 600,000,000;
outstanding shares - 155,920,477 at
March 31, 1995, and 155,198,038 at
December 31, 1994 . . . . . . . . . . . . . . $ 1 559 $ 1 552
Paid-in capital . . . . . . . . . . . . . . . . 1 553 478 1 535 658
Retained earnings . . . . . . . . . . . . . . . 911 857 877 061
Total common stock equity . . . . . . . . . 2 466 894 2 414 271
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption . . . . . . 267 929 267 929
Subject to mandatory redemption . . . . . . . . 210 000 210 000
Long-term Debt. . . . . . . . . . . . . . . . . . 2 516 417 2 715 269
Total capitalization. . . . . . . . . . . . 5 461 240 5 607 469
Current Liabilities
Long-term debt due within one year. . . . . . . 174 400 60 400
Notes payable . . . . . . . . . . . . . . . . . 230 101 228 900
Accounts payable. . . . . . . . . . . . . . . . 186 005 266 467
Refund due to customers . . . . . . . . . . . . 15 601 15 482
Litigation settlement . . . . . . . . . . . . . 80 000 80 000
Accrued taxes . . . . . . . . . . . . . . . . . 303 202 258 041
Accrued interest. . . . . . . . . . . . . . . . 50 567 58 504
Other . . . . . . . . . . . . . . . . . . . . . 41 948 36 610
1 081 824 1 004 404
Other Liabilities
Deferred income taxes . . . . . . . . . . . . . 1 062 836 1 071 104
Unamortized investment tax credits . . . . . . 193 306 195 878
Accrued pension and other postretirement
benefit costs . . . . . . . . . . . . . . . . 143 271 133 578
Other . . . . . . . . . . . . . . . . . . . . . 144 221 137 409
1 543 634 1 537 969
$8 086 698 $8 149 842
</TABLE>
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<TABLE>
<CAPTION> CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Twelve Months Ended
March 31 March 31
1995 1994 1995 1994
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues
Electric . . . . . . . . . . . . . . . . . . . . . . . . $629 291 $634 582 $2 461 514 $2 409 370
Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . 175 211 229 151 388 458 505 804
804 502 863 733 2 849 972 2 915 174
Operating Expenses
Fuel used in electric production . . . . . . . . . . . . 180 951 189 418 717 518 724 397
Gas purchased. . . . . . . . . . . . . . . . . . . . . . 94 493 142 025 200 761 300 399
Purchased and exchanged power. . . . . . . . . . . . . . 5 666 19 791 34 957 50 163
Other operation. . . . . . . . . . . . . . . . . . . . . 119 888 117 774 564 076 464 454
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 44 322 46 002 199 279 197 758
Depreciation . . . . . . . . . . . . . . . . . . . . . . 73 456 72 201 295 650 283 637
Post-in-service deferred operating expenses - net. . . . (2 004) (1 457) (6 545) (9 856)
Phase-in deferred depreciation . . . . . . . . . . . . . - (1 313) (848) (6 662)
Income taxes . . . . . . . . . . . . . . . . . . . . . . 62 470 61 731 152 920 180 005
Taxes other than income taxes. . . . . . . . . . . . . . 64 047 62 758 245 304 233 084
643 289 708 930 2 403 072 2 417 379
Operating Income . . . . . . . . . . . . . . . . . . . . . 161 213 154 803 446 900 497 795
Other Income and Expenses - Net
Allowance for equity funds used during construction. . . 954 3 530 3 625 14 791
Post-in-service carrying costs . . . . . . . . . . . . . 2 568 2 201 10 147 15 544
Phase-in deferred return . . . . . . . . . . . . . . . . 2 134 7 621 9 864 31 290
Write-off of a portion of Zimmer Station . . . . . . . . - - - (234 844)
Income taxes
Related to the write-off of a portion of
Zimmer Station . . . . . . . . . . . . . . . . . . . - - - 12 085
Other. . . . . . . . . . . . . . . . . . . . . . . . . 1 045 2 102 9 552 13 583
Other - net. . . . . . . . . . . . . . . . . . . . . . . 414 (5 001) (23 029) (21 808)
7 115 10 453 10 159 (169 359)
