UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-13-60
ANNUAL REPORT
For the Period
Beginning January 1, 1999 and Ending December 31, 1999
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:
Bernard F. Roberts, 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 4
Comparative Balance Sheets - Liabilities Schedule I 5
Service Company Property Schedule II 6
Accumulated Provision for Depreciation and
Amortization of Service Company Property Schedule III 7
Investments Schedule IV 8
Accounts Receivable from Associate Companies Schedule V 9
Fuel Stock Expenses Undistributed Schedule VI 10
Stores Expense Undistributed Schedule VII 11
Miscellaneous Current and Accrued Assets Schedule VIII 12
Miscellaneous Deferred Debits Schedule IX 13
Research, Development, or Demonstration
Expenditures Schedule X 14
Proprietary Capital Schedule XI 15
Long-term Debt Schedule XII 16
Current and Accrued Liabilities Schedule XIII 17
Notes to Financial Statements Schedule XIV 18
Comparative Income Statements Schedule XV 23
Analysis of Billing - Associate Companies Account 457 24
Analysis of Billing - Nonassociate Companies Account 458 25
Analysis of Charges for Service - Associate
and Nonassociate Companies Schedule XVI 26
Schedule of Expense Distribution by Department
or Service Function Schedule XVII 27
Departmental Analysis of Salaries Account 920 30
Outside Services Employed Account 923 31
Employee Pensions and Benefits Account 926 33
General Advertising Expenses Account 930.1 34
Miscellaneous General Expenses Account 930.2 35
Rents Account 931 36
Taxes Other Than Income Taxes Account 408 37
Donations Account 426.1 38
Other Deductions Account 426.5 39
Notes to Statements of Income Schedule XVIII 40
Financial Data Schedule Schedule XIX 41
LISTING OF INSTRUCTIONAL FILING REQUIREMENTS
DESCRIPTION OF REPORTS OR STATEMENTS PAGE NO.
Organization Chart 42
Methods of Allocation 43
Annual Statement of Compensation for Use of Capital Billed 45
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
As of December 31, 1999 and 1998
SCHEDULE I - COMPARATIVE BALANCE SHEETS
Give balance sheet of the Company as of
December 31 of the current and prior year
REF December
ACCOUNT ASSETS AND OTHER DEBITS SCHED 1999 1998
- --------------------------------------------------------------------------------
SERVICE COMPANY PROPERTY
101 Service Company Property II $ 36,407,209 $ 24,287,027
107 Construction Work in Progress II 1,553,672 13,391,702
--------------------------
Total Property 37,960,881 37,678,729
108 Accumulated Provision for
Depreciation and Amortization
of Service Company Property III (11,100,386) (4,235,284)
--------------------------
Net Service Company Property 26,860,495 33,443,445
INVESTMENTS
123 Investments in Associate Companies IV - -
124 Other Investments IV 8,867,727 -
--------------------------
Total Investments 8,867,727 -
CURRENT AND ACCRUED ASSETS
131 Cash (5,143,739) 34,879
134 Special Deposits 495,975 -
135 Working Funds 922 2,842
136 Temporary Cash Investments IV 6,366,667 -
141 Notes Receivable 463 (9,350)
143 Accounts Receivable 322,747 131,462
144 Accumulated Provision for
Uncollectible Accounts - -
145 Notes Receivable From Associate
Companies 6,707,000 14,766,612
146 Accounts Receivable From Associate
Companies V 42,794,749 29,344,101
152 Fuel Stock Expenses Undistributed VI - -
154 Materials and Supplies - -
163 Stores Expense Undistributed VII - -
165 Prepayments 50,000 50,000
174 Miscellaneous Current and
Accrued Assets VIII - -
--------------------------
Total Current and
Accrued Assets 51,594,784 44,320,546
DEFERRED DEBITS
181 Unamortized Debt Expense - -
184 Clearing Accounts 78,294 85,929
186 Miscellaneous Deferred Debits IX 9,466,951 10,165,815
188 Research, Development, or
Demonstration Expenditures X - -
190 Accumulated Deferred Income Taxes 25,771,965 27,600,110
--------------------------
Total Deferred Debits 35,317,210 37,851,854
TOTAL ASSETS AND OTHER DEBITS $122,640,216 $115,615,845
==========================
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
As of December 31, 1999 and 1998
SCHEDULE I - COMPARATIVE BALANCE SHEETS (CONTINUED)
ACCOUNT LIABILITIES AND REF December
PROPRIETARY CAPITAL SCHED 1999 1998
- --------------------------------------------------------------------------------
PROPRIETARY CAPITAL
201 Common Stock Issued (Note 2) XI $ 4 $ 3
208 Donations Received From
Stockholders XI 155,346 -
211 Miscellaneous Paid-In-Capital XI 999 -
215 Appropriated Retained Earnings XI - -
216 Unappropriated Retained Earnings XI (1,983,472) 739,125
Total Proprietary Capital (1,827,123) 739,128
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 19,760,609 27,630,215
233 Notes Payable To Associate
Companies XIII - 52,641
234 Accounts Payable to Associat
Companies XIII (88) -
235 Customer Deposits 495,975 -
236 Taxes Accrued 4,952,540 2,577,318
237 Interest Accrued - -
238 Dividends Declared - -
241 Tax Collections Payable 2,498,473 3,175,117
242 Miscellaneous Current and
Accrued Liabilities XIII (106,145) (4,667)
Total Current and
Accrued Liabilities 27,601,364 33,430,624
DEFERRED CREDITS
228 Accumulated Provisions for
Pensions and Benefits 14,434,881 8,424,032
253 Other Deferred Credits 82,132,696 72,734,162
255 Accumulated Deferred Investment
Tax Credits - -
Total Deferred Credits 96,567,577 81,158,194
282 ACCUMULATED DEFERRED INCOME TAXES 298,398 287,899
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $122,640,216 $115,615,845
==========================
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
SCHEDULE II - SERVICE COMPANY PROPERTY
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT RETIREMENTS OTHER BALANCE
BEGINNING OR CHANGES AT CLOSE
ACCOUNT ESCRIPTION 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 3,079,504 95,878 - - 3,175,382
309 Automobiles, Other Vehicles and - - - - -
Related Garage Equipment
310 Aircraft and Airport Equipment - - - - -
