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 March 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period from to
Commission Registrant; State of Incorporation; I. R. S. Employer
File Number Address; and Telephone Number Identification No.
1-3525 AMERICAN ELECTRIC POWER COMPANY, INC. 13-4922640
(A New York Corporation)
1 Riverside Plaza, Columbus, Ohio 43215
Telephone (614) 223-1000
0-18135 AEP GENERATING COMPANY 31-1033833
(An Ohio Corporation)
1 Riverside Plaza, Columbus, Ohio 43215
Telephone (614) 223-1000
1-3457 APPALACHIAN POWER COMPANY
(A Virginia Corporation) 54-0124790
40 Franklin Road, Roanoke, Virginia 24011
Telephone (703) 985-2300
1-2680 COLUMBUS SOUTHERN POWER COMPANY
(An Ohio Corporation) 31-4154203
215 North Front Street, Columbus, Ohio 43215
Telephone (614) 464-7700
1-3570 INDIANA MICHIGAN POWER COMPANY
(An Indiana Corporation) 35-0410455
One Summit Square
P.O. Box 60, Fort Wayne, Indiana 46801
Telephone (219) 425-2111
1-6858 KENTUCKY POWER COMPANY
(A Kentucky Corporation) 61-0247775
1701 Central Avenue, Ashland, Kentucky 41101
Telephone (606) 327-1111
1-6543 OHIO POWER COMPANY
(An Ohio Corporation) 31-4271000
301 Cleveland Avenue S.W., Canton, Ohio 44702
Telephone (216) 456-8173
AEP Generating Company, Columbus Southern Power Company and
Kentucky Power Company meet the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and are therefore
filing this Form 10-Q with the reduced disclosure format
specified in General Instruction H(2) to Form 10-Q.
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrants were required to
file
and (2) have been subject to such filing requirements for the past
90 days.
Yes X No
The number of shares outstanding of American Electric Power
Company, Inc.
Common Stock, par value $6.50, at April 30, 1994 was 184,535,000.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY
COMPANIES
FORM 10-Q
For The Quarter Ended March 31, 1994
INDEX
Part I. FINANCIAL INFORMATION
American Electric Power Company, Inc. and Subsidiary Companies:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Results of Operations and Financial Condition
AEP Generating Company:
Statements of Income and Statements of Retained
Earnings
Balance Sheets
Statements of Cash Flows
Notes to Financial Statements
Management's Narrative Analysis of Results of
Operations
Appalachian Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Columbus Southern Power Company and Subsidiaries:
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Retained Earnings
Notes to Consolidated Financial Statements
Management's Narrative Analysis of Results of
Operations
Indiana Michigan Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Kentucky Power Company:
Statements of Income and Statements of Retained
Earnings
Balance Sheets
Statements of Cash Flows
Notes to Financial Statements
Management's Narrative Analysis of Results of
Operations
Ohio Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Results of
Operations and Financial Condition
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY
COMPANIES
FORM 10-Q
For The Quarter Ended March 31, 1994
INDEX
Part II. OTHER INFORMATION
Item 1
Item 5
Item 6
SIGNATURES
This combined Form 10-Q is separately filed by American
Electric Power Company, Inc., AEP Generating Company, Appalachian
Power Company, Columbus Southern Power Company, Indiana Michigan
Power Company, Kentucky Power Company and Ohio Power Company.
Information contain herein relating to any individual registrant is
filed by such registrant on its own behalf. Each registrant makes
no representation as to information relating to the other
registrants.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . $1,488,185 $1,321,450
OPERATING EXPENSES:
Fuel and Purchased Power . . . . . . . . . . . . . . . . 501,569 412,358
Other Operation. . . . . . . . . . . . . . . . . . . . . 246,334 231,891
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 143,362 129,364
Depreciation and Amortization. . . . . . . . . . . . . . 138,831 130,547
Taxes Other Than Federal Income Taxes. . . . . . . . . . 128,220 121,093
Federal Income Taxes . . . . . . . . . . . . . . . . . . 72,421 55,229
TOTAL OPERATING EXPENSES. . . . . . . . . . . . . 1,230,737 1,080,482
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . 257,448 240,968
NONOPERATING INCOME:
Deferred Zimmer Plant Carrying Charges (net of tax). . . 2,419 9,291
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 4,821 6,669
TOTAL NONOPERATING INCOME . . . . . . . . . . . . 7,240 15,960
INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS . . 264,688 256,928
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . 98,571 108,781
PREFERRED STOCK DIVIDEND REQUIREMENTS OF SUBSIDIARIES. . . 13,163 15,089
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . $ 152,954 $ 133,058
AVERAGE NUMBER OF SHARES OUTSTANDING . . . . . . . . . . . 184,535 184,535
EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . $0.83 $0.72
CASH DIVIDENDS PAID PER SHARE. . . . . . . . . . . . . . . $0.60 $0.60
See Notes to Consolidated Financial Statements.
/TABLE
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $ 8,946,513 $ 9,079,130
Transmission . . . . . . . . . . . . . . . . . . . . 3,179,097 3,169,347
Distribution . . . . . . . . . . . . . . . . . . . . 3,759,806 3,743,047
General (including mining assets and nuclear fuel) . 1,456,824 1,406,159
Construction Work in Progress. . . . . . . . . . . . 353,613 314,489
Total Electric Utility Plant . . . . . . . . 17,695,853 17,712,172
Accumulated Depreciation and Amortization. . . . . . 6,560,210 6,612,131
NET ELECTRIC UTILITY PLANT . . . . . . . . . 11,135,643 11,100,041
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 728,936 724,373
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 74,893 42,561
Accounts Receivable (net). . . . . . . . . . . . . . 506,346 463,765
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 210,015 314,441
Materials and Supplies . . . . . . . . . . . . . . . 210,802 207,373
Accrued Utility Revenues . . . . . . . . . . . . . . 132,342 169,905
Prepayments and Other. . . . . . . . . . . . . . . . 139,316 98,958
TOTAL CURRENT ASSETS . . . . . . . . . . . . 1,273,714 1,297,003
REGULATORY ASSETS:
Amounts Due From Customers For
Future Federal Income Taxes. . . . . . . . . . . . 1,362,645 1,363,802
Other. . . . . . . . . . . . . . . . . . . . . . . . 960,264 856,182
TOTAL REGULATORY ASSETS. . . . . . . . . . . 2,322,909 2,219,984
TOTAL. . . . . . . . . . . . . . . . . . . $15,461,202 $15,341,401
See Notes to Consolidated Financial Statements.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock-Par Value $6.50; Shares Authorized -
300,000,000; Shares Issued - 193,534,992, of
which 8,999,992 were held in the treasury. . . . . $ 1,257,977 $ 1,257,977
Paid-in Capital. . . . . . . . . . . . . . . . . . . 1,624,612 1,625,068
Retained Earnings. . . . . . . . . . . . . . . . . . 1,311,401 1,269,283
Total Common Shareowners' Equity . . . . . . 4,193,990 4,152,328
Cumulative Preferred Stocks of Subsidiaries:
Not Subject to Mandatory Redemption. . . . . . . . 233,240 268,240
Subject to Mandatory Redemption. . . . . . . . . . 535,450 500,450
Long-term Debt . . . . . . . . . . . . . . . . . . . 4,858,765 4,964,060
TOTAL CAPITALIZATION . . . . . . . . . . . . 9,821,445 9,885,078
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 613,876 509,317
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . . . . 5,414 31,141
Short-term Debt. . . . . . . . . . . . . . . . . . . 289,863 278,976
Accounts Payable . . . . . . . . . . . . . . . . . . 222,085 259,145
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 418,183 409,198
Interest Accrued . . . . . . . . . . . . . . . . . . 118,576 91,161
Obligations Under Capital Leases . . . . . . . . . . 78,143 62,215
Other. . . . . . . . . . . . . . . . . . . . . . . . 397,230 338,988
TOTAL CURRENT LIABILITIES. . . . . . . . . . 1,529,494 1,470,824
DEFERRED FEDERAL INCOME TAXES. . . . . . . . . . . . . 2,467,410 2,468,015
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 477,183 487,501
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2. . . . . . . . . . . . . . . . 426,375 430,091
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 125,419 90,575
CONTINGENCIES (Note 6)
TOTAL. . . . . . . . . . . . . . . . . . . $15,461,202 $15,341,401
See Notes to Consolidated Financial Statements.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 152,954 $ 133,058
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . 139,892 139,337
Deferred Federal Income Taxes. . . . . . . . . . . . . . 552 (24,392)
Deferred Investment Tax Credits. . . . . . . . . . . . . (10,273) (6,306)
Amortization of Operating Expenses and Carrying Charges
(net of deferrals) . . . . . . . . . . . . . . . . . . (5,602) (4,184)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (42,581) (9,785)
Fuel, Materials and Supplies . . . . . . . . . . . . . . 100,997 15,415
Accrued Utility Revenues . . . . . . . . . . . . . . . . 37,563 49,531
Prepayments and Other Current Assets . . . . . . . . . . (40,358) (42,361)
Accounts Payable . . . . . . . . . . . . . . . . . . . . (37,060) (60,236)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 8,985 93,169
Interest Accrued . . . . . . . . . . . . . . . . . . . . 27,415 20,344
Rent Accrued - Rockport Plant Unit 2 . . . . . . . . . . 36,928 36,928
Other (net). . . . . . . . . . . . . . . . . . . . . . . . (18,706) 46,767
Net Cash Flows From Operating Activities . . . . . . 350,706 387,285
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (110,948) (104,650)
Proceeds from Sale of Property and Other . . . . . . . . . 36,728 (1,252)
Net Cash Flows Used For Investing Activities . . . . (74,220) (105,902)
FINANCING ACTIVITIES:
Issuance of Cumulative Preferred Stock . . . . . . . . . . 34,618 29,541
Issuance of Long-term Debt . . . . . . . . . . . . . . . . 292,847 104,317
Change in Short-term Debt (net). . . . . . . . . . . . . . 10,887 (50,279)
Retirement of Cumulative Preferred Stock . . . . . . . . . (35,798) (40,896)
Retirement of Long-term Debt . . . . . . . . . . . . . . . (435,985) (44,666)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (110,723) (110,723)
Net Cash Flows Used For Financing Activities . . . . (244,154) (112,706)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 32,332 168,677
Cash and Cash Equivalents at Beginning of Period . . . . . . 42,561 128,896
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 74,893 $ 297,573
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $68,174,000 and
$86,079,000 and for income taxes was $24,271,000 and $(44,221,000) in 1994 and
1993, respectively. Noncash acquisitions under capital leases were $73,848,000
and $8,244,000 in 1994 and 1993, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . $1,269,283 $1,358,800
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . 152,954 133,058
DEDUCTIONS:
Cash Dividends Declared. . . . . . . . . . . . . . . . . . . 110,723 110,723
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 39
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $1,311,401 $1,381,096
See Notes to Consolidated Financial Statements.
/TABLE
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements should
be read in conjunction with the 1993 Annual Report as incorporated in and
filed with the Form 10-K. Certain prior-period amounts have been
reclassified to conform to current-period presentation.
2. RECOVERY OF FUEL COSTS
The municipal wholesale customers of Ohio Power Company (OPCo) filed
a complaint in November 1992 with the Securities and Exchange Commission
(SEC) requesting an investigation of the July 1992 Martinka mining
operations sale and an investigation into the pricing of affiliated coal
purchases back to 1986. If actions of the SEC result in OPCo being
unable to recover a significant portion of the cost of affiliated coal,
it would have a material adverse impact on results of operations and
financial condition.