Income Before Interest and Other Charges . . . . . . . . . 168 328 165 256 457 059 328 436
Interest and Other Charges
Interest on long-term debt . . . . . . . . . . . . . . . 55 061 56 147 218 162 226 289
Other interest . . . . . . . . . . . . . . . . . . . . . 5 311 3 360 22 321 8 717
Allowance for borrowed funds used during construction. . (2 311) (3 191) (11 452) (12 739)
Preferred dividend requirements of subsidiaries. . . . . 8 657 9 586 34 630 38 980
66 718 65 902 263 661 261 247
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $101 610 $ 99 354 $ 193 398 $ 67 189
Average Common Shares Outstanding. . . . . . . . . . . . . 155 682 145 758 149 873 144 811
Earnings Per Common Share. . . . . . . . . . . . . . . . . $.65 $.68 $1.29 $ .46
Dividends Declared Per Common Share. . . . . . . . . . . . $.43 $.38 $1.55 $1.48
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(unaudited)
Common Paid-in Retained Total Common
Stock Capital Earnings Stock Equity
(dollars in thousands)
<S> <C> <C> <C> <C>
Quarter Ended March 31, 1995
Balance January 1, 1995. . . . . . . . . . $1 552 $1 535 658 $ 877 061 $2 414 271
Net income . . . . . . . . . . . . . . . . 101 610 101 610
Issuance of 722,439 shares of
common stock . . . . . . . . . . . . . . 7 18 004 18 011
Common stock issuance expenses . . . . . . (184) (184)
Dividends on common stock
(see page 5 for per share amount). . . . (66 814) (66 814)
Balance March 31, 1995 . . . . . . . . . . $1 559 $1 553 478 $ 911 857 $2 466 894
Quarter Ended March 31, 1994
Balance January 1, 1994. . . . . . . . . . $1 453 $1 312 426 $ 907 802 $2 221 681
Net income . . . . . . . . . . . . . . . . 99 354 99 354
Issuance of 723,188 shares of
common stock . . . . . . . . . . . . . . 7 17 191 17 198
Common stock issuance expenses . . . . . . (23) (23)
Dividends on common stock
(see page 5 for per share amount). . . . (55 603) (55 603)
Other. . . . . . . . . . . . . . . . . . . (6) (6)
Balance March 31, 1994 . . . . . . . . . . $1 460 $1 329 588 $ 951 553 $2 282 601
Twelve Months Ended March 31, 1995
Balance April 1, 1994. . . . . . . . . . . $1 460 $1 329 588 $ 951 553 $2 282 601
Net income . . . . . . . . . . . . . . . . 193 398 193 398
Issuance of 9,829,293 shares of
common stock . . . . . . . . . . . . . . 99 228 695 228 794
Common stock issuance expenses . . . . . . (5 386) (5 386)
Dividends on common stock
(see page 5 for per share amount). . . . (232 573) (232 573)
Other. . . . . . . . . . . . . . . . . . . 581 (521) 60
Balance March 31, 1995 . . . . . . . . . . $1 559 $1 553 478 $ 911 857 $2 466 894
Twelve Months Ended March 31, 1994
Balance April 1, 1993. . . . . . . . . . . $1 436 $1 272 607 $1 098 332 $2 372 375
Net income . . . . . . . . . . . . . . . . 67 189 67 189
Issuance of 2,407,288 shares of
common stock . . . . . . . . . . . . . . 24 59 010 59 034
Common stock issuance expenses . . . . . . (142) (142)
Dividends on common stock
(see page 5 for per share amount). . . . (214 044) (214 044)
Other. . . . . . . . . . . . . . . . . . . (1 887) 76 (1 811)
Balance March 31, 1994 . . . . . . . . . . $1 460 $1 329 588 $ 951 553 $2 282 601
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Quarter Ended Twelve Months Ended
March 31 March 31
1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . $101 610 $ 99 354 $ 193 398 $ 67 189
Items providing (using) cash currently:
Depreciation. . . . . . . . . . . . . . . . . . . 73 456 72 201 295 650 283 637
Deferred income taxes and investment tax
credits - net . . . . . . . . . . . . . . . . . 1 769 8 591 24 104 102 841
Allowance for equity funds used during
construction. . . . . . . . . . . . . . . . . . (954) (3 530) (3 625) (14 791)
Deferred gas and electric fuel costs - net. . . . 6 984 7 604 (10 891) (7 469)
