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, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
1-11377 CINERGY CORP. 31-1385023
(A Delaware Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030
(An Ohio Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-3543 PSI ENERGY, INC. 35-0594457
(An Indiana Corporation)
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611
2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080
(A Kentucky Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas
& Electric Company, PSI Energy, Inc., and The Union Light, Heat and 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.
The Union Light, Heat and Power Company meets the conditions set forth in
General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its
company specific information with the reduced disclosure format.
As of April 30, 1998, shares of Common Stock outstanding for each registrant
were as listed:
Company Shares
Cinergy Corp., par value $.01 per share 157,764,020
The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086
PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701
The Union Light, Heat and Power Company, par value $15.00 per share 585,333
<PAGE>
TABLE OF CONTENTS
Item Page
Number Number
Glossary of Terms . . . . . . . . . . . . . . . . . . . 3
PART I. FINANCIAL INFORMATION
1 Financial Statements
Cinergy Corp.
Consolidated Balance Sheets . . . . . . . . . . . . . 6
Consolidated Statements of Income . . . . . . . . . . 8
Consolidated Statements of Changes in Common
Stock Equity. . . . . . . . . . . . . . . . . . . . 9
Consolidated Statements of Cash Flows . . . . . . . . 11
Results of Operations . . . . . . . . . . . . . . . . 12
The Cincinnati Gas & Electric Company
Consolidated Balance Sheets . . . . . . . . . . . . . 20
Consolidated Statements of Income and Comprehensive
Income. . . . . . . . . . . . . . . . . . . . . . . 22
Consolidated Statements of Cash Flows . . . . . . . . 23
Results of Operations . . . . . . . . . . . . . . . . 24
PSI Energy, Inc.
Consolidated Balance Sheets . . . . . . . . . . . . . 28
Consolidated Statements of Income and Comprehensive
Income. . . . . . . . . . . . . . . . . . . . . . . 30
Consolidated Statements of Cash Flows . . . . . . . . 31
Results of Operations . . . . . . . . . . . . . . . . 32
The Union Light, Heat and Power Company
Balance Sheets. . . . . . . . . . . . . . . . . . . . 35
Statements of Income. . . . . . . . . . . . . . . . . 37
Statements of Cash Flows. . . . . . . . . . . . . . . 38
Results of Operations . . . . . . . . . . . . . . . . 39
Notes to Financial Statements . . . . . . . . . . . . . 41
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 46
3 Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . . 49
PART II. OTHER INFORMATION
1 Legal Proceedings . . . . . . . . . . . . . . . . . . . 49
4 Submission of Matters to a Vote of Security Holders . . 49
6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 50
Signature . . . . . . . . . . . . . . . . . . . . . . . 52
<PAGE>
GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text of this combined Form
10-Q are defined below:
TERM DEFINITION
1997 Form Combined 1997 Annual Report on Form 10-K filed separately by
10-K Cinergy, CG&E, PSI, and ULH&P
Avon Energy Avon Energy Partners Holdings, an Unlimited Liability
Company and its wholly-owned subsidiary Avon Energy
Partners PLC, a Limited Liability Company
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act
CFC National Rural Utilities Cooperative Finance Corporation
CG&E The Cincinnati Gas & Electric Company (a subsidiary of
Cinergy)
Cinergy or Cinergy Corp.
Company
Cinergy UK Cinergy UK, Inc., formerly M.E. Holdings, Inc., (a
subsidiary of Cinergy Investments, Inc.) which holds
Cinergy's 50% investment in Avon Energy
Committed Lines Unsecured lines of credit
December 1996 A PUCO order issued in December 1996 on CG&E's gas rate
Order proceeding
December 1996 An Indiana Utility Regulatory Commission order issued in
DSM Order December 1996 on PSI's DSM proceeding
DSM Demand-side management
Enertech Enertech Associates, Inc., formerly named Power
International, Inc. (a subsidiary of Cinergy
Investments, Inc.)
EPA United States Environmental Protection Agency
EPS Earnings per share
February 1995 An Indiana Utility Regulatory Commission order issued in
Order February 1995
HB 443 Customer choice bill introduced by the House Chairman of
the Tourism, Development and Energy Committee in Kentucky
HJR House Joint Resolution, which calls for an executive task
force to study electricity restructuring in Kentucky
kwh Kilowatt-hour
<PAGE>
GLOSSARY OF TERMS (Continued)
TERM DEFINITION
IDEM Indiana Department of Environmental Management
IGC Indiana Gas Company, Inc., formerly Indiana Gas and Water
Company, Inc.
Investments Cinergy Investments, Inc. (a subsidiary of Cinergy)
IRS Internal Revenue Service
Mcf Thousand cubic feet
MGP Manufactured gas plant
Midlands Midlands Electricity plc
NIPSCO Northern Indiana Public Service Company
PSI PSI Energy, Inc. (a subsidiary of Cinergy)
PUCO Public Utilities Commission of Ohio
RUS Rural Utilities Service
September 1996 An Indiana Utility Regulatory Commission order issued in
Order September 1996 on PSI's retail rate proceeding
Statement 130 Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income
ULH&P The Union Light, Heat and Power Company (a wholly-owned
subsidiary of CG&E)
Uncommitted Short-term borrowings with various banks arranged on an
Lines "as offered" basis
WVPA Wabash Valley Power Association, Inc.
Zimmer CG&E's William H. Zimmer Generating Station
<PAGE>
CINERGY CORP.
AND SUBSIDIARY COMPANIES
<PAGE>
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31 December 31
1998 1997
(unaudited)
(dollars in thousands)
Utility Plant - Original Cost
In service
Electric $9,014,797 $8,981,182
Gas 753,311 746,903
Common 186,631 186,078
---------- ----------
9,954,739 9,914,163
Accumulated depreciation 3,860,682 3,800,322
---------- ----------
6,094,057 6,113,841
Construction work in progress 194,042 183,262
---------- ----------
Total utility plant 6,288,099 6,297,103
Current Assets
Cash and temporary cash investments 58,731 53,310
Restricted deposits 2,348 2,319
Accounts receivable less accumulated provision for
doubtful accounts of $10,349 at March 31, 1998,
and $10,382 at December 31, 1997 519,396 413,626
Materials, supplies, and fuel - at average cost
Fuel for use in electric production 68,292 57,916
Gas stored for current use 12,232 29,174
Other materials and supplies 77,972 76,066
Prepayments and other 47,291 38,171
---------- ----------
786,262 670,582
Other Assets
Regulatory assets
Amounts due from customers - income taxes 383,314 374,456
Post-in-service carrying costs and deferred
operating expenses 176,531 178,504
Coal contract buyout costs 117,964 122,485
Deferred demand-side management costs 101,958 109,596
Deferred merger costs 89,015 90,346
Phase-in deferred return and depreciation 85,960 89,689
Unamortized costs of reacquiring debt 65,941 66,242
Other 46,592 45,533
Investments in unconsolidated subsidiaries 580,269 537,720
Other 274,092 275,897
---------- ----------
1,921,636 1,890,468
$8,995,997 $8,858,153
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
<PAGE>
CINERGY CORP.
CAPITALIZATION AND LIABILITIES
March 31 December 31
1998 1997
(unaudited)
(dollars in thousands)
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding
shares - 157,764,020 at March 31, 1998,
and 157,744,658 at December 31, 1997 $ 1,578 $ 1,577
Paid-in capital 1,574,080 1,573,064
Retained earnings 1,002,495 967,420
Accumulated other comprehensive income (3,279) (2,861)
---------- ----------
Total common stock equity 2,574,874 2,539,200
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 92,752 177,989
Long-term Debt 2,032,156 2,150,902
---------- ----------
Total capitalization 4,699,782 4,868,091
Current Liabilities
Long-term debt due within one year 145,000 85,000
Notes payable and other short-term obligations 1,222,795 1,114,028
Accounts payable 558,021 488,716
Accrued taxes 218,251 187,033
Accrued interest 40,342 46,622
Other 98,740 79,193
---------- ----------
2,283,149 2,000,592
Other Liabilities
Deferred income taxes 1,233,505 1,248,543
Unamortized investment tax credits 163,850 166,262
Accrued pension and other postretirement
benefit costs 307,373 297,142
Other 308,338 277,523
---------- ----------
2,013,066 1,989,470
$8,995,997 $8,858,153
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<S> <C> <C> <C> <C>
Quarter Ended Twelve Months Ended
March 31 March 31
1998 1997 1998 1997
(in thousands, except per share amounts)
Operating Revenues
Electric $1,158,724 $ 817,914 $4,202,508 $2,901,780
Gas 173,061 212,266 451,940 487,145
---------- ---------- ---------- ----------
1,331,785 1,030,180 4,654,448 3,388,925
Operating Expenses
Fuel used in electric production 180,519 175,746 698,208 697,544
Gas purchased 96,611 123,968 238,801 279,859
Purchased and exchanged power 471,885 160,592 1,530,651 291,809
Other operation 163,028 163,412 637,561 615,712
Maintenance 39,066 45,854 169,683 196,120
Depreciation 73,305 71,556 290,826 284,124
Amortization of phase-in deferrals 5,539 3,371 15,651 13,569
Amortization of post-in-service
deferred operating expenses - net 1,091 1,091 4,362 425
Income taxes 70,791 63,919 255,809 208,205
Taxes other than income taxes 69,649 68,372 266,301 260,450
---------- ---------- ---------- ----------
1,171,484 877,881 4,107,853 2,847,817
Operating Income 160,301 152,299 546,595 541,108
Other Income and Expenses - Net
Allowance for equity funds used
during construction 21 191 (72) 1,065
Post-in-service carrying costs - - - 880
Phase-in deferred return 1,811 2,002 7,817 8,281
Equity in earnings of unconsolidated subsidiaries 11,854 26,500 45,746 51,930
Income taxes 13,342 791 48,488 17,109
Other - net (19,031) (2,627) (47,906) (35,415)
---------- ---------- ---------- ----------
7,997 26,857 54,073 43,850
Income Before Interest and Other Charges 168,298 179,156 600,668 584,958
Interest and Other Charges
Interest on long-term debt 43,758 49,275 176,255 190,757
Other interest 17,994 13,867 64,074 42,165
Allowance for borrowed funds
used during construction (1,947) (1,342) (6,005) (6,387)
Preferred dividend requirements of subsidiaries 2,422 3,239 11,752 19,650
---------- ---------- ---------- ----------
62,227 65,039 246,076 246,185
Net Income Before Extraordinary Item $ 106,071 $ 114,117 $ 354,592 $ 338,773
Extraordinary Item - Equity Share of
Windfall Profits Tax (Less
Applicable Income Taxes of $0) - - (109,400) -
---------- ---------- ---------- ----------
Net Income $ 106,071 $ 114,117 $ 245,192 $ 338,773
Average Common Shares Outstanding 157,764 157,679 157,706 157,679
Earnings Per Common Share (Note 9)
Net income before extraordinary item $.67 $.72 $2.24 $2.02
Net income $.67 $.72 $1.55 $2.02
Earnings Per Common Share - Assuming Dilution (Note 9)
Net income before extraordinary item $.67 $.72 $2.23 $2.01
Net income $.67 $.72 $1.54 $2.01
Dividends Declared Per Common Share $.45 $.45 $1.80 $1.76
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other Total Total
Common Paid-in Retained Comprehensive Comprehensive Common Stock
Stock Capital Earnings Income Income Equity
Quarter Ended March 31, 1998
Balance January 1, 1998 $1,577 $1,573,064 $ 967,420 $(2,861) $2,539,200
Comprehensive income
Net income 106,071 $106,071 106,071
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (367) (367)
Minimum pension liability
adjustment (51) (51)
--------
Other comprehensive income
total (418) (418)
--------
Comprehensive income total $105,653
Issuance of 19,362 shares of
common stock - net 1 289 290
Treasury shares purchased (1) (1,430) (1,431)
Treasury shares reissued 1 2,149 2,150
Dividends on common stock (see
page 8 for per share amounts) (70,994) (70,994)
Other 8 (2) 6
------ ---------- ---------- ------- ----------
Balance March 31, 1998 $1,578 $1,574,080 $1,002,495 $(3,279) $2,574,874
Quarter Ended March 31, 1997
Balance at January 1, 1997 $1,577 $1,590,735 $ 993,526 $(1,384) $2,584,454
Comprehensive income
Net income 114,117 $114,117 114,117
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (1,035) (1,035)
--------
Other comprehensive income
total (1,035) (1,035)
--------
Comprehensive income total $113,082
========
Treasury shares purchased (7) (31,947) (31,954)
Treasury shares reissued 7 21,134 21,141
Dividends on common stock (see
page 8 for per share amounts) (71,000) (71,000)
Other 12 12
------ ---------- ---------- ------- ----------
Balance March 31, 1997 $1,577 $1,579,934 $1,036,643 $(2,419) $2,615,735
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (CONTINUED)
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other Total Total
Common Paid-in Retained Comprehensive Comprehensive Common Stock
Stock Capital Earnings Income Income Equity
Twelve Months Ended March 31, 1998
Balance April 1, 1997 $1,577 $1,579,934 $1,036,643 $(2,419) $2,615,735
Comprehensive income
Net income 245,192 $245,192 245,192
Other comprehensive income,
net of tax
Foreign currency translation
adjustment 273 273
Minimum pension liability
adjustment (1,133) (1,133)
--------
Other comprehensive income
total (860) (860)
--------
Comprehensive income total $244,332
Issuance of 84,891 shares of
common stock - net 1 2,355 2,356
Treasury shares purchased (5) (15,682) (15,687)
Treasury shares reissued 5 7,744 7,749
Dividends on common stock (see
page 8 for per share amounts) (283,860) (283,860)
Other (271) 4,520 4,249
------ ---------- ---------- ------- ----------
Balance March 31, 1998 $1,578 $1,574,080 $1,002,495 $(3,279) $2,574,874
Twelve Months Ended March 31, 1997
Balance at April 1, 1996 $1,577 $1,595,435 $ 993,632 $(1,074) $2,589,570
Comprehensive income
Net income 338,773 $338,773 338,773
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (1,166) (1,166)
Minimum pension liability
adjustment (179) (179)
--------
Other comprehensive income
total (1,345) (1,345)
--------
Comprehensive income total $337,428
========
Treasury shares purchased (10) (40,717) (40,727)
Treasury shares reissued 10 25,548 25,558
Costs of reacquisition of
preferred stock of subsidiary (18,391) (18,391)
Dividends on common stock (see
page 8 for per share amounts) (277,559) (277,559)
Other (332) 188 (144)
------ ---------- ---------- ------- ----------
Balance March 31, 1997 $1,577 $1,579,934 $1,036,643 $(2,419) $2,615,735
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<S> <C> <C> <C> <C>
Year to Date Twelve Months Ended
March 31 March 31
1998 1997 1998 1997
(in thousands)
Operating Activities
Net income $106,071 $114,117 $245,192 $338,773
Items providing or (using) cash:
Depreciation 73,305 71,556 290,826 284,124
Deferred income taxes and investment tax
credits - net (12,955) (6,889) 61,572 24,045
Equity in earnings of unconsolidated subsidiaries (11,854) (26,500) (20,593) (51,930)
Extraordinary item - equity share of windfall
profits tax - - 109,400 -
Allowance for equity funds used during
construction (21) (191) 72 (1,065)
Regulatory assets - net 20,915 21,599 70,626 41,922
Changes in current assets and current
liabilities
Restricted deposits (29) (2) (625) (336)
Accounts receivable, net of reserves on
receivables sold (106,525) (8,498) (315,184) (19,527)
Materials, supplies, and fuel 4,660 30,699 (4,222) 45,535
Accounts payable 69,305 (60,734) 313,335 (36,128)
Litigation settlement - - - (80,000)
Accrued taxes and interest 24,938 52,412 (48,888) 29,121
Other items - net 25,596 (21,239) 79,010 68,573
-------- -------- -------- --------
Net cash provided by operating activities 193,406 166,330 780,521 643,107
Financing Activities
Issuance of common stock 290 - 2,356 -
Issuance of long-term debt 98,901 - 198,963 150,217
Retirement of preferred stock of subsidiaries (85,229) (25) (101,473) (212,507)
Redemption of long-term debt (160,291) (61,880) (434,723) (148,774)
Change in short-term debt 108,767 26,560 274,018 668,477
Dividends on common stock (70,802) (71,000) (283,668) (277,559)
-------- -------- -------- --------
Net cash (used in) or provided by
financing activities (108,364) (106,345) (344,527) 179,854
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (66,348) (58,909) (335,494) (332,162)
Deferred demand-side management costs (3,615) (5,109) (18,373) (39,718)
Investments in unconsolidated subsidiaries (9,658) - (38,690) (503,349)
-------- -------- -------- --------
Net cash used in investing activities (79,621) (64,018) (392,557) (875,229)
Net increase (decrease) in cash and
temporary cash investments 5,421 (4,033) 43,437 (52,268)
Cash and temporary cash investments at
beginning of period 53,310 19,327 15,294 67,562
-------- -------- -------- --------
Cash and temporary cash investments at
end of period $ 58,731 $ 15,294 $ 58,731 $ 15,294
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
CINERGY CORP.