3. FINANCING AND RELATED ACTIVITIES
Significant financing transactions by subsidiaries during the
quarter ended March 31, 1994 included the following:
Face Amount
(in thousands)
Issuances: First Mortgage Bonds
6.55% Series due 2004. . . . . . . . . . $ 50,000
6.55% Series due 2004. . . . . . . . . . 25,000
6.75% Series due 2004. . . . . . . . . . 50,000
7.45% Series due 2024. . . . . . . . . . 50,000
7.50% Series due 2024. . . . . . . . . . 25,000
7.60% Series due 2024. . . . . . . . . . 50,000
Notes Payable
6.20% due 2001 (three series). . . . . . 30,000
3.725% Initial Rate (through July 1994)
due 1999 . . . . . . . . . . . . . . . 15,000
Cumulative Preferred Stock
6.30% Series . . . . . . . . . . . . . . 35,000
Retirements: First Mortgage Bonds
8-5/8% Series due 1996 . . . . . . . . . 100,000
9% Series due 1999 . . . . . . . . . . . 19,700
8-3/4% Series due 2017 (two series). . . 156,686
9% Series due 2017 . . . . . . . . . . . 100,000
Notes Payable
8% due 1994 (two series) . . . . . . . . 25,000
8.01% Series due 1994. . . . . . . . . . 25,000
Cumulative Preferred Stock
7.76% Series . . . . . . . . . . . . . . 35,000
4. BREED PLANT RETIREMENT
Indiana Michigan Power Company's 325-megawatt Breed Plant was
removed from service in January 1994 and was closed on March 31, 1994.
The retirement of Breed Plant, with an original cost of $153 million, did
not have a material impact on results of operations or financial
condition. Breed Plant had been operated on a restricted basis since
1992 when plans to close the plant were announced.
5. VALUATION OF SECURITIES
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt
and Equity Securities, (SFAS 115) which requires fair value accounting
for investments in equity securities with a readily determinable market
value and all investments in debt securities except those that the
reporting enterprise has the positive intent and ability to hold to
maturity. Debt securities not classified as held-to-maturity, shall be
classified as trading or available-for-sale. Investments held in trust
for decommissioning the nuclear facilities and for disposal of spent
nuclear fuel were classified as available-for-sale under SFAS 115. SFAS
115 requires that unrealized gains and losses on investments classified
as available-for-sale should be a separate component of shareholder's
equity. However, due to the rate-making process, SFAS 115 adjustments
for unrealized gains and losses to the carrying value of investments held
in the trusts will result in corresponding adjustments to the nuclear
decommissioning liability and the regulatory asset for future recovery of
spent nuclear fuel disposal costs.
The cumulative effect of adopting SFAS 115 on January 1, 1994
resulted in an increase in the decommissioning and spent nuclear fuel
trusts of $20.4 million comprised of an unrealized holding gain of $21.4
million and an unrealized holding loss of $1 million, with no effect on
net income and/or shareholder's equity. As required by SFAS 115, prior
year amounts were not restated.
The trust investments reported in other property and investments had
a fair value of $321 million at January 1, 1994 and consist primarily of
long-term tax-exempt municipal bonds. At January 1, 1994, the maturities
of investments in debt securities range from 1994 to 2024.
6. CONTINGENCIES
The Company continues to be involved in certain matters discussed in
the 1993 Annual Report.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FIRST QUARTER 1994 vs. FIRST QUARTER 1993
RESULTS OF OPERATIONS
Net income increased 15% or $19.9 million primarily as a result of an 8%
increase in energy sales due to severe winter weather and continuing
improvement in sales to industrial customers, rate increases in several
jurisdictions and a decline in interest charges resulting from the refinancing
of debt at lower interest rates. The favorable earnings impact of the cold
winter was partly offset by storm damage expenses.
The AEP System set a new winter peak demand for energy as a result of
below zero temperatures in the Company's service territory and a portion of
the eastern United States served by interconnected unaffiliated utilities
resulting in a 13% increase in operating revenues. Retail revenues rose 9%
due to increased weather related energy sales to residential and commercial
customers of 9% and 5%, respectively, rate increases in the Indiana, Michigan,
Ohio and Virginia jurisdictions and a 2% rise in industrial energy sales as a
result of customer growth and increased usage reflecting improved economic
conditions. Wholesale energy sales increased 23% also resulting from the
severe winter and forced outages at unaffiliated generating units.
Other income statement lines which changed significantly were:
Increase (Decrease)
(in millions) %
Fuel and Purchased Power Expense. . . . . . . . . . $ 89.2 22
Other Operation Expense . . . . . . . . . . . . . . 14.4 6
Maintenance Expense . . . . . . . . . . . . . . . . 14.0 11
Depreciation and Amortization Expense . . . . . . . 8.3 6
Taxes Other Than Federal Income Taxes . . . . . . . 7.1 6
Federal Income Taxes. . . . . . . . . . . . . . . . 17.2 31
Deferred Zimmer Plant Carrying Charges (net of tax) (6.9) (74)
Fuel and purchased power expense rose significantly due to increased
generation and increased energy purchases from unaffiliated utilities for
immediate pass-through sales to other unaffiliated utilities as a result of
the weather related increase in energy demand. Also contributing to the rise
in fuel expense was an increase in the average cost of fuel and increased
utilization of coal-fired generation due to a reduction of low-cost nuclear
generation resulting from a scheduled refueling outage at one of two nuclear
units and an unscheduled maintenance outage at the other unit in 1994. The
unscheduled maintenance outage ended in April 1994 and the unit returned to
service. The refueling outage is scheduled to be completed in May.
Other operation expense increased mainly due to recording provisions for
loss on disposal of inventories and employee severance benefits related to
closing of the Breed Plant, and increased nuclear decommissioning expense
commensurate with increased rate recovery. Partly offsetting these increases
was a reduction in the amortization of the pressurized fluidized bed
combustion demonstration plant cost concurrent with a reduction in rate
recovery.
A January 1994 snow storm, two major ice storms in February and March
1994 and several other smaller storms significantly increased maintenance
expense in 1994. Storm damage expenditures from these storms in 1994 were
$41.6 million of which $19.9 million of incremental expenses were deferred as
a regulatory asset consistent with a hearing examiner's findings in a pending
retail rate case with regard to unusual storm damage expenditures incurred in
the summer of 1993.
Depreciation and amortization expense rose primarily due to the
amortization of Zimmer Plant phase-in plan costs which increased sharply due
to a discontinuance of the phase-in plan deferrals in February 1994 and the
amortization of the previously deferred balances in February and March of 1994
commensurate with rate relief.
Taxes other than federal income taxes increased primarily due to the West
Virginia business and occupation tax which is based on generation at West
Virginia plants that significantly increased reflecting the nuclear units'
outages and weather related increase in energy demand. The increase in
federal income tax expense attributable to operations was primarily due to an
increase in pre-tax operating income.
Accrual of deferred Zimmer carrying charges declined from the prior year
since the 1994 carrying charges are on the unamortized phase-in deferral
balance while the 1993 deferrals were on the larger Zimmer investment not yet
phased into rates.
FINANCIAL CONDITION
Total plant and property additions including capital leases for the
current period were $186 million.
During the quarter subsidiaries issued $295 million principal amount of
long-term debt at interest rates ranging from 3.725% to 7.60% and $35 million
of $100 par value 6.30% cumulative preferred stock. Subsidiaries retired $427
million principal amount of long-term debt with interest rates ranging from 8%
to 9-7/8%; redeemed $35 million of $100 par value 7.76% cumulative preferred
stock; and increased short-term debt by $11 million since the beginning of the
year.
BREED PLANT RETIREMENT
In the first quarter of 1994 Indiana Michigan Power Company retired its
325-megawatt Breed Plant, which began commercial operation in 1960, without
any material effect on results of operation or financial condition. Breed
Plant, with an original cost of $153 million, had been operated on a
restricted basis since 1992 when plans to close the plant were announced.
RECOVERY OF FUEL COSTS
The municipal wholesale customers of Ohio Power Company (OPCo) filed a
complaint in November 1992 with the Securities and Exchange Commission (SEC)
requesting an investigation of the July 1992 Martinka mining operations sale
and an investigation into the pricing of affiliated coal purchases back to
1986. If actions of the SEC result in OPCo being unable to recover a
significant portion of the cost of affiliated coal, it would have a material
adverse impact on results of operations and financial condition.
AEP GENERATING COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . . . $59,901 $58,764
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,030 23,175
Rent - Rockport Plant Unit 2 . . . . . . . . . . . . . . . . 16,578 16,614
Other Operation. . . . . . . . . . . . . . . . . . . . . . . 2,603 2,660
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . 2,785 3,338
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 5,408 5,456
Taxes Other Than Federal Income Taxes. . . . . . . . . . . . 1,089 1,612
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . 1,309 1,375
TOTAL OPERATING EXPENSES . . . . . . . . . . . . . . 55,802 54,230
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . 4,099 4,534
NONOPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 817 1,399
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . . . . . 4,916 5,933
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . . . 2,425 2,677
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,491 $ 3,256
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . $1,339 $23,173
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . 2,491 3,256
CASH DIVIDENDS DECLARED. . . . . . . . . . . . . . . . . . . . 2,561 7,197
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $1,269 $19,232
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Financial Statements.
/TABLE
AEP GENERATING COMPANY
BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production. . . . . . . . . . . . . . . . . . . . . . . . $628,608 $627,502
General . . . . . . . . . . . . . . . . . . . . . . . . . 1,772 1,757
Construction Work in Progress . . . . . . . . . . . . . . 1,656 1,773
Total Electric Utility Plant. . . . . . . . . . . 632,036 631,032
Accumulated Depreciation. . . . . . . . . . . . . . . . . 186,944 181,587
NET ELECTRIC UTILITY PLANT. . . . . . . . . . . . 445,092 449,445
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . 1,833 3
Accounts Receivable . . . . . . . . . . . . . . . . . . . 19,590 18,729
Fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . 12,681 12,867
Materials and Supplies. . . . . . . . . . . . . . . . . . 4,217 4,121
Prepayments . . . . . . . . . . . . . . . . . . . . . . . 682 731
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . 39,003 36,451
DEFERRED FEDERAL INCOME TAX ASSETS. . . . . . . . . . . . . 9,108 10,975
REGULATORY ASSETS . . . . . . . . . . . . . . . . . . . . . 32,698 30,536
TOTAL . . . . . . . . . . . . . . . . . . . . . $525,901 $527,407
See Notes to Financial Statements.
AEP GENERATING COMPANY
BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock - Par Value $1,000:
Authorized and Outstanding - 1,000 Shares . . . . . . . $ 1,000 $ 1,000
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . 53,435 54,435
Retained Earnings . . . . . . . . . . . . . . . . . . . . 1,269 1,339
Total Common Shareowner's Equity. . . . . . . . . 55,704 56,774
Long-term Debt. . . . . . . . . . . . . . . . . . . . . . 108,226 108,188
TOTAL CAPITALIZATION. . . . . . . . . . . . . . . 163,930 164,962
OTHER NONCURRENT LIABILITIES. . . . . . . . . . . . . . . . 1,693 1,736
CURRENT LIABILITIES:
Short-term Debt - Notes Payable . . . . . . . . . . . . . - 15,250
Accounts Payable. . . . . . . . . . . . . . . . . . . . . 5,196 8,809
Taxes Accrued . . . . . . . . . . . . . . . . . . . . . . 7,110 3,697
Interest Accrued. . . . . . . . . . . . . . . . . . . . . 745 2,963
Rent Accrued - Rockport Plant Unit 2. . . . . . . . . . . 24,052 5,588
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 2,368 1,063
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . 39,471 37,370
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2 . . . . . . . . . . . . . . . . . . 216,756 218,646
DEFERRED INVESTMENT TAX CREDITS . . . . . . . . . . . . . . 83,055 83,901
DEFERRED AMOUNTS DUE TO CUSTOMERS FOR
FEDERAL INCOME TAXES. . . . . . . . . . . . . . . . . . . 20,406 20,792
DEFERRED CREDITS. . . . . . . . . . . . . . . . . . . . . . 590 -
CONTINGENCIES (Note 2)
TOTAL . . . . . . . . . . . . . . . . . . . . . $525,901 $527,407
See Notes to Financial Statements.
