UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-13-60
ANNUAL REPORT
For the Period
Beginning January 1, 1997 and Ending December 31, 1997
to the
U.S. SECURITIES AND EXCHANGE COMMISSION
of
Cinergy Services, Inc.
(Exact Name of Reporting Company)
A Subsidiary SERVICE COMPANY
Date of Incorporation: February 23, 1994
State or Sovereign Power under which Incorporated or Organized: Delaware
Location of Principal Executive Offices of Reporting Company: Cincinnati,
Ohio
Name, title, and address of officer to whom correspondence concerning this
report should be addressed:
John P. Steffen, Vice President and Comptroller,
139 East Fourth Street, Cincinnati, Ohio 45202
Name of Principal Holding Company Whose Subsidiaries are served by Reporting
Company: Cinergy Corp.
<PAGE>
INSTRUCTIONS FOR USE OF FORM U-13-60
1. Time of Filing. Rule 94 provides that on or before the first day of May
in each calendar year, each mutual service company and each subsidiary
service company as to which the Commission shall have made a favorable
finding pursuant to Rule 88, and every service company whose application
for approval or declaration pursuant to Rule 88 is pending shall file
with the Commission an annual report on Form U-13-60 and in accordance
with the Instructions for that form.
2. Number of Copies. Each annual report shall be filed in duplicate. The
company should prepare and retain at least one extra copy for itself in
case correspondence with reference to the report becomes necessary.
3. Period Covered by Report. The first report filed by any company shall
cover the period from the date the Uniform System of Accounts was
required to be made effective as to that company under Rules 82 and 93
to the end of that calendar year. Subsequent reports should cover a
calendar year.
4. Report Format. Reports shall be submitted on the forms prepared by the
Commission. If the space provided on any sheet of such form is
inadequate, additional sheets may be inserted of the same size as a
sheet of the form or folded to each size.
5. Money Amounts Displayed. All money amounts required to be shown in
financial statements may be expressed in whole dollars, in thousands of
dollars or in hundred thousands of dollars, as appropriate and subject
to provisions of Regulation S-X (210.3-01(b)).
6. Deficits Displayed. Deficits and other like entries shall be indicated
by the use of either brackets or a parenthesis with corresponding
reference in footnotes. (Regulation S-X, 210.3-01(c)).
7. Major Amendments or Corrections. Any company desiring to amend or
correct a major omission or error in a report after it has been filed
with the Commission shall submit an amended report including only those
pages, schedules, and entries that are to be amended or corrected. A
cover letter shall be submitted requesting the Commission to incorporate
the amended report changes and shall be signed by a duly authorized
officer of the company.
8. Definitions. Definitions contained in Instruction 01-8 to the Uniform
System of Accounts for Mutual Service Companies and Subsidiary Service
Companies, Public Utility Holding Company Act of 1935, as amended
February 2, 1979 shall be applicable to words or terms used specifically
within this Form U-13-60.
9. Organization Chart. The service company shall submit with each annual
report a copy of its current organization chart.
10. Methods of Allocation. The service company shall submit with each annual
report a listing of the currently effective methods of allocation being
used by the service company and on file with the Securities and Exchange
Commission pursuant to the Public Utility Holding Company Act of 1935.
11. Annual Statement of Compensation for Use of Capital Billed. The service
company shall submit with each annual report a copy of the annual
statement supplied to each associate company in support of the amount of
compensation for use of capital billed during the calendar year.
<PAGE>
Annual Report of Cinergy Services, Inc.
LISTING OF SCHEDULES AND ANALYSIS OF ACCOUNTS
Schedule or
Description of Schedules and Accounts Account No. Page No.
Comparative Balance Sheets - Assets Schedule I 5
Comparative Balance Sheets - Liabilities Schedule I 6
Service Company Property Schedule II 7
Accumulated Provision for Depreciation and
Amortization of Service Company Property Schedule III 8
Investments Schedule IV 9
Accounts Receivable from Associate Companies Schedule V 10
Fuel Stock Expenses Undistributed Schedule VI 11
Stores Expense Undistributed Schedule VII 12
Miscellaneous Current and Accrued Assets Schedule VIII 13
Miscellaneous Deferred Debits Schedule IX 14
Research, Development, or Demonstration
Expenditures Schedule X 15
Proprietary Capital Schedule XI 16
Long-term Debt Schedule XII 17
Current and Accrued Liabilities Schedule XIII 18
Notes to Financial Statements Schedule XIV 19
Comparative Income Statements Schedule XV 27
Analysis of Billing - Associate Companies Account 457 28
Analysis of Billing - Nonassociate Companies Account 458 29
Analysis of Charges for Service - Associate
and Nonassociate Companies Schedule XVI 30
Schedule of Expense Distribution by Department
or Service Function Schedule XVII 31
Departmental Analysis of Salaries Account 920 34
Outside Services Employed Account 923 35
Employee Pensions and Benefits Account 926 38
General Advertising Expenses Account 930.1 39
Miscellaneous General Expenses Account 930.2 40
Rents Account 931 41
Taxes Other Than Income Taxes Account 408 42
Donations Account 426.1 43
Other Deductions Account 426.5 44
Notes to Statements of Income Schedule XVIII 45
LISTING OF INSTRUCTIONAL FILING REQUIREMENTS
Description of Reports or Statements Page No.
Organization Chart 47
Methods of Allocation 48
Annual Statement of Compensation for Use of Capital Billed 50
<PAGE>
Annual Report of Cinergy Services, Inc.
As of December 31, 1997 and 1996
Schedule I - COMPARATIVE BALANCE SHEETS
Give balance sheet of the Company as of December 31 of the current and prior
year
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
REF DECEMBER
ACCOUNT ASSETS AND OTHER DEBITS SCHED 1997 1996
SERVICE COMPANY PROPERTY
101 Service Company Property II $ 8,943,593 $ 2,063,444
107 Construction Work in Progress II 11,722,791 5,255,666
Total Property 20,666,384 7,319,110
108 Accumulated Provision for Depreciation and
Amortization of Service Company Property III (1,103,349) (183,179)
Net Service Company Property 19,563,035 7,135,931
INVESTMENTS
123 Investments in Associate Companies IV - -
124 Other Investments IV - -___
Total Investments - -
CURRENT AND ACCRUED ASSETS
131 Cash - 7,059,935
134 Special Deposits - -
135 Working Funds - (51,260)
136 Temporary Cash Investments IV - -
141 Notes Receivable - -
143 Accounts Receivable 339,601 477,496
144 Accumulated Provision for Uncollectible Accounts - -
146 Accounts Receivable from Associate Companies V 19,533,715 14,357,685
152 Fuel Stock Expenses Undistributed VI - -
154 Materials and Supplies - -
163 Stores Expense Undistributed VII - -
165 Prepayments - -
174 Miscellaneous Current and Accrued Assets VIII - -___
Total Current and Accrued Assets 19,873,316 21,843,856
DEFERRED DEBITS
181 Unamortized Debt Expense - -
184 Clearing Accounts 555 -
186 Miscellaneous Deferred Debits IX 55,441 (187,036)
188 Research, Development, or Demonstration Expenditures X - -
190 Accumulated Deferred Income Taxes 763,671 -___
Total Deferred Debits 819,667 (187,036)
TOTAL ASSETS AND OTHER DEBITS $40,256,018 $28,792,751
</TABLE>
<PAGE>
Annual Report of Cinergy Services, Inc.
