UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000MARCH 31, 2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 1-2385
------
THE DAYTON POWER AND LIGHT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 31-0258470
- ---------------------------------- --------------------------------------------------------------------- --------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
COURTHOUSE PLAZA SOUTHWEST
DAYTON, OHIO 45402
- ----------------------------------------------------------------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(937) 224-6000
- ----------------------------------------------------------------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- ------ The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this form with the reduced disclosure
format.------
Indicate the number of shares of the issuer's classes of common stock, as of the
latest practicable date.
Common Stock, $.01 par value 41,172,173 Shares
- --------------------------------------- -------------------------------------------------------------------------- -------------------------------------
(Title of each class) (Outstanding at September 30, 2000)March 31, 2001)
THE DAYTON POWER AND LIGHT COMPANY
INDEX
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Results of Operations 13
Consolidated Statement of Cash Flows 24
Consolidated Balance Sheet 35
Consolidated Statement of Shareholder's Equity 57
Notes to Consolidated Financial Statements 68
Operating Statistics 810
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 1011
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 1314
PART II. OTHER INFORMATION
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 1514
Signatures 1615
i2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------------------------THREE MONTHS ENDED
MARCH 31,
---------------------------------
2001 2000 1999 2000 1999
---- ----
---- ----
REVENUES
Utility Service Revenues --
Electric ...................................... $ 303.9 $ 304.1 $ 826.2 $ 812.7
Gas ........................................... 33.2 15.7 165.9 147.2
------ ------Electric............................................................. $294.7 $259.5
Gas.................................................................. - 101.5
------ ------
Total utility service revenues ..... 337.1 319.8 992.1 959.9revenues............................ 294.7 361.0
EXPENSES
Fuel and purchased power ........................ 75.5 84.6 201.0 207.4power............................................... 82.1 59.1
Gas purchased for resale ........................ 19.6 5.3 104.7 85.5resale............................................... - 67.6
Operation and maintenance ....................... 47.1 51.0 143.4 136.6maintenance.............................................. 33.1 46.5
Depreciation and amortization ................... 32.8 32.4 100.7 97.1amortization.......................................... 28.7 33.5
Amortization of regulatory assets, net .......... 2.0 .5 14.7net................................. 12.1 5.6
General taxes ................................... 31.0 34.7 96.8 103.1
------ ------taxes.......................................................... 25.8 34.5
------ ------
Total expenses .................... 208.0 208.5 661.3 641.8expenses........................................... 181.8 246.8
------ ------
OPERATING INCOME....................................................... 112.9 114.2
Other deductions....................................................... (2.5) (7.6)
Interest expense....................................................... (15.9) (18.5)
------ ------
OperatingINCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE.................................................. 94.5 88.1
Income ................................ 129.1 111.3 330.8 318.1
OTHERtaxes........................................................... 38.0 32.0
----- ------
INCOME (DEDUCTIONS)
Investment income ............................... 2.2 2.0 6.6 18.9
Other income (deductions) ....................... (6.2) .8 (16.4) (2.9)
Interest expense ................................ (20.7) (19.8) (55.0) (65.3)
------ ------ ------ ------
Income Before income taxes and Extraordinary Item 104.4 94.3 266.0 268.8
Income taxes .................................... 37.4 38.0 95.7 103.8
------ ------ ------ ------
Income Before Extraordinary Item ................ 67.0 56.3 170.3 165.0
Extraordinary item,BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE................... 56.5 56.1
Cumulative effect of accounting change, net of taxes ................ 41.4 - 41.4tax..................... 1.0 -
------ ------
NET INCOME............................................................. 57.5 56.1
Preferred dividends.................................................... 0.2 0.2
------ ------
Net Income ...................................... 25.6 56.3 128.9 165.0
Preferred dividends ............................. .2 .2 .7 .7
------ ------ ------ ------
Earnings on Common Stock ........................EARNINGS ON COMMON STOCK............................................... $ 25.457.3 $ 56.1 $ 128.2 $ 164.3
====== ====== ====== ======55.9
===== =====
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-1-3
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN MILLIONS)
Nine Months Ended
September 30
----------------------------THREE MONTHS ENDED
MARCH 31,
----------------------------------
2001 2000
1999
---- ----------- -------
OPERATING ACTIVITIES
Cash received from utility customers ........... $ 1,002.3 $ 986.1customers............................................. $292.4 $362.1
Other operating cash receipts .................. 16.8 19.5receipts.................................................... 29.8 5.2
Cash paid for:
Fuel and purchased power ................. (197.2) (208.2)power.................................................... (91.7) (51.2)
Purchased gas ............................ (123.8) (109.2)gas............................................................... - (41.8)
Operation and maintenance labor .......... (60.1) (58.0)labor............................................. (18.5) (20.5)
Nonlabor operating expenditures .......... (122.8) (96.6)
Interest ................................. (63.0) (69.2)expenditures............................................. (46.4) (47.3)
Interest.................................................................... (25.6) (28.2)
Income taxes ............................. (88.8) (57.4)
Property, excise and payroll taxes ....... (116.0) (115.2)
-------- ------taxes................................................................ (2.4) (15.9)
General taxes............................................................... (53.2) (56.6)
------- -------
Net Cash Providedcash provided by Operating Activities ...... 247.4 291.8
-------- ------operating activities........................................ 84.4 105.8
