UNITED STATES | |||||||||||
FORM 10-Q | |||||||||||
Quarterly Report Under Section 13 or 15(d) | |||||||||||
For Quarter Ended | September 30, 2002 | ||||||||||
Commission File Number | 1-1405 | ||||||||||
Delmarva Power & Light Company | |||||||||||
Delaware and Virginia | 51-0084283 | ||||||||||
800 King Street, P.O. Box 231, Wilmington, Delaware | 19899 | ||||||||||
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Yes | [ X ] | No | [ ] | ||||||||
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: | |||||||||||
All 1,000 issued and outstanding shares of Delmarva Power & Light Company common stock, $2.25 per share par value, are owned by Conectiv. |
DELMARVA POWER & LIGHT COMPANY | ||
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Part I. Financial Information: | ||
Item 1. | Financial Statements | |
Consolidated Statements of Income for the three and nine months ended September 30, 2002, and September 30, 2001 |
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Consolidated Balance Sheets as of September 30, 2002, and December 31, 2001 |
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2002, and September 30, 2001 |
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Notes to Consolidated Financial Statements | 5-8 | |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 16 |
Item 4. | Controls and Procedures | 16 |
Part II. Other Information | ||
Item 6. | Exhibits and Reports on Form 8-K | 17 |
Signatures and Certifications | 18-23 | |
Part 1. FINANCIAL INFORMATION | |||||||
Three Months Ended | Nine Months Ended | ||||||
2002 | 2001 | 2002 | 2001 | ||||
OPERATING REVENUES | |||||||
Electric | $318,054 | $315,569 | $802,593 | $830,860 | |||
Gain on sale of electric plants | - | - | 11,600 | 221,224 | |||
Gas | 23,330 | 28,393 | 131,380 | 186,503 | |||
Other services | 2,663 | 6,161 | 8,508 | 17,392 | |||
344,047 | 350,123 | 954,081 | 1,255,979 | ||||
OPERATING EXPENSES | |||||||
Electric fuel and purchased energy and capacity | 214,184 | 228,024 | 525,049 | 503,815 | |||
Gas purchased | 17,087 | 22,660 | 95,637 | 148,952 | |||
Other services' cost of sales | 2,711 | 6,026 | 7,875 | 16,255 | |||
Operation and maintenance | 46,093 | 46,429 | 131,379 | 121,247 | |||
Merger-related costs | 9,731 | - | 9,731 | - | |||
Depreciation and amortization | 21,201 | 20,897 | 63,040 | 74,188 | |||
Taxes other than income taxes | 9,449 | 8,925 | 26,924 | 26,450 | |||
320,456 | 332,961 | 859,635 | 890,907 | ||||
OPERATING INCOME | 23,591 | 17,162 | 94,446 | 365,072 | |||
OTHER INCOME | 2,045 | 6,555 | 6,957 | 15,382 | |||
INTEREST EXPENSE | |||||||
Interest charges | 10,637 | 13,953 | 34,382 | 50,545 | |||
Allowance for borrowed funds used during | 64 | (206) | (523) | (520) | |||
10,701 | 13,747 | 33,859 | 50,025 | ||||
PREFERRED DIVIDEND REQUIREMENT ON | 1,422 | 1,421 | 4,266 | 4,265 | |||
INCOME BEFORE INCOME TAXES AND | 13,513 | 8,549 | 63,278 | 326,164 | |||
INCOME TAXES, EXCLUDING INCOME TAXES | 5,761 | 3,972 | 26,351 | 135,320 | |||
INCOME BEFORE EXTRAORDINARY ITEM | 7,752 | 4,577 | 36,927 | 190,844 | |||
EXTRAORDINARY ITEM (Net of Income Taxes of $1,885) | - | (2,790) | - | (2,790) | |||
NET INCOME | 7,752 | 1,787 | 36,927 | 188,054 | |||
DIVIDENDS ON PREFERRED STOCK | 409 | 852 | 1,227 | 3,335 | |||
EARNINGS APPLICABLE TO COMMON STOCK | $ 7,343 | $ 935 | $ 35,700 | $184,719 | |||