As of December 31, 1997 and 1996
Schedule I - COMPARATIVE BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
REF December 31
ACCOUNT LIABILITIES AND PROPRIETARY CAPITAL SCHED 1997 1996
PROPRIETARY CAPITAL
201 Common Stock Issued (Note 2) XI $ 3 $ 3
211 Miscellaneous Paid-In-Capital XI - -
215 Appropriated Retained Earnings XI - -
216 Unappropriated Retained Earnings XI - (3)
Total Proprietary Capital 3 -
LONG-TERM DEBT
223 Advances From Associate Companies XII - -
224 Other Long-Term Debt XII - -
225 Unamortized Premium on Long-Term Debt - -
226 Unamortized Discount on Long-Term Debt - -___
Total Long-Term Debt - -
CURRENT AND ACCRUED LIABILITIES
231 Notes Payable - -
232 Accounts Payable 15,910,544 10,962,571
233 Notes Payable To Associate Companies XIII 20,949,887 18,489,079
234 Accounts Payable to Associate Companies XIII 2,274,100 1,840,449
236 Taxes Accrued 1,232,047 (2,567,123)
237 Interest Accrued - -
238 Dividends Declared - -
241 Tax Collections Payable (363,074) 256
242 Miscellaneous Current and Accrued Liabilities XIII - -___
Total Current and Accrued Liabilities 40,003,504 28,725,232
DEFERRED CREDITS
253 Other Deferred Credits 140,000 -
255 Accumulated Deferred Investment Tax Credits - -___
Total Deferred Credits 140,000 -
282 ACCUMULATED DEFERRED INCOME TAXES 112,511 67,519
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $40,256,018 $28,792,751
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule II - SERVICE COMPANY PROPERTY
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT RETIREMENTS OTHER BALANCE
BEGINNING OR CHANGES AT CLOSE
ACCOUNT DESCRIPTION OF YEAR ADDITIONS SALES (1) OF YEAR
SERVICE COMPANY PROPERTY
301 Organization $ - $ - $ - $ - $ -
303 Miscellaneous Intangible Plant - - - - -
304 Land and Land Rights - - - - -
305 Structures and Improvements - - - - -
306 Leasehold Improvements - - - - -
307 Equipment (2) - - - - -
308 Office Furniture and Equipment 1,311,991 1,242,914 - - 2,554,905
309 Automobiles, Other Vehicles and
Related Garage Equipment - - - - -
310 Aircraft and Airport Equipment - - - - -
311 Other Service Company Property (3) 751,453 5,637,235 - - 6,388,688
Sub-Total 2,063,444 6,880,149 - - 8,943,593
107 Construction Work in Progress (4) 5,255,666 6,467,125 - - 11,722,791
Total $7,319,110 $13,347,274 $ - $ - $20,666,384
<FN>
NOTES
(1) Provide an explanation of those changes considered material: None
(2) Subaccounts are required for each class of equipment owned. The Service
Company shall provide a listing by subaccount of equipment additions during
the year and the balance at the close of the year: None
</FN>
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(3) Describe Other Service Company property: BALANCE
AT CLOSE
DESCRIPTION OF YEAR
Computer Software $ 6,388,688
$ 6,388,688
(4) Describe Construction Work in Progress: BALANCE
AT CLOSE
DESCRIPTION OF YEAR
Computer Software $11,212,571
Office Furniture & Equipment 510,220
Other -
$11,722,791
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule III - ACCUMULATED PROVISION FOR DEPRECIATION AND AMORTIZATION OF SERVICE COMPANY PROPERTY
<S> <C> <C> <C> <C> <C>
BALANCE AT BALANCE
BEGINNING OTHER CHANGES AT CLOSE
ACCOUNT DESCRIPTION OF YEAR ADDITIONS RETIREMENTS ADD (DEDUCT) (1) OF YEAR
301 Organization $ - $ - $ - $ - $ -
303 Miscellaneous Intangible Plant - - - - -
304 Land and Land Rights - - - - -
305 Structures and Improvements - - - - -
306 Leasehold Improvements - - - - -
307 Equipment - - - - -
308 Office Furniture and Equipment 158,131 300,116 - - 458,247
309 Automobiles, Other Vehicles and
Related Garage Equipment - - - - -
310 Aircraft and Airport Equipment - - - - -
311 Other Service Company Property 25,048 620,054 - - 645,102
Total $183,179 $920,170 $ - $ - $1,103,349
<FN>
NOTES
(1) Provide an explanation of those changes considered material: None
</FN>
</TABLE>
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule IV - INVESTMENTS
INSTRUCTIONS: Complete the following schedule concerning investments.
Under Account 124, "Other Investments", state each investment separately, with
description, including the name of issuing company, number of shares or
principal amount, etc.
Under Account 136, "Temporary Cash Investments", list each investment
separately.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
Account 123 - Investments in Associate
Companies
None
Total $ - $ -
Account 124 - Other Investments
None
Total $ - $ -
Account 136 - Temporary Cash Investments
None
Total $ - $ -
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule V - ACCOUNTS RECEIVABLE FROM ASSOCIATE COMPANIES
INSTRUCTIONS: Complete the following schedule listing accounts
receivable from each associate company. Where the service
company has provided accommodation or convenience payments
for associate companies, a separate listing of total
payments for each associate company by subaccount should
be provided.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
Account 146 - Accounts Receivable
from Associate Companies:
PSI Energy, Inc. (PSI) $ 7,088,383 $12,095,900
PSI Energy Argentina, Inc. 8,020
Lawrenceburg Gas Company (Lawrenceburg) 41,422 114,693
KO Transmission Company - 46
Miami Power Corporation 41 -
The Union Light, Heat and Power
Company (ULH&P) 3,036,609 2,142,565
West Harrison Gas and Electric
Company (WHG&E) 58 3,789
Cinergy Corp. (Cinergy) 4,191,172 5,168,702
Total $14,357,685 $19,533,715
Analysis Of Convenience Or Accommodation Payments:
None
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule VI - FUEL STOCK EXPENSES UNDISTRIBUTED
INSTRUCTIONS: Report the amount of labor and expenses incurred with
respect to fuel stock expenses during the year and
indicate amount attributable to each associate company.
Under the section headed "Summary" listed below give an
overall report of the fuel functions performed by the
service company.
DESCRIPTION LABOR EXPENSES TOTAL
Account 152 - Fuel Stock Expenses Undistributed
None
Total $ - $ - $ -
Summary:
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule VII - STORES EXPENSE UNDISTRIBUTED
INSTRUCTIONS: Report the amount of labor and expenses incurred with
respect to stores expense during the year and indicate
amount attributable to each associate company.
DESCRIPTION LABOR EXPENSES TOTAL
Account 163 - Stores Expense Undistributed
None
Total $ - $ - $ -
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule VIII - MISCELLANEOUS CURRENT AND ACCRUED ASSETS
INSTRUCTIONS: Provide detail of items in this account. Items less than $10,000
may be grouped, showing the number of items in each group.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
Account 174 - Miscellaneous Current
and Accrued Assets
None
Total $ - $ -
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule IX- MISCELLANEOUS DEFERRED DEBITS
INSTRUCTIONS: Provide detail of items in this account. Items less than $10,000
may be grouped by class showing the number of items in each
class.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
Account 186 - Miscellaneous Deferred
Debits
ITEMS DEFERRED PENDING INVESTIGATION $(187,036) $55,441
Total $(187,036) $55,441
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule X - RESEARCH, DEVELOPMENT, OR DEMONSTRATION EXPENDITURES
INSTRUCTIONS: Provide a description of each material research, development, or
demonstration project which incurred costs by the service
corporation during the year.
DESCRIPTION AMOUNT
Account 188 - Research, Development, or
Demonstration Expenditures
None
Total $ -
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XI - PROPRIETARY CAPITAL
<S> <C> <C> <C> <C> <C>
NUMBER PAR OR
ACCOUNT OF SHARES STATED VALUE - OUTSTANDING CLOSE OF PERIOD -
NUMBER CLASS OF STOCK AUTHORIZED PER SHARE NO. OF SHARES TOTAL AMOUNT
201 Common Stock Issued 100 $0.05 50 $3
INSTRUCTIONS: Classify amounts in each account with brief explanation,
disclosing the general nature of transactions which gave rise to the
reported amounts.
DESCRIPTION AMOUNT
211 Miscellaneous Paid-In-Capital None
215 Appropriated Retained Earnings None
Total $ -
INSTRUCTIONS: Give particulars concerning net income or (loss) during
the year, distinguishing between compensation for the use
of capital owed or net loss remaining from servicing
nonassociates per the General Instructions of the Uniform
System of Accounts. For dividends paid during the year in
cash or otherwise, provide rate percentage, amount of
dividend, date declared, and date paid.
BALANCE BALANCE
AT BEGINNING NET INCOME DIVIDENDS AT CLOSE
ACCOUNT DESCRIPTION OF YEAR OR (LOSS) PAID OF YEAR
216 Unappropriated Retained Earnings $(3) $ 3 $ - $ -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XII - LONG-TERM DEBT
INSTRUCTIONS: Advances from associate companies should be reported
separately for advances on notes and advances on open
account. Names of associate companies from which advances
were received shall be shown under the class and series of
obligation column. For Account 224 - Other Long-Term Debt,
provide the name of creditor company or organization,
terms of the obligation, date of maturity, interest rate,
and the amount authorized and outstanding.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TERMS OF OBLIGATION BALANCE AT BALANCE
CLASS & SERIES DATE OF INTEREST AMOUNT BEGINNING (1) AT CLOSE
NAME OF CREDITOR OF OBLIGATION MATURITY RATE AUTHORIZED OF YEAR ADDITIONS DEDUCTIONS OF YEAR
Account 223 - Advances from
Associate Companies: None
Total
Account 224 - Other Long-
Term Debt: None
Total
NOTES:
(1) Give an explanation of
deductions: None
</TABLE>
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XIII - CURRENT AND ACCRUED LIABILITIES
INSTRUCTIONS: Provide balance of notes and accounts payable to each
associate company. Give description and amount of
miscellaneous current and accrued liabilities. Items less
than $10,000 may be grouped, showing the number of items
in each group.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
Account 233 - Notes Payable to
Associate Companies
The Cincinnati Gas & Electric Company (CG&E) $18,447,192 $10,758,000
PSI - 10,150,000
Cinergy 41,887 41,887
Total $18,489,079 $20,949,887
Account 234 - Accounts Payable to
Associate Companies
CG&E $ 1,840,449 $ 2,274,100
Total $ 1,840,449 $ 2,274,100
Account 242 - Miscellaneous Current and
Accrued Liabilities $ - $ -
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XIV - NOTES TO FINANCIAL STATEMENTS
Instructions: The space below is provided for important notes regarding
the financial statements or any account thereof. Furnish
particulars as to any significant contingent assets or
liabilities existing at the end of the year. Notes
relating to financial statements shown elsewhere in this
report may be indicated here by reference.