311 Other Service Company Property (3) 21,207,523 12,024,304 - - 33,231,827
Sub-Total 24,287,027 12,120,182 - - 36,407,209
107 Construction Work in Progress (4) 13,391,702 2,505,639 - (14,343,669) 1,553,672
Total $37,678,729 $14,625,821 $ - $(14,343,669) $37,960,881
<FN>
NOTES
(1) Provide an explanation of those changes considered material:
Transfer to Plant-in service (12,120,182)
Write-off of software ( 2,223,487)
-----------
(14,343,669)
(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
(3) Describe Other Service Company Property:
DESCRIPTION BALANCE AT CLOSE OF YEAR
Computer Software $33,231,827
(4) Describe Construction Work in Progress:
DESCRIPTION BALANCE AT CLOSE OF YEAR
Computer Software $1,553,672
</FN>
</TABLE>
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
SCHEDULE III - ACCUMULATED PROVISION FOR DEPRECIATION AND AMORTIZATION OF SERVICE COMPANY PROPERTY
<S> <C> <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 (822,164) (381,455) - - (1,203,619)
309 Automobiles, Other Vehicles and - - - - -
Related Garage Equipment
310 Aircraft and Airport Equipment - - - - -
311 Other Service Company Property (3,413,120) (6,487,447) - 3,800 (9,896,767)
Total $(4,235,284) $(6,868,902) $ - $ 3,800 $(11,100,386)
======================================================================================
<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, 1999
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
Rabbi Trust
Total $ - $ 8,867,727
============ ============
Account 136 - Temporary
Cash Investments
PNC Government Short-term
Investment Fund
Total $ - $ 6,366,667
============ ============
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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:
The Cincinnati Gas & Electric Company
(CG&E) $ 8,323,592 $20,483,086
PSI Energy, Inc. (PSI) 8,509,459 6,680,168
Lawrenceburg Gas Company (Lawrenceburg) 57,008 81,680
KO Transmission Company 4,344 371
The Union Light, Heat and Power Company
(ULH&P) 3,061,688 2,174,932
The West Harrison Gas and Electric Company
(WHG&E) 2,277 3,194
Cinergy Corp. (Cinergy) 9,385,733 13,371,318
TOTAL $29,344,101 $42,794,749
=========== ===========
Analysis of Convenience or Accommodation Payments:
None
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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, 1999
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 Espense
Undistributed
None
Total $ - $ - $ -
========= =========== =========
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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.
DESCRIPTION BALANCE AT BALANCE AT
BEGINNING CLOSE
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, 1999
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.
DESCRIPTION BALANCE AT BALANCE AT
BEGINNING CLOSE
OF YEAR OF YEAR
Account 186 - Miscellaneous
Deferred Debits
Items Deferred Pending Investigation $ 464,874 $ 228,692
Intangible Asset Associated with
Non-qualified Pension Plans 9,700,941 9,238,259
TOTAL $10,165,815 $9,466,951
=========== ==========
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1999
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>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
SCHEDULE XI - PROPRIETARY CAPITAL
<S> <C> <C> <C> <C> <C>
NUMBER PAR OR CLOSE OF
ACCOUNT OF SHARES STATED VALUE OUTSTANDING PERIOD
NUMBER CLASS OF STOCK AUTHORIZED PER SHARE NO. OF SHARES TOTAL AMOUNT
201 Common Stock Issued 100 $0.05 70 $4
<FN>
INSTRUCTIONS: Classify amounts in each account with brief explanation, disclosing the general nature of transactions
which gave rise to the reported amounts.
</FN>
DESCRIPTION AMOUNT
208 Donations Received from Stockholders $155,346
211 Miscellaneous Paid-In-Capital 999
215 Appropriated Retained Earnings -
$156,345
<FN>
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.
</FN>
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
BALANCE BALANCE
AT BEGINNING NET INCOME DIVIDENDS AT CLOSE
ACCOUNT DESCRIPTION OF YEAR OR (LOSS) PAID OTHER (1) OF YEAR
216 Unappropriated
Retained Earnings $739,125 $ - $ - $(2,722,597) $(1,983,472)
<FN>
(1) Represents reversal of 1998 stock based compensation plan ($1,532,825); and an adjustment for additional minimum pension
liability pursuant to Statement of Financial Accounting Standards No. 87, Employers' Accounting for Pensions ($1,226,650)
and associated taxes $36,878.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
SCHEDULE XII - LONG-TERM DEBT
<FN>
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.
</FN>
<S> <C> <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
<FN>
NOTES:
(1) Give an explanation of deductions: None
</FN>
</TABLE>
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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
BEGINNING AT CLOSE
DESCRIPTION OF YEAR OF YEAR
Account 233 - Notes Payable to
Associate Companies
CG&E $ 5,893 $ -
PSI 4,861 -
Cinergy 41,887 -
Total $52,641 $ -
Account 234 - Accounts Payable to
Associate Companies
Cinergy $ _ $ (88)
Total $ - $ (88)
Account 242 - Miscellaneous Current and
Accrued Liabilities
Transaction Fees $ - $(106,325)
Mutual Benefit Credit Union Payments
Withheld - (423)
Bureau of Support Payments Withheld (5,817) -
Wage Garnishments 176 -
Helping Hands - Payroll Deductions 974 603
Total $(4,667) $(106,145)
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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) NATURE OF OPERATIONS Cinergy Corp., a Delaware corporation (Cinergy)
created in the October 1994 merger of The Cincinnati Gas & Electric
Company (CG&E) and PSI Resources, Inc., is a registered utility
holding company under the Public Utility Holding Company Act of 1935,
as amended (PUHCA). Cinergy Services, Inc. (Services) is a
wholly-owned subsidiary of Cinergy. Cinergy's other wholly-owned
subsidiaries are CG&E, PSI Energy, Inc. (PSI), Cinergy Investments,
Inc., and Cinergy Global Resources.