See accompanying Notes to Consolidated Financial Statements. |
DELMARVA POWER & LIGHT COMPANY | |||
ASSETS | September 30, | December 31, | |
Current Assets | |||
Cash and cash equivalents | $206,698 | $174,876 | |
Accounts receivable, net of allowances | |||
178,302 | 187,309 | ||
Inventories, at average cost | |||
Fuel (coal, oil and gas) | 17,195 | 16,353 | |
Materials and supplies | 14,848 | 13,636 | |
Prepayments | 9,640 | 6,885 | |
Deferred energy supply costs | - | 25,525 | |
426,683 | 424,584 | ||
Investments | 3,868 | 5,192 | |
Property, Plant and Equipment | |||
Electric transmission and distribution | 1,548,308 | 1,497,259 | |
Gas transmission and distribution | 294,943 | 284,983 | |
Other electric and gas facilities | 140,372 | 141,603 | |
Other property, plant and equipment | 5,256 | 5,231 | |
1,988,879 | 1,929,076 | ||
Less: Accumulated depreciation | 783,976 | 749,451 | |
Net plant in service | 1,204,903 | 1,179,625 | |
Construction work-in-progress | 70,957 | 76,718 | |
Intangibles | 22,695 | 24,897 | |
Goodwill, net | 48,459 | 48,459 | |
1,347,014 | 1,329,699 | ||
Deferred Charges and Other Assets | |||
Regulatory assets | |||
Deferred recoverable stranded costs | 63,571 | 65,702 | |
Other regulatory assets | 39,517 | 53,702 | |
Prepaid employee benefits costs | 193,899 | 192,181 | |
Unamortized debt expense | 10,333 | 10,084 | |
Other | 717 | 2,313 | |
308,037 | 323,982 | ||
Total Assets | $2,085,602 | $2,083,457 | |
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DELMARVA POWER & LIGHT COMPANY | |||
CAPITALIZATION AND LIABILITIES | September 30, | December 31, | |
Current Liabilities | |||
Long-term debt due within one year | $133,193 | $75,461 | |
Variable rate demand bonds | 104,830 | 104,830 | |
Accounts payable | 56,073 | 64,407 | |
Accounts payable to affiliated companies | 31,491 | 20,002 | |
Taxes accrued | 148,590 | 90,962 | |
Interest accrued | 13,018 | 11,093 | |
Other | 66,289 | 79,348 | |
553,484 | 446,103 | ||
Deferred Credits and Other Liabilities | |||
Deferred income taxes, net | 283,910 | 290,319 | |
Deferred investment tax credits | 13,795 | 14,504 | |
Above-market purchased energy contracts and | 58,065 | 68,711 | |
Other | 13,260 | 16,258 | |
369,030 | 389,792 | ||
Capitalization | |||
Common stock, $2.25 par value; | 2 | 2 | |
Additional paid-in-capital | 213,405 | 213,405 | |
Retained earnings | 367,454 | 364,871 | |
Total common stockholder's equity | 580,861 | 578,278 | |
Preferred stock not subject to mandatory redemption | 29,583 | 29,583 | |
Company obligated mandatorily redeemable preferred securities | 70,000 | 70,000 | |
Long-term debt | 482,644 | 569,701 | |
1,163,088 | 1,247,562 | ||
Commitments and Contingencies (Note 7) | |||
Total Capitalization and Liabilities | $2,085,602 | $2,083,457 | |
See accompanying Notes to Consolidated Financial Statements. |
DELMARVA POWER & LIGHT COMPANY | ||||
Nine Months Ended | ||||
2002 | 2001 | |||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Net income | $ 36,928 | $188,054 | ||
Adjustments to reconcile net income to | ||||
Gain on sales of electric generating plants | (11,600) | (221,224) | ||
Depreciation and amortization | 62,468 | 74,244 | ||
Deferred income taxes, net | (6,167) | (42,554) | ||
Investment tax credit adjustments, net | (709) | (5,569) | ||
Deferred energy supply costs | 35,418 | (12,984) | ||