1. Summary of Significant Accounting Policies
(a) Merger Cinergy Corp. (Cinergy), a Delaware corporation and registered
holding company under the Public Utility Holding Company Act of 1935 (PUHCA),
was created in the October 1994 merger of The Cincinnati Gas & Electric Company
(CG&E) and PSI Resources, Inc. Cinergy Services, Inc. (Services) is a
wholly-owned subsidiary of Cinergy. Cinergy's other wholly-owned subsidiaries
are CG&E, PSI Energy, Inc. (PSI), and Cinergy Investments, Inc. (Investments).
(b) Nature of Operations Services, a Delaware corporation, is the service
company for the Cinergy system, providing member companies with a variety of
administrative, management, and support services.
(c) Management's Use of Estimates The preparation of financial statements in
conformity with generally accepted accounting principles (GAAP) requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. (See Note 9.)
(d) Regulation Services is subject to regulation by the Securities and Exchange
Commission (SEC) under the PUHCA. Services' accounting policies conform to GAAP
and follow the Uniform System of Accounts for Mutual Service Companies and
Subsidiary Service Companies prescribed by the SEC pursuant to the PUHCA.
(e) Federal and State Income Taxes Deferred tax assets and liabilities are
recognized for the income tax consequences of transactions treated differently
for financial reporting and tax return purposes, measured on the basis of
statutory tax rates.
(f) Service Company Property Service company property and equipment, including
any interest capitalized during construction, are recorded at cost.
(g) Depreciation Provisions for depreciation are determined by using the
straight-line method applied to the cost of depreciable plant in service. The
effective annual depreciation rate for 1997 was 11.8% and for 1996 was 10.0%.
Software is amortized over a five-year period at an annual rate of 20%.
(h) Income and Expenses Services provided to affiliated companies are provided
at cost. The costs of services are determined on a direct charge basis to the
extent practicable. Indirect costs are charged using the ratios defined in the
service agreements between Services and the client companies. (See "Methods of
Allocation.")
2. Common Stock
Services is authorized to issue 100 shares of Common Stock at a par value of
five cents ($.05) per share. All of Services' outstanding common stock is held
by Cinergy.
3. Notes Payable to Associate Companies
To better manage cash and working capital requirements, Cinergy's utility
subsidiaries, and Services, participate in a money pooling arrangement. Under
this arrangement, Cinergy system companies with surplus short-term funds,
whether from internal or external sources, provide short-term loans to other
system companies at rates that reflect (1) the actual costs of the external
borrowing and/or (2) the costs of the internal funds which are set at the 30-
day Federal Reserve "AA" industrial commercial paper rate. The SEC's approval of
the money pool, pursuant to the PUHCA, extends through December 31, 2002.
4. Leases
Cinergy and its subsidiaries, including Services, have entered into operating
lease agreements covering various facilities and properties, including office
space and computer, communications, and transportation equipment. Total rental
payments on operating leases for each of the past two years were as follows:
1997 1996
(in millions)
Cinergy and subsidiaries $36 $31
Future minimum lease payments required under operating leases with remaining,
non-cancelable lease terms in excess of one year as of December 31, 1997, are as
follows:
Cinergy and
Subsidiaries
(in millions)
Year Ended December 31
1998 $ 36
1999 29
2000 22
2001 13
2002 7
After 2002 26
$133
5. Pension Plans
Cinergy's defined benefit pension plans, of which Services is a participant,
cover substantially all employees meeting certain minimum age and service
requirements. Plan benefits are determined under a final average pay formula
with consideration of years of participation, age at retirement, and the
applicable average Social Security wage base or benefit amount.
Cinergy's funding policy is to contribute annually to the plans an amount which
is not less than the minimum amount required by the Employee Retirement Income
Security Act of 1974 and not more than the maximum amount deductible for income
tax purposes. Contributions applicable to the 1997 plan year were $8 million and
to the 1996 plan year were $7 million. The plans' assets consist of investments
in equity and fixed income securities.
Effective January 1, 1998, Cinergy reconfigured its defined benefit pension
plans. The reconfigured plans cover the same employees as the previous plans and
established a uniform final average pay formula for all employees. When an
employee retires, he or she will receive the greater of the benefit accrued
under the previous plan as of December 31, 1997, or the benefit accrued under
the new plan as of the retirement date. The reconfiguration of the pension plans
is not expected to have a significant impact on the Company's financial
condition or results of operations.
Cinergy's pension cost for 1997 and 1996 included the following components:
1997 1996
(in millions)
Benefits earned during the period $ 19.8 $21.2
Interest accrued on projected
benefit obligations 67.8 61.6
Return on plans' assets
Actual (186.6) (75.6)
Deferred gain 123.8 14.4
Net amortizations 2.8 2.9
Net periodic pension cost $ 27.6 $24.5
During 1996, Cinergy recognized an additional $61 million of accrued pension
cost in accordance with Statement of Financial Accounting Standards No. 88,
Employers' Accounting for Settlements and Curtailments of Defined Pension Plans
and for Termination Benefits. This amount represents the costs associated with
additional benefits extended in connection with voluntary workforce reduction
programs.
1997 1996
Actuarial Assumptions:
For determination of projected benefit
obligations
Discount Rate 7.5% 8.0%
Rate of increase in future compensation 4.5 5.0
For determination of pension cost
Rate of return on plans' assets 9.0 9.0
The following table reconciles the plans' funded status with amounts recorded in
the Consolidated Financial Statements of Cinergy. Under the provisions of
Statement of Financial Accounting Standards No. 87, Employers' Accounting for
Pensions (Statement 87), certain assets and obligations of the plans are
deferred and recognized in the Consolidated Financial Statements of Cinergy in
later years.
1997 1996
Plans' Plans' Plan's
Assets Exceed Assets Exceed Accumulated
Accumulated Accumulated Benefits
Benefits Benefits Exceed Assets
(in millions)
Actuarial present value
of benefits
Vested benefits $(731.6) $(423.1) $(241.6)
Non-vested benefits (35.5) (33.5) (10.1)
Accumulated benefit
obligations (767.1) (456.6) (251.7)
Effect of future
compensation
increases (193.2) (121.7) (53.3)
Projected benefit
obligations (960.3) (578.3) (305.0)
Plans' assets
at fair value 888.1 531.6 234.1
Projected benefit
obligations in excess
of plans' assets (72.2) (46.7) (70.9)
Remaining balance of plans'
net assets existing at date
of initial application of
Statement 87 to be recognized
as a reduction of pension
cost in future periods (8.5) (6.7) (3.1)
Unrecognized net gain
resulting from experience
different from that
assumed and effects of
changes in assumptions (134.6) (48.4) (28.1)
Prior service cost not
yet recognized in net
periodic pension cost 46.6 33.6 23.2
Accrued pension cost at
December 31 $(168.7) $ (68.2) $ (78.9)
6. Other Postretirement Benefits
Cinergy, including Services, provides certain health care and life insurance
benefits to retired employees who have met minimum age and service requirements
and their eligible dependents. The health care benefits include medical
coverage, dental coverage, and prescription and are subject to certain
limitations, such as deductibles and co-payments. Prior to January 1, 1997, CG&E
and PSI employees were covered under separate plans. Effective January 1, 1997,
all Cinergy active employees are eligible to receive essentially the same
postretirement health care benefits. Certain classes of employees, based on age,
as well as all retirees, have been grandfathered under benefit provisions in
place prior to January 1, 1997. Neither CG&E and its subsidiaries nor PSI
currently pre-fund their obligations for these postretirement benefits; however,
PSI, in connection with the settlement which resulted in a February 1995 Indiana
Utility Regulatory Commission (IURC) order, agreed to begin pre-funding.
Implementation of pre-funding is subject to the outcome of negotiations with The
Office of the Utility Consumer Counselor and approval by the IURC.
Postretirement benefit cost for 1997 and 1996 included the following components:
Health Life
Care Insurance Total
(in millions)
1997
Benefits earned during the period $ 3.0 $ .1 $ 3.1
Interest accrued on Accumulated
Postretirement Benefit Obligations
(APBO) 14.1 2.2 16.3
Net amortization and deferral .2 .1 .3
Amortization of transition obligations 4.7 .3 5.0
Net periodic postretirement benefit cost $22.0 $2.7 $24.7
1996
Benefits earned during the period $ 5.7 $ .1 $ 5.8
Interest accrued on APBO 16.5 2.2 18.7
Net amortization and deferral .3 - .3
Amortization of transition obligations 8.1 .3 8.4
Net periodic postretirement benefit cost $30.6 $2.6 $33.2
The following table reconciles the APBO of the health care and life insurance
plans with amounts recorded in the Consolidated Financial Statements of Cinergy.