Regulatory assets
Post-in-service and phase-in cost deferrals . . (6 673) (12 592) (27 371) (63 351)
Deferred merger costs . . . . . . . . . . . . . (3 284) (9 514) (15 031) (25 613)
Other . . . . . . . . . . . . . . . . . . . . . 9 188 1 803 3 865 501
Write-off of a portion of Zimmer Station. . . . . - - - 234 844
Changes in current assets and current
liabilities
Restricted deposits . . . . . . . . . . . . . 15 (44) 10 105 66
Accounts receivable . . . . . . . . . . . . . 20 251 (24 189) 84 990 (28 025)
Materials, supplies, and fuel . . . . . . . . 16 830 19 825 (48 944) 32 154
Accounts payable. . . . . . . . . . . . . . . (80 462) (63 597) (25 056) 15 223
Refund due to customers . . . . . . . . . . . 119 (34 484) (31 747) (91 786)
Advance under accounts receivable
purchase agreement. . . . . . . . . . . . . - (49 940) - -
Accrued taxes and interest. . . . . . . . . . 37 224 34 979 7 998 1 948
Other items - net . . . . . . . . . . . . . . . . 6 063 13 590 105 042 11 678
Net cash provided by (used in)
operating activities. . . . . . . . . . . . 182 136 60 057 562 487 519 046
FINANCING ACTIVITIES
Issuance of common stock. . . . . . . . . . . . . . 17 827 17 175 223 408 58 892
Issuance of preferred stock of subsidiaries . . . . - - - 59 475
Issuance of long-term debt. . . . . . . . . . . . . - 361 025 59 910 821 041
Funds on deposit from issuance of long-term
debt. . . . . . . . . . . . . . . . . . . . . . . 5 729 9 177 24 449 38 207
Retirement of preferred stock of subsidiaries . . . - (4) (40 422) (60 111)
Redemption of long-term debt. . . . . . . . . . . . (87 517) (313 247) (87 952) (815 569)
Change in short-term debt . . . . . . . . . . . . . 1 201 69 055 (16 668) 204 099
Dividends on common stock . . . . . . . . . . . . . (66 814) (55 603) (232 573) (214 044)
Net cash provided by (used in)
financing activities. . . . . . . . . . . . (129 574) 87 578 (69 848) 91 990
INVESTING ACTIVITIES
Construction expenditures (less allowance for
equity funds used during construction). . . . . . (78 214) (88 996) (468 903) (527 531)
Deferred demand-side management costs . . . . . . . (8 949) (7 842) (48 375) (37 211)
Net cash provided by (used in)
investing activities. . . . . . . . . . . . (87 163) (96 838) (517 278) (564 742)
Net increase (decrease) in cash and
temporary cash investments. . . . . . . . . . . . . (34 601) 50 797 (24 639) 46 294
Cash and temporary cash investments at
beginning of period . . . . . . . . . . . . . . . . 71 880 11 121 61 918 15 624
Cash and temporary cash investments at
end of period . . . . . . . . . . . . . . . . . . . $ 37 279 $ 61 918 $ 37 279 $ 61 918
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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CINERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.These Consolidated Financial Statements reflect all adjustments (which
include only normal, recurring adjustments) necessary in the opinion of CINergy
Corp. (CINergy or Company) for a fair presentation of the interim results.
These statements should be read in conjunction with CINergy`s 1994 Annual
Report on Form 10-K, as amended (1994 Form 10-K) (Commission File Number
1-11377).
2. As previously discussed in the 1994 Form 10-K, The Cincinnati Gas &
Electric Company (CG&E), a subsidiary of CINergy, redeemed $59 million
principal amount of its 9.70% first mortgage bonds (due June 15, 2019) on
April 30, 1995, and $55 million principal amount of its 10 1/8% first
mortgage bonds (due May 1, 2020) on May 1, 1995. Additionally, $41
million principal amount of the 9.70% first mortgage bonds and $45 million
principal amount of the 10 1/8% first mortgage bonds were retired on March
31, 1995.