Net change in: | ||||
Accounts receivable | 8,555 | 106,052 | ||
Inventories | (2,054) | (15,584) | ||
Accounts payable | (5,056) | (79,634) | ||
Taxes accrued | 57,628 | 164,519 | ||
Other current assets and liabilities (1) | 2,238 | (23,143) | ||
Other, net | (8,071) | (15,733) | ||
Net cash provided by operating activities | 169,578 | 116,444 | ||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Capital expenditures | (66,832) | (75,001) | ||
Proceeds from sales of electric generating plants | 10,000 | 528,215 | ||
Proceeds from other assets sold | 324 | 8,543 | ||
Other, net | 338 | 1,689 | ||
Net cash provided (used) by investing activities | (56,170) | 463,446 | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Common dividends paid | (47,489) | (66,294) | ||
Preferred dividends paid | (1,228) | (3,070) | ||
Long-term debt issued | 46,000 | 59,000 | ||
Long-term debt redeemed | (75,461) | (314,403) | ||
Preferred stock redeemed | - | (59,871) | ||
Costs of issuances and redemptions | (3,296) | (16,737) | ||
Other, net | (112) | (54) | ||
Net cash used by financing activities | (81,586) | (401,429) | ||
Net change in cash and cash equivalents | 31,822 | 178,461 | ||
Cash and cash equivalents at beginning of period | 174,876 | 94,604 | ||
Cash and cash equivalents at end of period | $206,698 | $273,065 | ||
(1) Other than debt and deferred income taxes classified as current. |
DELMARVA POWER & LIGHT COMPANY |
Note 1.Financial Statement Presentation |
Note 3.Supplemental Cash Flow Information |
Nine Months Ended | ||||
2002 2001 | ||||
(Dollars in Thousands) | ||||
Cash paid (received) for: | ||||
Interest, net of amounts capitalized | $27,627 | $53,229 | ||
Income taxes, net of refunds | $(22,201) | $25,574 | ||
Note 4.Income Taxes |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||
2002 | 2001 | 2002 | 2001 | |||||||
Amount | Rate | Amount | Rate | Amount | Rate | Amount | Rate | |||
(Dollars in Thousands) | ||||||||||
Statutory federal income tax expense |
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State income taxes, net of federal benefit |
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Depreciation | 500 | 4 | 770 | 9 | 1,500 | 2 | 2,309 | 1 | ||
Regulatory asset basis difference |
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Investment tax credit amortization |
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Other, net | 33 | - | (70) | (1) | (225) | - | 1,331 | - | ||
$5,761 | 43% | $3,972 | 46% | $26,351 | 42% | $135,320 | 41% | |||
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS | ||||||||||
Acquisition of Conectiv by Pepco Holdings, Inc. | ||||||||||
Gas Revenues |
Three Months Ended | Nine Months Ended | |||
2002 2001 | 2002 2001 | |||
(Dollars in millions) | ||||
Regulated gas revenues | $15.5 | $16.3 | $106.9 | $119.6 |
Non-regulated gas revenues | 7.8 | 12.1 | 24.5 | 66.9 |
Total gas revenues | $23.3 | $28.4 | $131.4 | $186.5 |
The table above shows the amounts of gas revenues from sources which were subject to price regulation (regulated) and which were not subject to price regulation (non-regulated). DPL's on-system sales and transportation of natural gas are generally subject to price regulation. Liquidity and Capital Resources |
September 30, | December 31, | |
Common stockholder's equity | 41.5% | 40.5% |
Preferred stock | 2.1% | 2.1% |