Under the provisions of Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, certain
obligations of the plans are deferred and recognized in the Consolidated
Financial Statements of Cinergy in later years.
Health Life
Care Insurance Total
(in millions)
1997
Actuarial present value of benefits
Fully eligible active plan participants $ (9.9) $ (2.3) $ (12.2)
Other active plan participants (66.3) (1.1) (67.4)
Retirees and beneficiaries (113.6) (28.7) (142.3)
Projected APBO (189.8) (32.1) (221.9)
Unamortized transition obligations 70.7 .2 70.9
Unrecognized net loss resulting from
experience different from that assumed
and effects of changes in assumptions 21.1 1.5 22.6
Accrued postretirement benefit obligations
at December 31, 1997 $ (98.0) $(30.4) $(128.4)
1996
Actuarial present value of benefits
Fully eligible active plan participants $ (13.7) $ (1.6) $ (15.3)
Other active plan participants (49.8) (1.5) (51.3)
Retirees and beneficiaries (118.0) (26.4) (144.4)
Projected APBO (181.5) (29.5) (211.0)
Unamortized transition obligations 75.4 .4 75.8
Unrecognized net loss (gain) resulting from
experience different from that assumed
and effects of changes in assumptions 19.5 (.5) 19.0
Accrued postretirement benefit obligations
at December 31, 1996 $ (86.6) $(29.6) $(116.2)
The following assumptions were used to determine the APBO:
1997 1996
Discount rate 7.5% 8.0%
Health care cost trend rate,
gradually declining to 5% 7.0-8.0% 7.0-9.0%
Year ultimate trend rates achieved 2004 2004
Increasing the health care cost trend rate by one percentage point in each year
would increase the APBO by approximately $24 million for 1997 and $21 million
for 1996, and the aggregate of the service and interest cost components of the
postretirement benefit cost by approximately $2 million for 1997 and by
approximately $4 million for 1996.
7. Net Income
The net income for the year ended December 31, 1997, represents the assignment
of expenses not assigned at December 31, 1996.
8. Income Taxes
Services complies with the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (Statement 109). Statement 109
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of existing differences between the financial reporting
and tax reporting bases of assets and liabilities.
Services' net deferred income tax liability (asset) at Decemer 31, 1997, and
1996, is as follows:
1997 1996
Deferred Income Tax Liability (Asset)
Other $(651,160) $67,519
A summary of Federal and state income taxes charged (credited) to income and the
allocation of such amounts is as follows:
1997 1996
Current Income Taxes
Federal $ - $(63,353)
State - (4,166)
Total current income taxes - $(67,519)
Deferred Income Taxes
Federal
Depreciation and other utility
plant-related items $ - $ 63,353
State
Depreciation and other utility
plant-related items - 4,166
Total deferred income taxes $ - $ 67,519
Total Income Taxes $ - $ -
Services will participate in the filing of a consolidated Federal income tax
return with Cinergy for the year ended December 31, 1997. The current tax
liability is allocated among the members of the group pursuant to a tax sharing
agreement consistent with Rule 45(c) of the PUHCA.
9. Commitments and Contingencies
(a) Enertech Associates, Inc. (Enertech) Litigation In October 1995, a suit was
filed in the Federal District Court for the Southern District of Ohio by three
former employees of Enertech, formerly named Power International, Inc., a
subsidiary of Investments, naming as defendants Enertech, Cinergy, Investments,
CG&E, PSI, James E. Rogers, and William J. Grealis. (Mr. Rogers and Mr. Grealis
are officers and/or directors of the foregoing companies.) The lawsuit, which
stems from the termination of employment of the three former employees, alleges
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 alleges 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 alleges
compensatory damages of $154 million based upon assumed future success of
potential future investments and punitive damages of three times that amount.
All defendants are vigorously defending against the charges based upon
meritorious defenses. Cinergy is currently unable to predict the outcome of this
litigation.
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XV - COMPARATIVE INCOME STATEMENTS
<S> <C> <C> <C>
December 31
ACCOUNT DESCRIPTION 1997 1996
INCOME:
457 Services Rendered to Associate Companies $483,823,472 $615,348,166
458 Services Rendered to Nonassociate Companies - -
415 Jobbing and Contract Work - 74
419 Other Interest Income 34,030 62,642
Total Income 483,857,502 615,410,882
EXPENSES:
920 Salaries and Wages 211,064,421 206,699,993
921 Office Supplies and Expenses 62,784,790 61,183,041
922 Administrative Expenses Transferred - Credit (838,673) (1,496,336)
923 Outside Services Employed 37,360,393 50,449,167
924 Property Insurance 1,668,240 4,331,407
925 Injuries and Damages (191,042) 5,929,886
926 Employee Pension and Benefits 72,739,966 202,867,382
928 Regulatory Commission Expense 1,843,674 3,566,809
930.1 General Advertising Expenses 53,159 346,551
930.2 Miscellaneous General Expenses 33,048,682 41,260,147
931 Rents 43,526,355 20,701,478
932 Maintenance of Structures and Equipment 5,678,703 7,318,401
403,404 Depreciation and Amortization Expense 920,170 157,057
408 Taxes Other Than Income Taxes 12,846,806 11,315,084
409 Income Taxes - (67,519)
410 Provision for Deferred Income Taxes - 67,519
411 Provision for Deferred Income Taxes - Credit - -
411.5 Investment Tax Credit - -
421 Miscellaneous Income or Loss (7,888) (1,309)
426.1 Donations - -
426.5 Other Deductions - -
427 Interest on Long-term Debt - -
430 Interest on Debt to Associate Companies 1,723,197 625,487
431 Other Interest Expense (363,454) (55,861)
Total Expense 483,857,499 615,198,384
NET INCOME $ 3 $ 212,498
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
ANALYSIS OF BILLING
ASSOCIATE COMPANIES - ACCOUNT 457
<S> <C> <C> <C> <C>
DIRECT INDIRECT COMPENSATION
COSTS COSTS FOR USE TOTAL
CHARGED CHARGED OF CAPITAL AMOUNT
NAME OF ASSOCIATE COMPANY 457-1 457-2 457-3 BILLED
PSI Energy, Inc. $151,678,731 $ 65,427,160 $ 487,981 $217,593,872
PSI Energy Argentina, Inc. 29,142 18 - 29,160
Cinergy Investments, Inc. 2,704,688 5,641 22,173 2,732,502
Power Equipment Supply Co. 4,309 91 - 4,400
Cinergy Capital & Trading, Inc. (Formerly
Wholesale Power Services, Inc.) 1,335,983 2,402 - 1,338,385
PSI Recycling, Inc. 1,368 20 - 1,388
The Cincinnati Gas & Electric Company 140,930,720 85,834,287 580,244 227,345,251
Enertech Associates, Inc. (Formerly
Power International, Inc.) 465,995 3,680 14,263 483,938
Lawrenceburg Gas Company 147,572 508,660 2,221 658,453
KO Transmission Company 9,612 155 - 9,767
Miami Power Corporation 2,457 28 334 2,819
The Union Light, Heat and Power Company 12,491,772 13,093,952 249,359 25,835,083
The West Harrison Gas and Electric Company 10,331 13,993 - 24,324
Tri-State Improvement Company 15,607 28 2,220 17,855
Cinergy Resources, Inc. 833,189 3,337 - 836,526
CGE ECK, Inc. 21 1 - 22
Cinergy Corp. 1,067,508 3,193 10,735 1,081,436
Cinergy Technology, Inc. 338,046 916 - 338,962
Cinergy Cooling Corp. 611,422 1,915 - 613,337
Cinergy UK, Inc. 1,151,300 8,593 - 1,159,893
Cinergy Solutions, Inc. 3,485,008 82,600 - 3,567,608
Cinergy Communications, Inc. 83,717 832 - 84,549
Cinergy Engineering, Inc. 19,885 12 - 19,897
Cinergy Global Power, Inc. 43,852 193 - 44,045
TOTAL $317,462,235 $164,991,707 $1,369,530 $483,823,472
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
ANALYSIS OF BILLING
NONASSOCIATE COMPANIES - ACCOUNT 458
Instructions: Provide a brief description of the services rendered to each
nonassociate company.