AEP GENERATING COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 2,491 $ 3,256
Adjustments for Noncash Items:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 5,408 5,456
Deferred Federal Income Taxes. . . . . . . . . . . . . . 1,481 462
Deferred Investment Tax Credits. . . . . . . . . . . . . (846) (847)
Amortization of Deferred Gain on Sale and Leaseback -
Rockport Plant Unit 2. . . . . . . . . . . . . . . . . (1,890) (1,890)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable. . . . . . . . . . . . . . . . . . . (861) 1,392
Fuel, Materials and Supplies . . . . . . . . . . . . . . 90 5,170
Accounts Payable . . . . . . . . . . . . . . . . . . . . (3,613) (369)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 3,413 15,013
Interest Accrued . . . . . . . . . . . . . . . . . . . . (2,218) (2,251)
Rent Accrued - Rockport Plant Unit 2 . . . . . . . . . . 18,464 18,464
Other (net). . . . . . . . . . . . . . . . . . . . . . . . (160) (1,829)
Net Cash Flows From Operating Activities . . . . . . 21,759 42,027
INVESTING ACTIVITIES - Construction Expenditures . . . . . . (1,118) (621)
FINANCING ACTIVITIES:
Capital Contributions Returned to Parent Company . . . . . (1,000) -
Change in Short-term Debt (net). . . . . . . . . . . . . . (15,250) -
Dividends Paid . . . . . . . . . . . . . . . . . . . . . . (2,561) (7,197)
Net Cash Flows Used For Financing Activities . . . . (18,811) (7,197)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 1,830 34,209
Cash and Cash Equivalents at Beginning of Period . . . . . . 3 27,974
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 1,833 $62,183
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $4,560,000 and
$4,840,000 and for income taxes was $(528,000) and $(10,138,000) in 1994 and 1993,
respectively.
See Notes to Financial Statements.
/TABLE
AEP GENERATING COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
1. GENERAL
The accompanying unaudited financial statements should be read in
conjunction with the 1993 Annual Report as incorporated in and filed with
the Form 10-K.
2. CONTINGENCIES
The Company continues to be involved in certain matters discussed in
its 1993 Annual Report.
AEP GENERATING COMPANY
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
FIRST QUARTER 1994 vs. FIRST QUARTER 1993
Operating revenues are derived from the sale of Rockport Plant energy and
capacity to two affiliated companies and one unaffiliated utility pursuant to
Federal Energy Regulatory Commission (FERC) approved long-term unit power
agreements. The unit power agreements provide for recovery of costs including
a FERC approved rate of return on common equity and a return on other capital
net of temporary cash investments. Net income declined $0.8 million or 23.5%
reflecting the reduction in common equity on which a return is earned, offset
in part by an increase in the return on other capital due to lower temporary
cash investments during 1994. The reduction of common equity resulted from
the payment of dividends in excess of net income as well as a return of
capital to the parent company.
Operating revenues increased $1.1 million reflecting the recovery of
increased operating expenses. However, the increase in revenues was less than
the increase in expenses since the common equity return component of revenues
decreased.
Other income statement items which changed significantly were as follows:
Increase (Decrease)
(in millions) %
Fuel Expense . . . . . . . . . . . . . . . . . . . . . . $ 2.9 12.3
Maintenance Expense. . . . . . . . . . . . . . . . . . . (0.6) (16.6)
Taxes Other Than Federal Income Taxes. . . . . . . . . . (0.5) (32.4)
Nonoperating Income. . . . . . . . . . . . . . . . . . . (0.6) (41.6)
Interest Charges . . . . . . . . . . . . . . . . . . . . (0.3) (9.4)
Fuel expense increased due to the effect of a coal transportation cost
refund received in the first quarter of 1993. Higher maintenance expense in
1993 due to planned boiler inspections and repairs at both Rockport Plant
units resulted in the decrease in maintenance expense as only one unit is
scheduled to be out of service for maintenance in 1994. Taxes other than
federal income taxes decreased as a result of prior period accrual adjustments
for Indiana property taxes.
The reduction in nonoperating income resulted from interest income
recorded in March 1993 on prior years' income tax refunds from the Internal
Revenue Service. The redemption of a $55 million installment purchase
contract in December 1993 accounted for the decline in interest charges.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . $438,095 $393,036
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . 111,538 84,009
Purchased Power. . . . . . . . . . . . . . . . . . . . . 94,863 91,754
Other Operation. . . . . . . . . . . . . . . . . . . . . 48,592 45,200
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 40,577 28,236
Depreciation and Amortization. . . . . . . . . . . . . . 31,512 30,507
Taxes Other Than Federal Income Taxes. . . . . . . . . . 33,049 27,239
Federal Income Taxes . . . . . . . . . . . . . . . . . . 18,022 18,344
TOTAL OPERATING EXPENSES . . . . . . . . . . . . 378,153 325,289
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . 59,942 67,747
NONOPERATING LOSS. . . . . . . . . . . . . . . . . . . . . (2,690) (1,088)
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . . . 57,252 66,659
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . 24,720 25,105
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . 32,532 41,554
PREFERRED STOCK DIVIDEND REQUIREMENTS. . . . . . . . . . . 3,592 4,239
EARNINGS APPLICABLE TO COMMON STOCK. . . . . . . . . . . . $ 28,940 $ 37,315
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . $227,816 $229,920
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . 32,532 41,554
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . . . . . . . . . . 27,035 26,729
Cumulative Preferred Stock . . . . . . . . . . . . . . 3,407 4,122
Capital Stock Expense. . . . . . . . . . . . . . . . . . 185 116
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . $229,721 $240,507
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
/TABLE
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $1,784,957 $1,781,005
Transmission . . . . . . . . . . . . . . . . . . . . 991,058 987,147
Distribution . . . . . . . . . . . . . . . . . . . . 1,233,748 1,225,436
General. . . . . . . . . . . . . . . . . . . . . . . 141,999 140,942
Construction Work in Progress. . . . . . . . . . . . 68,890 59,170
Total Electric Utility Plant . . . . . . . . 4,220,652 4,193,700
Accumulated Depreciation and Amortization. . . . . . 1,570,926 1,550,855
NET ELECTRIC UTILITY PLANT . . . . . . . . . 2,649,726 2,642,845
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 50,530 51,551
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 6,514 4,626
Accounts Receivable (net). . . . . . . . . . . . . . 140,431 130,862
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 32,550 46,881
Materials and Supplies . . . . . . . . . . . . . . . 45,438 43,351
Accrued Utility Revenues . . . . . . . . . . . . . . 43,388 58,294
Prepayments. . . . . . . . . . . . . . . . . . . . . 15,703 7,430
TOTAL CURRENT ASSETS . . . . . . . . . . . . 284,024 291,444
REGULATORY ASSETS:
Amounts Due From Customers for Future
Federal Income Taxes . . . . . . . . . . . . . . . 317,759 320,160
Other. . . . . . . . . . . . . . . . . . . . . . . . 148,303 122,367
TOTAL REGULATORY ASSETS. . . . . . . . . . . 466,062 442,527
TOTAL. . . . . . . . . . . . . . . . . . . $3,450,342 $3,428,367
See Notes to Consolidated Financial Statements.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 30,000,000 Shares
Outstanding - 13,499,500 Shares. . . . . . . . . . $ 260,458 $ 260,458
Paid-in Capital. . . . . . . . . . . . . . . . . . . 494,834 494,834
Retained Earnings. . . . . . . . . . . . . . . . . . 229,721 227,816
Total Common Shareowner's Equity . . . . . . 985,013 983,108
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . . . . 55,000 55,000
Subject to Mandatory Redemption. . . . . . . . . . 160,450 160,450
Long-term Debt . . . . . . . . . . . . . . . . . . . 1,157,930 1,215,124
TOTAL CAPITALIZATION . . . . . . . . . . . . 2,358,393 2,413,682
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 72,767 55,865
CURRENT LIABILITIES:
Short-term Debt. . . . . . . . . . . . . . . . . . . 59,125 39,500
Accounts Payable . . . . . . . . . . . . . . . . . . 83,709 68,158
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 62,924 52,128
Customer Deposits. . . . . . . . . . . . . . . . . . 13,600 13,670
Interest Accrued . . . . . . . . . . . . . . . . . . 32,433 18,212
Other. . . . . . . . . . . . . . . . . . . . . . . . 70,272 71,259
TOTAL CURRENT LIABILITIES. . . . . . . . . . 322,063 262,927
DEFERRED FEDERAL INCOME TAXES. . . . . . . . . . . . . 578,879 578,948
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 81,854 82,987
REGULATORY LIABILITIES AND DEFERRED CREDITS. . . . . . 36,386 33,958
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . $3,450,342 $3,428,367
See Notes to Consolidated Financial Statements.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 32,532 $ 41,554
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . 32,147 31,142
Deferred Federal Income Taxes. . . . . . . . . . . . . . 2,322 (4,952)
Deferred Investment Tax Credits. . . . . . . . . . . . . (1,224) (1,231)
Deferred Power Supply Costs (net). . . . . . . . . . . . 2,005 13,256
Provision for Rate Refunds . . . . . . . . . . . . . . . 7,403 874
Storm Damage Expense Deferrals . . . . . . . . . . . . . (14,596) -
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (9,569) (12,937)
Fuel, Materials and Supplies . . . . . . . . . . . . . . 12,244 (7,124)
Accrued Utility Revenues . . . . . . . . . . . . . . . . 14,906 10,122
Prepayments. . . . . . . . . . . . . . . . . . . . . . . (8,273) (9,112)
Accounts Payable . . . . . . . . . . . . . . . . . . . . 15,551 (9,102)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 10,796 32,129
Interest Accrued . . . . . . . . . . . . . . . . . . . . 14,221 9,313
Other (net). . . . . . . . . . . . . . . . . . . . . . . . (3,637) 4,592
Net Cash Flows From Operating Activities . . . . . . 106,828 98,524
INVESTING ACTIVITIES - Construction Expenditures . . . . . . (35,751) (34,597)
FINANCING ACTIVITIES:
Change in Short-term Debt (net). . . . . . . . . . . . . . 19,625 (31,225)
Retirement of Long-term Debt . . . . . . . . . . . . . . . (58,219) (2,317)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (27,035) (26,729)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (3,560) (4,122)
Net Cash Flows Used For Financing Activities . . . . (69,189) (64,393)
Net Increase (Decrease) in Cash and Cash Equivalents . . . . 1,888 (466)
Cash and Cash Equivalents at Beginning of Period . . . . . . 4,626 9,501
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 6,514 $ 9,035
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $9,919,000 and
$15,330,000 and for income taxes was $5,882,000 and $(7,714,000) in 1994 and 1993,
respectively. Noncash acquisitions under capital leases were $1,994,000 and
$1,049,000 in 1994 and 1993, respectively.
See Notes to Consolidated Financial Statements.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements should be
read in conjunction with the 1993 Annual Report as incorporated in and
filed with the Form 10-K. Certain prior-period amounts have been
reclassified to conform to current-period presentation.
2. FINANCING ACTIVITIES:
In March 1994, the Company redeemed the remaining $56.7 million
outstanding balance of 8-3/4% Series First Mortgage Bonds due in 2017.
3. CONTINGENCIES
The Company continues to be involved in certain matters discussed in
its 1993 Annual Report.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FIRST QUARTER 1994 vs. FIRST QUARTER 1993
RESULTS OF OPERATIONS
Although operating revenues increased by $45.1 million reflecting a
significant increase in the demand for energy due to severe winter weather,
net income decreased $9 million or 22% primarily due to unusual storm damage
expenditures.