Preferred trust securities | 5.0% | 4.9% |
Long-term debt and variable rate demand bonds | 41.9% | 47.2% |
Current maturities of long-term debt | 9.5% | 5.3% |
DPL's ratio of earnings to fixed charges and ratio of earnings to fixed charges and preferred dividends are shown below. See Exhibit 12-A, Ratio of Earnings to Fixed Charges, and Exhibit 12-B, Ratio of Earnings to Fixed Charges and Preferred Dividends, for additional information. |
Exhibit 12-A | |||||||||||
Delmarva Power & Light Company | |||||||||||
9 Months | Year Ended December 31, | ||||||||||
2002 | 2001 | 2000 | 1999 | 1998 | 1997 | ||||||
Income before extraordinary item | $36,927 | $203,409 | $141,816 | $142,179 | $112,410 | $105,709 | |||||
Income taxes | 26,351 | 141,810 | 81,510 | 95,321 | 72,276 | 72,155 | |||||
Fixed charges: | |||||||||||
Interest on long-term debt | 35,268 | 63,765 | 77,178 | 77,790 | 81,132 | 78,350 | |||||
Other interest | 1,942 | 3,388 | 7,512 | 6,117 | 9,328 | 12,835 | |||||
Preferred dividend require- | 4,266 | 5,687 | 5,687 | 5,687 | 5,688 | 5,687 | |||||
Total fixed charges | 41,476 | 72,840 | 90,377 | 89,594 | 96,148 | 96,872 | |||||
Nonutility capitalized interest | - | - | - | - | - | (208) | |||||
Earnings before extraordinary | $104,754 | $418,059 | $313,703 | $327,094 | $280,834 | $274,528 | |||||
Ratio of earnings to fixed charges | 2.53 | 5.74 | 3.47 | 3.65 | 2.92 | 2.83 |
Exhibit 12-B | |||||||||||
Delmarva Power & Light Company | |||||||||||
9 Months | Year Ended December 31, | ||||||||||
2002 | 2001 | 2000 | 1999 | 1998 | 1997 | ||||||
Income before extraordinary item | $36,927 | $203,409 | $141,816 | $142,179 | $112,410 | $105,709 | |||||
Income taxes | 26,351 | 141,810 | 81,510 | 95,321 | 72,276 | 72,155 | |||||
Fixed charges: | |||||||||||
Interest on long-term debt | 35,268 | 63,765 | 77,178 | 77,790 | 81,132 | 78,350 | |||||
Other interest | 1,942 | 3,388 | 7,512 | 6,117 | 9,328 | 12,835 | |||||
Preferred dividend require- | 4,266 | 5,687 | 5,687 | 5,687 | 5,688 | 5,687 | |||||
Total fixed charges | 41,476 | 72,840 | 90,377 | 89,594 | 96,148 | 96,872 | |||||
Nonutility capitalized interest | - | - | - | - | - | (208) | |||||
Earnings before extraordinary | $104,754 | $418,059 | $313,703 | $327,094 | $280,834 | $274,528 | |||||
Fixed charges | $ 41,476 | $ 72,840 | $ 90,377 | $ 89,594 | $ 96,148 | $ 96,872 | |||||
Preferred dividend requirements | 2,104 | 6,354 | 7,787 | 7,417 | 7,150 | 7,556 | |||||
$ 43,580 | $ 79,194 | $ 98,164 | $ 97,011 | $103,298 | $104,428 | ||||||
Ratio of earnings to fixed charges | 2.40 | 5.28 | 3.20 | 3.37 | 2.72 | 2.63 |
Exhibit 99 | |
Certificate of Chief Executive Officer and Chief Financial Officer of Delmarva Power & Light Company (Pursuant to 18 U.S.C. Section 1350) | |
I, Thomas S. Shaw, Chief Executive Officer, and I, Andrew W. Williams, Senior Vice President and Chief Financial Officer, of Delmarva Power & Light Company, certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of Delmarva Power & Light Company for the quarter ended September 30, 2002, filed with the Securities and Exchange Commission on the date hereof (i) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained therein fairly presents, in all material respects, the financial condition and results of operations of Delmarva Power & Light Company. | |
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