------- -------
INVESTING ACTIVITIES
Capital expenditures ........................... (77.2) (62.2)
Purchasesexpenditures............................................................. (46.6) (26.0)
Proceeds from sale of available-for-sale financial assetsnatural gas retail distribution operations, net............ (90.9) -
(197.2)
Sales of available-for-sale financial assets ... - 58.0
-------- ------------- -------
Net Cash Usedcash used for Investing Activities ......... (77.2) (201.4)
-------- ------investing activities........................................... (137.5) (26.0)
------- -------
FINANCING ACTIVITIES
Dividends paid on common stock ................. (189.6) (55.8)
Retirement of short-term debt .................. (73.3) (38.6)
Parent company capital contribution ............stock................................................... (8.1) - 245.0
Retirement of long-term debt ................... (.4) (237.5)
Dividends paid on preferred stock .............. (.7) (.7)
-------- ------stock................................................ (0.2) (0.2)
Issuance (retirement) of short-term debt......................................... 74.8 (123.0)
------- -------
Net Cash Used for Financing Activities ......... (264.0) (87.6)
-------- ------cash provided by/(used for) financing activities............................. 66.5 (123.2)
------- -------
CASH AND TEMPORARY CASH INVESTMENTS--
Net change ..................................... (93.8) 2.8change....................................................................... 13.4 (43.4)
Balance at beginning of period .................period................................................... 8.6 95.5
1.9
-------- ------------- -------
Balance at end of period .......................period......................................................... $ 1.722.0 $ 4.7
========52.1
===== ======
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-2-4
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
At At
September 30,March 31, December 31,
2001 2000
1999
------------------------------------ --------------
ASSETS
PROPERTY
Electric property ............................................ $ 3,448.6 $ 3,384.1
Gas property ................................................. 336.3 330.6
Other property ............................................... 38.8 58.9
-------- --------
Total property ......................................... 3,823.7 3,773.6property............................................................ $3,554.6 $3,522.6
Less--
Accumulated depreciation and amortization .............. (1,688.7) (1,602.6)amortization............................... (1,585.8) (1,560.4)
-------- --------
Net property ...................................... 2,135.0 2,171.0property........................................................ 1,968.8 1,962.2
-------- --------
CURRENT ASSETS
Cash and temporary cash investments .......................... 1.7 95.5investments.......................................... 22.0 8.6
Accounts receivable, less provision for uncollectible accounts
of $2.3$9.8 and $4.3, respectively ......................... 192.0 206.6$6.8, respectively.......................................... 202.8 189.7
Inventories, at average cost ................................. 94.2 92.9cost................................................. 52.2 45.7
Prepaid taxes ................................................ 12.9 94.6
Other ........................................................ 47.7 66.9taxes................................................................ 41.6 65.4
Prepaid public utility excise tax............................................ 29.7 14.9
Other........................................................................ 21.7 20.6
-------- --------
Total current assets ................................... 348.5 556.5assets.................................................... 370.0 344.9
-------- --------
OTHER ASSETS
Deferred compensation plan ................................... 173.8 116.6plan................................................... 155.1 171.8
Income taxes recoverable through future revenues ............. 28.8 168.5revenues............................. 47.3 49.4
Other regulatory assets ...................................... 155.3 53.3
Other ........................................................ 58.5 87.6assets...................................................... 134.7 146.4
Other........................................................................ 73.2 76.4
-------- --------
Total other assets ..................................... 416.4 426.0assets...................................................... 410.3 444.0
-------- --------
Total Assets ................................................. $ 2,899.9 $ 3,153.5TOTAL ASSETS................................................................. $2,749.1 $2,751.1
======== ========
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-3-5
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
(CONTINUED)
At At
September 30,March 31, December 31,
2001 2000
1999
--------------------------------- --------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder's equity--
Common stock ...........................stock............................................................. $ .40.4 $ .40.4
Other paid-in capital ..................capital.................................................... 769.8 769.7769.8
Accumulated other comprehensive income.. 33.2 13.6income................................... 25.7 37.3
Earnings reinvested in the business .... 452.5 513.9business...................................... 254.5 205.4
-------- --------
Total common shareholders' equity.. 1,255.9 1,297.6equity.................................... 1,050.4 1,012.9
Preferred stock ..............................stock............................................................... 22.9 22.9
Long-term debt ............................... 661.6 661.2debt................................................................ 666.4 666.5
-------- --------
Total capitalization .............. 1,940.4 1,981.7capitalization................................................. 1,739.7 1,702.3
-------- --------
CURRENT LIABILITIES
Accounts payable ............................. 82.0 126.2payable.............................................................. 100.8 103.9
Accrued taxes ................................ 102.7 164.2taxes................................................................. 114.8 220.0
Accrued interest ............................. 8.6 19.7interest.............................................................. 8.3 19.1
Short-term debt .............................. 49.7 123.1
Other ........................................ 32.6 60.9debt............................................................... 74.8 -
Other......................................................................... 17.0 14.3
-------- --------