Retail revenues increased 6% as a result of a 5% rise in retail energy
sales, attributable to the cold weather which significantly increased energy
requirements for heating, and a May 1993 Virginia retail rate increase being
collected subject to refund. The Company set a new all-time internal peak
demand as below zero temperatures extended across its service territory.
Weather sensitive residential and commercial customers increased their energy
consumption by 9% and 5%, respectively.
A 40% increase in wholesale revenues resulted from a corresponding 40%
increase in wholesale energy sales due to increased sales to unaffiliated
utilities by the AEP System Power Pool (Power Pool) resulting from the severe
winter and forced outages at unaffiliated generating units. Wholesale
revenues also increased as the Company supplied additional amounts of energy
to the Power Pool due to refueling and maintenance outages at an affiliate's
nuclear plant.
Other income statement lines which changed significantly were as follows:
Increase (Decrease)
(in millions) %
Fuel Expense. . . . . . . . . . . . . . . . . . . . . $27.5 33
Other Operation Expense . . . . . . . . . . . . . . . 3.4 8
Maintenance Expense . . . . . . . . . . . . . . . . . 12.3 44
Taxes Other Than Federal Income Taxes . . . . . . . . 5.8 21
Fuel expense increased primarily due to a 59% increase in coal-fired
generation reflecting the increased demand for retail and wholesale energy,
less maintenance outages as compared to the same period last year and the need
to supply additional power to the Power Pool due to outages of affiliated
nuclear generating units.
The Power Pool allocates capacity costs to its members based on their
relative peak demands in the prior twelve months. As a result of the new all-
time peak in January 1994, the Company will incur a greater portion of the
Power Pool's capacity charges which are recorded as purchased power expense.
Until the Company is able to recover from its ratepayers the increase in
capacity charges, estimated to be $36 million annually, its results of
operations will be adversely affected. The Company's ability to timely
recover these additional Power Pool capacity charges are affected by the time
required to file and receive a base rate increase in Virginia and the recently
agreed to three-year rate increase moratorium in West Virginia.
The increase in other operation expense was primarily due to increased
administrative and general expenses and employee benefit expenses.
A January 1994 snow storm, primarily in the West Virginia service
territory, two major ice storms in February and March 1994, primarily in the
Virginia service territory, and several other smaller storms significantly
increased maintenance expenses in 1994. Storm damage expenditures from these
storms in 1994 were $38.5 million of which $19.9 million of Virginia
jurisdictional incremental expenses were deferred as a regulatory asset
consistent with a finding by a Virginia State Corporation Commission Hearing
Examiner in the Company's pending Virginia retail rate case with regard to
unusual storm damage expenditures incurred in the summer of 1993.
Taxes other than federal income taxes increased primarily due to the West
Virginia business and occupation tax which is on generation at West Virginia
plants which increased significantly.
FINANCIAL CONDITION
For the first three months of 1994 total plant and property additions
including capital leases were $38 million, a 6% increase.
In March 1994, the Company redeemed the remaining $56.7 million
outstanding balance of 8-3/4% Series First Mortgage Bonds due in 2017.
Outstanding short-term debt increased $19.6 million from year-end levels.
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . $255,829 $219,875
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . 53,632 50,130
Purchased Power. . . . . . . . . . . . . . . . . . . . . 39,396 33,590
Other Operation. . . . . . . . . . . . . . . . . . . . . 42,544 40,717
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 15,828 16,507
Depreciation . . . . . . . . . . . . . . . . . . . . . . 20,590 21,360
Amortization (Deferral) of Zimmer Plant Phase-in Costs . 3,385 (3,592)
Taxes Other Than Federal Income Taxes. . . . . . . . . . 25,296 25,087
Federal Income Taxes . . . . . . . . . . . . . . . . . . 11,690 6,113
TOTAL OPERATING EXPENSES. . . . . . . . . . . . . 212,361 189,912
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . 43,468 29,963
NONOPERATING INCOME:
Deferred Zimmer Plant Carrying Charges (net of tax). . . 2,419 9,291
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 681 1,074
TOTAL NONOPERATING INCOME . . . . . . . . . . . . 3,100 10,365
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . . . 46,568 40,328
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . 21,916 22,098
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . 24,652 18,230
PREFERRED STOCK DIVIDEND REQUIREMENTS. . . . . . . . . . . 2,766 2,766
EARNINGS APPLICABLE TO COMMON STOCK. . . . . . . . . . . . $ 21,886 $ 15,464
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $1,449,981 $1,443,506
Transmission . . . . . . . . . . . . . . . . . . . . 296,152 295,539
Distribution . . . . . . . . . . . . . . . . . . . . 766,213 755,342
General. . . . . . . . . . . . . . . . . . . . . . . 98,174 97,874
Construction Work in Progress. . . . . . . . . . . . 49,529 52,794
Total Electric Utility Plant . . . . . . . . 2,660,049 2,645,055
Accumulated Depreciation . . . . . . . . . . . . . . 830,102 811,817
NET ELECTRIC UTILITY PLANT . . . . . . . . . 1,829,947 1,833,238
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 32,661 34,558
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 8,396 6,633
Accounts Receivable. . . . . . . . . . . . . . . . . 55,251 52,088
Allowance for Uncollectible Accounts . . . . . . . . (1,634) (991)
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 19,122 32,257
Materials and Supplies . . . . . . . . . . . . . . . 27,647 25,772
Accrued Utility Revenues . . . . . . . . . . . . . . 23,655 28,889
Prepayments. . . . . . . . . . . . . . . . . . . . . 35,999 28,372
Other. . . . . . . . . . . . . . . . . . . . . . . . 1,345 1,863
TOTAL CURRENT ASSETS . . . . . . . . . . . . 169,781 174,883
REGULATORY ASSETS:
Amounts Due From Customers For Future
Federal Income Taxes . . . . . . . . . . . . . . . 288,948 290,644
Other. . . . . . . . . . . . . . . . . . . . . . . . 254,418 249,348
TOTAL REGULATORY ASSETS. . . . . . . . . . . 543,366 539,992
TOTAL. . . . . . . . . . . . . . . . . . . $2,575,755 $2,582,671
See Notes to Consolidated Financial Statements.
/TABLE
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 24,000,000 Shares
Outstanding - 16,410,426 Shares. . . . . . . . . . $ 41,026 $ 41,026
Paid-in Capital. . . . . . . . . . . . . . . . . . . 566,046 566,046
Retained Earnings. . . . . . . . . . . . . . . . . . 22,942 18,288
Total Common Shareowner's Equity . . . . . . 630,014 625,360
Cumulative Preferred Stock - Subject to
Mandatory Redemption . . . . . . . . . . . . . . . 125,000 125,000
Long-term Debt . . . . . . . . . . . . . . . . . . . 997,265 997,013
TOTAL CAPITALIZATION . . . . . . . . . . . . 1,752,279 1,747,373
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 21,649 17,189
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . . . . - 20,700
Short-term Debt. . . . . . . . . . . . . . . . . . . 53,500 25,225
Accounts Payable . . . . . . . . . . . . . . . . . . 40,936 50,547
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 96,891 114,233
Interest Accrued . . . . . . . . . . . . . . . . . . 26,346 23,245
Other. . . . . . . . . . . . . . . . . . . . . . . . 29,846 22,189
TOTAL CURRENT LIABILITIES. . . . . . . . . . 247,519 256,139
DEFERRED FEDERAL INCOME TAXES. . . . . . . . . . . . . 477,684 474,290
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 67,610 68,533
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 9,014 19,147
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . $2,575,755 $2,582,671
See Notes to Consolidated Financial Statements.
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 24,652 $ 18,230
Adjustments for Noncash Items:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 20,648 22,221
Deferred Federal Income Taxes. . . . . . . . . . . . . . 5,090 6,451
Deferred Investment Tax Credits. . . . . . . . . . . . . (922) (943)
Deferred Fuel Costs (net). . . . . . . . . . . . . . . . (5,701) 1,911
Deferred Zimmer Plant Operating Expenses
and Carrying Charges . . . . . . . . . . . . . . . . . (179) (17,305)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (2,520) 462
Fuel, Materials and Supplies . . . . . . . . . . . . . . 11,260 644
Accrued Utility Revenues . . . . . . . . . . . . . . . . 5,234 296
Prepayments. . . . . . . . . . . . . . . . . . . . . . . (7,627) (8,120)
Accounts Payable . . . . . . . . . . . . . . . . . . . . (9,611) (4,990)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . (17,342) (26,088)
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 12,227 12,781
Net Cash Flows From Operating Activities . . . . . . 35,209 5,550
INVESTING ACTIVITIES - Construction Expenditures . . . . . . (14,222) (17,309)
FINANCING ACTIVITIES:
Issuance of Long-term Debt . . . . . . . . . . . . . . . . 198,298 -
Change in Short-term Debt (net). . . . . . . . . . . . . . 28,275 37,981
Retirement of Long-term Debt . . . . . . . . . . . . . . . (225,834) (2,250)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (17,197) (20,185)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (2,766) (2,766)
Net Cash Flows From (Used For) Financing Activities. (19,224) 12,780
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 1,763 1,021
Cash and Cash Equivalents at Beginning of Period . . . . . . 6,633 8,322
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 8,396 $ 9,343
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $17,863,000 and
$23,563,000 and for income taxes was $(81,000) and $5,922,000 in 1994 and 1993,
respectively. Noncash acquisitions under capital leases were $1,360,000 and
$1,486,000 in 1994 and 1993, respectively.
See Notes to Consolidated Financial Statements.
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . $18,288 $127,562
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . 24,652 18,230
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . . . . . . . . . . . . 17,197 20,185
Cumulative Preferred Stock . . . . . . . . . . . . . . . . 2,766 2,766
Capital Stock Expense. . . . . . . . . . . . . . . . . . . . 35 35
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $22,942 $122,806
See Notes to Consolidated Financial Statements.
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
1. GENERAL:
The accompanying unaudited consolidated financial statements should be
read in conjunction with the 1993 Annual Report as incorporated in and
filed with the Form 10-K. Certain prior-period amounts have been
reclassified to conform to current-period presentation.
2. FINANCING ACTIVITIES:
Significant financing transactions during the quarter ended March 31,
1994 include the following:
Face Amount
(in thousands)
Issuances: First Mortgage Bonds:
6.55% Series due 2004 $ 50,000
7.45% Series due 2024 50,000
6.75% Series due 2004 50,000
7.60% Series due 2024 50,000
Retirements: First Mortgage Bonds:
8-5/8% Series due 1996 100,000
9% Series due 1999 19,700
9% Series due 2017 100,000
3. CONTINGENCIES:
The Company continues to be involved in certain matters discussed in
its 1993 Annual Report.
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
FIRST QUARTER 1994 vs. FIRST QUARTER 1993
Net income increased 35% to $24.7 million due to a 15% increase in energy
sales as severe winter weather increased demand.
The weather related sales increase and a rate increase resulted in a 12%
rise in retail revenues. The Public Utilities Commission of Ohio (PUCO)
granted a 7.11% increase in rates effective February 1, 1994 as a result of a
November 1993 Ohio Supreme Court ruling that the PUCO did not have authority
under state law to order a rate phase-in for the Zimmer Plant. The increase
includes a 3.72% base rate increase, which represents the acceleration of the
final step of the court rejected rate phase-in plan, and a 3.39% surcharge,
which provides for recovery of the $96.9 million of previous deferrals under
the phase-in plan and a return thereon, to be collected over a period that is
not expected to exceed four and one-half years. The rate increase has no
effect on net income because it is offset by the amortization of prior year
phase-in plan deferrals and the cessation of current year deferrals which
would have occurred had the phase-in plan continued in effect.
Wholesale energy sales increased 71% primarily due to increased sales to
unaffiliated utilities by the AEP System Power Pool (Power Pool) also
resulting from the severe winter and forced outages at unaffiliated generating
units.