Below is information concerning the consolidated results of operations for
Cinergy for the quarter and twelve months ended March 31, 1998. For information
concerning the results of operations for each of the other registrants for the
same quarter, see the discussion under the heading "Results of Operations"
following the financial statements of each such registrant.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998
Kwh Sales
Increased activity in Cinergy's power marketing and trading operations, for the
quarter ended March 31, 1998, led to higher non-firm power sales for resale and
significantly contributed to the increase in total kwh sales of 72%, as compared
to the same period of 1997. An increase in retail sales, which reflects higher
industrial sales and an increased average number of residential and commercial
customers, was partially offset by a decline in residential sales as a result of
milder weather during the first quarter of 1998 as compared to the first quarter
of 1997. Increased industrial sales primarily reflected growth in the primary
metals sector.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the first quarter of 1998 decreased
7.3%, as compared to the same period in 1997. Decreased residential and
commercial sales, reflecting the milder weather during the first quarter of
1998, were slightly offset by an increase in the average number of customers.
Higher gas transportation volumes reflect the continued trend of customers
purchasing gas directly from suppliers, using transportation services provided
by CG&E.
Operating Revenues
Electric Operating Revenues
Electric operating revenues for the quarter ended March 31, 1998, increased $341
million (42%), as compared to the same period last year, primarily as a result
of the increased kwh sales as previously discussed. The operation of CG&E's fuel
adjustment clauses, reflecting a higher average cost of fuel used in electric
production, also contributed to the increase.
An analysis of electric operating revenues is shown below:
Quarter
Ended March 31
(in millions)
Electric operating revenues - March 31, 1997 $818
Increase (Decrease) due to change in:
Price per kwh
Retail 15
Sales for resale
Firm power obligations (1)
Non-firm power transactions (26)
Total change in price per kwh (12)
Kwh sales
Retail 7
Sales for resale
Non-firm power transactions 343
Total change in kwh sales 350
Other 3
Electric operating revenues - March 31, 1998 $1 159
Gas Operating Revenues
The increasing trend of industrial customers purchasing gas directly from
producers and utilizing CG&E facilities to transport the gas continues to put
downward pressure on gas operating revenues. (See the "Mcf Sales and
Transportation" section.) Since providing transportation services does not
necessitate recovery of the cost of gas purchased, the revenue per Mcf
transported is less than the revenue per Mcf sold. As a result, a higher
relative volume of gas transported to gas sold translates into lower gas
operating revenues.
Gas operating revenues decreased $39 million (18%) in the first quarter of 1998,
when compared to the same period last year. The decrease in gas operating
revenues is primarily attributable to lower residential and commercial sales due
to the milder weather during the first quarter of 1998. An increase in the
relative volume of gas transported to gas sold, as previously discussed, also
contributed to the decrease.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs increased $5 million (3%) for the quarter ended March 31,
1998, as 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, 1997 $176
Increase (Decrease) due to change in:
Price of fuel (6)
Deferred fuel cost 9
Kwh generation 2
----
Fuel expense - March 31, 1998 $181
Gas Purchased
Gas purchased for the quarter ended March 31, 1998, decreased $27 million (22%),
when compared to the same period last year, reflecting a lower average cost per
Mcf purchased and a decline in the volumes of gas purchased primarily due to the
milder weather during the first quarter of 1998.
Purchased and Exchanged Power
Purchased and exchanged power increased $311 million for the quarter ended March
31, 1998, when compared to the same period last year, primarily reflecting
increased purchases of non-firm power for resale to others as a result of
increased activity in Cinergy's power marketing and trading operations.
Maintenance
For the three months ended March 31, 1998, maintenance costs decreased $7
million (15%), when compared to the three months ended March 31, 1997. This
decrease is partially due to a decline in maintenance activities associated with
postponed outages at certain of CG&E's electric production facilities. Decreased
maintenance costs, associated with CG&E's electric distribution facilities, also
contributed to the lower level of expenses for the current quarter.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for
Zimmer.
Other Income and Expenses - Net
Equity in Earnings of Unconsolidated Subsidiaries
The $15 million decrease in equity in earnings of unconsolidated subsidiaries
for the first three months of 1998, as compared to the same period of 1997, is
primarily attributable to the decrease in earnings of Midlands, which is due to
milder weather conditions and a penalty imposed on each electric distribution
company due to the delay in opening up the electricity supply business to
competition.
Other - net
The change in other - net of $16 million for the three months ended March 31,
1998, from the same period of 1997, is primarily due to a litigation settlement
(see Note 6 of the "Notes to Financial Statements" in "Part I. Financial
Information"), an increase in expenses related to Cinergy Global Power, Inc.,
which was acquired in September 1997, and an adjustment recorded in the first
quarter of 1997 related to a 1996 sale of a foreign subsidiary.
Interest and Other Charges
Interest on Long-term Debt
Interest on long-term debt decreased $6 million (11%) for the quarter ended
March 31, 1998, as compared to the same period last year, primarily due to the
net redemption of approximately $250 million of long-term debt by CG&E and PSI
during the period from February 1997 through March 1998.
Other Interest
Other interest increased $4 million (30%) for the first quarter of 1998, as
compared to the same period last year, primarily due to higher levels of
short-term borrowings, the recognition of a full quarter of interest on the
currency swap program, which was initiated in mid-February 1997, and an increase
in short-term interest rates during 1998 over 1997. The remainder of the
increase is attributable to interest resulting from an IRS audit of the 1989 and
1990 tax years.
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
Kwh Sales
Increased activity in Cinergy's power marketing and trading operations led to
higher non-firm power sales for resale and significantly contributed to the
increase in total kwh sales of 86% for the twelve months ended March 31, 1998,
as compared to the same period for 1997. An increase in retail sales, which
reflects higher industrial sales and an increase in the average number of
residential and commercial customers, was partially offset by a decline in
residential sales as a result of the milder weather experienced for the twelve
months ended March 31, 1998, as compared to the same period last year. Increased
industrial sales primarily reflected growth in the primary metals sector.
Mcf Sales and Transportation
Mcf gas sales for the twelve months ended March 31, 1998, decreased 9.5% while
transportation volumes increased 12.4%, as compared to the same period in 1997.
The decrease in Mcf sales is due, in part, to the milder weather during the
twelve month period ended March 31, 1998, and was partially offset by increases
in the average number of customers. Higher gas transportation volumes reflect
the continued trend of customers purchasing gas directly from suppliers, using
transportation services provided by CG&E.
Operating Revenues
Electric Operating Revenues
Increased kwh sales, as previously discussed, the effects of PSI's retail rate
increases approved in the September 1996 Order, as amended in August 1997, and
the December 1996 DSM Order significantly contributed to the $1.3 billion (45%)
increase in electric operating revenues for the twelve months ended March 31,
1998, when compared to the same period of 1997. Also contributing to the
increase was the return of approximately $5 million to customers in 1996 in
accordance with an order issued by the IURC in February 1995. The February 1995
Order required all retail operating income above a certain rate of return to be
refunded to customers. The operation of PSI's and CG&E's fuel adjustment
clauses, reflecting a lower average cost of fuel used in electric production,
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, 1997 $2 902
Increase (Decrease) due to change in:
Price per kwh
Retail 22
Sales for resale
Firm power obligations (13)
Non-firm power transactions 31
Total change in price per kwh 40
Kwh sales
Retail 20
Sales for resale
Firm power obligations 14
Non-firm power transactions 1 220
------
Total change in kwh sales 1 254
Other 7
Electric operating revenues - March 31, 1998 $4 203
Gas Operating Revenues
For a discussion of the continued trend of downward pressure on gas operating
revenues from increased transportation services, refer to the discussion under
the caption "Gas Operating Revenues" for Cinergy in "Results of Operations for
the Quarter Ended March 31, 1998."
Gas operating revenues decreased $35 million (7%) for the twelve months ended
March 31, 1998, when compared to the same period last year. This decrease is
primarily attributable to the decline in Mcf sales due to the milder weather. An
increase in the relative volume of gas transported to gas sold, as previously
discussed, also contributed to the decrease.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs for the twelve months ended March 31, 1998, were relatively
constant, as 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, 1997 $698
Increase (Decrease) due to change in:
Price of fuel 6
Deferred fuel cost (37)
Kwh generation 31
----
Fuel expense - March 31, 1998 $698
Gas Purchased
Gas purchased for the twelve months ended March 31, 1998, decreased $41 million
(15%) when compared to the same period last year. This decrease reflects a lower
average cost per Mcf of gas purchased and a decline in the volumes purchased as
previously discussed.
Purchased and Exchanged Power
Purchased and exchanged power increased $1.2 billion for the twelve months ended
March 31, 1998, when compared to the same period of last year, primarily
reflecting increased purchases of non-firm power for resale to others as a
result of increased activity in Cinergy's power marketing and trading
operations.
Maintenance
Maintenance costs decreased $26 million (13%) for the twelve months ended March
31, 1998, as compared to the same period last year, partially due to a decline
in maintenance activities associated with postponed outages at certain of CG&E's
and PSI's electric production facilities. Decreased maintenance costs,
associated with electric distribution facilities, also contributed to the lower
level of expenses for the current twelve month period.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for
Zimmer.
Amortization of Post-in-Service Deferred Operating Expenses - Net
Amortization of post-in-service deferred operating expenses - net reflects the
amortization and related recovery in rates of various deferrals of depreciation,
operation and maintenance expenses (exclusive of fuel costs), and property taxes
on certain generating units and other utility plant from the in-service date
until the related plant was reflected in retail rates.
Other Income and Expenses - Net
Equity in Earnings of Unconsolidated Subsidiaries
The $6 million (12%) decrease in equity in earnings of unconsolidated
subsidiaries for the twelve months ended March 31, 1998, as compared to the same
period of 1997, is primarily attributable to the decrease in earnings of
Midlands, which is due to milder weather conditions and a penalty imposed on
each electric distribution company due to the delay in opening up the
electricity supply business to competition.