Total current liabilities ......... 275.6 494.1liabilities............................................ 315.7 357.3
-------- --------
DEFERRED CREDITS AND OTHER
Deferred taxes ............................... 428.6 453.9taxes................................................................ 432.5 429.9
Unamortized investment tax credit ............ 64.0 66.3credit............................................. 59.7 60.2
Deferred compensation ........................ 116.4 97.2
Other ....................................... 74.9 60.3compensation......................................................... 104.2 113.6
Other......................................................................... 97.3 87.8
-------- --------
Total deferred credits and other.. 683.9 677.7other..................................... 693.7 691.5
-------- --------
Total Capitalization and Liabilities ......... $ 2,899.9 $ 3,153.5
======== ========TOTAL CAPITALIZATION AND LIABILITIES.......................................... $2,749.1 $2,751.1
======= =======
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-4-6
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
Common Stock Accumulated Earnings
--------------------------------------------------- Other Other Reinvested
Outstanding Paid-In Comprehensive in the
$ in millions Shares Amount Capital Income Business Total
- ---------------------------------------------------------------------------------- -------------- ---------- ------------ --------------- ------------------ ----------------- ---------------- -------------- -------------
2000:2001:
Beginning balance..........balance......... 41,172,173 $.4 $769.7 $13.6 $513.9 $1,297.6$0.4 $769.8 $37.3 $205.4 $1,012.9
Net income................. 128.9income................ 57.5
Unrealized gains, net of
reclassification
adjustments, after tax.. 19.6(16.5)
Unrealized gains on derivative
instruments, after tax....... 4.9
Total comprehensive
income................. 148.545.9
Common stock dividends..... (189.6) (189.6)dividends.... (8.1) (8.1)
Preferred stock dividends.. (.7) (.7)
Other...................... .1 .1
-----------------dividends. (0.2) (0.2)
Other (0.1) (0.1)
-------------- ---------- ------------ --------------- ------------------ ----------------- ---------------- -------------- -------------
Ending balance.............balance............ 41,172,173 $.4$0.4 $769.8 $33.2 $452.5 $1,255.9
=================$25.7 $254.5 $1,050.4
============== ========== ============ =============== ================== ================= ================ 1999:============== =============
2000:
Beginning balance..........balance......... 41,172,173 $.4 $788.2 $33.6 $450.8 $1,273.0$0.4 $769.7 $13.6 $513.9 $1,297.6
Net income................. 165.0income................ 56.1
Unrealized gains, net of
reclassification
adjustments, after tax.. (.5)8.2
Total comprehensive
164.5
income...................
Common stock dividends..... (81.9) (81.9)income................. 64.3
Preferred stock dividends.. (.7) (.7)
Parent company capital
contribution............ 245.0 245.0
Other...................... .1 .1
-----------------dividends. (0.2) (0.2)
Other..................... 0.1 (0.1) -
-------------- ---------- ------------ --------------- ------------------ ----------------- ---------------- -------------- -------------
Ending balance.............balance............ 41,172,173 $.4 $1,033.3 $33.1 $533.2 $1,600.0
=================$0.4 $769.8 $21.7 $569.8 $1,361.7
============== ========== ============ =============== ================== ================= ================ ============== =============
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
-5-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Dayton Power and Light Company ("DP&L" or "the Company") is a wholly
owned subsidiary of DPL Inc.Inc ("DPL"). DP&L has prepared the consolidated
financial statements in this report without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto in the Company's 19992000 Annual Report on Form 10-K.
2. Reclassifications have been made in certain prior years' amounts to conform
to the current reporting presentation of the Company.
In the opinion of management, the information included in this Form 10-Q
reflects all adjustments that are necessary for a fair statement of the results
of operations for the periods presented. Any adjustments are of a normal
recurring nature.
3. Costs associated with all planned major repair and maintenance activities,
primarily power plant outages, are recognized atThe Company adopted the time the work is performed.
Outage costs include labor, materials and supplies, and outside services
required to maintain company equipment and facilities. These costs are either
capitalized or expensed based on Company defined criteria, identifying specific
unitsprovisions of property to be capitalized.
4. In June 2000, the Financial Accounting Standards BoardStandard
Board's ("FASB") issued
Statement of Financial Accounting Standards No. 138,133, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities, - an amendment" as amended ("SFAS No. 133") as of FASB
Statement No. 133." This statement addresses a limited number of issues causing
implementation difficulties for a large number of entities getting ready to
apply Statement No. 133. The effective date of StatementJanuary 1, 2001. SFAS No.
133 isrequires that all derivatives be recognized as either assets or liabilities
in the fiscal
year beginning after June 15, 2000. Accordingly,consolidated balance sheet and be measured at fair value, and changes in
the fair value be recorded in earnings, unless they are designated as hedges of
an underlying transaction. As a result of adopting this accounting standard, the
Company will adopt
Statement No. 133 at the beginningrecorded a cumulative effect of fiscal year 2001. Implementationaccounting change of $1.0 million, net
of tax. The implementation of this statement isaccounting standard did not expected to have a material
impact on the Company's financial position or results of operations.
5. DP&L received approval fromThe Company uses forward and option purchase contracts as a hedge against the
Public Utilities Commissionrisk of Ohio (PUCO)
for its customer transition planchanges in cash flows associated with expected electricity purchases.
These purchases are required to meet full requirements load during times of peak
demand or during planned and unplanned generation facility outages. The Company
also holds forward sales contracts that hedge against the risk of changes in
cash flows associated with power sales during periods of projected generation
facility availability. The Company records the fair value of all these contracts
as "Other Assets" on the Consolidated Balance Sheet with an offset to
"Accumulated Other Comprehensive Income," which is reclassified into earnings in
the month of September 2000.physical receipt or delivery of power.