<S> <C> <C> <C> <C> <C> <C>
DIRECT INDIRECT COMPENSATION EXCESS
COSTS COSTS FOR USE OR TOTAL
CHARGED CHARGED OF CAPITAL TOTAL DEFICIENCY AMOUNT
NAME OF NONASSOCIATE COMPANY 458-1 458-2 458-3 COST 458-4 BILLED
None
TOTAL $ - $ - $ - $ - $ - $ -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XVI - ANALYSIS OF CHARGES FOR SERVICE - ASSOCIATE AND NONASSOCIATE COMPANIES
INSTRUCTIONS: Total cost of service will equal for associate and nonassociate
companies the total amount billed under their separate analysis
of billing schedules.
<S> <C> <C> <C> <C> <C> <C>
Associate Company Charges Nonassociate Company Charge
Direct Indirect Direct Indirect
Account Description Of Items Cost Cost Total Cost Cost Total
920 Salaries and Wages $133,789,323 $ 77,275,098 $211,064,421 $ - $ - $ -
921 Office Supplies and Expenses 46,020,669 16,764,121 62,784,790 - - -
922 Administrative Expense
Transferred - Credit (813,760) (24,913) (838,673) - - -
923 Outside Services Employed 24,424,784 12,935,609 37,360,393 - - -
924 Property Insurance 1,668,240 - 1,668,240 - - -
925 Injuries and Damages (203,913) 12,871 (191,042) - - -
926 Employee Pensions and Benefits 33,036,520 39,703,446 72,739,966 - - -
928 Regulatory Commission Expense 1,658,051 185,623 1,843,674 - - -
930.1 General Advertising Expenses 51,039 2,120 53,159 - - -
930.2 Miscellaneous General Expenses 25,965,097 7,083,585 33,048,682 - - -
931 Rents 11,844,181 31,682,174 43,526,355 - - -
932 Maintenance of Structures
and Equipment 4,725,452 953,251 5,678,703 - - -
403,404 Depreciation and Amortization - 920,170 920,170 - - -
Expense - - - - - -
408 Taxes Other Than Income Taxes 9,574,236 3,272,570 12,846,806 - - -
409 Income Taxes - - - - - -
410 Provision for Deferred Income
Taxes - - - - - -
411 Provision for Deferred Income
Taxes - Credit - - - - - -
411.5 Investment Tax Credit - - - - - -
421 Miscellaneous Income or Loss - (7,888) (7,888) - - -
426.1 Donations - - - - - -
426.5 Other Deductions - - - - - -
427 Interest on Long-term Debt - - - - - -
430 Interest on Debt to Associate
Companies - 1,723,197 1,723,197 - - -
431 Other Interest Expense (146,350) (217,104) (363,454) - - -
Total Expense $291,593,569 $192,263,930 $483,857,499 $ - $ - $ -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XVI - ANALYSIS OF CHARGES FOR SERVICE - ASSOCIATE AND NONASSOCIATE COMPANIES (CONTINUED)
INSTRUCTIONS: Total cost of service will equal for associate and nonassociate
companies the total amount billed under their separate analysis
of billing schedules.
<S> <C> <C> <C>
Total Charges for Service
Direct Indirect
Account Description Of Items Cost Cost Total
920 Salaries and Wages $133,789,323 $ 77,275,098 $211,064,421
921 Office Supplies and Expenses 46,020,669 16,764,121 62,784,790
922 Administrative Expense
Transferred - Credit (813,760) (24,913) (838,673)
923 Outside Services Employed 24,424,784 12,935,609 37,360,393
924 Property Insurance 1,668,240 - 1,668,240
925 Injuries and Damages (203,913) 12,871 (191,042)
926 Employee Pensions and Benefits 33,036,520 39,703,446 72,739,966
928 Regulatory Commission Expense 1,658,051 185,623 1,843,674
930.1 General Advertising Expenses 51,039 2,120 53,159
930.2 Miscellaneous General Expenses 25,965,097 7,083,585 33,048,682
931 Rents 11,844,181 31,682,174 43,526,355
932 Maintenance of Structures
and Equipment 4,725,452 953,251 5,678,703
403,404 Depreciation and Amortization - 920,170 920,170
Expense - - -
408 Taxes Other Than Income Taxes 9,574,236 3,272,570 12,846,806
409 Income Taxes - - -
410 Provision for Deferred Income
Taxes - - -
411 Provision for Deferred Income
Taxes - Credit - - -
411.5 Investment Tax Credit - - -
421 Miscellaneous Income or Loss - (7,888) (7,888)
426.1 Donations - - -
426.5 Other Deductions - - -
427 Interest on Long-term Debt - - -
430 Interest on Debt to Associate
Companies - 1,723,197 1,723,197
431 Other Interest Expense (146,350) (217,104) (363,454)
Total Expense $291,593,569 $192,263,930 $483,857,499
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31,1997
Schedule XVII - SCHEDULE OF EXPENSE DISTRIBUTION BY DEPARTMENT OR SERVICE FUNCTION
INSTRUCTIONS: Indicate each department or service function. (See Instruction 01-3 General Structure of Accounting System:
Uniform System of Account(s))
<S> <C> <C> <C> <C>
---DEPARTMENT OR SERVICE FUNCTION----
TOTAL INFORMATION METERS AND
ACCOUNT DESCRIPTION OF ITEMS AMOUNT OVERHEAD SYSTEMS TRANSPORTATION
920 Salaries and Wages $211,064,421 $ - $18,005,369 $13,313,873
921 Office Supplies and
Expenses 62,784,790 - 6,795,222 4,389,308
922 Administrative Expense
Transferred - Credit (838,673) - (6,566) (1,882)
923 Outside Services
Employed 37,360,393 - 12,665,571 25,789
924 Property Insurance 1,668,240 - - 538,215
925 Injuries and Damages (191,042) - - -
926 Employee Pensions and
Benefits 72,739,966 - 4,438,566 2,307,928
928 Regulatory Commission
Expense 1,843,674 - - -
930.1 General Advertising
Expenses 53,159 - 3,740 -
930.2 Miscellaneous General
Expenses 33,048,682 - (2,020,565) 1,148,340
931 Rents 43,526,355 - 18,753,562 2,282,465
932 Maintenance of Structures
and Equipment 5,678,703 - 3,316,313 85
403,404 Depreciation and
Amortization Expense 920,170 920,170 - -
408 Taxes Other Than
Income Taxes 12,846,806 - 1,213,075 665,468
409 Income Taxes - - - -
410 Provision for Deferred
Income Taxes - - - -
411 Provision for Deferred
Income Taxes - Credit - - - -
411.5 Investment Tax Credit - - - -
421 Miscellaneous Income or
Loss (7,888) - - -
426.1 Donations - - - -
426.5 Other Deductions - - - -
427 Interest on Long-term
Debt - - - -
430 Interest on Debt to
Associate Companies 1,723,197 - - -
431 Other Interest Expense (363,454) - - -
Total Expenses $483,857,499 $920,170 $63,164,287 $24,669,589
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31,1997
Schedule XVII - SCHEDULE OF EXPENSE DISTRIBUTION BY DEPARTMENT OR SERVICE FUNCTION (CONTINUED)
INSTRUCTIONS: Indicate each department or service function. (See Instruction 01-3 General Structure of Accounting System:
Uniform System of Account(s))
<S> <C> <C> <C> <C>
------------DEPARTMENT OR SERVICE FUNCTION-----------
ELEC. SYSTEM INTERNAL ELEC. TRANS.