Other - net
The change in other - net of $12 million for the twelve months ended March 31,
1998, as compared to the same period last year is primarily due to a litigation
settlement (see Note 6 of the "Notes to Financial Statements" in "Part I.
Financial Information"), a gain in 1996 related to the sale of certain CG&E
assets, and expenses incurred relative to non-regulated entities. These amounts
are partially offset by charges in 1996 associated with the December 1996 Order.
Interest and Other Charges
Interest on Long-term Debt
Interest on long-term debt decreased $15 million (8%) for the twelve months
ended March 31, 1998, from the same period of 1997 primarily due to the net
redemption of approximately $170 million of long-term debt by CG&E, PSI, and
ULH&P during the period from May 1996 through March 1998.
Other Interest
Other interest increased $22 million (52%) for the twelve months ended March 31,
1998, as compared to the same period last year, primarily reflecting the
recognition of a full twelve months of interest on the currency swap program,
which was initiated in mid-February 1997, an increase in short-term interest
rates during 1998 over 1997, higher levels of short-term borrowing, a full
twelve months of interest on the borrowings used to fund the purchase of
Midlands, and increased borrowings to fund CG&E's and PSI's redemption of first
mortgage bonds and PSI's redemption of preferred stock.
Preferred Dividend Requirements of Subsidiaries
The decrease in preferred dividend requirements of subsidiaries of $8 million
(40%) for the twelve months ended March 31, 1998, from the same period of 1997
is primarily attributable to the September 1996 reacquisition and retirement of
approximately 90% of the outstanding preferred stock of CG&E. Additionally, PSI
redeemed all outstanding shares of its 7.15% Cumulative Preferred Stock and
7.44% Series Cumulative Preferred Stock on September 1, 1997, and March 1, 1998,
respectively.
<PAGE>
THE CINCINNATI GAS &
ELECTRIC COMPANY
AND SUBSIDIARY COMPANIES
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31 December 31
1998 1997
(unaudited)
(dollars in thousands)
<S> <C> <C>
Utility Plant - Original Cost
In service
Electric $4,716,835 $4,700,631
Gas 753,311 746,903
Common 186,631 186,078
---------- ----------
5,656,777 5,633,612
Accumulated depreciation 2,047,211 2,008,005
---------- ----------
3,609,566 3,625,607
Construction work in progress 126,145 118,133
---------- ----------
Total utility plant 3,735,711 3,743,740
Current Assets
Cash and temporary cash investments 5,384 2,349
Restricted deposits 1,173 1,173
Notes receivable from affiliated companies 14,235 27,193
Accounts receivable less accumulated provision
for doubtful accounts of $9,816 at March 31, 1998,
and $9,199 at December 31, 1997 223,784 193,549
Accounts receivable from affiliated companies 17,523 35,507
Materials, supplies, and fuel - at average cost
Fuel for use in electric production 31,647 29,682
Gas stored for current use 12,232 29,174
Other materials and supplies 50,015 49,111
Prepayments and other 39,982 31,827
---------- ----------
395,975 399,565
Other Assets
Regulatory assets
Amounts due from customers - income taxes 358,286 350,515
Post-in-service carrying costs and deferred
operating expenses 132,967 134,672
Deferred merger costs 16,323 16,557
Deferred demand-side management costs 39,058 38,318
Phase-in deferred return and depreciation 85,960 89,689
Unamortized costs of reacquiring debt 36,912 36,575
Other 4,704 1,439
Other 92,642 103,368
---------- ----------
766,852 771,133
$4,898,538 $4,914,438
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CAPITALIZATION AND LIABILITIES
March 31 December 31
1998 1997
(unaudited)
(dollars in thousands)
<S> <C> <C>
Common Stock Equity
Common stock - $8.50 par value;
authorized shares - 120,000,000;
outstanding shares - 89,663,086 at March 31, 1998,
and December 31, 1997 $ 762,136 $ 762,136
Paid-in capital 534,654 534,649
Retained earnings 342,929 314,553
Accumulated other comprehensive income (905) (750)
---------- ----------
Total common stock equity 1,638,814 1,610,588
Cumulative Preferred Stock
Not subject to mandatory redemption 20,779 20,793
Long-term Debt 1,105,476 1,324,432
---------- ----------
Total capitalization 2,765,069 2,955,813
Current Liabilities
Long-term debt due within one year 60,000 -
Notes payable and other short-term obligations 327,000 289,000
Notes payable to affiliated companies 23,410 12,253
Accounts payable 277,923 249,538
Accounts payable to affiliated companies 34,407 10,821
Accrued taxes 144,572 149,129
Accrued interest 25,548 25,430
Other 27,947 29,950
---------- ----------
920,807 766,121
Other Liabilities
Deferred income taxes 814,080 794,396
Unamortized investment tax credits 115,420 116,966
Accrued pension and other postretirement benefit costs 154,208 180,566
Other 128,954 100,576
---------- ----------
1,212,662 1,192,504
$4,898,538 $4,914,438
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
Quarter Ended
March 31
1998 1997
(in thousands)
<S> <C> <C>
Operating Revenues
Electric
Non-affiliated companies $574,841 $395,625
Affiliated companies 18,464 6,075
Gas
Non-affiliated companies 173,060 212,266
Affiliated companies 402 1
-------- --------
766,767 613,967
Operating Expenses
Fuel used in electric production 88,063 70,239
Gas purchased 96,588 123,968
Purchased and exchanged power
Non-affiliated companies 229,494 70,862
Affiliated companies 7,614 1,572
Other operation 81,647 79,275
Maintenance 19,758 27,336
Depreciation 41,298 40,404
Amortization of phase-in deferrals 5,539 3,371
Amortization of post-in-service deferred operating expenses 823 823
Income taxes 44,613 43,800
Taxes other than income taxes 54,683 53,514
-------- --------
670,120 515,164
Operating Income 96,647 98,803
Other Income and Expenses - Net
Allowance for equity funds used during
construction 10 119
Phase-in deferred return 1,811 2,002
Income taxes 3,828 3,006
Other - net (4,315) (4,775)
-------- --------
1,334 352
Income Before Interest 97,981 99,155
Interest
Interest on long-term debt 26,052 30,045
Other interest 2,101 1,696
Allowance for borrowed funds used during construction (1,364) (909)
-------- --------
26,789 30,832
Net Income $ 71,192 $ 68,323
Preferred Dividend Requirement 215 219
-------- --------
Net Income Applicable to Common Stock $ 70,977 $ 68,104
Other Comprehensive Income, Net of Tax (155) - _
-------- --------
Comprehensive Income $ 70,822 $ 68,104
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
March 31
1998 1997
(in thousands)
Operating Activities
Net income $ 71,192 $68,323
Items providing or (using) cash:
Depreciation 41,298 40,404
Deferred income taxes and investment tax
credits - net (27) 2,929
Allowance for equity funds used during
construction (10) (119)
Regulatory assets - net 11,214 9,787
Changes in current assets and current
liabilities
Accounts and notes receivable, net of
reserves on receivables sold 391 (44,863)
Materials, supplies, and fuel 14,073 27,887
Accounts payable 51,971 (18,922)
Accrued taxes and interest (4,439) (8,207)
Other items - net 9,753 (13,945)
Net cash provided by operating activities 195,416 63,274
Financing Activities
Retirement of preferred stock (9) (24)
Redemption of long-term debt (160,291) (16,180)
Change in short-term debt 49,157 25,982
Dividends on preferred stock (215) (219)
Dividends on common stock (42,600) (42,600)
-------- -------
Net cash used in financing activities (153,958) (33,041)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (36,483) (31,021)
Deferred demand-side management costs (1,940) (1,968)
-------- -------
Net cash used in investing activities (38,423) (32,989)
Net increase (decrease) in cash and
temporary cash investments 3,035 (2,756)
Cash and temporary cash investments at
beginning of period 2,349 5,120
-------- -------
Cash and temporary cash investments at
end of period $ 5,384 $ 2,364
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998
Kwh Sales
Increased activity in Cinergy's power marketing and trading operations led to
higher non-firm power sales for resale and significantly contributed to the
increase in total kwh sales of 80% for the first quarter of 1998, as compared to
the same period of 1997. Milder weather during the first quarter of 1998, as
compared to the same period last year, resulted in decreased residential and
commercial sales. These decreases were partially offset by increased industrial
sales, reflecting, in part, growth in the primary metals sector. Nonsystem kwh
sales (and related revenues and expenses) resulting from Cinergy's power
marketing and trading operations are allocated 50%/50% between CG&E and PSI
pursuant to the operating agreements filed with the companies' regulators.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the first quarter of 1998 decreased
7.3%, as compared to the same period in 1997. Decreased residential and
commercial sales, reflecting the milder weather during the first quarter of
1998, were slightly offset by an increase in the average number of customers.
Higher gas transportation volumes reflect the continued trend of customers
purchasing gas directly from suppliers, using transportation services provided
by CG&E.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $191 million (48%) for the quarter ended
March 31, 1998, from the comparable period of 1997. This increase primarily
reflects the increased kwh sales as previously discussed. The operation of fuel
adjustment clauses reflecting a higher average cost of fuel used in electric
production also contributed to the increase.
An analysis of electric operating revenues is shown below:
Quarter
Ended March 31
(in millions)
Electric operating revenues - March 31, 1997 $402
Increase (Decrease) due to change in:
Price per kwh
Retail 21
Sales for resale
Non-firm power transactions 5
Total change in price per kwh 26
Kwh sales
Retail (2)
Sales for resale
Firm power obligations (1)
Non-firm power transactions 167
Total change in kwh sales 164
Other 1
----
Electric operating revenues - March 31, 1998 $593
Gas Operating Revenues
The increasing trend of industrial customers purchasing gas directly from
producers and utilizing CG&E facilities to transport the gas continues to put
downward pressure on gas operating revenues. (See the "Mcf Sales and
Transportation" section.) Since providing transportation services does not
necessitate recovery of the cost of gas purchased, the revenue per Mcf
transported is less than the revenue per Mcf sold. As a result, a higher
relative volume of gas transported to gas sold translates into lower gas
operating revenues.
Gas operating revenues decreased $39 million (18%) in the first quarter of 1998,
when compared to the same period last year. The decrease in gas operating
revenues is primarily attributable to lower residential and commercial sales due
to the milder weather during the first quarter of 1998. An increase in the
relative volume of gas transported to gas sold, as previously discussed, also
contributed to the decrease.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs increased $18 million (25%) for the quarter ended March 31,
1998, as 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, 1997 $70
Increase (Decrease) due to change in:
Price of fuel (1)
Deferred fuel cost 21
Kwh generation (2)
---
Fuel expense - March 31, 1998 $88
Gas Purchased
Gas purchased for the quarter ended March 31, 1998, decreased $27 million (22%),
when compared to the same period last year, reflecting a lower average cost per
Mcf purchased and a decline in the volumes of gas purchased primarily due to the
milder weather during the first quarter of 1998.
Purchased and Exchanged Power
Purchased and exchanged power for the quarter ended March 31, 1998, increased
$165 million over the comparable period of 1997, reflecting increased purchases
of non-firm power for resale to others as a result of increased activity in
Cinergy's power marketing and trading operations.
Maintenance
The $8 million (28%) decrease in maintenance costs for the first quarter of
1998, as compared to the same period of 1997, is partially due to a decline in
maintenance activities associated with postponed outages at certain electric
production facilities. Decreased maintenance costs, associated with electric
distribution facilities, also contributed to the lower level of expenses for the
current quarter.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for
Zimmer.
Interest
Interest on Long-term Debt
Interest on long-term debt decreased approximately $4 million (13%) for the
quarter ended March 31, 1998, as compared to the same period of 1997, primarily
due to the net redemption of $350 million of long-term debt during the period
from March 1997 through March 1998.
<PAGE>
PSI ENERGY, INC.
