THE CONSOLIDATED 10-Q FOR AMERICAN ELECTRIC POWER CO., INC, AND
SUBSIDIARIES IS REQUESTED TO BE INCLUDED AS PART OF THE FILING.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 1996
[ ] 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 (An Ohio Corporation) 31-1033833
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 (540) 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 (800) 572-1141
1-6543 OHIO POWER COMPANY (An Ohio Corporation) 31-4271000
301 Cleveland Avenue S.W., Canton, Ohio 44702
Telephone (330) 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 such reports), 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 October 31, 1996 was 187,835,000.
/TABLE
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q
For The Quarter Ended September 30, 1996
INDEX
Page
Part I. FINANCIAL INFORMATION
American Electric Power Company, Inc. and Subsidiary Companies:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . A-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . A-2 - A-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . A-4
Notes to Consolidated Financial Statements . . . . . . . . . A-5
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . A-6 - A-8
AEP Generating Company:
Statements of Income and Statements of Retained Earnings . . B-1
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . B-2 - B-3
Statements of Cash Flows . . . . . . . . . . . . . . . . . . B-4
Notes to Financial Statements. . . . . . . . . . . . . . . . B-5
Management's Narrative Analysis of Results of Operations . . B-6 - B-7
Appalachian Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . C-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . C-2 - C-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . C-4
Notes to Consolidated Financial Statements . . . . . . . . . C-5 - C-6
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . C-7 - C-9
Columbus Southern Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . D-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . D-2 - D-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . D-4
Notes to Consolidated Financial Statements . . . . . . . . . D-5
Management's Narrative Analysis of Results of Operations . . D-6 - D-7
Indiana Michigan Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . E-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . E-2 - E-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . E-4
Notes to Consolidated Financial Statements . . . . . . . . . E-5
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . E-6 - E-7
Kentucky Power Company:
Statements of Income and Statements of Retained Earnings . . F-1
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . F-2 - F-3
Statements of Cash Flows . . . . . . . . . . . . . . . . . . F-4
Notes to Financial Statements. . . . . . . . . . . . . . . . F-5
Management's Narrative Analysis of Results of Operations . . F-6 - F-7
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q
For The Quarter Ended September 30, 1996
INDEX
Page
Ohio Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . G-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . G-2 - G-3
Consolidated Statements of Cash Flows. . . . . . . . . . . G-4
Notes to Consolidated Financial Statements . . . . . . . . G-5
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . G-6 - G-8
Part II. OTHER INFORMATION
Item 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
Item 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1 - II-2
Item 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . II-2
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-3
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 contained 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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
OPERATING REVENUES . . . . . . . . . . . $1,484,422 $1,523,390 $4,403,144 $4,244,901
OPERATING EXPENSES:
Fuel and Purchased Power . . . . . . . 416,470 456,496 1,262,361 1,225,538
Other Operation. . . . . . . . . . . . 299,496 316,850 903,927 868,667
Maintenance. . . . . . . . . . . . . . 129,140 131,134 373,606 393,130
Depreciation and Amortization. . . . . 151,809 150,424 450,337 444,844
Taxes Other Than Federal Income Taxes. 128,155 125,052 376,771 371,282
Federal Income Taxes . . . . . . . . . 99,607 80,886 263,650 210,052
TOTAL OPERATING EXPENSES . . . 1,224,677 1,260,842 3,630,652 3,513,513
OPERATING INCOME . . . . . . . . . . . . 259,745 262,548 772,492 731,388
NONOPERATING INCOME. . . . . . . . . . . 3,655 5,693 3,558 10,574
INCOME BEFORE INTEREST CHARGES AND
PREFERRED DIVIDENDS. . . . . . . . . . 263,400 268,241 776,050 741,962
INTEREST CHARGES . . . . . . . . . . . . 90,878 99,784 289,266 301,040
PREFERRED STOCK DIVIDEND REQUIREMENTS
OF SUBSIDIARIES. . . . . . . . . . . . 10,198 14,301 31,782 42,438
NET INCOME . . . . . . . . . . . . . . . $ 162,324 $ 154,156 $ 455,002 $ 398,484
AVERAGE NUMBER OF SHARES OUTSTANDING . . 187,528 186,024 187,118 185,671
EARNINGS PER SHARE . . . . . . . . . . . $0.87 $0.83 $2.43 $2.15
CASH DIVIDENDS PAID PER SHARE. . . . . . $0.60 $0.60 $1.80 $1.80
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . $1,478,193 $1,347,260 $1,409,645 $1,325,581
NET INCOME . . . . . . . . . . . . . . . 162,324 154,156 455,002 398,484
DEDUCTIONS:
Cash Dividends Declared. . . . . . . . 112,463 111,563 336,651 334,058
Other. . . . . . . . . . . . . . . . . 9 (154) (49) -
BALANCE AT END OF PERIOD . . . . . . . . $1,528,045 $1,390,007 $1,528,045 $1,390,007
See Notes to Consolidated Financial Statements.