ACCOUNT DESCRIPTION OF ITEMS MAINTENANCE AUDITING & DISTRIBUTION ACCOUNTING
920 Salaries and Wages $1,523,957 $1,628,199 $21,140,744 $ 9,220,821
921 Office Supplies and
Expenses 72,533 355,968 1,861,112 2,544,109
922 Administrative Expense
Transferred - Credit (477) - (312,668) (6,834)
923 Outside Services
Employed (903) - 15,211 1,877,667
924 Property Insurance - - - -
925 Injuries and Damages - - - -
926 Employee Pensions and
Benefits 369,809 368,048 4,383,651 2,073,101
928 Regulatory Commission
Expense - - - 108,000
930.1 General Advertising
Expenses - - 109 -
930.2 Miscellaneous General
Expenses 294 - 365,893 18,613
931 Rents - - 96,734 15,046,396
932 Maintenance of Structures
and Equipment - - 12 -
403,404 Depreciation and
Amortization Expense - - - -
408 Taxes Other Than
Income Taxes 99,472 105,385 1,237,514 629,486
409 Income Taxes - - - -
410 Provision for Deferred
Income Taxes - - - -
411 Provision for Deferred
Income Taxes - Credit - - - -
411.5 Investment Tax Credit - - - -
421 Miscellaneous Income or
Loss - - - (7,888)
426.1 Donations - - - -
426.5 Other Deductions - - - -
427 Interest on Long-term
Debt - - - -
430 Interest on Debt to
Associate Companies - - - 1,723,197
431 Other Interest Expense - - - (363,454)
Total Expenses $2,064,685 $2,457,600 $28,788,312 $32,863,214
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XVII - SCHEDULE OF EXPENSE DISTRIBUTION BY DEPARTMENT OR SERVICE FUNCTION
INSTRUCTIONS: Indicate each department or service function. (See Instruction 01-3 General Structure of Accounting System:
Uniform System of Account(s))
------------DEPARTMENT OR SERVICE FUNCTION---------------
<S> <C> <C> <C> <C>
HUMAN MATERIALS MARKETING &
ACCOUNT DESCRIPTION OF ITEMS RESOURCES MANAGEMENT FACILITIES CUST. RELATIONS
920 Salaries and Wages $23,885,115 $ 5,582,448 $ 4,570,657 $31,666,351
921 Office Supplies and
Expenses 1,989,279 2,352,253 5,813,820 7,306,024
922 Administrative Expense
Transferred - Credit - (1,953) (27) (8,544)
923 Outside Services
Employed 756,774 96,257 78,210 5,146,963
924 Property Insurance - 158,900 - -
925 Injuries and Damages 2,947 56 - -
926 Employee Pension and
Benefits 31,506,182 1,241,743 1,310,047 7,195,295
928 Regulatory Commission
Expense - - - -
930.1 General Advertising
Expenses - - - 8,969
930.2 Miscellaneous General
Expenses 146,603 2,939,078 855 8,297,617
931 Rents 2,291 2,661 1,255,577 16,727
932 Maintenance of Structures
and Equipment - - 2,301,675 (819)
403,404 Depreciation and
Amortization Expense - - - -
408 Taxes other Than Income
Taxes 930,068 345,872 376,800 2,023,782
409 Income Taxes - - - -
410 Provision for Deferred
Income Taxes - - - -
411 Provision for Deferred
Income Taxes - Credit - - - -
411.5 Investment Tax Credit - - - -
421 Miscellaneous Income
or Loss - - - -
426.1 Donations - - - -
426.5 Other Deductions - - - -
427 Interest on Long-term
Debt - - - -
430 Interest on Debt to
Associate Companies - - - -
431 Other Interest Expense - - - -
Total Expenses $59,219,259 $12,717,315 $15,707,614 $61,652,365
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XVII - SCHEDULE OF EXPENSE DISTRIBUTION BY DEPARTMENT OR SERVICE FUNCTION
INSTRUCTIONS: Indicate each department or service function. (See Instruction 01-3 General Structure of Accounting System:
Uniform System of Account(s))
---------DEPARTMENT OR SERVICE FUNCTION----------
<S> <C> <C> <C> <C>
ENVIRONMENTAL PUBLIC POWER ENG. & INVESTOR
ACCOUNT DESCRIPTION OF ITEMS AFFAIRS AFFAIRS CONSTRUCTI RELATIONS
920 Salaries and Wages $1,542,781 $1,983,795 $22,255,687 $ 668,859
921 Office Supplies and
Expenses 3,001,366 1,202,915 3,023,082 293,567
922 Administrative Expense
Transferred - Credit - (423) (416,537) -
923 Outside Services
Employed 13,083 1,138,293 513,932 323,906
924 Property Insurance - - - -
925 Injuries and Damages - - 6,616 -
926 Employee Pension and
Benefits 605,980 455,337 4,733,656 146,847
928 Regulatory Commission
Expense - - - -
930.1 General Advertising
Expenses - 2,561 227 -
930.2 Miscellaneous General
Expenses 79,933 1,435,990 221,985 580,513
931 Rents (1,295) 46,381 989 -
932 Maintenance of Structures
and Equipment (105) 14,284 - -
403,404 Depreciation and
Amortization Expense - - - -
408 Taxes other Than Income
Taxes 168,587 128,874 1,345,543 42,817
409 Income Taxes - - - -
410 Provision for Deferred
Income Taxes - - - -
411 Provision for Deferred
Income Taxes - Credit - - - -
411.5 Investment Tax Credit - - - -
421 Miscellaneous Income
or Loss - - - -
426.1 Donations - - - -
426.5 Other Deductions - - - -
427 Interest on Long-term
Debt - - - -
430 Interest on Debt to
Associate Companies - - - -
431 Other Interest Expense - - - -
Total Expenses $5,410,330 $6,408,007 $31,685,180 $2,056,509
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XVII - SCHEDULE OF EXPENSE DISTRIBUTION BY DEPARTMENT OR SERVICE FUNCTION
INSTRUCTIONS: Indicate each department or service function. (See Instruction 01-3 General Structure of Accounting System:
Uniform System of Account(s))
-----------DEPARTMENT OR SERVICE FUNCTION------------
<S> <C> <C> <C> <C>
ACCOUNT DESCRIPTION OF ITEMS LEGAL RATES FINANCE RIGHT OF WAY
920 Salaries and Wages $ 6,162,289 $1,664,369 $ 5,386,034 $1,473,572
921 Office Supplies and
Expenses 1,654,227 1,325,234 326,868 314,461
922 Administrative Expense
Transferred - Credit (268) - (16,359) (1,681)
923 Outside Services
Employed 3,014,879 11,387 2,121,870 921,459
924 Property Insurance - - 948,036 -
925 Injuries and Damages 13,472 - (214,081) (52)
926 Employee Pension and
Benefits 1,552,371 389,137 1,336,292 290,722
928 Regulatory Commission
Expense 283,395 1,452,272 - -
930.1 General Advertising
Expenses - - 37,551 2
930.2 Miscellaneous General
Expenses 1,685,204 - 2,563,067 2,071
931 Rents 326,403 811 1,355 4,057,131
932 Maintenance of Structures
and Equipment 9,723 - - -
403,404 Depreciation and
Amortization Expense - - - -
408 Taxes Other Than Income
Taxes 406,625 105,672 389,607 81,547
409 Income Taxes - - - -
410 Provision for Deferred
Income Taxes - - - -
411 Provision for Deferred
Income Taxes - Credit - - - -
411.5 Investment Tax Credit - - - -
421 Miscellaneous Income or
Loss - - - -
426.1 Donations - - - -
426.5 Other Deductions - - - -
427 Interest on Long-term
Debt - - - -
430 Interest on Debt to
Associate Companies - - - -
431 Other Interest Expense - - - -
Total Expenses $15,108,320 $4,948,882 $12,880,240 $7,139,232
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XVII - SCHEDULE OF EXPENSE DISTRIBUTION BY DEPARTMENT OR SERVICE FUNCTION (CONTINUED)
INSTRUCTIONS: Indicate each department or service function. (See Instruction 01-3 General Structure of Accounting System:
Uniform System of Account(s))
----------DEPARTMENT OR SERVICE FUNCTION----------
<S> <C> <C> <C> <C>
POWER
ACCOUNT DESCRIPTION OF ITEMS FUELS PLANNING EXECUTIVE PLANNING
920 Salaries and Wages $1,359,718 $ 392,725 $14,987,091 $22,649,967
921 Office Supplies and
Expenses 180,969 164,970 7,649,005 10,168,498
922 Administrative Expense
Transferred - Credit - (371) (42,652) (21,431)
923 Outside Services
Employed 113,831 371,441 4,420,983 3,733,790
924 Property Insurance - - 23,089 -
925 Injuries and Damages - - - -
926 Employee Pension and
Benefits 321,590 93,481 2,871,027 4,749,156
928 Regulatory Commission
Expense - - 7 -
930.1 General Advertising
Expenses - - - -
930.2 Miscellaneous General
Expenses 56,781 574 2,964,100 12,561,736
931 Rents - - 391,479 1,246,688
932 Maintenance of Structures
and Equipment - - 28,505 9,030
403,404 Depreciation and
Amortization Expense - - - -
408 Taxes Other Than Income
Taxes 87,800 26,568 972,357 1,463,887
409 Income Taxes - - - -
410 Provision for Deferred
Income Taxes - - - -
411 Provision for Deferred
Income Taxes - Credit - - - -
411.5 Investment Tax Credit - - - -
421 Miscellaneous Income or
Loss - - - -
426.1 Donations - - - -
426.5 Other Deductions - - - -
427 Interest on Long-term
Debt - - - -
430 Interest on Debt to
Associate Companies - - - -
431 Other Interest Expense - - - -
Total Expenses $2,120,689 $1,049,388 $34,264,991 $56,561,321
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
DEPARTMENTAL ANALYSIS OF SALARIES - ACCOUNT 920
<S> <C> <C> <C> <C> <C>
---------- DEPARTMENTAL SALARY EXPENSE ----------
NAME OF DEPARTMENT --- INCLUDED IN AMOUNTS BILLED TO -- NUMBER OF
INDICATE EACH DEPARTMENT TOTAL PARENT OTHER NON- PERSONNEL
OR SERVICE FUNCTION AMOUNT COMPANY ASSOCIATES ASSOCIATES END OF YEAR
Information Systems $ 18,005,369 $ - $ 18,005,369 $ - 287
Meters and Transportation 13,313,873 39 13,313,834 - 187
Electric System Maintenance 1,523,957 - 1,523,957 - 23
Marketing and Customer Relations 31,666,351 262 31,666,089 - 594
Electric Transmission and
Distribution Engineering
and Construction 21,140,744 - 21,140,744 - 295
Power Engineering and Construction 22,255,687 850 22,254,837 - 327
Human Resources 23,885,115 - 23,885,115 - 189
Materials Management 5,582,448 - 5,582,448 - 77
Facilities 4,570,657 190 4,570,467 - 129
Accounting 9,220,821 52,936 9,167,885 - 160
Power Planning 22,649,967 8,960 22,641,007 - 263
Public Affairs 1,983,795 - 1,983,795 - 34
Legal 6,162,289 48,106 6,114,183 - 88
Rates 1,664,369 - 1,664,369 - 24
Finance 5,386,034 21,343 5,364,691 - 64
Right of Way 1,473,572 - 1,473,572 - 22
Internal Auditing 1,628,199 - 1,628,199 - 20
Environmental Affairs 1,542,781 2,350 1,540,431 - 35
Fuels 1,359,718 - 1,359,718 - 17
Investor Relations 668,859 - 668,859 - 11
Planning 392,725 1,230 391,495 - 10
Executive 14,987,091 130,006 14,857,085 - 172
TOTAL
$211,064,421 $266,272 $210,798,149 $ - 3,028
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923
INSTRUCTIONS: Provide a breakdown by subaccount of outside services
employed. If the aggregate amounts paid to any one payee
and included within one subaccount is less than $100,000,
only the aggregate number and amount of all such payments
included within the subaccount need be shown. Provide a
subtotal for each type of service.