Services, a Delaware corporation, is the service company for the
Cinergy system, providing member companies with a variety of
administrative, management, and support services.
(b) PRESENTATION Management makes estimates and assumptions when preparing
financial statements under generally accepted accounting principles
(GAAP). Actual results could differ, as these estimates and
assumptions involve judgment. These estimates and assumptions affect
various matters, including:
the reported amounts of assets and liabilities in the Comparative
Balance Sheets at the dates of the financial statements; the
disclosure of contingent assets and liabilities at the dates of the
financial statements; and the reported amounts of revenues and
expenses in the Statements of Income during the reporting periods.
(c) FEDERAL AND STATE INCOME TAXES Under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes
(Statement 109) 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.
(d) REGULATION Services is subject to regulation by the Securities and
Exchange Commission (SEC) under the PUHCA. The accounting policies of
Services 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) SERVICE COMPANY PROPERTY Service company property and equipment,
including any interest capitalized during construction, are recorded
at cost.
(f) 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 1999 was 12.0% and
for 1998 was 12.3%. Software is amortized over a five-year period at
an annual rate of 20%.
(g) 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 on pages 43-44.)
2. COMMON STOCK
Services is authorized to issue 100 shares of Common Stock at a par value of
five cents ($.05) per share and had 70 shares outstanding at December 31, 1999.
Cinergy holds all of Services' outstanding common stock.
3. NOTES PAYABLE TO ASSOCIATE COMPANIES
Services participates in a money pooling arrangement to better manage cash and
working capital requirements, with Cinergy's utility subsidiaries. Under this
arrangement, Cinergy and its utility subsidiaries with surplus short-term funds
provide short-term loans to each other. This surplus cash may be from internal
or external sources.
4. LEASES
Cinergy and its subsidiaries, including Services, have entered into operating
lease agreements covering various facilities and properties, including computer,
communications, and transportation equipment and office space. Total rental
payments on operating leases for each of the past two years were as follows:
1999 1998
(in millions)
CINERGY AND SUBSIDIARIES $50 $42
Future minimum lease payments required under operating leases with remaining,
non-cancelable lease terms in excess of one year as of December 31, 1999, are as
follows:
Cinergy and
SUBSIDIARIES
(in millions)
2000 $ 36
2001 28
2002 18
2003 13
2004 10
AFTER 2004 35
----
$140
<PAGE>
5. PENSION AND OTHER POSTRETIREMENT BENEFITS
Cinergy's defined benefit pension plans, of which Services is a participant,
cover substantially all United States (U.S.) employees meeting certain minimum
age and service requirements. A final average pay formula determines plan
benefits. These plan benefits are based on (1) years of participation, (2) age
at retirement, and (3) the applicable average Social Security wage base or
benefit amount.
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. The
reconfiguration of the pension plans did not have a significant impact on
Services' financial condition or results of operations.
Cinergy's pension plan funding policy for U.S. employees is to contribute at
least the amount required by the Employee Retirement Income Security Act of
1974, and up to the amount deductible for income tax purposes. The pension
plans' assets consist of investments in equity and fixed income securities.
Cinergy, including Services, provides certain health care and life insurance
benefits to retired U.S. employees and their eligible dependents. These benefits
are subject to the retiree meeting the minimum age and service requirements. The
health care benefits include medical coverage, dental coverage, and prescription
drugs and are subject to certain limitations, such as deductibles and
co-payments. Prior to January 1, 1997, CG&E and PSI employees had separate
postretirement benefit plans. Effective January 1, 1997, most of Cinergy's
active U.S. employees are eligible to receive essentially the same
postretirement health care benefits. Certain classes of employees (based on age)
and all retirees have been grandfathered under benefit provisions in place prior
to January 1, 1997. CG&E does not pre-fund its obligations for these
postretirement benefits. During 1999, PSI began pre-funding its obligations as
authorized by the Indiana Utility Regulatory Commission through a grantor trust.
Cinergy's benefit plans' cost for the past two years, as well as the actuarial
assumptions used in determining these costs, included the following components:
Other
Postretirement
Pension Benefits Benefits
(in millions)
1999 1998 1999 1998
Service Cost $24.8 $21.8 $3.5 $4.1
Interest Cost 70.8 71.6 16.2 16.1
Expected Return On Plans' Assets (72.0) (66.9) - -
Amortization of Transition
Obligation/(asset) (1.3) (1.3) 5.0 5.0
Amortization of Prior Service Cost 4.5 4.4 - -
Recognized Actuarial Loss .6 - .8 .4
Net Periodic Benefit Cost 27.4 $29.6 $25.5 $25.6
Actuarial Assumptions:
DISCOUNT RATE 7.50% 6.75% 7.50% 6.75%
RATE OF FUTURE COMPENSATION
INCREASE 4.50 3.75 N/A N/A
RATE OF RETURN ON PLANS' ASSETS 9.00 9.00 N/A N/A
For measurement purposes, Cinergy assumed an 8% annual rate of increase in the
per capita cost of covered health care benefits was assumed for 2000. It was
assumed that the rate would decrease gradually to 5% in 2008 and remain at that
level thereafter.
The following table provides a reconciliation of the changes in the Cinergy
plans' benefit obligations and fair value of assets over the two-year period
ended December 31, 1999, and a statement of the funded status as of December 31
of both years.