The plan,
which beginsCompany has entered into derivative contracts in January 2001, providesorder to hedge the fair
value of a three-year transition period (the
market development period) ending December 31, 2003, at which timefirm sales commitment. The fair value of the Company's
generation business unit will be fully merchant.derivative contracts as
well as the firm commitment are captured as "Other Assets" on the Consolidated
Balance Sheet, and any hedge ineffectiveness is included as "Other
Income/Deductions" on the Consolidated Statement of Results of Operations. The
plan, as approved, provides
for the recoverynet impact of DP&L's transition costs, including generation-related
regulatory assets,these contracts was immaterial during the market development period. Basedquarter.
8
The Company also holds purchased gas contracts through November 2001, as well as
emission allowance options through 2004, that are classified as derivatives not
subject to hedge accounting. The fair value of these contracts is reflected as
"Other Assets" on the Company's
assessmentConsolidated Balance Sheet and "Other Income/Deductions"
on the Consolidated Statement of recoveriesResults of regulatory assetsOperations. The impact on net income
was immaterial during the market development
periodquarter.
4. In prior years, the Company had two reportable operating segments: Electric
and actual generation-related regulatoryNatural Gas. In October 2000, the Company completed the sale of
substantially all of its natural gas retail distribution assets a write-off of $63.7
million before tax benefits ($41.4 million net of taxes) was recordedand certain
liabilities. Accordingly, the Electric segment is the remaining reportable
operating segment. The Electric segment generates, markets, distributes, and
transmits electricity to retail and wholesale customers. Prior year amounts
related to the Natural Gas segment are included in the
third quarter of 2000 as an extraordinary item in accordance with FASB Statement
No. 101, "Regulated Enterprises-Accounting for the Discontinuation of
Application of FASB Statement No. 71."Other." The assessment of the impact of the plan
was based on assumptions for sales levels during the market development period.
-6-
6. The reconciliation of segment profit to DP&L's consolidated income before
income taxes and extraordinary item is as follows:
SEGMENT INFORMATION For the three months For the nine months
ended September 30, ended September 30,
$ in millions 2000 1999 2000 1999
- ----------------------------------------------------------------- -------------------- ------------------- --------------------FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------------
ELECTRIC
Revenues from external customers $303.9 $304.1 $826.2 $812.7
Intersegment revenues2001 2000
------ ------
NET REVENUES:
Electric................................. $212.6 $200.5
Other.................................... - .6 - 1.9
Earnings before interest, taxes, and
extraordinary item 128.4 113.4 317.7 294.5
NATURAL GAS
Revenues from external customers 33.3 15.7 165.9 147.2
Intersegment revenues .6 1.8 1.8 3.6
Earnings before interest, taxes, and
extraordinary item 2.8 (1.6) 23.0 25.0
TOTAL
Revenues from external customers 337.2 319.8 992.1 959.9
Intersegment revenues .6 2.4 1.8 5.5
Earnings before interest, taxes, and
extraordinary item 131.2 111.8 340.7 319.5
PROFIT OR LOSS RECONCILIATION33.8
------ ------
Total................................. $212.6 $234.3
===== =====
OPERATING INCOME:
Electric................................. $106.9 $ 98.4
Other (a)
Total earnings before interest, taxes, and
extraordinary item 131.2 111.8 340.7 319.5
Unallocated corporate expenses (2.1) (.5) (9.9) (1.4)
Investment income 2.2 2.0 6.6 18.9................................ 6.0 15.8
------ ------
Total................................. $112.9 $114.2
===== =====
RECONCILIATION:
Operating income......................... $112.9 $114.2
Other income and deductions (6.2) .8 (16.4) (2.9)deductions......................... (15.9) (18.5)
Interest expense (20.7) (19.8) (55.0) (65.3)
------------------- -------------------- ------------------- --------------------expense......................... (2.5) (7.6)
------- -------
Income before income taxes and
extraordinary item $104.4cumulative effect of accounting
change................................ $ 94.3 $266.0 $268.8
=================== ==================== =================== ====================94.5 $ 88.1
===== =====
(a) For categories not reconciled above, segment totals equal consolidated
totals.
-7-Includes unallocated corporate items. The first quarter of 2000 also
includes operating income for the natural gas retail distribution operations,
the sale of which was completed in October 2000.
9
THE DAYTON POWER AND LIGHT COMPANY
OPERATING STATISTICS
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- ---------------------------THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000 1999 2000 1999
---- ----
---- ----
ELECTRIC
Sales (millions of kWh)--
Residential.................................... 1,218 1,309 3,566 3,666
Commercial..................................... 931 927 2,637 2,577
Industrial..................................... 1,254 1,272 3,676 3,712
Other 1,307 1,084 3,267 2,927
---------Residential.................................................. 1,480 1,340
Commercial................................................... 879 825
Industrial................................................... 1,094 1,158
Wholesale and other.......................................... 1,260 872
-------- --------- ---------
Total..................................... 4,710 4,592 13,146 12,882--------
Total.................................................... 4,713 4,195
Revenues (thousands of dollars)--
Residential.................................... $110,412 $116,756 $313,685 $318,817
Commercial..................................... 62,451 61,460 180,380 176,188
Industrial..................................... 60,886 68,208 177,910 185,919
Other 70,179 57,684 154,261 131,808Residential.................................................. $120,360 $110,868
Commercial................................................... 60,556 57,027
Industrial................................................... 54,758 55,487
Wholesale and other.......................................... 59,021 36,121
-------- --------
------- -------
Total..................................... $303,928 $304,108 $826,236 $812,732
Other Electric Statistics--
Average price per kWh - Retail (cents)......... 6.75 6.70 6.89 6.73
Average price per kWh - Wholesale (cents)...... 4.77 3.76 4.71 3.36
Fuel cost per net kWh generated (cents)........ 1.13 1.29 1.16 1.27Total.................................................... $294,695 259,503
Electric customers at end of period............ 497,000 491,941 497,000 491,941
Average kWh use per residential customer....... 2,750 2,982 8,057 8,356
Peak demand-maximum one hour use (MW), (net)... 2,866 3,130 2,866 3,130
NOTE: Sales and revenue numbers include electric peaking generation capacity
sales.