Other income statement lines which changed significantly were as follows:
Increase (Decrease)
(in millions) %
Fuel Expense. . . . . . . . . . . . . . . . . . . . $ 3.5 7.0
Purchased Power Expense . . . . . . . . . . . . . . 5.8 17.3
Amortization (Deferral) of Zimmer Plant
Phase-in Costs. . . . . . . . . . . . . . . . . . 7.0 N.M.
Federal Income Taxes. . . . . . . . . . . . . . . . 5.6 91.2
Deferred Zimmer Plant Carrying Charges
(net of tax). . . . . . . . . . . . . . . . . . . (6.9) (74.0)
N.M. = Not meaningful
Fuel expense rose due to an increase in net generation and an increase in
the average cost of fuel consumed partially offset by the amortization of
previously over collected fuel costs through the operation of fuel clause
adjustment mechanism. Under the fuel clause the Company defers fuel expense
to the extent it varies from the allowed electric fuel component rate. Such
cost variance deferrals are amortized to fuel expense commensurate with
subsequent rate recovery. The increase in purchased power expense resulted
mainly from increased energy purchases from unaffiliated utilities for
immediate pass-through sales to other unaffiliated utilities to meet the
weather related increase in demand for energy.
The amortization (deferral) of Zimmer Plant phase-in costs increased
sharply due to a discontinuance of the phase-in deferrals in February 1994 and
the amortization, commensurate with rate relief, of the previously deferred
balances in February and March of 1994.
Federal income tax expense attributable to operations increased primarily
as a result of the increase in pre-tax operating income.
The accrual of deferred Zimmer carrying charges declined from the prior
year since the 1994 carrying charges are on the unamortized phase-in deferral
balance while the 1993 carrying charge deferrals were on the larger Zimmer
investment not yet phased into rates.
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . $337,921 $302,968
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . 53,058 58,477
Purchased Power. . . . . . . . . . . . . . . . . . . . . 44,906 25,431
Other Operation. . . . . . . . . . . . . . . . . . . . . 74,178 63,104
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 36,931 38,465
Depreciation and Amortization. . . . . . . . . . . . . . 34,445 34,339
Amortization of Rockport Plant Unit 1
Phase-in Plan Deferrals. . . . . . . . . . . . . . . . 3,911 3,911
Taxes Other Than Federal Income Taxes. . . . . . . . . . 19,461 18,504
Federal Income Taxes . . . . . . . . . . . . . . . . . . 12,216 7,468
TOTAL OPERATING EXPENSES . . . . . . . . . . . . 279,106 249,699
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . 58,815 53,269
NONOPERATING INCOME (LOSS) . . . . . . . . . . . . . . . . 4,435 (3,004)
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . . . 63,250 50,265
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . 18,282 21,743
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . 44,968 28,522
PREFERRED STOCK DIVIDEND REQUIREMENTS. . . . . . . . . . . 2,980 3,806
EARNINGS APPLICABLE TO COMMON STOCK. . . . . . . . . . . . $ 41,988 $ 24,716
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . $177,638 $171,309
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . 44,968 28,522
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . . . . . . . . . . 26,652 26,236
Cumulative Preferred Stock . . . . . . . . . . . . . . 2,980 3,806
Capital Stock Expense. . . . . . . . . . . . . . . . . . 45 5
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . $192,929 $169,784
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
/TABLE
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $2,453,841 $2,602,527
Transmission . . . . . . . . . . . . . . . . . . . . 841,169 839,198
Distribution . . . . . . . . . . . . . . . . . . . . 613,561 608,752
General (including nuclear fuel) . . . . . . . . . . 180,885 152,470
Construction Work in Progress. . . . . . . . . . . . 98,788 88,010
Total Electric Utility Plant . . . . . . . . 4,188,244 4,290,957
Accumulated Depreciation and Amortization. . . . . . 1,592,604 1,714,829
NET ELECTRIC UTILITY PLANT . . . . . . . . . 2,595,640 2,576,128
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 458,566 432,459
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 6,434 3,752
Accounts Receivable (net). . . . . . . . . . . . . . 120,026 121,336
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 23,309 34,476
Materials and Supplies . . . . . . . . . . . . . . . 57,970 57,800
Accrued Utility Revenues . . . . . . . . . . . . . . 31,194 34,642
Prepayments. . . . . . . . . . . . . . . . . . . . . 15,516 12,043
TOTAL CURRENT ASSETS . . . . . . . . . . . . 254,449 264,049
REGULATORY ASSETS:
Amounts Due From Customers For Future
Federal Income Taxes . . . . . . . . . . . . . . . 294,306 286,948
Other. . . . . . . . . . . . . . . . . . . . . . . . 250,919 205,874
TOTAL REGULATORY ASSETS. . . . . . . . . . . 545,225 492,822
TOTAL. . . . . . . . . . . . . . . . . . . $3,853,880 $3,765,458
See Notes to Consolidated Financial Statements.
/TABLE
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 2,500,000 Shares
Outstanding - 1,400,000 Shares . . . . . . . . . . $ 56,584 $ 56,584
Paid-in Capital. . . . . . . . . . . . . . . . . . . 734,477 734,933
Retained Earnings. . . . . . . . . . . . . . . . . . 192,929 177,638
Total Common Shareowner's Equity . . . . . . 983,990 969,155
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . . . . 52,000 87,000
Subject to Mandatory Redemption. . . . . . . . . . 135,000 100,000
Long-term Debt . . . . . . . . . . . . . . . . . . . 1,024,757 1,073,154
TOTAL CAPITALIZATION . . . . . . . . . . . . 2,195,747 2,229,309
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 345,362 288,197
CURRENT LIABILITIES:
Short-term Debt - Commercial Paper . . . . . . . . . 66,725 50,075
Accounts Payable . . . . . . . . . . . . . . . . . . 51,405 57,918
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 67,976 54,473
Interest Accrued . . . . . . . . . . . . . . . . . . 20,860 18,894
Rent Accrued - Rockport Plant Unit 2 . . . . . . . . 24,052 5,588
Obligations Under Capital Leases . . . . . . . . . . 30,626 20,585
Other. . . . . . . . . . . . . . . . . . . . . . . . 78,881 73,779
TOTAL CURRENT LIABILITIES. . . . . . . . . . 340,525 281,312
DEFERRED FEDERAL INCOME TAXES. . . . . . . . . . . . . 564,393 553,920
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 179,755 186,032
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2. . . . . . . . . . . . . . . . 209,619 211,446
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 18,479 15,242
CONTINGENCIES (Note 5)
TOTAL. . . . . . . . . . . . . . . . . . . $3,853,880 $3,765,458
See Notes to Consolidated Financial Statements.
/TABLE
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 44,968 $ 28,522
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . 37,840 36,284
Amortization of Rockport Plant Unit 1
Phase-in Plan Deferrals. . . . . . . . . . . . . . . . 3,911 3,911
Amortization (Deferral) of Incremental Nuclear
Refueling Outage Expenses (net). . . . . . . . . . . . (9,334) 9,210
Deferred Federal Income Taxes. . . . . . . . . . . . . . 3,115 (15,223)
Deferred Investment Tax Credits. . . . . . . . . . . . . (6,160) (2,079)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . 1,310 2,400
Fuel, Materials and Supplies . . . . . . . . . . . . . . 10,997 8,926
Accrued Utility Revenues . . . . . . . . . . . . . . . . 3,448 29,214
Accounts Payable . . . . . . . . . . . . . . . . . . . . (6,513) (10,138)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 13,503 72,366
Rent Accrued - Rockport Plant Unit 2 . . . . . . . . . . 18,464 18,464
Other (net). . . . . . . . . . . . . . . . . . . . . . . . (22,735) (17,965)
Net Cash Flows From Operating Activities . . . . . . 92,814 163,892
INVESTING ACTIVITIES - Construction Expenditures . . . . . . (23,854) (23,094)
FINANCING ACTIVITIES:
Issuance of Cumulative Preferred Stock . . . . . . . . . . 34,618 29,541
Issuance of Long-term Debt . . . . . . . . . . . . . . . . 49,548 -
Retirement of Cumulative Preferred Stock . . . . . . . . . (35,798) (40,896)
Retirement of Long-term Debt . . . . . . . . . . . . . . . (101,833) -
Change in Short-term Debt (net). . . . . . . . . . . . . . 16,650 (44,200)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (26,652) (26,236)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (2,811) (4,454)
Net Cash Flows Used For Financing Activities . . . . (66,278) (86,245)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 2,682 54,553
Cash and Cash Equivalents at Beginning of Period . . . . . . 3,752 7,459
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 6,434 $ 62,012
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $15,861,000 and
$18,694,000 and for income taxes was $12,501,000 and $(29,429,000) in 1994 and 1993,
respectively. Noncash acquisitions under capital leases were $38,731,000 and
$774,000 in 1994 and 1993, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements should be
read in conjunction with the 1993 Annual Report as incorporated in and
filed with the Form 10-K. Certain prior-period amounts have been
reclassified to conform to current-period presentation.
2. FINANCING ACTIVITIES
During February 1994 the Company redeemed $35 million of 7.76%
Cumulative Preferred Stock and issued $35 million of 6.30% Cumulative
Preferred Stock. In March 1994 the Company retired $100 million of 8-3/4%
First Mortgage Bonds and issued two $25 million series of First Mortgage
Bonds at 6.55% due in 2004 and 7.50% due in 2024.
3. BREED PLANT RETIREMENT
The 325-megawatt Breed Plant, with an original cost of $153 million,
was removed from service in January 1994 and was closed on March 31, 1994.
The retirement of Breed Plant did not have a material impact on results of
operations or financial condition. Breed Plant had been operated on a
restricted basis since 1992 when plans to close the plant were announced.
4. VALUATION OF SECURITIES
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt
and Equity Securities, (SFAS 115) which requires fair value accounting for
investments in equity securities with a readily determinable market value
and all investments in debt securities except those that the reporting
enterprise has the positive intent and ability to hold to maturity. Debt
securities not classified as held-to-maturity, shall be classified as
trading or available-for-sale. Investments held in trust for
decommissioning the nuclear facilities and for disposal of spent nuclear
fuel were classified as available-for-sale under SFAS 115. SFAS 115
requires that unrealized gains and losses on investments classified as
available-for-sale should be a separate component of shareholder's equity.
However, due to the rate-making process, SFAS 115 adjustments for
unrealized gains and losses to the carrying value of investments held in
the trusts will result in corresponding adjustments to the nuclear
decommissioning liability and the regulatory asset for future recovery of
spent nuclear fuel disposal costs.
The cumulative effect of adopting SFAS 115 on January 1, 1994 resulted
in an increase in the decommissioning and spent nuclear fuel trust fund
assets of $20.4 million comprised of an unrealized holding gain of $21.4
million and an unrealized holding loss of $1 million, with no effect on
net income and/or shareholder's equity. As required by SFAS 115, prior
year amounts were not restated.
The trust investments reported in other property and investments had a
fair value of $321 million at January 1, 1994 and consist primarily of
long-term tax-exempt municipal bonds. At January 1, 1994, the maturities
of investments in debt securities range from 1994 to 2024.
5. CONTINGENCIES
The Company continues to be involved in certain matters discussed in
its 1993 Annual Report.
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FIRST QUARTER 1994 vs. FIRST QUARTER 1993
RESULTS OF OPERATIONS
Net income increased 58% or $16.4 million as a result of increased retail
sales due to colder winter weather, a retail rate increase, certain
nonoperating federal income tax items and interest savings from a refinancing
program.
Operating revenues increased $35 million reflecting increased weather
related retail energy demand and a rate increase in the Indiana retail
jurisdiction effective November 1993. Sales to weather sensitive residential
and commercial customers increased 6% and 5%, respectively, as customers
demanded energy to meet the heating requirements of the cold weather in 1994.