Other
Postretirement
Pension Benefits Benefits
(in millions)
1999 1998 1999 1998
Change in benefit obligation
Benefit obligation at
beginning of period $1,052.1 $960.3 $246.5 $221.9
Service cost 24.8 21.8 3.5 4.1
Interest cost 70.8 71.6 16.2 16.1
Amendments 1.1 1.0 - -
Actuarial (gain)/loss (90.3) 53.6 (18.4) 17.4
Benefits paid (56.5) (56.2) (13.4) (13.0)
Benefit obligation at end
of period 1,002.0 1,052.1 234.4 246.5
Fair value of plan assets at
beginning of period 865.3 888.1 - -
Actual return on plan assets 137.3 9.9 - -
Employer contribution - 23.5 13.4 13.0
Benefits paid (56.5) (56.2) (13.4) (13.0)
Fair value of plan assets at
end of period 946.1 865.3 - -
Funded status (55.9) (186.8) (234.4) (246.5)
Unrecognized prior service cost 39.9 43.3 - -
Unrecognized net actuarial
(gain)/loss (180.6) (24.1) 20.1 40.3
Unrecognized net transition
(asset)/obligation (5.8) (7.1) 60.8 65.8
Accrued benefit cost at
December 31 $ (202.4) $(174.7) $(153.5) $(140.4)
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
1-Percentage- 1-Percentage-
POINT INCREASE POINT DECREASE
(in millions)
Effect on total of service and interest
cost components $ 2.8 $(2.4)
Effect on postretirement benefit
obligation 30.1 (26.2)
In addition, Cinergy sponsors non-qualified pension plans that cover officers,
certain other key employees, and non-employee directors. Cinergy began funding
certain of these non-qualified plans through a rabbi trust in 1999.
The pension benefit obligations and pension expense under these plans were:
1999 1998
(in millions)
Pension Benefit Obligations $37.0 $31.4
Pension Cost 4.0 4.5
6. Income Taxes
Services' net deferred income tax asset at December 31, 1999, and 1998, is as
follows:
1999 1998
---- ----
Deferred Income Tax Liability $ 298,398 $287,899
Deferred Income Tax Asset
Accrued Pension and Other
Benefit Costs 25,771,965 27,467,792
Other - 132,318
----------- ------------
25,771,965 27,600,110
Net Deferred Income Tax Asset $25,473,567 $27,312,211
Services will participate in the filing of a consolidated federal income tax
return with Cinergy for the year ended December 31, 1999. 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.
A summary of federal and state income taxes charged (credited) to income and the
allocation of such amounts is as follows:
1999 1998
---- ----
Current Income Taxes
Federal $(3,494,336) $ 5,774,520
State 1,372,057 1,768,698
----------- --------------
Total Current Income Taxes (2,122,279) 7,543,218
Deferred Income Taxes
Federal
Pension and Other Benefit Costs 3,614,282 (6,348,836)
State
Pension and Other Benefit Costs (977,252) (1,529,396)
Total Deferred Income Taxes 2,637,030 (7,878,232)
Total Income Taxes $ 514,751 $ (335,014)
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
SCHEDULE XV - COMPARATIVE INCOME STATEMENTS
December 31
ACCOUNT DESCRIPTION 1999 1998
INCOME:
457 Services Rendered to Associate
Companies $416,341,521 $412,408,919
458 Services Rendered to Nonassociate
Companies - -
415 Jobbing and Contract Work - -
419 Other Interest Income 443,213 424,175
Total Income 416,784,734 412,833,094
EXPENSES:
920 Salaries and Wages 224,271,507 191,505,681
921 Office Supplies and Expenses 57,362,397 65,215,253
922 Administrative Expenses Transferred
- Credit (1,144,461) (791,816)
923 Outside Services Employed 27,452,477 30,942,281
924 Property Insurance 451,883 383,853
925 Injuries and Damages 366,433 (84,490)
926 Employee Pensions and Benefits 31,361,858 39,159,153
928 Regulatory Commission Expense 2,027,695 999,353
930.1 General Advertising Expenses 28,220 382,271
930.2 Miscellaneous General Expenses 18,161,986 38,390,762
931 Rents 35,396,625 26,090,822
932 Maintenance of Structures and Equipment 4,763,025 5,054,406
403,404 Depreciation and Amortization Expense 6,868,902 3,131,934
408 Taxes Other Than Income Taxes 8,532,630 11,869,493
409 Income Taxes (2,122,279) 7,543,218
410 Provision for Deferred Income Taxes 1,581,551 (11,158)
411 Provision for Deferred Income Taxes - Credit 1,055,479 (7,867,074)
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 405,082 1,073,253
431 Other Interest Expense (36,276) (154,101)
Total Expense 416,784,734 412,833,094
NET INCOME $ - $ -
============ =============
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
ANALYSIS OF BILLING
ASSOCIATE COMPANIES - ACCOUNT 457
DIRECT INDIRECT COMPENSATION
COSTS COSTS FOR USE TOTAL
CHARGED CHARGED OF CAPITAL AMOUNT
NAME OF ASSOCIATE COMPANY 457-1 457-2 457-3 BILLED
The Cincinnati Gas &
Electric Company $ 65,612,752 $119,002,956 - $184,615,708
PSI Energy, Inc. 62,695,295 105,592,717 - 168,288,012
The Union Light, Heat
and Power Company 6,511,607 16,549,622 - 23,061,229
Cinergy Capital & Trading,
Inc. 8,112,413 3,143,188 - 11,255,601
Cinergy Solutions, Inc. 5,940,180 319,734 - 6,259,914
Cinergy Corp. 3,038,457 2,712,541 - 5,750,998
Cinergy Business Solutions,
Inc. 3,091,885 - - 3,091,885
Cinergy Global Resources,
Inc. 2,632,325 386,163 - 3,018,488
Cinergy Global Power, Inc. 2,407,478 24,669 - 2,432,147
Cinergy Communications, Inc. 1,581,969 14,967 - 1,596,936
Cinergy UK, Inc. 954,331 446,457 - 1,400,788
Cinergy Resources, Inc. 789,604 546,278 - 1,335,882
Cinergy Investments, Inc. 904,881 133,764 - 1,038,645
Cinergy Supply Network, Inc. 641,975 4 - 641,979
Lawrenceburg Gas Company 177,839 456,310 - 634,149
Cinergy Technology, Inc. 560,945 47,806 - 608,751
Cinergy-Centrus Communications,
Inc. 361,082 - - 361,082
Cinergy Solutions of Tuscola,
Inc. 331,801 - - 331,801
Tri-State Improvement Company 51,904 211,052 - 262,956
Trigen-Cinergy Solutions of
Ashtabula LLC 171,426 - - 171,426
CinCap VIII, LLC 103,496 - - 103,496
The West Harrison Gas and
Electric Company 10,555 16,187 - 26,742
KO Transmission Company 23,444 - - 23,444
PSI Energy Argentina, Inc. 2,322 11,264 - 13,586
CinCap MVC OpCo, LLC 5,202 - - 5,202
Enertech Associates, Inc. 4,013 - - 4,013
Miami Power Corporation 3,789 1 - 3,790
Cinergy Engineering, Inc. 2,833 1 - 2,834
Cinergy-Centrus, Inc. 37 - - 37
TOTAL $166,725,840 $249,615,681 $ - $416,341,521
============ ============ ========= ============
<PAGE>
Annual Report of Cinergy Services, Inc.