-8-
THE DAYTON POWER AND LIGHT COMPANY
OPERATING STATISTICS
(CONTINUED)
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
period............................... 500,137 496,142
GAS (a)
Sales (millions of MCF)--
Residential......................................... 2,401 1,029 17,071 16,691
Commercial.......................................... 985 525 5,398 5,390
Industrial.......................................... 250 235 1,849 1,705
Other 125 36 737 852Residential.................................................. - 11,634
Commercial................................................... - 3,554
Industrial................................................... - 1,066
Other........................................................ - 470
Transportation gas delivered........................ 3,478 3,549 14,511 13,868
----- ----- ------ ------
Total.......................................... 7,239 5,374 39,566 38,506delivered................................. - 6,893
-------- --------
Total.................................................... - 23,617
Revenues (thousands of dollars)--
Residential.........................................Residential.................................................. $ 21,197- $67,228
Commercial................................................... - 19,657
Industrial................................................... - 5,655
Other........................................................ - 8,940
-------- --------
Total.................................................... $ 8,163 $107,804 $ 94,059
Commercial.......................................... 7,160 2,932 31,917 27,607
Industrial.......................................... 1,693 1,142 9,852 8,187
Other 3,188 3,448 16,289 17,363
----- ----- ------ ------
Total.......................................... $ 33,238 $ 15,685 $165,862 $147,216
Other Gas Statistics--
Average price per MCF--retail customers (dollars)... $ 8.22 $ 6.81 $ 6.14 $ 5.44- 101,480
Gas customers at end of period...................... 309,186 304,818 309,186 304,818
Degree Days (based on calendar month)--
Heating............................................. 120 83 3,248 3,381
Cooling............................................. 521 738 806 1,051period.................................... - 309,743
-9-(a) DP&L completed the sale of its natural gas retail distribution assets and
certain liabilities in October 2000.
10
ItemITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.OPERATIONS
The Dayton Power and Light Company ("the Company") reported earnings on common
stock for the first quarter of 2001 of $57.3 million, an increase of 3% over
earnings on common stock of $55.9 million for the same quarter last year.
Excluding non-recurring items, first quarter earnings on common stock of $56.3
million was 4% lower than earnings on common stock of $58.6 million for the same
quarter last year. The non-recurring item in the current quarter, which
contributed $1 million after taxes to earnings, reflected the adoption of a new
accounting standard for derivatives. The non-recurring charge in the first
quarter of 2000, equal to $4.2 million before taxes, was associated with the
elimination of certain compensation programs.
The earnings decline was primarily attributable to the sale of the natural gas
retail distribution assets and certain liabilities in October 2000. This was
partially offset by a 6% increase in net electric revenues and a 29% decrease in
operation and maintenance expense.
FINANCIAL CONDITION
At March 31, 2001, the Company's cash and temporary cash investment balance was
$22.0 million.
During the first quarter of 2001, investing cash flows included a cash payment
of $90.9 million for income taxes associated the gain on the sale of the natural
gas retail distribution assets and certain liabilities that was reported in
October 2000.
DPL and its subsidiaries have up to $300 million available through Revolving
Credit Agreements ("Credit Agreements"). The primary purpose of the revolving
credit facilities is to provide back-up liquidity for the commercial paper
program. The Company had no borrowings outstanding under these Credit Agreements
at March 31, 2001. The Company also has $75 million available in short-term
informal lines of credit. The Company had no borrowings outstanding under these
informal lines and $75 million in commercial paper outstanding at March 31,
2001.
The Company currently has sufficient capacity to issue First Mortgage Bonds to
satisfy its requirements in connection with the financing of its construction
and refinancing programs during the five-year period 2001-2005.
Construction plans are subject to continuing review and are expected to be
revised in light of changes in financial and economic conditions, load
forecasts, legislative and regulatory developments and changing environmental
standards, among other factors.