Industrial energy sales also rose 7% as a result of customer growth and
increased usage reflecting improved economic conditions. A decline in
wholesale sales partially offset the retail revenue increase as outages at
both units of the Company's nuclear plant reduced the amount of energy
supplied to the AEP System Power Pool (Power Pool). The decreased sales to
the Power Pool were offset in part by increased sales to unaffiliated
utilities which experienced severe weather.
Other income statement line items which changed significantly were:
Increase (Decrease)
(in millions) %
Fuel Expense. . . . . . . . . . . . . . . . . $(5.4) (9)
Purchased Power Expense . . . . . . . . . . . 19.5 77
Other Operation Expense . . . . . . . . . . . 11.1 18
Federal Income Taxes. . . . . . . . . . . . . 4.7 64
Nonoperating Income (Loss). . . . . . . . . . 7.4 N.M.
Interest Charges. . . . . . . . . . . . . . . (3.5) (16)
N.M. = Not Meaningful
Fuel expense declined as generation decreased due to a scheduled refueling
outage at one of the nuclear units and an unscheduled maintenance outage at
the other unit in 1994. The unit that was out of service for unscheduled
maintenance returned to service in April 1994. The unit being refueled is
scheduled to return to service in May. Purchased power expense increased as
additional power was obtained from the AEP System Power Pool in 1994 to meet
the increased demand for energy and to replace the decrease in generation.
Energy purchased from unaffiliated utilities for immediate pass-through sales
to other unaffiliated utilities to meet their weather related increased demand
for energy also contributed to the increase in purchased power expense.
Other operation expense increased due to the recordation of loss
provisions for disposal of inventories and employee severance benefits
resulting from the closing of the Breed Plant and additional nuclear
decommissioning expense commensurate with increased rate recovery.
Federal income taxes attributable to operations increased primarily due to
increased pre-tax operating income.
Nonoperating income increased reflecting favorable tax effects related to
the Breed Plant closing and the recordation in January 1993 of the negative
effect of adopting Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes, for nonutility assets and liabilities.
Interest charges were reduced significantly due to a refinancing program.
Subsequent to March 1993 the Company retired $192 million of long-term debt,
and refinanced at lower rates $200 million of long-term debt and $97 million
of installment purchase contracts.
BREED PLANT RETIREMENT
In the first quarter of 1994 the 325-megawatt Breed Plant, with an
original cost of $153 million, was retired without materially affecting
results of operations or financial condition. The Breed Plant, which began
commercial operations in 1960, had been operated on a restricted basis since
1992 when plans to close the plant were announced.
FINANCIAL CONDITION
Total plant and property additions including capital leases for the
current period were $62.9 million. During the first three months of 1994
short-term debt outstanding increased $16.65 million from year-end levels.
During February 1994 the Company redeemed $35 million of 7.76% Cumulative
Preferred Stock and issued $35 million of 6.30% Cumulative Preferred Stock.
In March the Company retired $100 million of 8-3/4% First Mortgage Bonds and
issued two $25 million series of First Mortgage Bonds at 6.55% due in 2004 and
7.50% due in 2024, respectively.
NEW ACCOUNTING STANDARD
On January 1, 1994 the Company adopted SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities, which requires the use of fair
value accounting for the nuclear decommissioning and spent nuclear fuel
disposal trust fund investments. The cumulative effect of adopting SFAS 115
resulted in the recording of an unrealized holding gain of $21.4 million and
an unrealized holding loss of $1 million with no effect on net income. SFAS
115 requires that unrealized gains and losses on investments classified as
available-for-sale should be included as a separate component of shareholder's
equity. However, due to the rate-making process, adjustments to the fair
value of the investments held in the trusts will result in corresponding
adjustments to the nuclear decommissioning liability and the regulatory asset
for future recovery of spent nuclear fuel disposal costs. Note 4 of the Notes
to Consolidated Financial Statements describes the details of implementing
this new accounting standard.
KENTUCKY POWER COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . $86,457 $80,175
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . 20,189 19,550
Purchased Power. . . . . . . . . . . . . . . . . . . . . 24,247 22,630
Other Operation. . . . . . . . . . . . . . . . . . . . . 9,011 8,892
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 9,817 6,420
Depreciation and Amortization. . . . . . . . . . . . . . 5,715 5,521
Taxes Other Than Federal Income Taxes. . . . . . . . . . 2,405 2,682
Federal Income Taxes . . . . . . . . . . . . . . . . . . 2,093 1,820
TOTAL OPERATING EXPENSES . . . . . . . . . . . . 73,477 67,515
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . 12,980 12,660
NONOPERATING LOSS. . . . . . . . . . . . . . . . . . . . . (35) (52)
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . . . 12,945 12,608
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . 5,142 5,347
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . $ 7,803 $ 7,261
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . $85,296 $89,957
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . 7,803 7,261
CASH DIVIDENDS DECLARED. . . . . . . . . . . . . . . . . . 5,349 5,479
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . $87,750 $91,739
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Financial Statements.
/TABLE
KENTUCKY POWER COMPANY
BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $211,255 $211,617
Transmission . . . . . . . . . . . . . . . . . . . . 252,389 249,966
Distribution . . . . . . . . . . . . . . . . . . . . 279,420 281,834
General. . . . . . . . . . . . . . . . . . . . . . . 54,424 54,637
Construction Work in Progress. . . . . . . . . . . . 15,120 9,374
Total Electric Utility Plant . . . . . . . . 812,608 807,428
Accumulated Depreciation and Amortization. . . . . . 253,033 248,673
NET ELECTRIC UTILITY PLANT . . . . . . . . . 559,575 558,755
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 6,314 6,763
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 804 858
Accounts Receivable (net). . . . . . . . . . . . . . 27,305 24,138
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 5,964 8,405
Materials and Supplies . . . . . . . . . . . . . . . 9,062 8,804
Accrued Utility Revenues . . . . . . . . . . . . . . 5,686 10,476
Prepayments. . . . . . . . . . . . . . . . . . . . . 1,120 1,367
TOTAL CURRENT ASSETS . . . . . . . . . . . . 49,941 54,048
REGULATORY ASSETS:
Amounts Due From Customers For Future
Federal Income Taxes . . . . . . . . . . . . . . . 39,592 37,910
Other. . . . . . . . . . . . . . . . . . . . . . . . 14,166 12,903
TOTAL REGULATORY ASSETS. . . . . . . . . . . 53,758 50,813
TOTAL. . . . . . . . . . . . . . . . . . . $669,588 $670,379
See Notes to Financial Statements.
KENTUCKY POWER COMPANY
BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock - Par Value $50:
Authorized - 2,000,000 Shares
Outstanding - 1,009,000 Shares . . . . . . . . . . $ 50,450 $ 50,450
Paid-in Capital. . . . . . . . . . . . . . . . . . . 58,750 58,750
Retained Earnings. . . . . . . . . . . . . . . . . . 87,750 85,296
Total Common Shareowner's Equity . . . . . . 196,950 194,496
Long-term Debt . . . . . . . . . . . . . . . . . . . 253,517 253,495
TOTAL CAPITALIZATION . . . . . . . . . . . . 450,467 447,991
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 10,079 7,678
CURRENT LIABILITIES:
Short-term Debt. . . . . . . . . . . . . . . . . . . 29,400 38,150
Accounts Payable . . . . . . . . . . . . . . . . . . 16,161 18,456
Customer Deposits. . . . . . . . . . . . . . . . . . 4,508 4,621
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 10,290 6,767
Interest Accrued . . . . . . . . . . . . . . . . . . 5,396 5,905
Other. . . . . . . . . . . . . . . . . . . . . . . . 9,545 8,186
TOTAL CURRENT LIABILITIES. . . . . . . . . . 75,300 82,085
DEFERRED FEDERAL INCOME TAXES. . . . . . . . . . . . . 110,097 108,966
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 16,209 16,454
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 7,436 7,205
CONTINGENCIES (Note 2)
TOTAL. . . . . . . . . . . . . . . . . . . $669,588 $670,379
See Notes to Financial Statements.
KENTUCKY POWER COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 7,803 $ 7,261
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . 5,732 5,542
Deferred Federal Income Taxes. . . . . . . . . . . . . . (551) (1,098)
Deferred Investment Tax Credits. . . . . . . . . . . . . (317) (321)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (3,167) (1,046)
Fuel, Materials and Supplies . . . . . . . . . . . . . . 2,183 1,803
Accrued Utility Revenues . . . . . . . . . . . . . . . . 4,790 2,048
Accounts Payable . . . . . . . . . . . . . . . . . . . . (2,295) (1,947)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 3,523 2,374
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 2,748 4,116
Net Cash Flows From Operating Activities . . . . . . 20,449 18,732
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (7,119) (7,747)
Proceeds from Sales of Property. . . . . . . . . . . . . . 715 155
Net Cash Flows Used For Investing Activities . . . . (6,404) (7,592)
FINANCING ACTIVITIES:
Change in Short-term Debt (net). . . . . . . . . . . . . . (8,750) (5,775)
Dividends Paid . . . . . . . . . . . . . . . . . . . . . . (5,349) (5,479)
Net Cash Flows Used For Financing Activities . . . . (14,099) (11,254)
Net Decrease in Cash and Cash Equivalents. . . . . . . . . . (54) (114)
Cash and Cash Equivalents at Beginning of Period . . . . . . 858 1,070
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 804 $ 956
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $5,596,000 and
$4,120,000 and for income taxes was $(781,000) and $1,121,000 in 1994 and 1993,
respectively.
See Notes to Financial Statements.
KENTUCKY POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
1. GENERAL
The accompanying unaudited financial statements should be read in
conjunction with the 1993 Annual Report as incorporated in and filed with
the Form 10-K.
2. CONTINGENCIES
The Company continues to be involved in certain matters discussed in
its 1993 Annual Report.
KENTUCKY POWER COMPANY
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
FIRST QUARTER 1994 vs. FIRST QUARTER 1993
Net income increased 7.5% or $0.5 million reflecting improved energy sales
due to severe winter weather, and decreased interest expense due to debt
refinancings at lower interest rates. The favorable earnings impact of the
cold weather in 1994 was partially offset by storm damage expenses. Other
income statement line items which changed significantly were:
Increase (Decrease)
(in millions) %
Operating Revenues. . . . . . . . . . . . . . . . . . $6.3 7.8
Fuel Expense. . . . . . . . . . . . . . . . . . . . . 0.6 3.3
Purchased Power Expense . . . . . . . . . . . . . . . 1.6 7.1
Maintenance Expense . . . . . . . . . . . . . . . . . 3.4 52.9
Taxes Other Than Federal Income Taxes . . . . . . . . (0.3) (10.3)
Federal Income Taxes. . . . . . . . . . . . . . . . . 0.3 15.0
The increase in operating revenues was due to the cold weather in 1994.
Retail energy sales increased 4.6% as sales to weather sensitive retail and
commercial customers increased. Wholesale energy sales rose 4.7% due to
increased sales to unaffiliated utilities by the AEP System Power Pool
reflecting the effect of the severe winter on energy demand and forced outages
at unaffiliated generating units.
Fuel expense increased reflecting a 5% rise in net generation in response
to the higher energy demand. The increase in purchased power expense resulted
from increased energy purchases from unaffiliated utilities for immediate
pass-through sales to other unaffiliated utilities. These increased pass-
through sales were also generated by the weather. Maintenance expense
increased due to storm damage to distribution lines caused by the severe
winter storms in January and February 1994. An accrual adjustment in 1993 of
state income taxes as a result of an audit caused the decrease in taxes other
than federal income taxes. The increase in federal income tax expense
attributable to operations was primarily due to an increase in pre-tax
operating income.