For the Year Ended December 31, 1999
ANALYSIS OF BILLING
NONASSOCIATE COMPANIES - ACCOUNT 458
Instructions: Provide a brief description of the services rendered to each
nonassociate company.
DIRECT INDIRECT COMPENSATION EXCESS
NAME OF COSTS COSTS FOR USE OR TOTAL
ASSOCIA CHARGED CHARGED OF CAPITAL TOTAL DEFICIENCY AMOUNT
COMPANY 458-1 458-2 458-3 COST 458-4 BILLED
None
TOTAL $ $ $ $ $ $
========= ========= ========= ========= ========= =========
<PAGE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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> <C> <C> <C>
ACCOUNT DESCRIPTION OF ITEMS ASSOCIATE COMPANY NONASSOCIATE COMPANY TOTAL CHARGES
CHARGES CHARGES FOR SERVICES
In-
Direct Indirect Direct Direct Direct Indirect
Cost Cost Total Cost Cost Total Cost Cost Total
920 Salaries and Wages $117,462,416 $106,809,091 $224,271,507 $ - $ - $ - $117,462,416 $106,809,091 $224,271,507
921 Office Supplies
and Expenses 18,153,883 39,208,514 57,362,397 - - - 18,153,883 39,208,514 57,362,397
922 Administrative Expense
Transferred-Credit (307,791) (836,670) (1,144,461) - - - (307,791) (836,670) (1,144,461)
923 Outside Services
Employed 7,828,822 19,623,655 27,452,477 - - - 7,828,822 19,623,655 27,452,477
924 Property Insurance 451,372 511 451,883 - - - 451,372 511 451,883
925 Injuries and Damages 358,232 8,201 366,433 - - - 358,232 8,201 366,433
926 Employee Pensions
and Benefits 8,648,483 22,713,375 31,361,858 - - - 8,648,483 22,713,375 31,361,858
928 Regulatory Commission
Expense 1,748,111 279,584 2,027,695 - - - 1,748,111 279,584 2,027,695
930.1 General Advertising
Expenses 15,429 12,791 28,220 - - - 15,429 12,791 28,220
930.2 Miscellaneous
General Expenses 9,467,092 8,694,894 18,161,986 - - - 9,467,092 8,694,894 18,161,986
931 Rents 974,621 34,422,004 35,396,625 - - - 974,621 34,422,004 35,396,625
932 Maintenance of
Structures & Equipment 369,738 4,393,287 4,763,025 - - - 369,738 4,393,287 4,763,025
403,404 Depreciation and
Amortization Expense 10,419 6,858,483 6,868,902 - - - 10,419 6,858,483 6,868,902
408 Taxes Other Than
Income Taxes 2,044,585 6,488,045 8,532,630 - - - 2,044,585 6,488,045 8,532,630
409 Income Taxes - (2,122,279) (2,122,279) - - - - (2,122,279) (2,122,279)
410 Provision for Deferred
Income Taxes - 1,581,551 1,581,551 - - - - 1,581,551 1,581,551
411 Provision for Deferred
Income Taxes - Credit - 1,055,479 1,055,479 - - - - 1,055,479 1,055,479
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 - 405,082 405,082 - - - - 405,082 405,082
431 Other Interest Expense 84,211 (120,487) (36,276) - - - 84,211 (120,487) (36,276)
TOTAL EXPENSE $167,309,623 $249,475,111 $416,784,734 $ - $ - $ - $167,309,623 $249,475,111 $416,784,734
====================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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> <C> <C> <C> <C> <C>
------------------------------DEPARTMENT OR SERVICE FUNCTION------------------------->
TOTAL INFORMATN METERS AND ELEC.SYSTEM INTERNAL ELEC. TRANS.