AND SUBSIDIARY COMPANIES
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31 December 31
1998 1997
(unaudited)
(dollars in thousands)
<S> <C> <C>
Electric Utility Plant - Original Cost
In service $4,297,962 $4,280,551
Accumulated depreciation 1,813,471 1,792,317
---------- ----------
2,484,491 2,488,234
Construction work in progress 67,897 65,129
---------- ----------
Total electric utility plant 2,552,388 2,553,363
Current Assets
Cash and temporary cash investments 25,816 18,169
Restricted deposits 1,175 1,146
Notes receivable 92 110
Notes receivable from affiliated companies 37,461 21,998
Accounts receivable less accumulated provision
for doubtful accounts of $527 at March 31, 1998,
and $1,183 at December 31, 1997 257,843 197,898
Accounts receivable from affiliated companies 6,018 6,384
Materials, supplies, and fuel - at average cost
Fuel 36,645 28,234
Other materials and supplies 27,957 26,955
Prepayments and other 5,177 4,438
---------- ----------
398,184 305,332
Other Assets
Regulatory assets
Amounts due from customers - income taxes 24,805 23,941
Post-in-service carrying costs and deferred
operating expenses 43,564 43,832
Coal contract buyout costs 117,964 122,485
Deferred merger costs 72,692 73,789
Deferred demand-side management costs 62,900 71,278
Unamortized costs of reacquiring debt 29,029 29,667
Other 41,888 44,094
Other 145,058 138,650
---------- ----------
537,900 547,736
$3,488,472 $3,406,431
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CAPITALIZATION AND LIABILITIES
March 31 December 31
1998 1997
(unaudited)
(dollars in thousands)
<S> <C> <C>
Common Stock Equity
Common stock - without par value; $.01 stated value;
authorized shares - 60,000,000; outstanding shares
- 53,913,701 at March 31, 1998, and December 31, 1997 $ 539 $ 539
Paid-in capital 400,895 400,893
Retained earnings 650,064 637,814
Accumulated other comprehensive income (642) (1,586)
---------- ----------
Total common stock equity 1,050,856 1,037,660
Cumulative Preferred Stock
Not subject to mandatory redemption 71,973 157,196
Long-term Debt 926,680 826,470
---------- ----------
Total capitalization 2,049,509 2,021,326
Current Liabilities
Long-term debt due within one year 85,000 85,000
Notes payable and other short-term obligations 215,495 190,600
Notes payable to affiliated companies 21 16,435
Accounts payable 249,681 212,833
Accounts payable to affiliated companies 38,077 41,326
Accrued taxes 101,326 69,304
Accrued interest 15,414 21,369
Other 2,527 2,560
---------- ----------
707,541 639,427
Other Liabilities
Deferred income taxes 411,992 403,535
Unamortized investment tax credits 48,430 49,296
Accrued pension and other postretirement benefit costs 106,374 116,576
Other 164,626 176,271
---------- ----------
731,422 745,678
$3,488,472 $3,406,431
</TABLE>
<PAGE>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
Quarter Ended
March 31
1998 1997
(in thousands)
Operating Revenues
Non-affiliated companies $583,884 $422,289
Affiliated companies 8,241 1,566
-------- --------
592,125 423,855
Operating Expenses
Fuel 92,456 105,507
Purchased and exchanged power
Non-affiliated companies 242,390 89,730
Affiliated companies 17,900 6,069
Other operation 82,377 83,709
Maintenance 19,308 18,518
Depreciation 32,007 31,152
Amortization of post-in-service
deferred operating expenses - net 268 268
Income taxes 26,261 20,225
Taxes other than income taxes 14,967 14,857
-------- --------
527,934 370,035
Operating Income 64,191 53,820
Other Income and Expenses - Net
Allowance for equity funds used during
construction 11 72
Income taxes 282 (603)
Other - net 1,799 3,263
-------- --------
2,092 2,732
Income Before Interest 66,283 56,552
Interest
Interest on long-term debt 17,706 19,230
Other interest 5,775 4,457
Allowance for borrowed funds used during
construction (583) (433)
-------- --------
22,898 23,254
Net Income $ 43,385 $ 33,298
Preferred Dividend Requirement 2,208 3,020
-------- --------
Net Income Applicable to Common Stock $ 41,177 $ 30,278
Other Comprehensive Income, Net of Tax 944 -
-------- -----
Comprehensive Income $ 42,121 $ 30,278
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
<PAGE>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
March 31
1998 1997
(in thousands)
Operating Activities
Net income $43,385 $33,298
Items providing or (using) cash:
Depreciation 32,007 31,152
Deferred income taxes and investment tax
credits - net (473) (9,820)
Allowance for equity funds used during
construction (11) (72)
Regulatory assets - net 9,701 11,812
Changes in current assets and current
liabilities
Restricted deposits (29) (1)
Accounts and notes receivable, net of
reserves on receivables sold (75,463) (51,892)
Materials, supplies, and fuel (9,413) 2,812
Accounts payable 33,599 (19,821)
Accrued taxes and interest 26,067 39,197
Other items - net (14,271) (104)
Net cash provided by operating activities 45,099 36,561
Financing Activities
Issuance of long-term debt 98,901 -
Retirement of preferred stock (85,220) (1)
Redemption of long-term debt - (45,700)
Change in short-term debt 8,481 65,205
Dividends on preferred stock (2,736) (3,020)
Dividends on common stock (28,400) (28,400)
------- -------
Net cash used in financing activities (8,974) (11,916)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (26,803) (22,040)
Deferred demand-side management costs (1,675) (3,141)
Net cash used in investing activities (28,478) (25,181)
Net increase (decrease) in cash and temporary
cash investments 7,647 (536)
Cash and temporary cash investments at
beginning of period 18,169 2,911
------- -------
Cash and temporary cash investments at
end of period $25,816 $ 2,375
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
<PAGE>
PSI ENERGY, INC.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998
Kwh Sales
Increased activity in Cinergy's power marketing and trading operations led to
higher non-firm power sales for resale and significantly contributed to the
increase in total kwh sales of 67% for the first quarter of 1998, as compared to
the same period last year. An increase in retail sales reflects higher
industrial sales and a higher average number of customers in all retail customer
classes. These increases were partially offset by a decline in residential sales
as a result of milder weather during the first quarter of 1998, as compared to
the first quarter of 1997. The increased industrial sales primarily reflect
growth in the primary metals sector. Nonsystem kwh sales (and related revenues
and expenses) resulting from Cinergy's power marketing and trading operations
are allocated 50%/50% between CG&E and PSI pursuant to the operating agreements
filed with the companies' regulators.
Operating Revenues
Operating revenues increased $168 million (40%) for the quarter ended March 31,
1998, when compared to the same period last year, primarily reflecting, the
increased kwh sales as previously discussed. This increase was partially offset
by the operation of fuel adjustment clauses reflecting a lower average cost of
fuel used in electric production.
An analysis of operating revenues is shown below:
Quarter
Ended March 31
(in millions)
Operating revenues - March 31, 1997 $424
Increase (Decrease) due to change in:
Price per kwh
Retail (5)
Sales for resale
Firm power obligations (1)
Non-firm power transactions (15)
Total change in price per kwh (21)
Kwh sales
Retail 8
Sales for resale
Firm power obligations 1
Non-firm power transactions 177
Total change in kwh sales 186
Other 3
Operating revenues - March 31, 1998 $592
Operating Expenses
Fuel
Electric fuel costs decreased $13 million (12%) for the first quarter of 1998,
as compared to the same period last year.
An analysis of fuel costs is shown below:
Quarter
Ended March 31
(in millions)
Fuel expense - March 31, 1997 $105
Increase (Decrease) due to change in:
Price of fuel (5)
Deferred fuel cost (12)
Kwh generation 4
----
Fuel expense - March 31, 1998 $ 92
Purchased and Exchanged Power
For the quarter ended March 31, 1998, purchased and exchanged power increased
$164 million, as compared to the same period last year, due primarily to
increased purchases of non-firm power for resale to others as a result of
increased activity in Cinergy's power marketing and trading operations.
Interest
Interest on Long-term Debt
The decrease in interest on long-term debt of $2 million (8%) for the first
quarter of 1998, as compared to the first quarter of 1997, is primarily due to
the recognition of interest income on interest rate swap activity. This was
partially offset by increased interest expense related to the net issuance of
approximately $100 million of long-term debt from February 1997 through March
1998.
Other Interest
The increase of $1 million (30%) in other interest for the quarter ended March
31, 1998, as compared to the same period of 1997, is attributable to interest
resulting from an IRS audit of the 1989 and 1990 tax years.
<PAGE>
THE UNION LIGHT, HEAT
AND POWER COMPANY
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEETS
ASSETS
March 31 December 31
1998 1997
(unaudited)
(dollars in thousands)
Utility Plant - Original Cost
In service
Electric $205,839 $204,111
Gas 157,517 155,167
Common 19,069 19,073
-------- --------
382,425 378,351
Accumulated depreciation 136,032 133,213
-------- --------
246,393 245,138
Construction work in progress 15,795 14,346
-------- --------
Total utility plant 262,188 259,484
Current Assets
Cash and temporary cash investments 4 546
Accounts receivable less accumulated
provision for doubtful accounts of
$1,101 at March 31, 1998, and $996 at
December 31, 1997 7,547 7,308
Accounts receivable from affiliated
companies 276 446
Materials, supplies, and fuel - at average
cost
Gas stored for current use 2,181 5,401
Other materials and supplies 802 693
Prepayments and other 243 385
-------- --------
Total current assets 11,053 14,779
Other Assets
Regulatory assets
Deferred merger costs 5,213 5,213
Unamortized costs of reacquiring debt 3,544 3,590
Other 2,303 2,262
Other 5,830 6,262
-------- --------
16,890 17,327
$290,131 $291,590
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
CAPITALIZATION AND LIABILITIES
March 31 December 31
1998 1997
(unaudited)
(dollars in thousands)
Common Stock Equity
Common stock - $15.00 par value;
authorized shares - 1,000,000;
outstanding shares - 585,333 at March 31, 1998,
and December 31, 1997 $ 8,780 $ 8,780
Paid-in capital 18,683 18,683
Retained earnings 101,219 95,450
-------- --------
Total common stock equity 128,682 122,913
Long-term Debt 34,684 44,671
-------- --------
Total capitalization 163,366 167,584
Current Liabilities
Long-term debt due within one year 10,000 -
Notes payable to affiliated companies 21,457 23,487
Accounts payable 8,695 11,097
Accounts payable to affiliated companies 16,363 19,712
Accrued taxes 5,714 6,332
Accrued interest 904 1,286
Other 4,223 4,364
-------- --------
67,356 66,278
Other Liabilities
Deferred income taxes 27,096 26,211
Unamortized investment tax credits 4,447 4,516
Accrued pension and other postretirement benefit costs 12,213 14,044
Income taxes refundable through rates 6,964 6,566
Other 8,689 6,391
-------- --------
59,409 57,728
$290,131 $291,590
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF INCOME
(unaudited)
Quarter Ended
March 31
1998 1997
(in thousands)
Operating Revenues
Electric
Non-affiliated companies $ 46,999 $ 48,580
Gas
Non-affiliated companies 28,375 33,963
Affiliated companies 105 121
-------- --------
75,479 82,664
Operating Expenses
Electricity purchased from parent company for resale 34,090 35,129
Gas purchased 16,353 20,449
Other operation 8,135 8,534
Maintenance 1,295 1,563
Depreciation 3,232 3,070
Income taxes 4,217 4,742
Taxes other than income taxes 1,005 1,099
-------- --------
68,327 74,586
Operating Income 7,152 8,078
Other Income and Expenses - Net
Allowance for equity funds used during
construction (14) (4)
Income taxes 228 92
Other - net (482) (447)
-------- --------
(268) (359)
Income Before Interest 6,884 7,719
Interest
Interest on long-term debt 883 881
Other interest 351 301
Allowance for borrowed funds used during
construction (119) (30)
-------- --------
1,115 1,152
Net Income $ 5,769 $ 6,567
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
March 31
1998 1997
(in thousands)
Operating Activities
Net income $ 5,769 $ 6,567
Items providing or (using) cash:
Depreciation 3,232 3,070
Deferred income taxes and investment tax
credits - net 462 (338)
Allowance for equity funds used during
construction 14 4
Regulatory assets (41) (9)
Changes in current assets and current
liabilities
Accounts and notes receivable, net of
reserves on receivables sold 240 6,016
Materials, supplies, and fuel 3,111 3,727
Accounts payable (5,751) (10,139)
Accrued taxes and interest (1,000) 5,871
Other items - net 1,627 1,810
------- -------
Net cash provided by operating
activities 7,663 16,579
Financing Activities
Change in short-term debt (2,030) (11,723)
Net cash used in financing activities (2,030) (11,723)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (6,175) (3,986)
Net cash used in investing activities (6,175) (3,986)
Net increase (decrease) in cash and temporary
cash investments (542) 870
Cash and temporary cash investments at
beginning of period 546 1,197
------- -------
Cash and temporary cash investments at
end of period $ 4 $ 2,067
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998
Kwh Sales
Kwh sales for the quarter ended March 31, 1998, decreased 1.9% from the
comparable period of 1997. The milder weather in the first quarter of 1998, as
compared to the same period last year, resulted in a decline in residential
sales. This decrease was partially offset by an increase in industrial sales,
primarily reflecting growth in the primary metals sector, and an increase in the
average number of customers in all major retail customer classes.
Mcf Sales and Transportation
For the first quarter of 1998, Mcf gas sales volumes decreased 12.3%, while Mcf
transportation volumes increased 17.9%, when compared to the same period in
1997. Decreased residential and commercial sales reflecting the milder weather
during the first quarter of 1998 were slightly offset by an increase in the
average number of customers. The higher level of gas transportation volumes
reflects the continued trend of customers purchasing gas directly from
suppliers, using transportation services provided by ULH&P.
Operating Revenues
Electric Operating Revenues
Electric operating revenues decreased $2 million (3%) for the quarter ended
March 31, 1998, from the comparable period of 1997. This decrease primarily
reflects the previously discussed decline in kwh sales and a reduction in the
cost of electricity purchased from CG&E.
Gas Operating Revenues
The increasing trend of industrial customers purchasing gas directly from
producers and utilizing ULH&P facilities to transport the gas continues to put
downward pressure on gas operating revenues. (See the "Mcf Sales and
Transportation" section.) Since providing transportation services does not
necessitate recovery of the cost of gas purchased, the revenue per Mcf
transported is less than the revenue per Mcf sold. As a result, a higher
relative volume of gas transported to gas sold translates into lower gas
operating revenues.
Gas operating revenues decreased $6 million (16%) for the quarter ended March
31, 1998, as compared to the same period of last year. The decrease in gas
operating revenues is primarily attributable to lower residential and commercial
sales due to the milder weather during the first quarter of 1998. An increase in
the relative volume of gas transported to gas sold, as previously discussed,
also contributed to the decrease.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased decreased $1 million (3%) for the quarter ended March 31,
1998, as compared to the same period last year. This decrease reflects the
aforementioned lower volumes purchased from CG&E and the reduction in the cost
of electricity purchased from CG&E.
Gas Purchased
Gas purchased for the quarter decreased $4 million (20%) from the first quarter
of last year, reflecting a lower average cost per Mcf purchased and a decline in
the volumes of gas purchased.