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . . . . $487,041 $430,158
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,629 162,101
Purchased Power. . . . . . . . . . . . . . . . . . . . . . . . 20,510 15,225
Other Operation. . . . . . . . . . . . . . . . . . . . . . . . 49,903 53,367
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . 36,145 35,239
Depreciation and Amortization. . . . . . . . . . . . . . . . . 32,730 31,948
Taxes Other Than Federal Income Taxes. . . . . . . . . . . . . 44,492 43,657
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . 27,772 19,656
TOTAL OPERATING EXPENSES . . . . . . . . . . . . . . . 412,181 361,193
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . 74,860 68,965
NONOPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . . 1,641 8,261
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . . . . . . 76,501 77,226
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . . . . 22,266 27,939
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,235 49,287
PREFERRED STOCK DIVIDEND REQUIREMENTS. . . . . . . . . . . . . . 3,825 4,279
EARNINGS APPLICABLE TO COMMON STOCK. . . . . . . . . . . . . . . $ 50,410 $ 45,008
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . $474,500 $445,955
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,235 49,287
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 34,617 33,822
Cumulative Preferred Stock . . . . . . . . . . . . . . . . . 3,825 4,279
Capital Stock Expense. . . . . . . . . . . . . . . . . . . . . 34 -
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . $490,259 $457,141
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
/TABLE
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $2,417,872 $2,412,973
Transmission . . . . . . . . . . . . . . . . . . . . 768,043 767,548
Distribution . . . . . . . . . . . . . . . . . . . . 762,195 766,639
General (including mining assets). . . . . . . . . . 772,789 754,347
Construction Work in Progress. . . . . . . . . . . . 116,285 100,820
Total Electric Utility Plant . . . . . . . . 4,837,184 4,802,327
Accumulated Depreciation and Amortization. . . . . . 2,017,622 1,992,082
NET ELECTRIC UTILITY PLANT . . . . . . . . . 2,819,562 2,810,245
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 120,238 138,224
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 42,041 20,803
Accounts Receivable. . . . . . . . . . . . . . . . . 213,963 180,135
Allowance for Uncollectible Accounts . . . . . . . . (1,233) (960)
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 116,390 179,554
Materials and Supplies . . . . . . . . . . . . . . . 65,614 66,791
Accrued Utility Revenues . . . . . . . . . . . . . . 24,600 32,234
Prepayments. . . . . . . . . . . . . . . . . . . . . 61,294 43,907
TOTAL CURRENT ASSETS . . . . . . . . . . . . 522,669 522,464
REGULATORY ASSETS:
Amounts Due From Customers For Future
Federal Income Taxes . . . . . . . . . . . . . . . 427,662 433,822
Other. . . . . . . . . . . . . . . . . . . . . . . . 227,908 211,550
TOTAL REGULATORY ASSETS. . . . . . . . . . . 655,570 645,372
TOTAL. . . . . . . . . . . . . . . . . . . $4,118,039 $4,116,305
See Notes to Consolidated Financial Statements.
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1994 1993
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 40,000,000 Shares
Outstanding - 27,952,473 Shares. . . . . . . . . . $ 321,201 $ 321,201
Paid-in Capital. . . . . . . . . . . . . . . . . . . 463,100 463,100
Retained Earnings. . . . . . . . . . . . . . . . . . 490,259 474,500
Total Common Shareowner's Equity . . . . . . 1,274,560 1,258,801
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . . . . 126,240 126,240
Subject to Mandatory Redemption. . . . . . . . . . 115,000 115,000
Long-term Debt . . . . . . . . . . . . . . . . . . . 1,189,071 1,189,086
TOTAL CAPITALIZATION . . . . . . . . . . . . 2,704,871 2,689,127
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 122,390 104,172
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . . . . 397 5,397
Short-term Debt. . . . . . . . . . . . . . . . . . . 13,288 40,250
Accounts Payable . . . . . . . . . . . . . . . . . . 101,718 140,089
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 167,295 168,095
Interest Accrued . . . . . . . . . . . . . . . . . . 29,848 20,862
Obligations Under Capital Leases . . . . . . . . . . 24,176 21,916
Other. . . . . . . . . . . . . . . . . . . . . . . . 117,227 107,592
TOTAL CURRENT LIABILITIES. . . . . . . . . . 453,949 504,201
DEFERRED FEDERAL INCOME TAXES. . . . . . . . . . . . . 708,620 725,283
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 45,021 45,795
REGULATORY LIABILITIES AND DEFERRED CREDITS. . . . . . 83,188 47,727
CONTINGENCIES (Note 4)
TOTAL. . . . . . . . . . . . . . . . . . . $4,118,039 $4,116,305
See Notes to Consolidated Financial Statements.
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
1994 1993
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 54,235 $ 49,287
Adjustments for Noncash Items:
Depreciation, Depletion and Amortization . . . . . . . . 35,975 36,560
Deferred Federal Income Taxes. . . . . . . . . . . . . . (10,526) (7,809)
Deferred Investment Tax Credits. . . . . . . . . . . . . (940) (998)
Deferred Fuel Costs (net). . . . . . . . . . . . . . . . (3,186) (3,914)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (33,555) (14,412)
Fuel, Materials and Supplies . . . . . . . . . . . . . . 64,341 5,930
Accrued Utility Revenues . . . . . . . . . . . . . . . . 7,634 6,296
Prepayments. . . . . . . . . . . . . . . . . . . . . . . (17,387) (17,636)
Accounts Payable . . . . . . . . . . . . . . . . . . . . (38,371) (25,010)
Interest Accrued . . . . . . . . . . . . . . . . . . . . 8,986 9,937
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 16,715 34,693
Net Cash Flows From Operating Activities . . . . . . 83,921 72,924
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (27,575) (19,979)
Proceeds from Sale of Property and Other . . . . . . . . . 35,395 535
Net Cash Flows From (Used For) Investing Activities. 7,820 (19,444)
FINANCING ACTIVITIES:
Issuance of Long-term Debt . . . . . . . . . . . . . . . . 45,000 104,316
Change in Short-term Debt (net). . . . . . . . . . . . . . (26,962) -
Retirement of Long-term Debt . . . . . . . . . . . . . . . (50,099) (40,099)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (34,617) (33,822)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (3,825) (4,279)
Net Cash Flows From (Used For) Financing Activities. (70,503) 26,116
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 21,238 79,596
Cash and Cash Equivalents at Beginning of Period . . . . . . 20,803 71,056
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 42,041 $150,652
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $12,608,000 and
$17,647,000 and for income taxes was $3,199,000 and $(3,563,000) in 1994 and 1993,
respectively. Noncash acquisitions under capital leases were $14,048,000 and
$3,415,000 in 1994 and 1993, respectively.
See Notes to Consolidated Financial Statements.
OHIO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements should be
read in conjunction with the 1993 Annual Report as incorporated in and
filed with the Form 10-K.
2. RECOVERY OF FUEL COSTS
The municipal wholesale customers filed a complaint in November 1992
with the Securities and Exchange Commission (SEC) requesting an
investigation of the July 1992 Martinka mining operations sale and an
investigation into the pricing of affiliated coal purchases back to 1986.
If actions of the SEC result in the Company being unable to recover a
significant portion of the cost of affiliated coal, it would have a
material adverse impact on results of operations and financial condition.
3. FINANCING ACTIVITIES
In January 1994 a coal mining subsidiary, Southern Ohio Coal Company
(SOCCo), entered into three term loan agreements due January 2001 totaling
$30 million with 6.20% fixed interest rates and one $15 million variable
interest rate term loan agreement due in January 1999 with a 3.725%
initial rate through July 1994. The proceeds were used in January 1994 to
pay at maturity two fixed interest rate term loans, $20 million at 8% and
$25 million at 8.01%. Also during January 1994 another coal mining
subsidiary, Windsor Coal Company, retired at maturity a $5 million term
loan with an interest rate of 8%.
4. CONTINGENCIES
Clean Air
The installation of the flue gas desulfurization system (scrubbers) at
the Gavin Plant for compliance with the Clean Air Act Amendments of 1990
(CAAA) is expected to be completed at substantial cost savings and earlier
than planned. Based on project performance through March 31, 1994, the
final cost of the scrubbers is expected to be about 15% below the $815
million recoverable cost limit authorized in the stipulation agreement
between the Company, the Public Utilities Commission of Ohio (PUCO) staff
and the Ohio Consumers' Counsel. The scrubber in-service dates are now
projected to be December 1994 and March 1995 for Gavin Units 1 and 2,
respectively. On March 30, 1994, the Ohio Supreme Court upheld, on
appeal, the PUCO approved CAAA compliance plan and related stipulation
agreement. The compliance plan and stipulation agreement are discussed in
Note 3 in the 1993 Annual Report.
Meigs Mine Litigation
On April 8, 1994 the U.S. Court of Appeals for the Sixth Circuit
reversed the judgement of the U.S. District Court for the Southern
District of Ohio which had granted a preliminary injunction to SOCCo, a
mining subsidiary, preventing the United States Environmental Protection
Agency (Federal EPA) and the Federal Office of Surface Mining, Reclamation
and Enforcement from interfering with the removal of water from Meigs 31
mine. The Court of Appeals remanded the case to the District Court with
instructions to dismiss it for lack of jurisdiction. On April 22, 1994
SOCCo filed a request for rehearing with the U.S. Sixth Circuit. The
resolution of this litigation is not expected to have a material adverse
impact on results of operations or financial condition. Note 3 in the
1993 Annual Report discusses the background of this litigation in detail.
Superfund Site
The Company was named as a third party defendant in a cost recovery
action involving a superfund site. There are approximately two dozen
parties involved in the litigation, about half of which have active
industrial operations located at the site.
The Company and other parties are alleged to have sent equipment
containing PCBs to the site. PCBs have been identified as one of the
chemicals at the site warranting remediation. The cost to date of site
investigation and negotiations with Federal EPA is approximately $20
million. Parties to the suit have hired an independent arbitrator to
apportion costs of the investigation phase. The Company has provisionally
paid 1.25% of the investigation/negotiation costs. The Company's
percentage share may be adjusted upward or downward depending on the
outcome of the voluntary arbitration process. A cost allocation report is
due in October 1994.
Site remediation is presently estimated to be $40 million, although
Federal EPA's 1986 Record of Decision initially proposed a remedy which
would cost in excess of $60 million. The Company's ultimate share of the
total cost cannot be estimated until the final responsibility of each
party is established. If significant costs are incurred, results of
operations would be adversely affected unless the costs can be recovered
through insurance proceeds and/or the ratemaking process.
The Company continues to be involved in certain other matters
discussed in the 1993 Annual Report.
OHIO POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FIRST QUARTER 1994 vs. FIRST QUARTER 1993
RESULTS OF OPERATIONS
Net income increased 10% or $4.9 million primarily as a result of a 14%
increase in energy sales due to severe winter weather and a $5.7 million
decline in interest charges resulting from a debt refinancing program to
refinance existing debt at lower interest rates partly offset by the favorable
effect on 1993's net income of adopting SFAS 109, Accounting for Income Taxes.
Other income statement lines which changed significantly were:
Increase (Decrease)
(in millions) %
Operating Revenues. . . . . . . . . . . . . . . $56.9 13
Fuel Expense. . . . . . . . . . . . . . . . . . 38.5 24
Purchased Power Expense . . . . . . . . . . . . 5.3 35
Other Operation Expense . . . . . . . . . . . . (3.5) (6)
Federal Income Taxes. . . . . . . . . . . . . . 8.1 41
Nonoperating Income . . . . . . . . . . . . . . (6.6) (80)
The significant increase in operating revenues was primarily due to cold
weather significantly increasing retail energy requirements for heating. The
Company set a new all-time internal peak demand for energy as a result of
below zero temperatures in the service territory. Retail revenues rose 7%
mainly due to the increased energy sales to residential, commercial and
industrial customers of 9%, 5% and 2%, respectively.