/TABLE
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $ 9,278,377 $ 9,238,843
Transmission . . . . . . . . . . . . . . . . . . . . 3,357,849 3,316,664
Distribution . . . . . . . . . . . . . . . . . . . . 4,321,685 4,184,251
General (including mining assets and nuclear fuel) . 1,489,816 1,442,086
Construction Work in Progress. . . . . . . . . . . . 344,492 314,118
Total Electric Utility Plant . . . . . . . . 18,792,219 18,495,962
Accumulated Depreciation and Amortization. . . . . . 7,451,534 7,111,123
NET ELECTRIC UTILITY PLANT . . . . . . . . . 11,340,685 11,384,839
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 866,659 825,781
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 112,704 79,955
Accounts Receivable (net). . . . . . . . . . . . . . 525,564 492,283
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 252,822 271,933
Materials and Supplies . . . . . . . . . . . . . . . 249,518 251,051
Accrued Utility Revenues . . . . . . . . . . . . . . 145,078 207,919
Prepayments and Other. . . . . . . . . . . . . . . . 111,126 98,717
TOTAL CURRENT ASSETS . . . . . . . . . . . . 1,396,812 1,401,858
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 1,875,724 1,979,446
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 206,709 310,377
TOTAL. . . . . . . . . . . . . . . . . . . $15,686,589 $15,902,301
See Notes to Consolidated Financial Statements.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock-Par Value $6.50:
1996 1995
Shares Authorized . . . .300,000,000 300,000,000
Shares Issued . . . . . .196,834,992 195,634,992
(8,999,992 shares were held in treasury) . . . . . $ 1,279,427 $ 1,271,627
Paid-in Capital. . . . . . . . . . . . . . . . . . . 1,702,102 1,658,524
Retained Earnings. . . . . . . . . . . . . . . . . . 1,528,045 1,409,645
Total Common Shareholders' Equity. . . . . . 4,509,574 4,339,796
Cumulative Preferred Stocks of Subsidiaries:
Not Subject to Mandatory Redemption. . . . . . . . 115,365 148,240
Subject to Mandatory Redemption. . . . . . . . . . 490,225 515,085
Long-term Debt . . . . . . . . . . . . . . . . . . . 4,813,827 4,920,329
TOTAL CAPITALIZATION . . . . . . . . . . . . 9,928,991 9,923,450
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 968,175 884,707
CURRENT LIABILITIES:
Preferred Stock and Long-term
Debt Due Within One Year . . . . . . . . . . . . . 97,304 144,597
Short-term Debt. . . . . . . . . . . . . . . . . . . 275,351 365,125
Accounts Payable . . . . . . . . . . . . . . . . . . 177,779 220,142
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 283,763 420,192
Interest Accrued . . . . . . . . . . . . . . . . . . 112,716 80,848
Obligations Under Capital Leases . . . . . . . . . . 93,260 89,692
Other. . . . . . . . . . . . . . . . . . . . . . . . 311,369 304,466
TOTAL CURRENT LIABILITIES. . . . . . . . . . 1,351,542 1,625,062
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 2,616,045 2,656,651
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 412,262 430,041
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2. . . . . . . . . . . . . . . . 242,917 249,875
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 166,657 132,515
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . $15,686,589 $15,902,301
See Notes to Consolidated Financial Statements.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1996 1995
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 455,002 $ 398,484
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . 442,205 431,936
Deferred Federal Income Taxes. . . . . . . . . . . . . . (14,126) 2,747
Deferred Investment Tax Credits. . . . . . . . . . . . . (17,643) (17,862)
Amortization of Deferred Property Taxes. . . . . . . . . 132,061 120,710
Amortization of Operating Expenses and