Account Description of Items AMOUNT OVERHEAD SYSTEMS TRANSPORTATN MAINTENANCE AUDITING & DISTRBTN ACCOUNTING
920 Salaries and Wages $224,271,507 $ - $24,110,136 $12,522,365 $5,435,621 $1,447,951 $24,054,030 $8,676,918
921 Office Supplies
and Expenses 57,362,397 - 9,165,332 1,072,135 875,937 320,586 656,795 4,111,302
922 Administrative Expense
Transferred-Credit (1,144,461) - (125,894) (78,028) (2,994) (2,377) (283,925) (10,256)
923 Outside Services
Employed 27,452,477 - 7,255,752 12,444 19,079 - 9,422 2,486,925
924 Property Insurance 451,883 - - 251,260 - - - -
925 Injuries and Damages 366,433 - - - - - - -
926 Employee Pensions
and Benefits 31,361,858 - 3,829,182 1,019,345 822,209 291,445 992,653 1,710,197
928 Regulatory Commission
Expense 2,027,695 - - - - - - -
930.1 General Advertising
Expenses 28,220 - - - - - - -
930.2 Miscellaneous General
Expenses 18,161,986 - 1,201,496 165,673 53,595 - 875,166 6,836,555
931 Rents 35,396,625 - 19,431,563 4,485 - 3,777 5,394 10,901,719
932 Maintenance of
Structures & Equipment 4,763,025 - 3,066,610 382 2,546 - 284 -
403,404 Depreciation and
Amortization Expense 6,868,902 6,868,902 - - - - - -
408 Taxes Other Than Income
Taxes 8,532,630 48,284 1,031,516 296,652 236,624 82,366 344,448 (889,978)
409 Income Taxes (2,122,279) (2,122,279) - - - - - -
410 Provision for Deferred
Income Taxes 1,581,551 1,581,551 - - - - - -
411 Provision for Deferred
Income Taxes-Credit 1,055,479 1,055,479 - - - - - -
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 405,082 405,082 - - - - - -
431 Other Interest Expense (36,276) (36,276) - - - - - -
Total Expenses $416,784,734 $7,800,743 $68,965,693 $15,266,713 $7,442,617 $2,143,748 $26,654,267 $33,823,382
====================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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> <C> <C> <C> <C> <C>
-----------------------------------DEPARTMENT OR SERVICE FUNCTION---------------------------------->
HUMAN MATERIALS MARKETING & ENVIRONMENTAL PUBLIC POWER ENG.& INVESTOR
Account Description Of Items RESOURCES MANAGEMENT FACILITIES CUST.RELATIONS AFFAIRS AFFAIRS CONSTRUCTION RELATIONS
920 Salaries and Wages $20,750,816 $11,471,784 $ 4,074,242 $27,439,425 $2,398,500 $4,117,977 $25,527,816 $ 606,699
921 Office Supplies
and Expenses 2,096,940 1,783,246 4,359,157 4,703,412 1,913,437 1,206,816 2,637,640 705,694
922 Administrative Expense
Transferred-Credit (13,063) (10,789) (714) (18,098) - (6,840) (492,218) (401)
923 Outside Services
Employed 730,331 91,215 279,222 2,082,633 399,082 313,197 142,629 329,627
924 Property Insurance - 200,112 - 511 - - - -
925 Injuries and Damages - - - - - - 361,967 -
926 Employee Pensions and
Benefits 2,724,863 484,314 1,142,158 5,494,516 603,068 835,345 1,295,602 141,506
928 Regulatory Commission
Expense - - - - - - - -
930.1 General Advertising
Expenses - - - 26,554 - 23 1,643 -
930.2 Miscellaneous General
Expenses 11,295 17,883 14,857 2,177,188 1,803 1,385,934 1,024,582 5,937
931 Rents 56,835 141 4,074,322 4,592 10,784 437,523 1,117 9,054
932 Maintenance of Structures
and Equipment 518 3,201 1,685,026 - - - 2,946 -
403,404 Depreciation and
Amortization Expense - - - - - - - -
408 Taxes Other Than
Income Taxes 557,378 162,657 336,389 853,497 175,903 292,382 386,799 44,093
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 $26,915,913 $14,203,764 $15,964,659 $43,764,230 $5,502,577 $8,582,357 $30,890,523 $1,842,209
====================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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> <C> <C> <C> <C> <C>
----------------------------------DEPARTMENT OR SERVICE FUNCTION---------------------------------->
POWER
Account Description of Items LEGAL RATES FINANCE RIGHT OF WAY FUELS PLANNING EXECUTIVE PLANNING
920 Salaries and Wages $ 5,311,271 $3,244,216 $ 9,515,214 $ 890,374 $ 47,129 $1,225,223 $14,399,767 $17,004,033
921 Office Supplies and
Expenses 1,302,974 231,717 2,479,618 69,753 64,187 481,802 4,242,486 12,881,431
922 Administrative Expense
Transferred - Credit (357) (1,074) (16,550) (597) (285) (6,808) (26,941) (46,252)
923 Outside Services
Employed 2,904,385 1,062,157 2,974,603 - (15,154) 10,977 5,534,989 828,962
924 Property Insurance - - - - - - - -
925 Injuries and Damages 4,283 - (617) - - - 28 772
926 Employee Pensions and
Benefits 1,178,474 609,031 1,921,768 200,114 325,787 217,709 2,009,707 3,512,865
928 Regulatory Commission
Expense 267,338 - 1,760,357 - - - - -
930.1 General Advertising
Expenses - - - - - - - -
930.2 Miscellaneous General
Expenses (519,377) 2,944 1,165,531 - 1,513,553 17,354 1,315,153 894,864