Maintenance
The $.3 million (17%) decrease in maintenance costs for the first quarter of
1998, as compared to the same period of 1997, is primarily attributable to a
decline in maintenance activities associated with electric distribution
facilities due to the milder weather in the first quarter of 1998.
Depreciation
Depreciation expense increased $.2 million (5%) for the quarter ended March 31,
1998, over the comparable period of last year. This increase primarily reflects
additions to gas and electric utility plant.
Taxes Other Than Income Taxes
The $.1 million (9%) decrease in taxes other than income taxes for the first
quarter of 1998, as compared to the same period of 1997, is primarily due to a
reduction in property taxes.
Interest
Other Interest
Other interest charges increased $.1 million (17%) for the quarter ended March
31, 1998, as compared to the same period of 1997, primarily due to payments to
the Kentucky State Treasurer resulting from a sales tax audit and underpayment
of tax year 1996 income taxes.
Allowance for Borrowed Funds Used During Construction
The increase in allowance for borrowed funds used during construction of $.1
million is primarily due to an increase in construction expenditures subject to
allowance during the quarter ended March 31, 1998, as compared to the same
period of 1997.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Cinergy, CG&E, PSI, and ULH&P
1. These Financial Statements reflect all adjustments (which include only
normal, recurring adjustments) necessary in the opinion of the
registrants for a fair presentation of the interim results. These
statements should be read in conjunction with the Financial Statements
and the notes thereto included in the combined 1997 Form 10-K of the
registrants. Certain amounts in the 1997 Financial Statements have been
reclassified to conform to the 1998 presentation.
Cinergy and CG&E
2. On April 7, 1998, CG&E issued and sold $100 million principal amount of its
6.40% Debentures due April 1, 2008. Proceeds from the sale were used to
repay short-term indebtedness incurred in connection with CG&E's March 1998
redemptions of $100 million principal amount of its First Mortgage Bonds, 8
1/2% Series due 2022 and $60 million principal of its First Mortgage Bonds,
7 3/8% Series due 2001.
3. On May 1, 1998, CG&E redeemed the entire $50 million principal amount of
its 7 3/8% Series First Mortgage Bonds due 1999, at the regular redemption
price of 100.00%. This redemption effectively eliminates the maintenance
and replacement fund provisions of CG&E's First Mortgage Bond indenture,
which provisions required CG&E to make cash payments, deposit bonds, or
pledge unfunded property additions to the trustee each year based on an
amount related to net revenues.
Cinergy, CG&E, and ULH&P
4. On April 30, 1998, ULH&P issued and sold $20 million principal amount of
its 6.50% Debentures due April 30, 2008. Proceeds from the sale were used
by ULH&P to repay short-term indebtedness incurred in connection with the
redemption, on April 24, 1998, of $10 million principal amount of its First
Mortgage Bonds, 8% Series due 2003, and in connection with its construction
program. The redemption of said First Mortgage Bonds effectively eliminates
the maintenance and replacement fund provisions of ULH&P's First Mortgage
Bond indenture, which provisions required ULH&P to make cash payments,
deposit bonds, or pledge unfunded property additions to the trustee each
year based on an amount related to net revenues.
Cinergy, CG&E, and PSI
5. Cinergy'spower marketing and trading function actively markets and trades
over-the-counter forward and option contracts for the purchase and sale of
electricity. The majority of these contracts are settled via physical
delivery of electricity or netted out in accordance with industry trading
standards. Option premiums are deferred and included in the Consolidated
Balance Sheets and amortized to "Operating Revenues - Electric" or
"Purchased and exchanged power" in the Consolidated Statements of Income
over the term of the option contract. Cinergy values its portfolio of
over-the-counter forward and option contracts using the aggregate lower of
cost or market method. To the extent there are net aggregate losses in the
portfolio, Cinergy reserves for such losses. Net gains are recognized when
realized. Due to the lack of liquidity and the volatility currently
experienced in the power markets, significant assumptions must be made by
the Company when estimating current market values for purposes of the
aggregate lower of cost or market comparison. It is possible that the
actual gains and losses from the Company's power marketing and trading
activities could differ substantially from the gains and losses estimated
currently.
Cinergy and its subsidiaries use derivative financial instruments to hedge
exposures to foreign currency exchange rates, lower funding costs, and
manage exposures to fluctuations in interest rates. Instruments used as
hedges must be designated as a hedge at the inception of the contract and
must be effective at reducing the risk associated with the exposure being
hedged. Accordingly, changes in market values of designated hedge
instruments must be highly correlated with changes in market values of the
underlying hedged items at inception of the hedge and over the life of the
hedge contract.
Cinergy utilizes a currency swap to hedge its pound sterling denominated
net investment in Avon Energy. Accordingly, any translation gains or losses
related to the principal exchange on the currency swap are recorded in
accumulated other comprehensive income, which is a separate component of
common stock equity. Aggregate translation losses related to the principal
exchange of the currency swap are reflected in "Current Liabilities -
Other" in the Consolidated Balance Sheets.
Interest rate swaps are accounted for under the accrual method.
Accordingly, gains and losses based on any interest differential between
fixed-rate and floating-rate interest amounts, calculated on agreed upon
notional principal amounts, are recognized in the Consolidated Statements
of Income as a component of interest expense as realized over the life of
the agreement.
Cinergy, CG&E, and PSI
6. As discussed in the 1997 Form 10-K, in October 1995, a suit was filed in
the Federal District Court for the Southern District of Ohio by three
former employees of Enertech naming as defendants Enertech, Cinergy,
Investments, CG&E, PSI, James E. Rogers, and William J. Grealis. (Mr.
Rogers and/or Mr. Grealis are officers and/or directors of the foregoing
companies.) The lawsuit, which stemmed from the termination of employment
of the three former employees, alleged that they entered into employment
contracts with Enertech based on the opportunity to participate in
potential profits from future investments in energy projects in central and
eastern Europe. The suit alleged causes of action based upon, among other
theories, breach of contract related to the events surrounding the
termination of their employment and fraud and misrepresentation related to
the level of financial support for future projects. The suit alleged
compensatory damages of $154 million based upon assumed future success of
potential future investments and punitive damages of three times that
amount.
In April 1998, the parties reached a comprehensive settlement and all
claims were dismissed by the Court. The obligations of the Company arising
out of the settlement are not material to its financial condition or its
results of operations.
Cinergy and PSI
7. As discussed in the 1997 Form 10-K, PSI and IGC submitted a proposed agreed
order to the IDEM in 1997 related to the Shelbyville MGP site. On April 15,
1998, the IDEM signed the proposed agreed order, which will result in a
determination by the IDEM of whether the activities previously undertaken
at the site are sufficient to adequately protect human health and the
environment. Based upon environmental investigations and remediation
completed to date, PSI believes that any further investigation and
remediation required for the Shelbyville site will not have a material
adverse effect on its financial condition or results of operations.
In August 1997, NIPSCO filed suit against PSI in the United States District
Court for the Northern District of Indiana, South Bend Division, claiming,
pursuant to the CERCLA, recovery from PSI of NIPSCO's past and future costs
of investigating and remediating MGP related contamination at the Goshen
MGP site. Recently, NIPSCO increased its estimate of the cost of
remediating the Goshen site from $2.7 million to about $3.0 million.
As also discussed in the 1997 Form 10-K, PSI previously placed its insurance
carriers on notice of IGC's, NIPSCO's and the IDEM's claims related to MGP
sites. In April 1998, PSI filed suit in Hendricks County Circuit Court
against its general liability insurance carriers, seeking, among other
matters, a declaratory judgment that its insurance carriers are obligated
to defend MGP claims against PSI or pay PSI's costs of defense and to
indemnify PSI for its costs of investigating, preventing, mitigating and
remediating damage to property and paying claims associated with MGP sites.
PSI cannot predict the outcome of this litigation.
Cinergy, CG&E, PSI, and ULH&P
8. Effective with the first quarter of 1998, Cinergy and its subsidiaries
adopted Statement 130. Statement 130 establishes standards for reporting
and displaying comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income is defined as
the change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner sources.
Cinergy
9. Presented below is a reconciliation of earnings per common share (basic
EPS) and earnings per common share assuming dilution (diluted EPS).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Income Shares Earnings
(Numerator) (Denominator) Per Share
(In thousands, except per share amounts)
Quarter ended March 31, 1998
Earnings per common share:
Net income $106,071 157,764 $.67
Effect of dilutive securities:
Common stock options 787
Contingently issuable common stock 123
EPS--assuming dilution:
Net income item plus assumed
conversions $106,071 158,674 $.67
Quarter ended March 31, 1997
Earnings per common share:
Net income $114,117 157,679 $.72
Effect of dilutive securities:
Common stock options 983
Contingently issuable common stock 204
EPS--assuming dilution:
Net income plus assumed conversions $114,117 158,866 $.72
</TABLE>
Options to purchase shares of common stock that were excluded from the
calculation of EPS--assuming dilution because the exercise prices of
these options were greater than the average market price of the common
shares during the period are summarized below:
Quarter Average
Ended Exercise
March 31 Shares Price
1998 914,800 $37.61
1997 10,400 34.50
Presented below is a reconciliation of earnings per common share
(basic EPS) and earnings per common share assuming dilution (diluted
EPS).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Income Shares Earnings
(Numerator) (Denominator) Per Share
(In thousands, except per share amounts)
Twelve months ended March 31, 1998
Earnings per common share:
Net income before extraordinary item $354,592 157,706 $2.24
Effect of dilutive securities:
Common stock options 886
Contingently issuable common stock 184
EPS--assuming dilution:
Net income before extraordinary
item plus assumed conversions $354,592 158,776 $2.23
Twelve months ended March 31, 1997
Net income $338,773
Less: costs of reacquisition of
preferred stock of subsidiary 18,391
Earnings per common share:
Net income applicable to common
stock 320,382 157,679 $2.02
Effect of dilutive securities:
Common stock options 913
Contingently issuable common stock 287
EPS--assuming dilution:
Net income applicable to common
stock plus assumed conversions $320,382 158,879 $2.01
</TABLE>
Options to purchase shares of common stock that were excluded from the
calculation of EPS--assuming dilution because the exercise prices of
these options were greater than the average market price of the common
shares during the period are summarized below:
Twelve Months Average
Ended Exercise
March 31 Shares Price
1998 925,200 $37.58
1997 375,700 33.53
The after-tax impact of the extraordinary item - equity share of
windfall profits tax in the twelve months ended March 31, 1998, was
$.69 for both basic and diluted earnings per share.
Cinergy and PSI
10. In February 1989, PSI and WVPA entered into a settlement agreement to
resolve all claims related to Marble Hill, a nuclear project canceled in
1984. Implementation of the settlement was contingent upon a number of
events, including the conclusion of WVPA's bankruptcy proceeding,
negotiation of certain terms and conditions with WVPA, the RUS, and the
CFC, and certain regulatory approvals. In December 1996, following the
resolution of issues associated with WVPA's bankruptcy proceeding, PSI, on
behalf of itself and its officers, paid $80 million on behalf of WVPA to
the RUS and the CFC. The $80 million obligation, net of insurance proceeds,
other credits, and applicable income tax effects, was charged to income in
1988. In January 1997, an order dismissing the WVPA litigation against PSI
and its officers with prejudice was entered by the United States District
Court for the Southern District of Indiana. Negotiations among PSI, WVPA,
the RUS, and the CFC continue regarding certain additional terms and
conditions of the settlement agreement. Based on the current status of
negotiations, the Company believes it has adequately reserved for any loss
that would be material to its financial condition or results of operations.
However, the Company cannot currently predict the outcome of these
negotiations. Depending on the form of the final negotiated terms and
conditions and the form of any regulatory approvals, the Company could be
required to recognize additional losses of up to $90 million for accounting
purposes. The recognition of this loss is not expected to have an immediate
impact on Cinergy's cash flow. The Company believes that negotiations could
be concluded and the final terms and conditions determined during 1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Recent Developments
Cinergy, CG&E, and PSI
Air Toxics As discussed in the 1997 Form 10-K, the EPA was to announce, by April
15, 1998, its conclusions regarding the need for additional air toxics
regulations. In April 1998, the EPA announced that it would make its regulatory
determination on the need for additional air toxics regulation by November 15,
1998. If more air toxics regulations are issued, the compliance cost could be
significant. Cinergy cannot predict the outcome or effects of the EPA's
determination.
Cinergy, CG&E and ULH&P
Competitive Pressures - State Developments As discussed in the 1997 Form 10-K,
competition legislation was to be introduced into the Ohio legislature during
1998. This legislation was introduced into the Ohio legislature during 1998 and
it is uncertain whether this legislation will be passed in Ohio in 1998.
As also discussed in the 1997 Form 10-K, HB 443 was introduced into the Kentucky
General Assembly in January 1998. HB 443 was not brought to a vote during the
1998 legislative session, rather, HJR 95, which calls for the formation of an
executive task force comprised of members from the governor's office and the
General Assembly to further study electricity restructuring, was passed by the
General Assembly. HJR 95 was signed by the governor during April 1998.
Kentucky's General Assembly does not reconvene until the year 2000.
Market Risk Sensitive Instruments and Positions
Cinergy, CG&E, and PSI
Energy Commodities Sensitivity The Company markets and trades over-the-counter
forward and option contracts for the purchase and sale of electricity. See Note
5 of the "Notes to Financial Statements" in "Part I. Financial Information" for
the Company's accounting policies for certain derivative instruments. The
Company's market risks have not changed materially from the market risks
reported in the 1997 Form 10-K.