The Union Light, Heat and Power Company (ULH&P), a subsidiary of CG&E,
announced its intention to redeem $5 million principal amount of its
10.25% first mortgage bonds (due June 1, 2020) at par with cash deposited
in the Maintenance and Replacement Fund, and to redeem the remaining
amount of such bonds at the redemption price of 107.34% on June 1, 1995.
3. CG&E and ULH&P filed registration statements with the Securities and
Exchange Commission (SEC) under the Securities Act of 1933, which became
effective on May 3, 1995, with respect to the issuance of up to $500
million and $55 million, respectively, of unsecured debt. Approval has
been received from the Public Utilities Commission of Ohio and the SEC
under the Public Utility Holding Company Act of 1935 (PUHCA), with respect
to the unsecured debt to be issued by CG&E. Applications are pending
before the Kentucky Public Service Commission and the SEC under the PUHCA
with respect to the unsecured debt to be issued by ULH&P.
4. Coal tar residues and other substances associated with manufactured gas
plant (MGP) sites have been found at former MGP sites in Indiana,
including, but not limited to, several sites previously owned by PSI
Energy, Inc. (Energy), a subsidiary of CINergy. Energy has identified at
least 21 MGP sites which it previously owned, including 19 it sold in 1945
to Indiana Gas and Water Company, Inc. (now Indiana Gas Company [IGC]).
IGC has informed Energy of the basis for its position that Energy, as a
Potentially Responsible Party (PRP) under the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA), should contribute to
IGC`s response costs related to investigating and remediating
contamination at MGP sites which Energy sold to IGC.
In February 1995, Energy received notification from Northern Indiana
Public Service Company (NIPSCO) alleging Energy is a PRP under the CERCLA
with respect to contamination associated with MGP sites previously owned
and/or operated by both Energy and NIPSCO (or their predecessors). The
notification included seven sites, five of which Energy acquired from
NIPSCO and subsequently sold to IGC.
On May 3, 1995, the Indiana Utility Regulatory Commission denied IGC`s
request for recovery of costs incurred in complying with Federal, state,
and local environmental regulations related to MGP sites in which IGC has
an interest, including sites acquired from Energy. IGC has announced it
will appeal this decision, which IGC contends is contrary to decisions
made by other state utility commissions with respect to this issue. In
light of this decision, Energy is evaluating its options with respect to
rate recovery of any MGP site-related costs it may incur.
At this time, Energy is unable to predict the nature, extent, and costs
of, or Energy`s responsibility for, any future environmental
investigations and remediations which may be required at MGP sites owned
or previously owned by Energy; however, any costs that ultimately are
incurred may be material.
<PAGE>
CINERGY CORP.
MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Regulatory Matters
On March 29, 1995, the Federal Energy Regulatory Commission (FERC) issued a
Notice of Proposed Rulemaking (MEGA-NOPR) on Open Access, which is another step
in the transition towards potentially full-scale competition in the electric
utility industry. The MEGA-NOPR is essentially the electric industry`s
equivalent of the FERC`s Order 636 applicable to the natural gas industry. The
MEGA-NOPR as proposed would, among other things, provide for mandatory filing
of open access/comparability transmission tariffs, provide for functional
unbundling of all services, require utilities to use the tariffs for their own
bulk power transactions, establish an electronic bulletin board, and establish
a contract-based approach to stranded costs. A final order could be issued by
the end of 1995. CINergy Corp. (CINergy or Company) is currently evaluating
its position with respect to the provisions of the MEGA-NOPR and the potential
effects upon the Company if ultimately adopted.
Manufactured Gas Plants
Coal tar residues and other substances associated with manufactured gas plant
(MGP) sites have been found at former MGP sites in Indiana, including, but not
limited to, several sites previously owned by PSI Energy, Inc. (Energy), a
subsidiary of CINergy. Energy has identified at least 21 MGP sites which it
previously owned, including 19 it sold in 1945 to Indiana Gas and Water
Company, Inc. (now Indiana Gas Company [IGC]). IGC has informed Energy of the
basis for its position that Energy, as a Potentially Responsible Party (PRP)
under the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA), should contribute to IGC`s response costs related to investigating
and remediating contamination at MGP sites which Energy sold to IGC.