<S> <C> <C>
FROM WHOM PURCHASED 1/ DESCRIPTION AMOUNT
Auditing Services:
Arthur Andersen LLP Audit of Cinergy and subsidiaries Consolidated
Financial Statements; audit of the financial
statements of Cinergy's or its subsidiaries
deferred compensation and stock plans; audit of
fuel cost recovery clauses; research and consultation
on various accounting and tax matters; and assistance
in the analysis and resolution of miscellaneous
accounting issues $2,659,918
2,659,918
Legal Services:
Bingham Summers Welsh & Spilman Collective Bargaining; Lobbying 108,972
Gallagher, Boland and Meiburger Pipeline Cases; Columbia Gulf Transmission 144,832
Latham & Watkins Ozone Issues Consulting 144,841
Skadden, Arps, Slate, Meagher Litigation; Wholesale Power Sales; Trigen; General
& Flom, LLP Corporate Advice and Regulatory Issues 927,728
Taft, Stettinius & Hollister Litigation; General Securities Matters, Consumer
Credit/Financial Svcs. Program; Power International 397,104
1,723,477
Tree Trimming Services:
Asplundh Tree Expert Co. Tree Trimming 120,081
The Davey Tree Experience Tree Trimming 241,084
361,165
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (CONTINUED)
FROM WHOM PURCHASED 1/ DESCRIPTION AMOUNT
<S> <C> <C>
Other Services
Analysts International Corp. Contract Programming 286,308
Assured Micro-Services, Inc. Records Management - Electronic Imaging 106,980
Barr Devlin Associates Inc. Financial Advisory Services 204,183
Bates USA Advertising, Marketing Services 639,182
Black Dog Productions, Inc. Marketing Services 192,581
Ciber Contract Programming 288,731
Claritas, Inc. Market Research Services 109,200
CMS/Tempro Resources of Indianapolis Accounting Temporary/Placement Agency 128,540
CSC Consulting Information Technology Consulting-Technical
Architecture 5,191,616
Customer Link Telemarketing; Customer Services 170,710
DDI Customer Service Training and Development Consulting 162,700
Deloitte & Touche LLP Tax services regarding changing tax depreciation
method 146,782
Donald B. Ingle, Jr. Management Consulting 120,000
Dun & Bradstreet Information Services Contract Programming 286,596
Edu-Tech Industries Strategic Training Program 1,787,884
Electric Power Research Institute Tailored Collaboration Agreement 206,500
Entex Information Services Contract Programming 954,107
Ferrell Capital Management Risk Management Services 233,629
Glenn Monigle Associates, Inc. Design/Consulting Services 290,578
H.B. Zachry Company Supplemental Maintenance - Generating Stations 256,207
Harris Corporation Network Telecommunications Services 249,428
Honeywell DMC Services, Inc. Home Energy House Call Program 283,404
Howard Systems International Information Technology Consulting 344,720
Hunter Group, Inc. Business Opportunity Analysis 109,601
Infotech Consulting, Inc. Information Technology Consulting 213,289
Manpower, Inc. Temporary Employment Service 221,269
Market Strategies, Inc. Benchmarking Survey 143,949
McKinsey & Company, Inc. Management Consulting 2,000,014
Darrell V. Menscer Management Consulting 136,769
Metro Information Services Information Technology Consulting 106,020
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (CONTINUED)
FROM WHOM PURCHASED _1/ DESCRIPTION AMOUNT
<S> <C> <C>
Miami Systems Corporation Forms Management Services 222,441
Mobilcomm Radio & Accessories Service 176,210
Morgan Stanley & Co. Financial Advisory Services 250,000
The NorthBridge Group Forecasting & Valuation Consulting 1,120,076
Origin Technology in Business Contract Programming 176,030
People Working Cooperatively, Inc. Low-income Weatherization - DSM 931,922
Preng & Associates, Inc. Recruitment/Placement/Staffing Services 104,609
Professional Computer Centers, Inc.
D/B/A Valcom Information Technology Consulting 1,289,221
Professional Computer Consultants, Inc. Information Technology Consulting 345,971
Professional Data Resources, Inc. Information Technology Consulting 131,582
Richard's Consulting, Inc. Information Technology Consulting 737,465
Search Consultants International, Inc. Recruitment/Placement/Staffing Services 123,600
Signature Graphics, Inc. Graphics Design 527,431
Strategic Marketing & Research, Inc. Opinion Leaders Study/Customer Attitude Survey 158,815
The Canyon Group Sales Training Consulting 541,333
The Dilenschneider Group Public Relations Consulting 139,174
The LEK/Alcar Consulting Group, LLC Performance Measurement Study 247,772
Top Line Performance Business & Product Marketing Strategy
Other _2/ 9,820,704
32,615,833
Total Outside Services $37,360,393
(1) All companies from which Services purchased outside services were
non-associated companies, unless otherwise noted.
(2) Outside services performed that did not meet the $100,000 amount are
totaled in this line item.
</TABLE>
<PAGE>
Annual Report of Cinergy Services, Inc. For the
Year Ended December 31, 1997
EMPLOYEE PENSIONS AND BENEFITS - ACCOUNT 926
INSTRUCTIONS: Provide a listing of each pension plan and benefit program
provided by the service company. Such listing should be limited to $25,000.
DESCRIPTION AMOUNT
Pension $23,342,255
Medical/Dental insurance 21,436,468
401(k) contributions 3,738,834
Life insurance 12,067,561
Others 12,154,848
TOTAL $72,739,966
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
GENERAL ADVERTISING EXPENSES - ACCOUNT 930.1
INSTRUCTIONS: Provide a listing of the amounts included in Account
930.1, "General Advertising Expenses", classifying the
items according to the nature of the advertising and as
defined in the account definition. If a particular class
includes an amount in excess of $3,000 applicable to a
single payee, show separately the name of the payee and
the aggregate amount applicable thereto.
DESCRIPTION NAME OF PAYEE AMOUNT
Advertising Fees -
Customer Education Martin Agency $37,500
Others 14,137
Promotional Items Others 1,522
TOTAL $53,159
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
MISCELLANEOUS GENERAL EXPENSES - ACCOUNT 930.2
INSTRUCTIONS: Provide a listing of the amount included in Account 930.2,
"Miscellaneous General Expenses", classifying such expenses according to
their nature. Payments and expenses permitted by Section 321 (b)(2) of the
Federal Election Campaign Act, as amended by Public Law 94-283 in 1976 (2
U.S.C. 441 (b)(2)) shall be separately classified.
DESCRIPTION AMOUNT
Sale of Accounts Receivable Fees (PSI, ULH&P, and CG&E) $ 2,329,391
Company Membership Fees and Dues 3,075,166
Miscellaneous Materials and Supplies Purchased 6,832,539
Customer Incentive/Rebates - Demand-side Management 344,712
Directors' Fees 1,326,327
Annual Report Expenses 171,074
Advertising 1,443,900
Customer Records and Collections 6,659,000
Technical, General, Computer and Engineering Services 452,629
Labor, Materials and Supplies 2,999,134
Miscellaneous Stores and Transportation Expenses 6,493,348
Other Miscellaneous Items 921,462
TOTAL $33,048,682
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
RENTS - ACCOUNT 931
INSTRUCTIONS: Provide a listing of the amount included in Account 931,
"Rents", classifying such expenses by major groupings of
property, as defined in the account definition of the
Uniform System of Accounts.