Cinergy
Exchange Rate Sensitivity Cinergy utilizes a currency swap to hedge the exchange
rate exposure related to its pound sterling denominated net investment in Avon
Energy. See Note 5 of the "Notes to Financial Statements" in "Part I. Financial
Information" for Cinergy's accounting policies for certain derivative
instruments. Cinergy's market risks have not changed materially from the market
risks reported in the 1997 Form 10-K.
Cinergy, CG&E, PSI, and ULH&P
Interest Rate Sensitivity The Company's net exposure to changes in interest
rates primarily consists of short-term debt instruments with floating interest
rates that are benchmarked to U.S. short-term money market indices. To manage
the Company's exposure to fluctuations in interest rates and to lower funding
costs, the Company constantly evaluates the use of, and has entered into,
interest rate swaps. See Note 5 of the "Notes to Financial Statements" in "Part
I. Financial Information" for the Company's accounting policies for certain
derivative instruments. The Company's market risks have not changed materially
from the market risks reported in the 1997 Form 10-K.
Accounting Issues
Cinergy, CG&E, PSI, and ULH&P
New Accounting Standards See Note 8 of the "Notes to Financial Statements" in
"Part I. Financial Information."
Other Commitments
Cinergy, CG&E, and PSI
Enertech See Note 6 of the "Notes to Financial Statements" in "Part I. Financial
Information."
Cinergy, CG&E, and PSI
MGP Sites See Note 7 of the "Notes to Financial Statements" in "Part I.
Financial Information."
Cinergy and PSI
WVPA See Note 10 of the "Notes to Financial Statements" in "Part I. Financial
Information."
CAPITAL RESOURCES AND REQUIREMENTS
Cinergy, CG&E, and ULH&P
Long-term Debt For information regarding recent issuances and redemptions of
long-term debt securities, see Notes 2, 3, and 4 of the "Notes to Financial
Statements" in "Part I. Financial Information."
Cinergy, CG&E, PSI, and ULH&P
Short-term Debt Obligations representing notes payable and other short-term
obligations (excluding notes payable to affiliated companies) at March 31, 1998,
were as follows:
Cinergy
Established
Lines Outstanding
(in millions)
Cinergy
Committed lines
Acquisition line $ 350 $ 350
Revolving line 400 91
Commercial paper - 183
Utility subsidiaries
Committed lines 300 88
Uncommitted lines 360 211
Pollution control notes 244 244
Cinergy UK, Inc. 115 56
------ ------
Total $1 769 $1 223
CG&E
Established
Lines Outstanding
(in millions)
Committed lines $100 $ 30
Uncommitted lines 190 113
Pollution control notes 184 184
---- ----
Total $474 $327
PSI
Established
Lines Outstanding
(in millions)
Committed lines $200 $ 58
Uncommitted lines 170 98
Pollution control notes 60 60
---- ----
Total $430 $216
Cinergy, CG&E, and PSI
Cinergy's committed lines are comprised of an acquisition line and a revolving
line. The established revolving line (as shown in the above table) also provides
credit support for Cinergy's commercial paper program. Such program is limited
to a maximum outstanding principal amount of $200 million. The majority of the
proceeds from the commercial paper sales were used to reduce the acquisition
line to the year-end level of $350 million. CG&E and PSI also have the capacity
to issue commercial paper that must be supported by committed lines (unsecured
lines of credit) of the respective company. Neither CG&E nor PSI issued
commercial paper in first quarter of 1998.
Cinergy, CG&E, PSI, and ULH&P
Cinergy's utility subsidiaries had regulatory authority to borrow up to $853
million ($453 million for CG&E and its subsidiaries, including $50 million for
ULH&P, and $400 million for PSI) as of March 31, 1998. In connection with this
authority, committed lines, as well as, uncommitted lines (short-term borrowings
with various banks on an "as offered" basis) have been arranged. The established
committed lines (as shown in the above table) include $100 million designated as
backup for certain of the uncommitted lines at March 31, 1998. Further, the
committed lines are maintained by commitment fees.
RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
Reference is made to "Item 1. Financial Statements" in "Part I. Financial
Information."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Cinergy, CG&E, PSI, and ULH&P
Reference is made to the "Market Risk Sensitive Instruments and Positions"
section in "Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations."
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Cinergy, CG&E, and PSI
See Notes 6, 7, and 10 of the "Notes to Financial Statements" in "Part I.
Financial Information."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Cinergy
(a) The annual meeting of shareholders of Cinergy was held April 22, 1998, in
Cincinnati, Ohio.
(c) At the meeting, five Class I directors were elected to the board of Cinergy
to serve three-year terms, expiring in 2001, as set forth below:
Votes Votes
Class I For Withheld
Neil A. Armstrong 132,494,599 2,094,057
James K. Baker 132,545,127 2,043,529
Cheryl M. Foley 132,482,049 2,106,607
John A. Hillenbrand II 132,546,546 2,042,110
George C. Juilfs 132,649,550 1,939,106
CG&E
(a) In lieu of the annual meeting of shareholders of CG&E, a resolution was
duly adopted via unanimous written consent of CG&E's sole shareholder,
effective April 21, 1998.
(b)-(c) The following members of the Board of Directors were elected via
unanimous written consent of the sole shareholder of CG&E, in lieu of
its annual meeting, for one-year terms expiring in 1999:
Jackson H. Randolph
James E. Rogers
E. Renae Conley
PSI
(a) The annual meeting of shareholders of PSI was held in Cincinnati, Ohio on
April 22, 1998.
(b) Proxies were not solicited for the annual meeting, at which the Board of
Directors was re-elected in its entirety (see (c) below).
(c) The following members of the Board of Directors were unanimously re-elected
at the annual meeting for one-year terms expiring in 1999:
James K. Baker
Michael G. Browning
John A. Hillenbrand II
John M. Mutz
Jackson H. Randolph
James E. Rogers
Van P. Smith
ULH&P
Omitted pursuant to Instruction H(2)(b).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits identified with a pound sign (#) are being filed herewith by the
registrant identified in the exhibit discussion below and are incorporated
herein by reference with respect to any other designated registrant.
Exhibits not so identified are filed herewith:
Exhibit
Designation Nature of Exhibit
Cinergy
3-a By-laws of Cinergy, as amended on April 22, 1998.
Cinergy and CG&E
4-a #Fourth Supplemental Indenture between CG&E and The
Fifth Third Bank, dated as of April 1, 1998. (Exhibit
to CG&E's March 31, 1998, Form 10-Q in File No.
1-1232.)
Cinergy, CG&E, and ULH&P
4-b #Second Supplemental Indenture between ULH&P and The
Fifth Third Bank, dated as of April 30, 1998. (Exhibit
to ULH&P's March 31, 1998, Form 10-Q in File No.
2-7793.)
Cinergy, CG&E, PSI, and ULH&P
27 Financial Data Schedules (included in
electronic submission only).
Cinergy, CG&E, PSI, and ULH&P
(b) No reports on Form 8-K were filed during the quarter.
<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, CG&E, PSI, and ULH&P believe that the disclosures are adequate to make
the information presented not misleading. In the opinion of Cinergy, CG&E, PSI,
and ULH&P, 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 Registrants have duly caused this report to be signed by an
officer and the chief accounting officer on their behalf by the undersigned
thereunto duly authorized.
CINERGY CORP.
THE CINCINNATI GAS & ELECTRIC COMPANY
PSI ENERGY, INC.
THE UNION LIGHT, HEAT AND POWER COMPANY
Registrants
Date: May 15, 1998 /s/ John P. Steffen
--------------------------------------
John P. Steffen
Duly Authorized Officer
and
Chief Accounting Officer
BY-LAWS
OF
CINERGY CORP.
Adopted: October 24, 1994
Amended: January 25, 1996
Amended: December 18, 1997
Amended: April 22, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Offices and Headquarters
Section 1.1 Offices............................................ 1
1.2 Headquarters....................................... 1
ARTICLE II
Stockholders
Section 2.1 Annual Meeting..................................... 2
2.2 Special Meetings................................... 3
2.3 Notice of Meetings................................. 3
2.4 Quorum............................................. 4
2.5 Voting............................................. 4
2.6 Presiding Officer and Secretary.................... 5
2.7 Proxies............................................ 6
2.8 List of Stockholders............................... 6
ARTICLE III
Directors
Section 3.1 Number of Directors................................ 7
3.2 Election and Term of Directors..................... 7
3.3 Vacancies and Newly Created Directorships........... 9
3.4 Resignation........................................ 10
3.5 Meetings........................................... 10
3.6 Quorum and Voting.................................. 11
3.7 Written Consent of Directors in Lieu of a Meeting.. 11
3.8 Compensation....................................... 11
3.9 Contracts and Transactions Involving Directors..... 12
ARTICLE IV
Committees of the Board of Directors
Section 4.1 Appointment and Powers.............................. 13
ARTICLE V
Officers, Agents and Employees
Section 5.1 Appointment and Term of Office..................... 14
5.2 The Chairman of the Board.......................... 15
5.3 Vice-Chairman...................................... 15
5.4 Chief Executive Officer............................ 16
5.5 The President...................................... 16
5.6 The Vice-Presidents................................ 16
5.7 The Secretary...................................... 17
5.8 The Treasurer...................................... 17
5.9 The Comptroller.................................... 19
5.10 Compensation and Bond.............................. 19
ARTICLE VI
Indemnification
Section 6.1 Indemnification of Directors, Officers, Employees
and Agents....................................... 20
6.2 Advances for Litigation Expenses................... 22
6.3 Indemnification Nonexclusive....................... 22
6.4 Indemnity Insurance................................ 23
6.5 Definitions........................................ 23
ARTICLE VII
Common Stock
Section 7.1 Certificates....................................... 24
7.2 Transfers of Stock................................. 25
7.3 Lost, Stolen or Destroyed Certificates............. 25
7.4 Stockholder Record Date............................ 25
7.5 Beneficial Owners.................................. 26
ARTICLE VIII
Seal
Section 8.1 Seal............................................... 27
ARTICLE IX
Waiver of Notice
Section 9.1 Waiver of Notice................................... 27
ARTICLE X
Fiscal Year
Section 10.1 Fiscal Year........................................ 28
ARTICLE XI
Contracts, Checks, etc.
Section 11.1 Contracts, Checks, etc............................. 28
ARTICLE XII
Amendments
Section 12.1 Amendments......................................... 28
ARTICLE XIII
Dividends
Section 13.1 Dividends.......................................... 30
<PAGE>
BY-LAWS
OF
CINERGY CORP. (THE "CORPORATION")
ARTICLE I
Offices and Headquarters
Section 1.1 Offices. The location of the Corporation's principal office
shall be in the City of Cincinnati, County of Hamilton, State of Ohio. The
Corporation may, in addition to the aforesaid principal office, establish and
maintain an office or offices elsewhere in Delaware, Ohio or Indiana or in such
other states and places as the Board of Directors may from time to time find
necessary or desirable, at which office or offices the books, documents, and
papers of the Corporation may be kept.
Section 1.2 Headquarters. Subject to the sentence next following, the
Corporation's headquarters and executive offices, shall be located in the City
of Cincinnati, County of Hamilton, State of Ohio. The location of the
Corporation's headquarters and executive offices may be changed from the City of
Cincinnati, County of Hamilton, State of Ohio only by the affirmative vote of
80% of the full Board of Directors of the Corporation and not by the vote of any
committee of the Board of Directors. As used in these By-Laws, the term "the
full Board of Directors" shall mean all directors then in office together with
any vacancies, however created. For the avoidance of doubt and as an example
only, if the Board of Directors consists of 17 members and two vacancies exist,
the affirmative vote of 14 of the 15 members of the Corporation's Board of
Directors then in office would be required to authorize a change in location of
the Corporation's headquarters and executive offices. The headquarters and
executive offices of the Corporation's subsidiary, PSI Energy, Inc., shall be
located in the City of Plainfield, Indiana and the headquarters and executive
offices of the Corporation's subsidiary, The Cincinnati Gas & Electric Company,
shall be located in the City of Cincinnati, Ohio.
ARTICLE II
Stockholders
Section 2.1 Annual Meeting. An annual meeting of stockholders of the
Corporation for the election of directors and for the transaction of any other
proper business shall be held at such time and date in each year as the Board of
Directors may from time to time determine. The annual meeting in each year shall
be held at such hour on said day and at such place within or without the State
of Delaware as may be fixed by the Board of Directors, or if not so fixed, at
the principal business office of the Corporation in the City of Cincinnati,
County of Hamilton, State of Ohio. In addition to all other applicable
requirements for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation, not less than 60 days nor more than 90 days prior to the annual
meeting; provided, however, that in the event that less than 70 days' notice or
prior public disclosure of the date of the annual meeting is given or made to
stockholders, notice by the stockholders to be timely must be so received not
later than the close of business on the fifteenth day following the date on
which such notice of the date of annual meeting was mailed or such public
disclosure was made whichever first occurs. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting; (ii) the name and record address of the stockholder
proposing such business; (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder; and (v) any material interest
of the stockholder in the business.
Notwithstanding anything to the contrary in the By-Laws, no business shall
be conducted at the annual meeting except in accordance with the procedures set
forth in this Section 2.1; provided, however, that nothing in this Section 2.1
shall be deemed to preclude discussion by any stockholder of any business
properly brought before the annual meeting.
Section 2.2 Special Meetings. A special meeting of the stockholders of the
Corporation entitled to vote on any business to be considered at any such
meeting may be called by the Chairman of the Board or the President or by a
majority of the members of the Board of Directors then in office, acting with or
without a meeting, or by the persons who hold 50% of all shares outstanding and
entitled to vote thereat upon notice in writing, stating the time, place and
purpose of the special meeting. The business transacted at the special meeting
shall be confined to the purposes and objects stated in the call.