Wholesale energy sales volume increased 34% primarily due to increased
sales to un-affiliated utilities by the AEP System Power Pool (Power Pool)
also resulting from the severe winter and forced outages at unaffiliated
generating units. The Company also supplied a larger share of the Power
Pool's energy requirements during the current period, primarily due to outages
of an affiliate's two nuclear generating units for maintenance and refueling.
Fuel expense rose due to increased generation reflecting the weather
related increase in demand for energy from all customer classes and an
increased average cost of fuel consumed. The increase in purchased power
expense resulted mainly from increased energy purchases from unaffiliated
utilities for immediate pass-through sales to other unaffiliated utilities to
also meet the weather related demand for energy. Other operation expense
decreased primarily due to a reduction of the amortization of the Company's
pressurized fluidized bed combustion demonstration plant cost, which is
described in Note 2 in the 1993 Annual Report. The increase in federal income
tax expense attributable to operations was primarily due to an increase in
pre-tax operating income.
Nonoperating income declined in 1994 mainly due to the effects of adopting
SFAS 109 on a prospective basis in January 1993 and the recordation of
interest income in 1993 on tax refunds received from the Internal Revenue
Service in connection with the settlement of audits of prior years' tax
returns.
FINANCIAL CONDITION
Total plant and property additions including capital leases for the
current period were $42 million.
In January 1994 a coal mining subsidiary, Southern Ohio Coal Company
(SOCCo), entered into three term loan agreements due January 2001 totaling $30
million with 6.20% fixed interest rates and one $15 million variable interest
rate term loan agreement due in January 1999 with a 3.725% initial rate
through July 1994. The proceeds were used in January 1994 to pay at maturity
two fixed interest rate term loans, $20 million at 8% and $25 million at
8.01%. Also during January 1994 another mining subsidiary, Windsor Coal
Company, retired at maturity a $5 million term loan with an interest rate of
8%.
CLEAN AIR
Substantial cost savings and earlier completion dates are forecast for
installation of the flue gas desulfurization system (scrubbers) at the Gavin
Plant to comply with the Clean Air Act Amendments of 1990 (CAAA). Based on
favorable performance through March 31, 1994, scrubber in-service dates are
now projected to be December 1994 and March 1995 for Gavin Units 1 and 2,
respectively. These target dates are more than eight months earlier than
initially scheduled. The final cost of the scrubbers is expected to be about
15% below the $815 million recoverable cost limit authorized in the
stipulation agreement between the Company, the Public Utilities Commission of
Ohio (PUCO) staff and the Ohio Consumers' Counsel. The earlier completion
dates and the lower estimated cost to complete further enhance the economics
of the PUCO approved decision to build scrubbers at Gavin. On March 30, 1994,
the Ohio Supreme Court upheld, on appeal, the PUCO approved CAAA compliance
plan and related stipulation agreement. The compliance plan and stipulation
agreement are discussed in Note 3 in the 1993 Annual Report.
MEIGS MINE LITIGATION
On April 8, 1994 the U.S. Court of Appeals for the Sixth Circuit reversed
the judgement of the U.S. District Court for the Southern District of Ohio
which had granted a preliminary injunction to SOCCo, preventing the United
States Environmental Protection Agency (Federal EPA) and the Federal Office of
Surface Mining, Reclamation and Enforcement from interfering with the removal
of water from Meigs 31 mine. The Court of Appeals remanded the case to the
District Court with instructions to dismiss it for lack of jurisdiction. On
April 22, 1994 SOCCo filed a request for rehearing with the U.S. Sixth
Circuit. The resolution of this litigation is not expected to have a material
adverse impact on results of operations or financial condition. Note 3 in the
1993 Annual Report discusses this litigation in detail.
RECOVERY OF FUEL COSTS
The municipal wholesale customers filed a complaint in November 1992 with
the Securities and Exchange Commission (SEC) requesting an investigation of
the July 1992 Martinka mining operations sale and an investigation into the
pricing of affiliated coal purchases back to 1986. If actions of the SEC
result in the Company being unable to recover a significant portion of the
cost of affiliated coal, it would have a material adverse impact on results of
operations and financial condition.
SUPERFUND SITE
The Company was named as a third party defendant in a cost recovery action
involving a superfund site. There are approximately two dozen parties
involved in the litigation, about half of which have active industrial
operations located at the site.
The Company and other parties are alleged to have sent equipment
containing PCBs to the site. PCBs have been identified as one of the
chemicals at the site warranting remediation. The cost to date of site
investigation and negotiations with Federal EPA is approximately $20 million.
Parties to the suit have hired an independent arbitrator to apportion costs of
the investigation phase. The Company has provisionally paid 1.25% of the
investigation/negotiation costs. The Company's percentage share may be
adjusted upward or downward depending on the outcome of the voluntary
arbitration process. A cost allocation report is due in October 1994.
Site remediation is presently estimated to be $40 million, although
Federal EPA's 1986 Record of Decision initially proposed a remedy which would
cost in excess of $60 million. The Company's ultimate share of the total cost
cannot be estimated until the final responsibility of each party is
established. If significant costs are incurred, results of operations would
be adversely affected unless the costs can be recovered through insurance
proceeds and/or the ratemaking process.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
American Electric Power Company, Inc. ("AEP") and Ohio Power Company ("OPCo")
Reference is made to pages 42 and 43 of the Annual Report on Form 10-K for
the year ended December 31, 1993 ("1993 10-K") for a discussion of litigation
with Ormet Corporation involving sulfur dioxide emission allowances. On May
2, 1994, AEP, OPCo and AEP Service Corporation and its two employee defendants
filed a motion with the U.S. District Court seeking to dismiss the complaint
filed by Ormet Corporation. On May 2, 1994, the U.S. Environmental Protection
Agency ("Federal EPA") defendants also filed a motion to dismiss.
Item 5. Other Information.
Indiana Michigan Power Company ("I&M")
Reference is made to page 8 of the 1993 10-K for a discussion of an
experimental retail wheeling proposal in Michigan. On April 11, 1994, the
Michigan Public Service Commission ("MPSC") approved an experimental five-year
retail wheeling program and ordered Consumers Power Company and Detroit Edison
Company, unaffiliated utilities, to make transmission services available to a
group of industrial customers, to be limited to 60 megawatts and 90 megawatts,
respectively, of retail delivery capacity. The MPSC remanded to the adminis-
trative law judge the issue of determining appropriate rates and charges for
retail delivery service. The experiment seeks, as its goal, to determine
whether a retail wheeling program best serves the public interest in a manner
that promotes retail competition in a non-discriminatory fashion. During the
experiment, the MPSC will collect information regarding the effects of retail
wheeling.
AEP, AEP Generating Company ("AEGCo"), Appalachian Power Company ("APCo"),
Columbus Southern Power Company ("CSPCo"), I&M, Kentucky Power Company
("KEPCo") and OPCo
Reference is made to page 8 of the 1993 10-K for a discussion of the
increasing competition in the electric utility industry and the transmission
access provisions of the Energy Policy Act of 1992. On April 12, 1993, APCo,
CSPCo, I&M, KEPCo and OPCo and two other AEP System companies filed a trans-
mission tariff with the Federal Energy Regulatory Commission ("FERC") under
which these AEP System companies would provide limited transmission service to
any "eligible utility." The tariff covers the terms and conditions of the
service, as well as the price which "eligible utilities" pay to wheel power on
the AEP transmission system, regardless of the source of electric power
generation. On September 3, 1993, the FERC issued an order accepting the
transmission service tariff for filing, with the tariff becoming effective on
September 7, 1993, subject to refund. On May 11, 1994, the FERC issued an
order on rehearing. The FERC stated that an open access tariff should offer
third parties access to the transmission system on the same or comparable
basis, and under the same or comparable terms and conditions, as the transmis-
sion provider's access to its system. As a result, the FERC has ordered a
hearing to review the AEP transmission system in order to determine what
services and prices should be included in the AEP tariff, particularly in
comparison to those services and prices provided to the AEP System.
APCo
Reference is made to page 16 of the 1993 10-K for a discussion of an order
requiring the AEP System to provide transmission service. On April 14, 1994,
the Federal Energy Regulatory Commission denied the petition for rehearing
filed by AEP System companies.
CSPCo and OPCo
Reference is made to pages 18 and 20 of the 1993 10-K for a discussion
concerning the Ohio Energy Strategy Task Force. On April 15, 1994, the Task
Force released its final report. The report contains seven broad implementa-
tion strategies along with 53 specific initiatives to be undertaken by
government and the private sector. One strategy recommends continuing to
encourage competition in the electric utility industry in a manner which
maximizes benefits and efficiencies for all customers. An initiative under
this strategy recommends facilitating informal roundtable discussions on
issues concerning competition in the electric utility industry and promoting
increased competitive options for Ohio businesses that do not unduly harm the
interests of utility company shareholders or ratepayers.
AEP, AEGCo, APCo, CSPCo, I&M, KEPCo and OPCo
Reference is made to page 28 of the 1993 10-K for a discussion of sulfur
dioxide emission regulations issued by Federal EPA and a determination by
Federal EPA that it had authority to defer action on acid rain compliance
programs. Settlement of a portion of the pending appeal of the January 11,
1993 rulemaking relating to substitution and reduced utilization plans and the
September 10, 1993 petition for review of Federal EPA's deferral of action on
certain acid rain compliance programs has been reached among a group of
utilities including APCo, CSPCo, I&M, KEPCo and OPCo, several environmental
groups and Federal EPA. The settlement is subject to public notice and
comment.
Reference is made to page 29 of the 1993 10-K for a discussion of regula-
tions governing nitrogen oxides emissions from Phase I units. On March 28,
1994, APCo, CSPCo, I&M, KEPCo, OPCo and a group of unaffiliated utilities
filed a petition in the U.S. Court of Appeals for the District of Columbia
Circuit seeking a review of the final nitrogen oxides emissions regulations
signed by the Federal EPA Administrator on March 1, 1994 and published in the
Federal Register on March 22, 1994. The National Coal Association has also
filed a petition for review of these regulations.
Reference is made to pages 31 and 32 of the 1993 10-K for a discussion of
global climate change. AEP System companies have joined with nearly 800
investor-owned, municipal, rural electric cooperative and Federal utilities in
a voluntary agreement signed with the U.S. Department of Energy ("DOE") on
April 20, 1994 that is intended to lead to reductions in future greenhouse gas
emissions through cost-effective actions. The actual steps the AEP System
companies will take to reduce future emissions will not be known before late
1994 when it is anticipated that DOE will publish its rules governing the
eligibility of actions for reporting under this voluntary program. The AEP
System companies will not undertake actions that threaten their economic
competitiveness, are incompatible with their Integrated Resource Plan, or are
unacceptable to their regulators.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
AEP, AEGCo, APCo, CSPCo, I&M, KEPCo and OPCo
None
(b) Reports on Form 8-K:
AEP, AEGCo, APCo, CSPCo, I&M, KEPCo and OPCo
No reports on Form 8-K were filed during the quarter ended March
31, 1994.
In the opinion of the companies, the financial statements contained
herein reflect all adjustments (consisting of only normal recurring accruals)
which are necessary to a fair presentation of the results of operations for
the interim periods, except for the adjustments resulting from the adoption of
SFAS 115 an American Electric Power Company, Inc. and Indiana Michigan Power
Company.
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 signatures for each undersigned
company shall be deemed to relate only to matters having reference to such
company and any subsidiaries thereof.
AMERICAN ELECTRIC POWER COMPANY, INC.
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Treasurer
AEP GENERATING COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Treasurer
APPALACHIAN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Treasurer
COLUMBUS SOUTHERN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Treasurer
INDIANA MICHIGAN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Treasurer
KENTUCKY POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Treasurer
OHIO POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Treasurer
Date: May 12, 1994