TYPE OF PROPERTY AMOUNT
Computer Equipment Rent $19,686,899
Facilities Rent 20,694,294
Operating and Work Equipment Rent 3,142,024
Other Rent 3,138
TOTAL $43,526,355
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
TAXES OTHER THAN INCOME TAXES - ACCOUNT 408
INSTRUCTIONS: Provide an analysis of Account 408, "Taxes Other Than Income
Taxes". Separate the analysis into two groups: (1) Other than U.S.
Government taxes, and (2) U.S. Government taxes. Specify each of the
various kinds of taxes and show the amounts thereof. Provide a subtotal for
each class of tax.
KIND OF TAX AMOUNT
Other Than U.S. Government Taxes:
Ohio Property Tax $ 22,085
Delaware Franchise Tax 50
Kentucky License Tax 363
Ohio Franchise Tax 402
Miscellaneous General Tax (55)
State Unemployment 69,655
Sub-total 92,500
U.S. Government Taxes:
Social Security Taxes 12,561,254
Federal Unemployment 193,052
Sub-total 12,754,306
TOTAL $12,846,806
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
DONATIONS - ACCOUNT 426.1
INSTRUCTIONS: Provide a listing of the amount included in Account 426.1,
"Donations", classifying such expenses by its purpose. The
aggregate number and amount of all items of less than
$3,000 may be shown in lieu of details.
NAME OF RECIPIENT PURPOSE OF DONATION AMOUNT
None
TOTAL
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
OTHER DEDUCTIONS - ACCOUNT 426.5
INSTRUCTIONS: Provide a listing of the amount included in Account 426.5, "Other
Deductions", classifying such expenses according to their nature.
DESCRIPTION NAME OF PAYEE AMOUNT
None
TOTAL
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XVIII - NOTES TO STATEMENTS OF INCOME
INSTRUCTIONS: The space below is provided for important notes regarding
the statement of income or any account thereof. Furnish
particulars as to any significant increase in services
rendered or expenses incurred during the year. Notes
relating to financial statements shown elsewhere in this
report may be indicated here by reference.
See Schedule XIV - Notes to Financial Statements.
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
Schedule XIX - FINANCIAL DATA SCHEDULE
ITEM NO. CAPTION HEADING
1 Net Service Company Property $ 19,563,035
2 Total Investments -
3 Total Current and Accrued Assets 19,873,316
4 Total Deferred Debits 819,667
5 Balancing Amount for Total Assets
and Other Debits -
6 Total Assets and Other Debits 40,256,018
7 Total Proprietary Capital 3
8 Total Long-Term Debt -
9 Notes Payable -
10 Notes Payable to Associate Companies 20,949,887
11 Balancing Amount for Total Current
and Accrued Liabilities 19,053,617
12 Total Deferred Credits 140,000
13 Accumulated Deferred Income Taxes 112,511
14 Total Liabilities and Proprietary Capital 40,256,018
15 Services Rendered to Associate Companies 483,823,472
16 Services Rendered to Nonassociate Companies -
17 Miscellaneous Income or Loss 34,030
18 Total Income 483,857,502
19 Salaries and Wages 211,064,421
20 Employee Pensions and Benefits 72,739,966
21 Balancing Amount for Total Expenses 200,053,112
22 Total Expenses 483,857,499
23 Net Income (Loss) -
24 Total Expenses (Direct Costs) 291,593,569
25 Total Expenses (Indirect Costs) 192,263,930
26 Total Expenses (Total) 483,857,499
27 Number of Personnel End of Year 3,028
<PAGE>
<TABLE>
<CAPTION>
Annual Report of Cinergy Services, Inc.
<S> <C> <C> <C> <C> <C> <C>
ORGANIZATION CHART
Chairman
- Executive
- Internal Auditing
|
|
Vice Chairman, President, and Chief Executive Officer
- Executive
|
---------
Vice President & Vice President, Vice President & President, President, President,
Senior Manager, General Chief Vice President Energy Energy Energy
Human Resource Counsel and Financial and Chief of Commodities Delivery Services
Strategy Secretary Officer Staff Business Business Business
Unit Unit Unit
- Human - Legal - Investor - Facilities - Fuels - Materials - Marketing
Resources - Rates Relations - Information - Power Management and
- Finance Systems Engineering & - Meters and Customer
- Accounting - Public Affairs Construction Transportation Relations
- Planning - Electric System
- Environmental Maintenance
Affairs - Electric Transmission
and Distribution
Engineering and
Construction
- Power Planning
- Right of Way
</TABLE>
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
METHODS OF ALLOCATION
The allocation of expenses not directly attributable to a particular Client
Company are based on the following factors:
1. Sales Ratio
A ratio, based on domestic firm kilowatt-hour electric sales (and/or the
equivalent cubic feet of gas sales, where applicable), excluding
intra-system sales, for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company and the
denominator of which is for all domestic utility Client Companies. This
ratio will be determined annually, or at such times as may be required
due to a significant change.
2. Electric Peak Load Ratio
A ratio, based on the sum of the monthly domestic firm electric maximum
system demands for the immediately preceding twelve consecutive calendar
months, the numerator of which is for a Client Company and the
denominator of which is for all domestic utility Client Companies. This
ratio will be determined annually, or at such time as may be required due
to a significant change.
3. Number of Customers Ratio
A ratio, based on the sum of the firm domestic electric customers (and/or
gas customers where applicable) at the end of each month for the
immediately preceding twelve consecutive calendar months, the numerator
of which is for a Client Company and the denominator of which is for all
domestic utility Client Companies. This ratio will be determined
annually, or at such time as may be required due to a significant change.
4. Number of Employees Ratio
A ratio, based on the sum of the number of employees at the end of each
month for the immediately preceding twelve consecutive calendar months,
the numerator of which is for a Client Company or Service Company
Function and the denominator of which is for all Client Companies (and
Cinergy Corp.'s non- utility and non-domestic utility affiliates, where
applicable) and/or the Service Company. This ratio will be determined
annually, or at such time as may be required due to a significant change.
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
METHODS OF ALLOCATION - continued
5. Construction Expenditure Ratio
A ratio, based on construction expenditures, net of reimbursements, for
the immediately preceding twelve consecutive calendar months, the
numerator of which is for a Client Company and the denominator of which
is for all Client Companies. Separate ratios will be computed for total
construction expenditure and appropriate functional plant (i.e.,
production, transmission, distribution, and general) classifications.
This ratio will be determined annually, or at such time as may be
required due to a significant change.
6. Circuit Miles of Electric Distribution Lines Ratio
A ratio, based on installed circuit miles of domestic electric
distribution lines at the end of the immediately preceding calendar year,
the numerator of which is for a Client Company and the denominator of
which is for all domestic utility Client Companies. This ratio will be
determined annually, or at such time as may be required due to a
significant change.
7. Number of Central Processing Unit Seconds Ratio
A ratio, based on the sum of the number of central processing unit
seconds expended to execute mainframe computer software applications for
the immediately preceding twelve consecutive calendar months, the
numerator of which is for a Client Company or Service Company Function,
and the denominator of which is for all Client Companies, (and Cinergy
Corp.'s non-utility and non-domestic utility affiliates, where
applicable) and/or the Service Company. This ratio will be determined
annually, or at such time as may be required due to a significant change.
NOTE: Services submitted a letter to the Securities and Exchange Commission on
April 1, 1998, requesting approval of a new allocation method to be used to
allocate general activities cost to the direct and indirect nonutility
subsidiaries of Cinergy Corp. The proposed method would establish a ratio based
on direct costs charged to the individual nonutility client companies divided by
total direct costs charged to all client companies (both utility and
nonutility).
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1997
ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED
The following annual statement was supplied to each associate company in support
of the amount of compensation for use of capital billed during 1997:
In accordance with Instruction 01-12 of the Securities and Exchange Commission's
Uniform System of Accounts for Mutual Service Companies and Subsidiary Service
Companies, Services submits the following information on the billing of interest
on borrowed funds to associated companies for the year 1997:
A. Amount of interest billed to associate companies is contained on page 28,
Analysis of Billing.
B. The basis for billing of interest to the associated companies is based on
the ratio of the total expenses charged to each associated company,
exclusive of interest, to the total expenses charged to all associated
companies, exclusive of interest during the previous year.
<PAGE>
ANNUAL REPORT OF Cinergy Services, Inc.
SIGNATURE CLAUSE
Pursuant to the requirements of the Public Utility Holding Company Act of 1935
and the rules and regulations of the Securities and Exchange Commission issued
thereunder, the undersigned company has duly caused this report to be signed on
its behalf by the undersigned officer thereunto duly authorized.
Cinergy Services, Inc.
(Name of Reporting Company)
By: /s/John P. Steffen
(Signature of Signing Officer)
John P. Steffen, Vice President and Comptroller
(Printed Name and Title of Signing Officer)
Date: April 30, 1998