Section 2.3 Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, unless notice is waived in writing by
all stockholders entitled to vote at the meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.
Unless otherwise provided by law, and except as to any stockholder duly
waiving notice, the written notice of any meeting shall be given personally or
by mail, not less than 10 days nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, notice
shall be deemed given when deposited in the mail, postage prepaid, directed to
the stockholder at his or her address as it appears on the records of the
Corporation.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If, however, the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 2.4 Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation or by these By-Laws in respect of the vote required
for a specified action, at any meeting of stockholders the holders of a majority
of the outstanding stock entitled to vote thereat, either present, in person or
represented by proxy, shall constitute a quorum for the transaction of any
business, but the stockholders present, although less than a quorum, may adjourn
the meeting to another time or place and, except as provided in the last
paragraph of Section 2.3 of these By-Laws, notice need not be given of the
adjourned meeting.
Section 2.5 Voting. Whenever directors are to be elected at a meeting, they
shall be elected by a plurality of the votes cast at the meeting by the holders
of stock entitled to vote.
Whenever any corporate action, other than the election of directors, is to
be taken by vote of stockholders at a meeting, it shall, except as otherwise
required by law or by the Certificate of Incorporation or by these By-Laws, be
authorized by a majority of the votes cast at the meeting by the holders of
stock entitled to vote thereon.
Except as otherwise provided by law, or by the Certificate of
Incorporation, each holder of record of stock of the Corporation entitled to
vote on any matter at any meeting of stockholders shall be entitled to one (1)
vote for each share of such stock standing in the name of such holder on the
stock ledger of the Corporation on the record date for the determination of the
stockholders entitled to vote at the meeting.
Upon the demand of any stockholder entitled to vote, the vote for directors
or the vote on any other matter at a meeting shall be by written ballot, but
otherwise the method of voting and the manner in which votes are counted shall
be discretionary with the presiding officer at the meeting.
Section 2.6 Presiding Officer and Secretary. At every meeting of
stockholders the Chairman of the Board, or, in his or her absence, the
President, or, in his or her absence, the appointee of the meeting, shall
preside. The Secretary, or, in his or her absence an Assistant Secretary, or if
none be present, the appointee of the presiding officer of the meeting, shall
act as secretary of the meeting.
Section 2.7 Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. Every proxy shall be
signed by the stockholder or by his duly authorized attorney. A stockholder may
authorize another person or persons to act for him as proxy by transmitting or
authorizing the transmission of a telegram, cablegram, or other means of
electronic transmission to the person who will be the holder of the proxy or to
a proxy solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive such
transmission if such transmission is submitted with information from which it
may be determined that the transmission was authorized by the stockholder.
Section 2.8 List of Stockholders. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
The stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list required by this Section or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
ARTICLE III
Directors
Section 3.1 Number of Directors. The Board of Directors shall consist of 17
directors. This number may be changed to an odd number not less than 15 and not
more than 23 by a vote of not less than 75% of the full Board of Directors
("Supermajority Vote"). Any such determination made by the Board of Directors
shall continue in effect unless and until changed by the Board of Directors by
Supermajority Vote, but no such change shall affect the term of any director
then in office.
Section 3.2 Election and Term of Directors. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors. Except as may be required by applicable law, no person who is, at the
time of nomination, 70 years of age or older shall be eligible for election as a
director. Nominations of persons as candidates for election as directors of the
Corporation may be made at a meeting of stockholders (i) by or at the direction
of the Board of Directors acting by Supermajority Vote (or by a unanimous vote
of the remaining directors if a Supermajority Vote is not obtainable because the
number of vacancies on the Board of Directors); or (ii) by any stockholder of
the Corporation entitled to vote for the election of directors at such meeting
who complies with the notice procedures set forth herein. Any nomination other
than those governed by clause (i) of the preceding sentence shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal office of the Corporation in the State of Ohio not less than 50
days prior to the meeting; provided, however, that if less than 60 days' notice
or prior public disclosure of the date of the meeting is given to stockholders
or made public, to be timely notice by a stockholder must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such stockholder's notice to the Secretary shall set forth: (a) as to each
person whom the stockholder proposes to nominate for election as director: (i)
the name, age, business address, and residence address of such person; (ii) the
principal occupation or employment of such person; (iii) the class and number of
any shares of capital stock of the Corporation that are beneficially owned by
such person; and (iv) any other information relating to such person that is
required to be disclosed in solicitations for proxies for the election of
directors pursuant to any then existing rules or regulations promulgated under
the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder
giving notice: (i) the name and record address of such stockholder; (ii) the
class and number of shares of capital stock of the Corporation that are
beneficially owned by such stockholder, and (iii) the period of time such
stockholder has held such shares. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as a
director. No person otherwise eligible for election as a director shall be
eligible for election as a director unless nominated as set forth herein.
Commencing on October 24, 1994 (the "Classification Date") of the Board of
Directors of the Corporation, the terms of office of the Board of Directors
shall be divided into three (3) classes, Class I, Class II and Class III, as
determined by the Board of Directors. All classes shall be as nearly equal in
number as possible.
The terms of office of directors classified shall be as follows: (1) that
of Class I shall expire at the annual meeting of stockholders that occurs within
the first year after the Classification Date, (2) that of Class II shall expire
at the annual meeting of stockholders that occurs within the second year after
the Classification Date, and (3) that of Class III shall expire at the annual
meeting of stockholders that occurs within the third year after the
Classification Date. At each annual meeting of stockholders after the
Classification Date, the successors to directors whose terms shall expire shall
be elected to serve from the time of election and qualification until the third
annual meeting following election and until a successor shall have been elected
and qualified or until his earlier resignation, removal from office or death. As
being under 70 years of age constitutes a continuing qualification for service
on the Board of Directors, any director who reaches the age of 70 years while in
office shall, except as limited by applicable law, promptly resign from the
Corporation's Board of Directors.
Section 3.3 Vacancies and Newly Created Directorships. Vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by election at a meeting of stockholders. Except as
otherwise provided by law, and notwithstanding the provision of Section 3.6, the
remaining directors, whether or not constituting a majority of the whole
authorized number of directors, may, by not less than a Supermajority Vote (or
by a unanimous vote of the remaining directors if a Supermajority Vote is not
obtainable because of the number of vacancies on the Board of Directors) fill
any vacancy in the Board, however arising, for the unexpired term thereof. Any
person elected to fill a vacancy in the Board shall hold office until the
expiration of the term of office for the class to which he or she is elected and
until a successor is elected and qualified or until his or her earlier
resignation, removal from office or death.
Section 3.4 Resignation. Any director may resign at any time upon written
notice to the Corporation. Any such resignation shall take effect at the time
specified therein or, if the time be not specified, upon receipt thereof, and
the acceptance of such resignation, unless required by the terms thereof, shall
not be necessary to make such resignation effective.
Section 3.5 Meetings. Meetings of the Board of Directors, regular or
special, may be held at any place within or without the State of Delaware.
Members of the Board of Directors, or of any committee designated by the Board,
may participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting. An annual
meeting of the Board of Directors shall be held after each annual election of
directors. If such election occurs at an annual meeting of stockholders, the
annual meeting of the Board of Directors shall be held at the same place and
immediately following such meeting of stockholders, and no notice thereof need
be given. The Board of Directors may fix times and places for regular meetings
of the Board and no notice of such meetings need be given. A special meeting of
the Board of Directors shall be held whenever called by the Chairman of the
Board, the President or by the written request of at least two (2) members of
the Board of Directors, at such time and place as shall be specified in the
notice or waiver thereof. Notice of each special meeting shall be given by the
Secretary or by a person calling the meeting to each director in writing,
through the mail, not later than the second day before the meeting, or
personally served or by telephone, telecopy, telegram, cablegram or radiogram,
in each such cases, not later than the day before the meeting, and such notice
shall be deemed to be given at the time when the same shall be transmitted.
Section 3.6 Quorum and Voting. A majority of the full Board of Directors
shall constitute a quorum for the transaction of business, but, if there be less
than a quorum at any meeting of the Board of Directors, a majority of the
directors present may adjourn the meeting from time to time, and no further
notice thereof need be given other than announcement at the meeting which shall
be so adjourned. Except as otherwise provided by law, by the Certificate of
Incorporation, or by these By-Laws (including, without limitation, where any
Supermajority Vote or any other vote in excess of a majority is required), the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 3.7 Written Consent of Directors in Lieu of a Meeting. Any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or of such committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
Section 3.8 Compensation. Each director of the Corporation (other than
directors who are salaried officers of the Corporation or any of its
subsidiaries) shall be entitled to receive as compensation for services such
reasonable compensation, which may include pension, disability and death
benefits, as may be determined from time to time by the Board of Directors.
Reasonable compensation may also be paid to any person other than a director
officially called to attend any such meeting.
Section 3.9 Contracts and Transactions Involving Directors. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his, her
or their votes are counted for such purpose, if: (1) the material facts as to
his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (2) the material facts as to
his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
Committees of the Board of Directors
Section 4.1 Appointment and Powers. The Board of Directors may, by
resolution adopted by a majority of the Board, designate from time to time
(subject to Article V hereof) no less than three (3) and no more than six (6) of
their number to constitute an Executive Committee, and may delegate to such
committee power to authorize the seal of the Corporation to be affixed to all
papers which may require it and to exercise in the intervals between the
meetings of the Board of Directors the powers of the Board in the management of
the business and affairs of the Corporation to the fullest extent permitted by
Section 141(c)(1) of the Delaware General Corporation Law; provided, however,
that the Executive Committee shall not have the power or authority to take any
action for which a Supermajority Vote or other vote in excess of a majority of
the Board of Directors is required. Each member of the Executive Committee shall
continue to be a member thereof only during the pleasure of a majority of the
full Board of Directors.
The Executive Committee may act by a majority of its members at a meeting
or by a writing signed by all of its members.
All action by the Executive Committee shall be reported to the Board of
Directors at its meeting next succeeding such action.
Non-employee members of such Executive Committee shall be entitled to
receive such fees and compensation as the Board of Directors may determine.
The Board of Directors may also appoint a Finance Committee, a Committee on
Directors, an Audit Committee, a Public Policy Committee and a Compensation
Committee and may also appoint such other standing or temporary committees from
time to time as they may see fit, delegating to such committees all or any part
of their own powers (subject to the provisions of these By-Laws); provided,
however, that any compensation or benefits to be paid to an executive officer
who is also a director must be approved by the Board of Directors. The members
of such committees shall be entitled to receive such fees as the Board may
determine.
The Board of Directors shall not amend, modify, vary or waive any of the
terms of the Amended and Restated Agreement and Plan of Reorganization by and
among The Cincinnati Gas & Electric Company, PSI Resources, Inc., PSI Energy,
Inc., the Corporation, Cinergy Corp., an Ohio corporation, and Cinergy Sub, Inc.
dated as of December 11, 1992, as amended and restated as of July 2, 1993 and as
of September 10, 1993 and as further amended as of June 20, 1994, as of July 26,
1994 and as of September 30, 1994 (the "Merger Agreement") other than by a
Supermajority Vote of the Board of Directors.
ARTICLE V
Officers, Agents and Employees
Section 5.1 Appointment and Term of Office. The executive officers of the
Corporation, shall consist of a Chairman of the Board, a Vice-Chairman, a Chief
Executive Officer, a President, one or more Vice-Presidents, a Secretary, a
Treasurer and a Comptroller, all of whom shall be elected by the Board of
Directors by a Supermajority Vote, and shall hold office for one (1) year and
until their successors are chosen and qualified. Any number of such offices may
be held by the same person, but no officer shall execute, acknowledge or verify
any instrument in more than one capacity. Any vacancy occurring in the office of
the Chairman, Chief Executive Officer or President shall be filed by
Supermajority Vote of the Board of Directors. The Chairman, Chief Executive
Officer or President shall be subject to removal without cause only by
Supermajority Vote of the Board of Directors at a special meeting of the Board
of Directors called for that purpose.
The Board of Directors may appoint, and may delegate power to appoint, such
other non-executive officers, agents and employees as it may deem necessary or
proper, who shall hold their offices or positions for such terms, have such
authority and perform such duties as may from time to time be determined by or
pursuant to authorization of the Board of Directors.
Section 5.2 The Chairman of the Board. The Chairman of the Board shall be a
director and shall preside at all meetings of the Board of Directors and, in the
absence or inability to act of the Chief Executive Officer, meetings of
stockholders and shall, subject to the Board's direction and control, be the
Board's representative and medium of communication, and shall perform such other
duties as may from time-to-time be assigned to the Chairman of the Board by
Supermajority Vote of the Board of Directors. The Chairman of the Board shall
direct the long-term strategic planning process of the Corporation and shall
also lend his or her expertise to the President, as may be requested from
time-to-time by the President. The Chairman shall be a member of the Executive
Committee.
Section 5.3 Vice-Chairman. The Vice-Chairman of the Board shall be a
director and shall preside at meetings of the Board of Directors in the absence
or inability to act of the Chairman of the Board or meetings of stockholders in
the absence or inability to act of the Chief Executive Officer and the Chairman
of the Board. The Vice-Chairman shall perform such other duties as may from
time-to-time be assigned to him or her by Supermajority Vote of the Board of
Directors. The Vice-Chairman shall be a member of the Executive Committee and
the Corporate Governance Committee.