11
As a result of DPL's December 2000 press release regarding its exploration of
strategic alternatives, Standard & Poor's placed DPL and DP&L on credit watch
with developing implications in January 2001. Developing implications indicate
that ratings could be raised, lowered, or affirmed. On May 2, 2001, Standard &
Poor's affirmed its ratings on DPL and the Company with a stable outlook, and
removed the credit watch with developing implications. This action followed
DPL's announcement on February 15, 2001 that it would pursue its growth strategy
as an independent company based on its merchant generation expansion plan. The
current credit ratings for DPL and the Company are investment grade.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
2001 2000
-------------------------------------
Electric revenues........................ $294.7 $259.5
Fuel and purchased power................. 82.1 59.1
------ ------
Net electric revenues............... $212.6 $200.4
====== ======
Gas revenues............................. $ - $101.5
Gas purchased for resale................. - 67.6
------ ------
Net gas revenues.................... $ - $ 33.9
====== ======
Operating income......................... $112.9 $114.2
====== ======
Despite increases in fuel and purchased power costs, first quarter net electric
revenues increased by $12.2 million or 6% compared to last year. Wholesale
revenues more than doubled as a result of a 72% increase in sales volume and
higher wholesale market prices. Retail revenues were 4% higher as a result of
colder weather (heating degree days increased 41%). Fuel costs increased as a
result of higher prices on the wholesale market for purchased power, higher
spot-market prices for coal, and a greater volume of generated power (up 11%)
resulting from increased sales.
The loss of net gas revenues resulted from the sale of the natural gas retail
distribution assets and certain liabilities, which was completed in October
2000.
First quarter operating income decreased $1.3 million or 1% compared to last
year. This change was primarily attributable to the effect of the sale of the
natural gas retail distribution assets and a $6.5 million increase in regulatory
amortization, partially offset by the increase in net electric revenues, a $13.4
million decrease in operation and maintenance expense, and an $8.7 million
decrease in general taxes.
The decrease in operation and maintenance expense was attributable to decreased
deferred compensation costs, the sale of the natural gas retail distribution
operations, and changes in the timing of certain maintenance work, which is
expected to be performed later in the year. These favorable variances were
partially offset by higher uncollectible receivable expense, an increase in ash
removal program expense, and higher operating costs associated with the
increase in generation power.
12
The decrease in general taxes primarily resulted from changes in tax laws
associated with the Ohio deregulation order.
Regulatory transition cost assets of $144.8 million are being amortized over the
three-year period beginning January 1, 2001 based on transition revenues. As a
result, amortization expense was $12.1 million in the first quarter of 2001 as
compared to $5.6 million in the same period last year.
Other deductions decreased $5.1 million or 67% compared to the first quarter of
last year as a result of higher executive compensation and the elimination of
certain compensation programs in the prior year, and higher net realized gains
in the current year. These favorable variances were partially offset by a net
loss associated with derivative activity.
Interest expense decreased $2.6 million or 14% compared to the first quarter of
last year as a result of lower average short-term debt and higher capitalized
interest, partially offset by higher long-term debt, higher long-term debt
interest rates, and higher short-term debt interest rates.
The effective income tax rates for the first quarter of 2001 and 2000 were 40.2%
and 36.3%, respectively. The increase was primarily attributable to a $5.6
million increase in state income-based taxes resulting from the implementation
of the Ohio deregulation order.
Cumulative effect of an accounting change reflects the Company's adoption of the
provisions of the Financial Accounting Standard Board's ("FASB") Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities," as amended
("SFAS No. 133"). SFAS No. 133 requires that all derivatives be recognized as
either assets or liabilities in the consolidated balance sheet and be measured
at fair value, and changes in the fair value be recorded in earnings, unless
they are designated as hedges of an underlying transaction.
OTHER MATTERS
A wholly-owned captive subsidiary of DPL provides, among other coverages,
business interruption and specific risk coverage for DP&L with respect to the
impact of environmental law and electric deregulation. "Insurance Claims and
Costs" on DPL's Consolidated Balance Sheet includes insurance reserves of the
captive subsidiary of approximately $87 million for this coverage, as well as
other coverages based on actuarial methods and loss experience data. As the
policy impact of electric deregulation becomes known during the three-year
regulatory transition period ending December 31, 2003, either policy payments
from the captive subsidiary to DP&L or release of the appropriate reserves will
occur and be reflected in income.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements regarding plans and
expectations for the future. Investors are cautioned that actual outcomes and
results may vary materially from those projected due to various factors beyond
the Company's control, including abnormal weather, unusual maintenance or repair
requirements, changes in fuel costs, increased competition, regulatory changes
and decisions, changes in accounting rules and adverse economic conditions.
The Company's earnings before income taxes and extraordinary item for the
third quarter of 2000 was $67.0 million, up 19% from $56.3 million earned in the
third quarter a year ago. Year-to-date earnings before income taxes and
extraordinary item was $170.3, up 3% from $165.0 million earned in the same
period in 1999.
The earnings increase compared to the third quarter of last year is
primarily attributable to higher electric and gas operating margins, partially
offset by an increase in other deductions. The earnings increase for the
year-to-date period is primarily due to increased electric operating margins and
lower interest expense, partially offset by a decrease in investment income and
an increase in other deductions.
FINANCIAL CONDITION
DP&L completed the sale of its natural gas retail distribution assets and
certain liabiities on October 31, 2000 to Vectren Energy Delivery of Ohio, Inc.
and Indiana Gas Company, Inc. as tenants-in-common ("Vectren") for approximately
$463 million. The sale was completed in accordance with the terms of the related
Asset Purchase Agreement dated December 14, 1999. The transaction was valued
pursuant to an arms-length negotiation between DP&L and Vectren. The purchase
price was paid in cash and is subject to adjustment based upon the finalization
of the closing balance sheet in accordance with the provisions of the Asset
Purchase Agreement. Management believes any such adjustment will not be
material. DPL Inc. will invest the after-tax proceeds from the sale to continue
its regional merchant generation expansion, continue its common share repurchase
program, and reduce outstanding short-term debt.