In February 1995, Energy received notification from Northern Indiana Public
Service Company (NIPSCO) alleging Energy is a PRP under the CERCLA with respect
to contamination associated with MGP sites previously owned and/or operated by
both Energy and NIPSCO (or their predecessors). The notification included
seven sites, five of which Energy acquired from NIPSCO and subsequently sold to
IGC.
On May 3, 1995, the Indiana Utility Regulatory Commission (IURC) denied IGC`s
request for recovery of costs incurred in complying with Federal, state, and
local environmental regulations related to MGP sites in which IGC has an
interest, including sites acquired from Energy. IGC has announced it will
appeal this decision, which IGC contends is contrary to decisions made by other
state utility commissions with respect to this issue. In light of this
decision, Energy is evaluating its options with respect to rate recovery of any
MGP site-related costs it may incur.
At this time, Energy is unable to predict the nature, extent, and costs of, or
Energy`s responsibility for, any future environmental investigations and
remediations which may be required at MGP sites owned or previously owned by
Energy; however, any costs that ultimately are incurred may be material.
CAPITAL REQUIREMENTS
As previously discussed in CINergy`s 1994 Annual Report on Form 10-K, as
amended (1994 Form 10-K) (Commission File Number 1-11377), The Cincinnati Gas &
Electric Company (CG&E), a subsidiary of CINergy, redeemed $59 million
principal amount of its 9.70% first mortgage bonds (due June 15, 2019) on April
30, 1995, and $55 million principal amount of its 10 1/8% first mortgage bonds
(due May 1, 2020) on May 1, 1995. Additionally, $41 million principal amount
of the 9.70% first mortgage bonds and $45 million principal amount of the 10
1/8% first mortgage bonds were retired on March 31, 1995.
The Union Light, Heat and Power Company (ULH&P), a subsidiary of CG&E,
announced its intention to redeem $5 million principal amount of its 10.25%
first mortgage bonds (due June 1, 2020) at par with cash deposited in the
Maintenance and Replacement Fund, and to redeem the remaining amount of such
bonds at the redemption price of 107.34% on June 1, 1995.
CAPITAL RESOURCES
CG&E and ULH&P filed registration statements with the Securities and Exchange
Commission (SEC) under the Securities Act of 1933, which became effective on
May 3, 1995, with respect to the issuance of up to $500 million and $55
million, respectively, of unsecured debt. Approval has been received from the
Public Utilities Commission of Ohio and the SEC under the Public Utility
Holding Company Act of 1935 (PUHCA), with respect to the unsecured debt to be
issued by CG&E. Applications are pending before the Kentucky Public Service
Commission and the SEC under PUHCA with respect to the unsecured debt to be
issued by ULH&P.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1995
Kilowatt-hour Sales
Kilowatt-hour (kwh) sales for the quarter ended March 31, 1995, decreased 3.9%
as compared to the same period last year. This decrease was due, in part, to
reduced sales to domestic customers as a result of the milder weather
conditions experienced during the period. Also significantly contributing to
this decrease was Energy`s reduced non-firm power sales for resale reflecting
lower direct power sales to other utilities. Increased non-firm power sales for
resale by CG&E and higher sales by both CG&E and Energy to industrial
customers, which reflected growth in the primary metals, stone, clay and glass
products, transportation equipment, and chemicals sectors, partially offset
these decreases.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the first quarter of 1995
decreased 4.3% as compared to the first quarter of 1994. Warmer weather during
the winter heating season led to decreases in gas sales to domestic and
commercial customers. These decreases were partially offset by increases in
the average number of both domestic and commercial customers. Industrial sales
decreased as customers continued to purchase gas directly from suppliers, using
transportation services provided by the Company. The increase in these
transportation volumes, which was over twice the decrease in industrial sales,
was primarily a result of growth in the primary metals, paper products, and
chemicals sectors.
Revenues
Electric Operating Revenues
Electric operating revenues for the quarter ended March 31, 1995, decreased
slightly when compared to the same period last year. The decrease resulting
from the reduced kwh sales as previously discussed was partially offset by
Energy`s 4.3% retail rate increase and a 1.9% rate increase applicable to
construction work in progress (CWIP) property which were approved by the IURC
on February 17, 1995 (February 1995 Order), and March 9, 1995, respectively.