Section 5.4 Chief Executive Officer. The Chief Executive Officer shall be a
director and shall preside at all meetings of the stockholders, and, in the
absence or inability to act of the Chairman of the Board and the Vice-Chairman,
meetings of the Board of Directors, and shall submit a report of the operations
of the Corporation for the fiscal year to the stockholders at their annual
meeting and from time-to-time shall report to the Board of Directors all matters
within his or her knowledge which the interests of the Corporation may require
be brought to their notice. The Chief Executive Officer shall be the chairman of
the Executive Committee and ex officio a member of all standing committees.
Where the offices of President and Chief Executive Officer are held by different
individuals, the President will report directly to the Chief Executive Officer.
Section 5.5 The President. The President shall be the chief operating
officer of the Corporation. The President shall have general and active
management and direction of the affairs of the Corporation, shall have
supervision of all departments and of all officers of the Corporation, shall see
that the orders and resolutions of the Board of Directors and of the Executive
Committee are carried into effect, and shall have the general powers and duties
of supervision and management usually vested in the office of President of a
corporation. All corporate officers and functions except those reporting to the
Chairman of the Board or the Chief Executive Officer shall report directly to
the President.
Section 5.6 The Vice-Presidents. The Vice-Presidents shall perform such
duties as the Board of Directors shall, from time to time, require. In the
absence or incapacity of the President, the Vice President designated by the
President or Board of Directors or Executive Committee shall exercise the powers
and duties of the President.
Section 5.7 The Secretary. The Secretary shall attend all meetings of the
Board of Directors, of the Executive Committee and any other committee of the
Board of Directors and of the stockholders and act as clerk thereof and record
all votes and the minutes of all proceedings in a book to be kept for that
purpose, and shall perform like duties for the standing committees when
required.
The Secretary shall keep in safe custody the seal of the corporation and,
whenever authorized by the Board of Directors or the Executive Committee, affix
the seal to any instrument requiring the same.
The Secretary shall see that proper notice is given of all the meetings of
the stockholders of the Corporation and of the Board of Directors and shall
perform such other duties as may be prescribed from time to time by the Board of
Directors, the Chairman, the Chief Executive Officer, or the President.
Assistant Secretaries. At the request of the Secretary, or in his or her
absence or inability to act, the Assistant Secretary or, if there be more than
one, the Assistant Secretary designated by the Secretary, shall perform the
duties of the Secretary and when so acting shall have all the powers of and be
subject to all the restrictions of the Secretary. The Assistant Secretaries
shall perform such other duties as may from time to time be assigned to them by
the President, the Secretary, or the Board of Directors.
Section 5.8 The Treasurer. The Treasurer shall be the financial officer of
the Corporation, shall keep full and accurate accounts of all collections,
receipts and disbursements in books belonging to the corporation, shall deposit
all moneys and other valuables in the name and to the credit of the Corporation,
in such depositories as may be directed by the Board of Directors, shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, the Chairman, the Chief Executive Officer, or the President, taking
proper vouchers therefor, and shall render to the President, the Chief Executive
Officer, the Chairman, and/or directors at all regular meetings of the Board, or
whenever they may require it, and to the annual meeting of the stockholders, an
account of all his or her transactions as Treasurer and of the financial
condition of the Corporation.
The Treasurer shall also perform such other duties as the Board of
Directors, the Chairman, the Chief Executive Officer, or the President may from
time to time require.
If required by the Board of Directors the Treasurer shall give the
Corporation a bond in a form and in a sum with surety satisfactory to the Board
of Directors for the faithful performance of the duties of his or her office and
the restoration to the Corporation in the case of his or her death, resignation
or removal from office of all books, papers, vouchers, money and other property
of whatever kind in his or her possession belonging to the Corporation.
Assistant Treasurers. At the request of the Treasurer, or in his or her
absence or inability to act, the Assistant Treasurer or, if there be more than
one, the Assistant Treasurer designated by the Treasurer, shall perform the
duties of the Treasurer and when so acting shall have all the powers of and be
subject to all the restrictions of the Treasurer. The Assistant Treasurers shall
perform such other duties as may from time to time be assigned to them by the
President, the Treasurer, or the Board of Directors.
Section 5.9 The Comptroller. The Comptroller shall have control over all
accounts and records of the Corporation pertaining to moneys, properties,
materials and supplies. He or she shall have executive direction over the
bookkeeping and accounting departments and shall have general supervision over
the records in all other departments pertaining to moneys, properties, materials
and supplies. He or she shall have such other powers and duties as are incident
to the office of Comptroller of a corporation and shall be subject at all times
to the direction and control of the Board of Directors, the Chairman, the Chief
Executive Officer, the President, or a Vice President.
Assistant Comptrollers. At the request of the Comptroller, or in his or her
absence or inability to act, the Assistant Comptroller or, if there be more than
one, the Assistant Comptroller designated by the Comptroller, shall perform the
duties of the Comoptroller and when so acting shall have all the powers of and
be subject to all the restrictions of the Comptroller. The Assistant
Comptrollers shall perform such other duties as may from time to time be
assigned to them by the President, the Comptroller, or the Board of Directors.
Section 5.10 Compensation and Bond. The compensation of the officers of the
Corporation shall be fixed by the Compensation Committee of the Board of
Directors, but this power may be delegated to any officer in respect of other
officers under his or her control. The Corporation may secure the fidelity of
any or all of its officers, agents or employees by bond or otherwise.
ARTICLE VI
Indemnification
Section 6.1 Indemnification of Directors, Officers, Employees and Agents.
(A) Any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than any action or suit by or
in the right of the Corporation) by reason of the fact that he or she is or was
a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(specifically including employee benefit plans), shall be indemnified by the
Corporation, if, as and to the extent authorized by applicable law, against
expenses (specifically including attorney's fees), judgments, fines
(specifically including any excise taxes assessed on a person with respect to an
employee benefit plan) and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action, suit or proceeding, if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner he or she
reasonably believed to be in and not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, he or she
had no reasonable cause to believe his or her conduct was unlawful.
(B) The Corporation shall, to the extent not prohibited by applicable law,
indemnify or agree to indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action
or suit by or in the right of the Corporation to procure a judgement in its
favor by reason of the fact that he or she is or was a director, officer,
employee, or agent of the Corporation or is or was serving at the request of the
Corporation as a director, trustee, officer, employee, or agent of another
corporation, domestic or foreign, non-profit or for-profit, partnership, joint
venture, trust or other enterprise (specifically including employee benefit
plans), against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the Corporation;
provided that, no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
(C) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in the paragraphs (A) or (B) of this
Section, or in defense of any claim, issue, or matter therein, he or she shall
be indemnified against expenses, specifically including attorneys' fees,
actually and reasonably incurred by him or her in connection therewith.
(D) Any indemnification under Paragraphs (A) and (B) of this Section,
unless ordered by a court, shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
trustee, officer, employee, or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in such Paragraphs
(A) and (B). Such determination shall be made as follows: (1) the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit, or proceeding; (2) if the quorum described in
(D)(1) of this Section is not obtainable or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion; or (3) by the stockholders.
Section 6.2 Advances for Litigation Expenses. Expenses (including
attorneys' fees) incurred by a director, officer, employee, or agent of the
Corporation in defending any civil, criminal, administrative or investigative
action, suit or proceeding, shall be paid by the Corporation as they are
incurred in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director, officer,
employee, or agent: (1) to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VI; and (2) to cooperate reasonably with the
Corporation concerning the action, suit or proceeding.
Section 6.3 Indemnification Nonexclusive. The indemnification provided by
this Article shall not be exclusive of and shall be in addition to any other
rights granted to those seeking indemnification under the Certificate of
Incorporation, these By-Laws, any agreement, any vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office and
shall continue as to a person who has ceased to be a director, trustee, officer,
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
Section 6.4 Indemnity Insurance. The Corporation may purchase and maintain
insurance or furnish similar protection, including but not limited to trust
funds, letters of credit, or self-insurance, on behalf of or for any person who
is or was a director, officer, employee, or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, trustee, officer,
employee or agent of another corporation, domestic or foreign, nonprofit or for
profit, partnership, joint venture, trust, or other enterprise, against any
liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under this Article. Insurance may be purchased from or maintained with a person
in which the Corporation has a financial interest.
Section 6.5 Definitions. For purposes of this Article: (1) a person who
acted in good faith and in a manner he or she reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
conclusively be deemed to have acted in a manner "not opposed to the best
interests of the Corporation"; (2) a person shall be deemed to have acted in
"good faith" and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal action
or proceeding, to have had no reasonable cause to believe his conduct was
unlawful, if his action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to him by the
officers of the Corporation or another enterprise in the course of their duties,
or on the advice of legal counsel for the Corporation or another enterprise or
on information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise; (3) the term "another enterprise" as used in this Article VI shall
mean any other corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise of which such person is or was serving at the
request of the Corporation as a director, officer, employee or agent; and (4)
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger, which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees, and agents.
ARTICLE VII
Common Stock
Section 7.1 Certificates. Certificates for stock of the Corporation shall
be in such form as shall be approved by the Board of Directors and shall be
signed in the name of the Corporation by the Chairman or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary. Such certificates may be sealed with the seal of the
Corporation or a facsimile thereof. Any of or all the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the date of
issue.
Section 7.2 Transfers of Stock. Transfers of stock shall be made only upon
the books of the Corporation by the holder, in person or by duly authorized
attorney, and on the surrender of the certificate or certificates for such stock
properly endorsed. The Board of Directors shall have the power to make all such
rules and regulations, not inconsistent with the Certificate of Incorporation
and these By-Laws and the law, as the Board of Directors may deem appropriate
concerning the issue, transfer and registration of certificates for stock of the
Corporation. The Board of Directors or the Finance Committee may appoint one (1)
or more transfer agents or registrars of transfers, or both, and may require all
stock certificates to bear the signature of either or both.
Section 7.3 Lost, Stolen or Destroyed Certificates. The Corporation may
issue a new stock certificate in the place of any certificate theretofore issued
by it, alleged to have been lost, stolen or destroyed, and the Corporation may
require the owner of the lost, stolen or destroyed certificate or his or her
legal representative to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of any such new
certificate. The Board of Directors may require such owner to satisfy other
reasonable requirements.
Section 7.4 Stockholder Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than 60 nor less than 10 days
before the date of such meeting, nor more than sixty days prior to any other
action. Only such stockholders as shall be stockholders of record on the date so
fixed shall be entitled to notice of, and to vote at, such meeting and any
adjournment thereof, or to give such consent, or to receive payment of such
dividend or other distribution, or to exercise such rights in respect of any
such change, conversion or exchange of stock, or to participate in such action,
as the case may be, notwithstanding any transfer of any stock on the books of
the Corporation after any record date so fixed.
If no record date is fixed by the Board of Directors, (l) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
date on which notice is given, or, if notice is waived by all stockholders
entitled to vote at the meeting, at the close of business on the day next
preceding the day on which the meeting is held and (2) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 7.5 Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VIII
Seal
Section 8.1 Seal. The seal of the Corporation shall be circular in form and
shall bear, in addition to any other emblem or device approved by the Board of
Directors, the name of the Corporation, the year of its incorporation and the
words "Corporate Seal" and "Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
Waiver of Notice
Section 9.1 Waiver of Notice. Whenever notice is required to be given by
statute, or under any provision of the Certificate of Incorporation or these
By-Laws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. In the case of a stockholder, such waiver of notice may be signed by
such stockholder's attorney or proxy duly appointed in writing. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice.
ARTICLE X
Fiscal Year
Section 10.1 Fiscal Year. The Fiscal Year of the corporation shall begin on
the first day of January and terminate on the thirty-first day of December each
year.
ARTICLE XI
Contracts, Checks, etc.
Section 11.1 Contracts, Checks, etc. The Board of Directors or the Finance
Committee may by resolution adopted at any meeting designate officers of the
Corporation who may in the name of the Corporation execute contracts, checks,
drafts, and orders for the payment of money in its behalf and, in the discretion
of the Board of Directors or the Finance Committee, such officers may be so
authorized to sign such contracts or checks singly without the necessity of
counter-signature.
ARTICLE XII
Amendments
Section 12.1 Amendments. Except as set forth below, these By-Laws may be
amended or repealed by the Board of Directors or by the affirmative vote of the
holders of a majority of the issued and outstanding common stock of the
Corporation, or by the unanimous written consent of the holders of the issued
and outstanding common stock of the Corporation.
Notwithstanding the foregoing paragraph, the affirmative vote of the
holders of at least 80% of the issued and outstanding shares of common stock of
the Corporation shall be required to amend, alter or repeal, or adopt any
provision inconsistent with, the requirements of Section 2.2, Section 3.1,
Section 3.2, Section 3.3 or this paragraph of Section 12.1 of these ByLaws, in
addition to any requirements of law and any provisions of the Certificate of
Incorporation, any By-law, or any resolution of the Board of Directors adopted
pursuant to the Certificate of Incorporation (and notwithstanding that a lesser
percentage may be specified by law, the Certificate of Incorporation, these
By-Laws, such resolution, or otherwise).
Notwithstanding any of the foregoing, the affirmative vote of a majority of
the holders of the issued and outstanding common stock of the Corporation shall
be required to amend, alter or repeal, or adopt any provision inconsistent with
(i) any provision of these ByLaws requiring a Supermajority Vote of the Board of
Directors (including this provision of Section 12.1) or (ii) the
responsibilities of the Chief Executive Officer or President as set forth in
Section 5.4 or Section 5.5, and the Board of Directors shall not recommend any
such amendment to such provisions to the stockholders unless the proposed
amendment is approved by the Board of Directors acting by Supermajority Vote.
ARTICLE XIII
Dividends
Section 13.1 Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
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