DP&L and Vectren also entered into a continuing agreement whereby DP&L will
provide transitional support to Vectren in the areas of meter reading, billing,
cash receipts, collections, customer deposits, telecommunication services, and
other miscellaneous services for a predetermined fee.
At September 30, 2000, the Company's cash and temporary cash investment
balance was $1.7 million.
-10-13
DPL Inc. and its subsidiaries have $300 million available through Revolving
Credit Agreements ("Credit Agreements"). At September 30, 2000, DPL Inc. had no
borrowings outstanding under these Credit Agreements. DPL Inc. and its
subsidiaries also have $15 million available in a short-term informal line of
credit. At September 30, 2000, DPL Inc. had no borrowings outstanding from this
line. The Company has $75 million available in short-term informal lines of
credit. At September 30, 2000, the Company had no borrowings outstanding under
these informal lines and $49.7 million in commercial paper outstanding.
DP&L currently has sufficient capacity to issue First Mortgage Bonds to
satisfy its requirements in connection with the financing of its construction
and refinancing programs during the five-year period 2000-2004.
Construction plans are subject to continuing review and are expected to be
revised in light of changes in financial and economic conditions, load
forecasts, legislative and regulatory developments and changing environmental
standards, among other factors. The Company's ability to complete its capital
projects and the reliability of future service will be affected by its financial
condition and the availability of external funds at reasonable cost.
RESULTS OF OPERATIONS
Electric revenues were essentially flat compared to the third quarter of
1999 as increases in wholesale revenues were offset by a decrease in retail
revenues. Electric revenues for the year-to-date period were $13.5 million
higher due to higher wholesale sales, partially offset by lower retail revenues.
Gas revenues increased $17.6 million from the third quarter last year primarily
due to the impact of higher gas cost recovery factors on revenues, plus higher
sales to residential customers as the result of cooler weather in the third
quarter. For year-to-date compared to last year, gas revenues increased $18.7
million primarily due to the impact of higher gas cost recovery factors on
revenue, partially offset by lower sales attributable to warmer weather in the
first quarter.
Fuel and purchased power decreased $9.1 million and $6.4 million compared
to the third quarter and year-to-date 1999 periods, respectively, primarily due
to the impact of more efficient plant operations, along with lower peak demand
levels, which reduced purchased power costs.
Gas purchased for resale in the third quarter increased $14.3 million
compared to the same quarter last year primarily due to the increases in gas
costs and retail gas sales. For year-to-date compared to last year, gas
purchased for resale increased $19.2 million primarily due to higher gas costs.
Operation and maintenance expense decreased $3.9 million compared to the
third quarter of last year primarily due to lower power production and service
costs. For year-to-date, operation and maintenance expense increased $6.8
million over the same period a year ago primarily due to increased uncollectible
receivable expense, employee benefit costs, insurance costs, and power
production costs.
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Depreciation and amortization increased $1.9 million and $6.2 million over
the third quarter and year-to-date a year ago, respectively, primarily due to
increased property investment and the amortization of regulatory deferrals
related to fuel expense.
General taxes decreased $3.6 million from third quarter last year and $6.3
million from year-to-date 1999, primarily due to lower taxes resulting from
property tax adjustments for air and water quality expenditures, coupled with
the timing and recognition of credits received related to the Ohio Public
Utility Excise Tax.
Due to the November 1999 transfer of the Company's ownership interest in
the assets and liabilities of MVE, Inc. to Plaza Building, Inc., which is
another wholly-owned subsidiary of DPL Inc., other income decreased $7.0 million
for the third quarter compared to 1999 and investment income decreased $12.3
million compared to year-to-date 1999. Other deductions increased $13.5 million
from year-to-date last year primarily due to increased costs associated with the
elimination of certain compensation programs.
Interest expense increased $.9 million from the third quarter of 1999
primarily due to an increase in short-term interest rates. Interest expense
decreased $10.3 million for the year-to-date period primarily due to a reduction
in first mortgage bonds, partially offset by an increase in short-term interest
rates.
Income taxes decreased $.6 million compared to the third quarter of 1999
due to book to tax timing differences, partially offset by an increase in
taxable income. Income taxes decreased $8.1 million compared to year-to-date
1999 due to lower taxable income coupled with book/tax timing differences.
Third quarter and year-to-date results for 2000 include an extraordinary
charge of $41.4 million for unrecoverable generation-related regulatory assets
associated with the discontinuance of regulatory accounting for the generation
business (see Note 5 to the Consolidated Financial Statements).
OTHER MATTERS
DP&L received approval from the PUCO for its customer transition plan
during the month of September 2000. The plan, which begins in January 2001,
provides a three-year transition period (the market development period) ending
December 31, 2003, at which time the Company's generation business unit will be
fully merchant.
On August 15, 2000, DPL Inc. announced that members of Local 175 Utility
Workers Union of America approved a six-year labor agreement with the Company.
The package includes 3.25% wage increases each year for the next six years,
additional medical and retirement benefits, and employment security through
2005.