Also offsetting this decrease was the implementation in May 1994, of the final
increase of a three-year retail rate phase-in plan for CG&E that was ordered by
the PUCO in May 1992 (May 1992 Order).
An analysis of electric operating revenues is shown below:
Quarter
Ended March 31
(in millions)
Electric operating revenues - March 31, 1994 $635
Increase (Decrease) due to change in:
Price per kwh
Retail 7
Sales for resale
Firm power obligations 1
Total change in price per kwh 8
Kwh sales
Retail (2)
Sales for resale
Firm power obligations (4)
Non-firm power transactions (8)
Total change in kwh sales (14)
Electric operating revenues - March 31, 1995 $629
Gas Operating Revenues
Gas operating revenues declined $54 million (23.5%) in the first quarter of
1995 when compared to the same period last year. This decrease was primarily a
result of the previously mentioned changes in gas sales volumes and the
operation of fuel adjustment clauses reflecting a decline in the average cost
of gas purchased for the period. In addition, an increase in the relative
volume of gas transported to gas sold, as previously discussed, contributed to
the decrease. Providing transportation services does not necessitate the
recovery of gas purchased costs by the Company. Consequently, the revenue per
Mcf transported is below the revenue per Mcf sold.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs, the Company`s largest operating expense, decreased $8
million (4.5%) for the quarter when compared to the same period last year. An
analysis of these fuel costs is shown below:
Quarter
Ended March 31
(in millions)
Fuel expense - March 31, 1994 $189
Increase (Decrease) due to change in:
Price of fuel (9)
Kwh generation 1
Fuel expense - March 31, 1995 $181
Gas Purchased
Gas purchased for the quarter declined $48 million (33.5%) when compared to the
same period last year mainly reflecting decreases in the average cost per Mcf
of gas purchased of 22.9% and in volumes purchased of 13.7%.
Purchased and Exchanged Power
Purchased and exchanged power decreased $14 million (71.4%) for the first
quarter when compared to the same period last year, as the coordination of
CG&E`s and Energy`s electric dispatch systems enabled CINergy to increase the
percentage of direct non-firm power sales for resale to other utilities
compared to third party power sales through CG&E`s and Energy`s systems.
Other Income and Expenses - Net
Phase-in Deferred Return
Phase-in deferred return decreased $5 million (72.0%) for the quarter from the
comparable period of 1994 as a result of implementing the final increase of a
three-year rate phase-in plan, as previously discussed.
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED MARCH 31, 1995
Kilowatt-hour Sales
Kwh sales remained relatively unchanged for the twelve months ended March 31,
1995, showing less than a 1% decrease when compared to the same period last
year. A decrease in retail sales as a result of milder weather conditions
experienced during the last half of 1994 and the first quarter of 1995 was
partially offset by an increase in industrial sales reflecting growth in the
primary metals, transportation equipment, and the bituminous coal mining
sectors. Reduced non-firm power sales for resale reflecting lower third party
power sales to other utilities also contributed to the decrease.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the twelve months ended March 31,
1995, decreased 6.2% when compared to the same period last year. Warmer
weather during the winter heating season led to decreases in gas sales to
domestic and commercial customers which were partially offset by increases in
the average number of both domestic and commercial customers. Industrial sales
decreased as industrial customers continued the previously mentioned shift in
demand toward transportation services. The increase in Mcf transported was
over three times the decrease in industrial sales, primarily as a result of
growth in the primary metals, chemicals, and food sectors.
Revenues
Electric Operating Revenues
As compared to the same period last year, electric operating revenues increased
$52 million (2.2%) primarily as a result of CG&E`s electric rate increases
which became effective May 1993, August 1993, and May 1994, PSI`s electric rate
increases which became effective February 1995 and March 1995, and the effects
of Energy`s $31 million refund accrued in June 1993 as a result of the
settlement of the IURC`s April 1990 rate order. Also contributing to this
increase were the increased industrial sales as previously discussed. Reduced
non-firm power sales for resale, as previously discussed, partially offset
these increases.