931 Rents 139,325 12,046 56,942 - - 11,894 98,400 136,712
932 Maintenance of Structures
and Equipment - - - - - - - 1,512
403,404 Depreciation and
Amortization Expense - - - - - - - -
408 Taxes Other Than Income
Taxes 354,123 170,557 785,858 57,936 93,650 62,645 707,373 1,341,478
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 $10,942,439 $5,331,594 $20,642,724 $1,217,580 $2,028,867 $2,020,796 $28,280,962 $36,556,377
==================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
DEPARTMENTAL ANALYSIS OF SALARIES - ACCOUNT 920
<---------- DEPARTMENTAL SALARY EXPENSE ---------->
--- INCLUDED IN AMOUNTS BILLED TO --
<S> <C> <C> <C> <C> <C>
NAME OF DEPARTMENT
INDICATE EACH DEPARTMENT
OR SERVICE FUNCTION NUMBER OF
TOTAL PARENT OTHER NON- PERSONNEL
AMOUNT COMPANY ASSOCIATES ASSOCIATES END OF YEAR
Information Systems $ 24,110,136 $ 214,711 $ 23,895,425 $ - 464
Meters and Transportation 12,522,365 - 12,522,365 - 187
Electric System Maintenance 5,435,621 - 5,435,621 - 77
Marketing and Customer Relations 27,439,425 36 27,439,389 - 563
Electric Transmission and
Distribution Engineering and
Construction 24,054,030 1 24,054,029 - 328
Power Engineering and Construction 25,527,816 1 25,527,815 - 368
Human Resources 20,750,816 13 20,750,803 - 134
Materials Management 11,471,784 95 11,471,689 - 173
Facilities 4,074,242 - 4,074,242 - 138
Accounting 8,676,918 (120,504) 8,797,422 - 159
Power Planning 17,004,033 - 17,004,033 - 247
Public Affairs 4,117,977 273,956 3,844,021 - 76
Legal 5,311,271 60,421 5,250,850 - 84
Rates 3,244,216 38 3,244,178 - 36
Finance 9,515,214 1,192,394 8,322,820 - 107
Right of Way 890,374 - 890,374 - 15
Internal Auditing 1,447,951 67,694 1,380,257 - 18
Environmental Affairs 2,398,500 27 2,398,473 - 37
Fuels 47,129 - 47,129 - 17
Investor Relations 606,699 31,576 575,123 - 10
Planning 1,225,223 58,089 1,167,134 - 18
Executive 14,399,767 200,379 14,199,388 - 109
Total $224,271,507 $1,978,927 $222,292,580 $ - 3,365
==============================================================================================
</TABLE>
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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.
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 $2,194,115
===========
$2,194,115
LEGAL SERVICES:
Bracewell & Patterson Legal Services 149,013
Hogan & Hartson Legal Services 371,236
Latham & Watkins Ozone Issues Consulting 304,585
McDermott, Will & Emer Legal Issues 187,243
Porter, Wright, Morris
& Arthur Legal Services 101,903
Skadden, Arps, Slate,
Meagher & Litigation; Wholesale Power Sales;
Flom, LLP Trigen; General Corporate Advice
and Regulatory Issues 915,935
===========
$2,029,915
OTHER SERVICES
Alternative Resources Corp. Information Technology Consulting 200,862
Analysts International Corp. Contract Programming 175,053
Bowne of Dallas L.P. Printing and Distribution Services 163,044
CMS Management Services, LLC Professional Search and Placement
Services 105,273
CSC Consulting Information Technology Consulting 1,106,741
Ciber Information Technology Consulting 1,096,614
Competitive Business Assoc.,
Inc. Information Technology Consulting 235,775
Crowe Chizek & Company Information Technology Consulting 267,594
Deloitte & Touche LLP Management Consulting 265,404
Edu-Tech Industries Strategic Training Program 385,192
Electric Power Research
Institute Marketing Research 194,532
Entex Information Services Information Technology Consulting 512,927
Ernst & Young LLP Tax and Management Consultants 1,970,063
Heidrick & Struggles, Inc. Executive Search Consultants 126,574
Howard Systems International Information Technology Consulting 272,819
Infotech Consulting, Inc. Information Technology Consulting 334,132
Kramer and Associates Systems Development Consulting 453,478
Loder Drew & Associates Disbursements Review Services 452,114
McKinsey & Company, Inc. Management Consulting 902,557
New Media, Inc. Information Technology Consulting 315,358
Nitin Nohria Strategic Planning Consultant 235,856
The Northbridge Group Forecasting and Valuation Consulting 1,292,683
PHB Hagler Bailly, Inc. System Reliability Consulting
Services 548,671
Price Waterhouse LLP Financial Services 495,714
Professional Computer
Consultants, Inc. Information Technology Consulting 601,829
Richard's Consulting, Inc. Information Technology Consulting 426,486
SFT, Inc. Information Technology Consulting 126,315
Utilities International Information Technology & Programming
Consultants 254,822
Valcom, Inc. Information Technology 604,160
Other _2/ 9,105,805
===========
23,228,447
TOTAL OUTSIDE SERVICES $27,452,477
(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.