-12-
ItemITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.RISK
The carrying value of the Company's debt was $785$667.3 million at December 31,
1999,2000, consisting of the Company's first mortgage bonds, and guaranteed air quality
development obligations, notes and commercial paper.notes. The fair value of this debt was $776$666.7
million, based on current market prices or discounted cash flows using current
rates for similar issues with similar terms and remaining maturities. The
following table presents the principal cash repayments and related weighted
average interest rates by maturity date for long-term, fixed-rate debt at
December 31, 1999.2000:
- ---------------------------------------------------------------------------------------------------------------------------
Expected Maturity Date
----------------------
2000- ---------------------------------------------------------------------------------------------------------------------------
2001 2002 2003 2004 2005 Thereafter Total Fair Value
------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------
Long-term Debt
- ---------------------------------------------------------------------------------------------------------------------------
Amount ($ in millions) $.4 $.4 $.4 $.4 $.4 $660.8 $662.8 $651.4$1 $1 $1 $1 $1 $662.3 $667.3 $666.7
- ---------------------------------------------------------------------------------------------------------------------------
Average rate 6.4% 6.4% 6.4% 6.4% 6.4% 7.4% 7.4%
- ---------------------------------------------------------------------------------------------------------------------------
Because the long-term debt is at a fixed rate, the primary market risk to the
Company is short-term interest rate risk. The carrying value and fair value of
short-term debt was $125$75 million with a weighted averageweighted-average interest rate of 5.9%5.5% at
DecemberMarch 31, 1999. The carrying value and fair value of short-term debt
has been reduced to $49.7 million as of September 30, 2000.2001. The interest expense risk related to short-term debt at December 31, 1999 was estimated to be
approximately an increase/decrease of $.5 million if the weighted average cost
for each quarter increased/decreased by 10%. Given the reduction in short-term
debt from year-end 1999 to the third quarter 2000, the interest expense risk has
become negligible.
The fair value of available-for-sale securities was $126 million and $62
million at September 30, 2000 and December 31, 1999, respectively. The equity
price risk related to these securities was estimated as the potential
increase/decrease in fair value of $13 million and $6 million at September 30,
2000 and December 31, 1999, respectively, that resultedresulting from a hypothetical 10%
increase/decrease in the market prices.
Asquarterly average cost of September 30, 2000, there have been no other material changes in the
above information since the end of the preceding fiscal year.
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this debt is negligible.
PART II. OTHER INFORMATION
Item 5. OTHER INFORMATION.
RATE REGULATION AND GOVERNMENT LEGISLATION
In October 1999, legislation became effective in Ohio that will give
electric utility customers a choice of energy providers starting January 1,
2001. Under the legislation, electric generation, aggregation, power marketing
and power brokerage services supplied to retail customers in Ohio will be deemed
competitive and will not be subject to supervision and regulation by the PUCO.
As required by the legislation, the Company filed its transition plan at the
PUCO on December 20, 1999. The review and hearing process was completed with the
PUCO on June 21, 2000, with the Company reaching agreement with major groups
participating in the filing, including the Staff of the PUCO. The Company
received PUCO approval of its plan on September 21, 2000.
The plan, which begins in January 2001, provides a three-year transition
period ending December 31, 2003, at which time the Company's generation business
unit will be fully merchant. The plan also provides the organizational and
financial flexibility for the Company to continue its corporate realignment
initiatives. The Company has functionally separated its generation,
transmission, and distribution business units and completed the sale of its
natural gas retail distribution operations to Vectren Energy Delivery of Ohio,
Inc. and Indiana Gas Company, Inc. as tenants-in-common on October 5, 2000 for
$463 million in cash.
ENVIRONMENTAL CONSIDERATIONS
The Company and numerous other parties received notification from the Ohio
EPA on July 27, 1994 that it considers them Potentially Responsible Parties
("PRP's") for clean up of hazardous substances at the North Sanitary Landfill
site in Dayton, Ohio. The Company has not joined the PRP group formed for the
site because the available information does not demonstrate that the Company
contributed wastes to the site.
The PRP group recently brought an action against the Company and numerous
other parties alleging that the Company and the others are PRP's that should be
liable for a portion of clean-up costs at the site. The Company will vigorously
challenge this action. The final resolution is not expected to have a material
effect on the Company's financial position, earnings or cash flow.
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ItemITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.8-K
(a) The following exhibit is filed herewith:
Exhibit No. Description
-------------- -------------------
2 CopyThere are no exhibits required by Item 601 of Asset Purchase Agreement, dated
December 14, 1999, between The Dayton
Power and Light Company, Indiana Energy,
Inc., and Number-3CHK, Inc. (exclusive
of Exhibits, Schedules, and Ancillary
Agreements, which will be furnished toRegulation S-K
for the Commission upon request)
27 Financial Data Schedulequarter ended March 31, 2001.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
quarter ended September 30, 2000.
-15-March 31, 2001.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DAYTON POWER AND LIGHT COMPANY
-----------------------------------------------------------------------
(Registrant)
Date: NovemberMay 14, 20002001 /s/ Elizabeth M. McCarthy
----------------------- ------------------------------------------------- ------------------------------------------------
Elizabeth M. McCarthy
Vice President and Chief Financial Officer
Date: NovemberMay 14, 20002001 /s/ Stephen F. Koziar, Jr.
----------------------- -------------------------------------------------- ------------------------------------------------
Stephen F. Koziar, Jr.
Group Vice President and Secretary
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