An analysis of electric operating revenues is shown below:
Twelve Months
Ended March 31
(in millions)
Electric operating revenues - March 31, 1994 $2 410
Increase (Decrease) due to change in:
Price per kwh
Retail 56
Sales for resale
Firm power obligations 3
Non-firm power transactions (1)
Total change in price per kwh 58
Kwh sales
Retail 4
Sales for resale
Firm power obligations (6)
Non-firm power transactions (4)
Total change in kwh sales (6)
Electric operating revenues - March 31, 1995 $2 462
Gas Operating Revenues
Gas operating revenues declined $117 million (23.2%) for the twelve months
ended March 31, 1995, when compared to the same period last year. This
decrease was primarily a result of the previously mentioned changes in gas
sales volumes and the operation of fuel adjustment clauses reflecting a decline
in the average cost of gas purchased for the period. In addition, an increase
in the relative volume of gas transported to gas sold, as previously discussed,
contributed to the decrease. Providing transportation services does not
necessitate the recovery of gas purchased costs by the Company. Consequently,
the revenue per Mcf transported is below the revenue per Mcf sold.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs, the Company`s largest operating expense, decreased $7
million (1.0%) for the twelve months ended March 31, 1995, when compared to the
same period last year. An analysis of these fuel costs is shown below:
Twelve Months
Ended March 31
(in millions)
Fuel expense - March 31, 1994 $725
Increase (Decrease) due to change in:
Price of fuel (17)
Kwh generation 10
Fuel expense - March 31, 1995 $718
Gas Purchased
Gas purchased for the twelve month period ended March 31, 1995, decreased $100
million (33.2%) from the same period last year primarily reflecting declines in
the average cost per Mcf of gas purchased of 20.5% and in volumes purchased of
15.9%.
Purchased and Exchanged Power
Purchased and exchanged power decreased $15 million (30.3%) for the twelve
months ended March 31, 1995, when compared to the same period last year, as the
coordination of CG&E`s and Energy`s electric dispatch systems enabled CINergy
to increase the percentage of direct non-firm power sales for resale to other
utilities compared to third party power sales through CG&E`s and Energy`s
systems.
Other Operation
Other operation expenses increased $100 million (21.4%) for the twelve month
period ended March 31, 1995, as compared to the same period in 1994 due to a
number of factors including charges of approximately $62 million for merger-
related costs and other expenditures which the Company does not expect to
recover from customers due to rate settlements related to securing support for
the merger. Additionally, fuel litigation expenses incurred by Energy
contributed to the increase.
Depreciation
Depreciation expense increased $12 million (4.2%) when compared to the same
period last year, primarily as a result of increased plant additions. Also, a
full-year`s amortization of deferred post-in-service carrying costs on the Wm.
H. Zimmer (Zimmer) and Woodsdale (Woodsdale) Generating Stations added to the
increase. CG&E began amortizing these costs over the estimated useful life of
the applicable generating station in accordance with an August 1993 order of
the PUCO (August 1993 Order).
Post-in-service Deferred Operating Expenses - Net
The $3.3 million change in post-in-service deferred operating expenses for the
twelve months ended March 31, 1995, from the comparable period of 1994
partially resulted from ceasing the deferral and commencing the amortization of
deferred operating expenses associated with the first five units of Woodsdale
in August 1993. CG&E had deferred depreciation, operation and maintenance
expenses (exclusive of fuel costs), and property taxes related to these five
units from the time the units began commercial operation until the effective
date of new rates authorized by the August 1993 Order. The deferred expenses
are being amortized over a period of 10 years. Also contributing to this
change was Energy`s January 1993 authorization received from the IURC to defer
the depreciation expense on the combustion turbine generating unit constructed
at its Cayuga Generating Station and major environmental compliance projects
from the date the projects are placed in service until the effective date of an
order in a general retail rate proceeding. The February 1995 Order authorized
Energy to begin recovering amounts deferred as of July 31, 1993 ($1 million),
over the remaining lives of the related utility plant. Additionally, the
February 1995 Order authorized Energy to continue deferral of the applicable
depreciation recorded after the above cut-off dates through February 1995, for
subsequent recovery in an IURC order associated with Energy`s July 1994 retail
rate petition which is currently pending before the IURC. The February 1995
Order also authorized Energy to continue deferral of depreciation expense on
two major environmental projects from the date the projects are placed in
service until the projects` costs are reflected in retail electric rates.