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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 $15,496,338
Medical/Dental insurance 4,421,109
401(k) contributions 5,900,722
Life insurance 1,902,612
OTHERS 3,641,077
TOTAL $31,361,858
===========
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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 Moore North America, Inc. $ 4,753
Others 2,114
Promotional Items Herman Associates, Inc. 5,250
International Business 3,650
J C Hart Co. 8,400
Others 4,053
TOTAL $28,220
=======
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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
Company Membership Fees and Dues $ 2,203,434
Miscellaneous Materials and Supplies Purchased 37,584
Customer Incentive/Rebates - Demand-side Management 19,322
Directors' Fees 3,564,702
Advertising 798,142
Customer Records and Collections 364,260
Technical, General, Computer and Engineering Services 1,724,463
Labor, Materials and Supplies 4,845,039
Miscellaneous Stores and Transportation Expenses 300,865
OTHER MISCELLANEOUS ITEMS 4,304,175
TOTAL $18,161,986
===========
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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 $20,502,083
Facilities Rent 14,882,459
OPERATING AND WORK EQUIPMENT RENT 12,083
TOTAL $35,396,625
===========
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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 $ 48,284
Delaware Franchise Tax 50
Kentucky License Tax 1,466
Pennsylvania Franchise Tax 300
Ohio Franchise Tax 1,774
Indiana Property Tax -
California Property Tax -
New Jersey Corporation Tax -
Miscellaneous General Tax 2,081
STATE UNEMPLOYMENT 364,583
-----------
SUB-TOTAL 418,538
U.S. Government Taxes:
Social Security Taxes 7,969,955
Federal Unemployment 144,137
-----------
SUB-TOTAL 8,114,092
-----------
TOTAL $ 8,532,630
===========
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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, 1999
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, 1999
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, 1999
SCHEDULE XIX - FINANCIAL DATA SCHEDULE
ITEM NO. CAPTION HEADING
1 Net Service Company Property $26,860,495
2 Total Investments 8,867,727
3 Total Current and Accrued Assets 51,594,784
4 Total Deferred Debits 35,317,210
5 Balancing Amount for Total Assets and
Other Debits -
6 Total Assets and Other Debits 122,640,216
7 Total Proprietary Capital (1,827,123)
8 Total Long-Term Debt -
9 Notes Payable -
10 Notes Payable to Associate Companies -
11 Balancing Amount for Total Current and
Accrued Liabilities 27,601,364
12 Total Deferred Credits 96,567,577
13 Accumulated Deferred Income Taxes 298,398
14 Total Liabilities and Proprietary Capital 122,640,216
15 Services Rendered to Associate Companies 416,341,521
16 Services Rendered to Nonassociate Companies -
17 Miscellaneous Income or Loss 443,213
18 Total Income 416,784,734
19 Salaries and Wages 224,271,507
20 Employee Pensions and Benefits 31,361,858
21 Balancing Amount for Total Expenses 161,151,369
22 Total Expenses 416,784,734
23 Net Income (Loss) -
24 Total Expenses (Direct Costs) 167,309,623
25 Total Expenses (Indirect Costs) 249,475,111
26 Total Expenses (Total) 416,784,734
27 Number of Personnel End of Year 3,365
<PAGE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF CINERGY SERVICES, INC.
ORGANIZATION CHART
Chairman
- Executive
|
Vice Chairman, President, and Chief Executive Officer
- Executive
|
<S> <C> <C> <C> <C> <C> <C>
Vice President,
Vice President Corporate President, President, President, President,
& Chief Vice President, Communications Energy Energy International Cinergy
Financial Corporate & President, Commodities Delivery Business Unit & Investments
Officer Services Cinergy Foundation Business Unit Business Unit Secretary Business Unit
- -Accounting -Environmental -Facilities -Accounting -Accounting -Legal -Accounting
- -Finance Affairs -Public Affairs -Finance -Finance -Accounting -Finance
- -Internal Audit -Information -Fuels -Materials -Finance
- -Investor Systems -Human Resources Management
Relations -Planning -Materials -Meters and
-Rates Managemtent Transportation
- -Materials -Power -Electric System
Management Engineering & Maintenance
- -Human Resources Construction -Electric
- -Planning -Power Planning Transmission
& Distribution
Engineering and
Construction
-Power Planning
-Right of Way
-Marketing and
Customer
Relations
</TABLE>
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
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.
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.
<PAGE>
ANNUAL REPORT OF CINERGY SERVICES, INC.
For the Year Ended December 31, 1999
METHODS OF ALLOCATION - (Continued)
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.
8. Revenues Ratio
A ratio based on total revenues for the immediately preceding twelve
calendar months, the numerator of which is for a nonutility Client Company
or Service Company Function and the denominator of which is for all Client
Companies and/or the Service Company. This ratio will be determined
annually or at such time as may be required due to a significant change.
9. Direct Cost Ratio
A ratio, based on the direct costs charged to the individual nonutility
client companies divided by total direct costs charged to all client
companies (both utility and nonutility). 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, 1999
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 1999:
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 1999:
A. Amount of interest billed to associate companies is contained on page 24,
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/ BERNARD F. ROBERTS
(Signature of Signing Officer)
BERNARD F. ROBERTS, VICE PRESIDENT AND COMPTROLLER
(Printed Name and Title of Signing Officer)
Date: April 25, 2000
<TABLE> <S> <C>
<ARTICLE> OPUR2
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<NET-SERVICE-COMPANY-PROPERTY> 26,860,495
<TOTAL-INVESTMENTS> 8,867,727
<TOTAL-CURRENT-ASSETS> 51,594,784
<TOTAL-DEFERRED-DEBITS> 35,317,210
<OTHER-ASSETS-AND-DEBITS> 0
<TOTAL-ASSETS-AND-DEBITS> 122,640,216
<TOTAL-PROPRIETARY-CAPITAL> (1,827,123)
<TOTAL-LONG-TERM-DEBT> 0
<NOTES-PAYABLE> 0
<NOTES-PAYABLE-ASSOCIATE-COMP> 0
<OTHER-CURR-AND-ACCRUED-LIAB> 27,601,364
<TOTAL-DEFERRED-CREDITS> 96,567,577
<DEFERRED-INCOME-TAX> 298,398
<TOT-LIABIL-AND-PROPRIET-CAP> 122,640,216
<SERVICES-ASSOCIATE-COMPANIES> 416,341,521
<SERVICES-NON-ASSOCIATE-COMP> 0
<MISC-INCOME-OR-LOSS> 443,213
<TOTAL-INCOME> 416,784,734
<SALARIES-AND-WAGES> 224,271,507
<EMPLOYEE-PENSION-AND-BENEFIT> 31,361,858
<OTHER-EXPENSES> 161,151,369
<TOTAL-EXPENSES> 416,784,734
<NET-INCOME> 0
<TOTAL-EXPENSES-DIRECT-COST> 167,181,364
<TOTAL-EXPENSES-INDIRECT-COST> 249,160,157
<TOT-EXP-DIRECT-AND-INDIRECT> 416,341,521
<PERSONNEL-END-OF-YEAR> 3,365
</TABLE>