Phase-in Deferred Depreciation
Phase-in deferred depreciation is a result of the three-year rate phase-in plan
for Zimmer in accordance with the May 1992 Order. The change of $6 million for
phase-in deferred depreciation for the twelve months ended March 31, 1995,
versus the same period of 1994 reflects discontinuance of the deferral of
depreciation when the final increase of the phase-in plan became effective in
May 1994.
Taxes Other than Income Taxes
Taxes other than income taxes increased $12 million (5.2%) over the same period
of 1994, primarily due to increased excise taxes. Also contributing to this
increase were increased property taxes resulting from a greater investment in
taxable property and higher property tax rates.
Other Income and Expenses - Net
Allowance for Equity Funds Used During Construction
A decrease in the allowance for equity funds used during construction of $11
million (75.5%), as compared to the same period last year, was due largely to
an increase in short-term borrowings which resulted in a corresponding decrease
in the equity component of the allowance for funds used during construction
(AFUDC) rate.
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $5 million (34.7%) for the twelve
months ended March 31, 1995, when compared to the same period last year.
Accrual of carrying costs on the first five units of Woodsdale ceased after the
August 1993 Order which reflected Woodsdale in retail electric rates.
Additional environmental compliance projects completed by Energy which
qualified, under IURC authority, for continued accrual of the debt component of
AFUDC (post-in-service carrying costs) partially offset this decrease.
Phase-in Deferred Return
Phase-in deferred return decreased $21 million (68.5%) for the twelve month
period ended March 31, 1995, from the comparable period of 1994 as a result of
implementing the final increase of the three-year rate phase-in plan in May
1994.
Write-off of a Portion of Zimmer Station
In November 1993, CG&E wrote off Zimmer costs disallowed from rates in the May
1992 Order.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 4 of the Notes to Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders of CINergy Corp. (CINergy or Company)
was held April 20, 1995, in Cincinnati, Ohio.
(c) At the meeting, five Class I directors were elected to serve three year
terms, expiring in 1998, and one Class II director was elected to serve a one
year term, expiring in 1996, to the board of CINergy, as set forth below:
Votes Votes
For Withheld
Class I
Neil A. Armstrong 132,588,361 2,152,961
James K. Baker 132,887,242 1,854,080
Clement L. Buenger 132,689,186 2,052,136
John A. Hillenbrand, II 132,846,375 1,894,947
George C. Juilfs 132,920,953 1,820,369
Class II
Philip R. Sharp, Ph.D. 132,372,764 2,368,558
Also at the meeting, a shareholder proposal was defeated. The proposal,
if passed, would have prohibited properly executed but unmarked proxies from
being counted in voting for any matter described in the Company`s proxy
statement, and would have required additional reporting by the Company
pertaining to such unmarked proxies. There were 13,734,720 common shares for
the proposal, 98,561,014 against the proposal, 3,471,139 abstentions, and
18,974,449 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed herewith:
Exhibit
Designation Nature of Exhibit
27 Financial Data Schedule (included in
electronic submission only).
(b) No reports on Form 8-K were filed during the quarter ended March 31, 1995.
<PAGE>
SIGNATURES
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
CINergy Corp. (CINergy) believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of CINergy, these
statements reflect all adjustments (which include only normal, recurring
adjustments) necessary to reflect the results of operations for the respective
periods. The unaudited statements are subject to such adjustments as the
annual audit by independent public accountants may disclose to be necessary.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed by an
officer and the principal accounting officer on its behalf by the undersigned
thereunto duly authorized.
CINERGY CORP.
-----------------------------
Registrant
Date May 11, 1995 J. WAYNE LEONARD
-----------------------------
(J. Wayne Leonard)
Group Vice President and
Chief Financial Officer
Date May 11, 1995 CHARLES J. WINGER
-----------------------------
(Charles J. Winger)
Comptroller and Principal
Accounting Officer
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