Carrying Charges (net) . . . . . . . . . . . . . . . . 38,226 39,975
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (33,281) (69,061)
Fuel, Materials and Supplies . . . . . . . . . . . . . . 20,644 33,484
Accrued Utility Revenues . . . . . . . . . . . . . . . . 62,841 28,364
Accounts Payable . . . . . . . . . . . . . . . . . . . . (42,363) (50,855)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . (136,429) (127,377)
Interest Accrued . . . . . . . . . . . . . . . . . . . . 31,868 36,056
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 45,555 (20,101)
Net Cash Flows From Operating Activities . . . . . . 984,560 806,500
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (355,878) (427,716)
Proceeds from Sale of Property and Other . . . . . . . . . 8,825 11,560
Net Cash Flows Used For Investing Activities . . . . (347,053) (416,156)
FINANCING ACTIVITIES:
Issuance of Common Stock . . . . . . . . . . . . . . . . . 49,337 35,302
Issuance of Long-term Debt . . . . . . . . . . . . . . . . 406,905 425,309
Retirement of Cumulative Preferred Stock . . . . . . . . . (39,966) -
Retirement of Long-term Debt . . . . . . . . . . . . . . . (594,609) (381,607)
Change in Short-term Debt (net). . . . . . . . . . . . . . (89,774) (104,435)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (336,651) (334,058)
Net Cash Flows Used For Financing Activities . . . . (604,758) (359,489)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 32,749 30,855
Cash and Cash Equivalents at Beginning of Period . . . . . . 79,955 62,866
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 112,704 $ 93,721
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $247,393,000 and $255,342,000
and for income taxes was $278,050,000 and $220,897,000 in 1996 and 1995, respectively.
Noncash acquisitions under capital leases were $108,340,000 and $78,170,000 in
1996 and 1995, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial state-ments should be
read in conjunction with the 1995 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 AND RELATED ACTIVITIES
During the first nine months of 1996, subsidiaries issued
$410 million principal amount of long-term debt: two series of
first mortgage bonds totaling $200 million at 6-3/8% and 6.8%
due in 2001 and 2006, respectively; two series of junior
subordinated deferrable interest debentures totaling $115
million at 8% and 8-1/4% due in 2026; two 6.75% term loans
totaling $20 million due 2001 and three term loans totaling $75
million at 6.42%, 6.57% and 7.445% due in 1999, 2000 and 2002,
respectively.
In 1996 the subsidiaries redeemed the outstanding shares
of two series of $100 par value cumulative preferred stock:
75,000 shares at 9.5% and 300,000 shares at 7.08%; and retired
$588 million principal amount of long-term debt: $529 million
of first mortgage bonds with interest rates ranging from 5% to
9-7/8% with due dates ranging from 1996 to 2022; $31 million
of sinking fund debentures with interest rates ranging from 5-1/8% to
7-7/8% with due dates ranging from 1996 to 1999; and
$28 million of term loans with interest rates ranging from
5.79% to 10.78% at maturity.
The redemption of three series of first mortgage bonds in
1996, a 7-7/8% series and a 7-1/2% series both due in 2002 and
a 9-7/8% series due in 2020, reduced the restriction on
subsidiaries use of retained earnings for the payment of cash
dividends on their common stock from $230 million to $30
million.
3. CONTINGENCIES
The Company continues to be involved in certain matters
discussed in the 1995 Annual Report.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRD QUARTER 1996 vs. THIRD QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
RESULTS OF OPERATIONS
Although operating revenues decreased 3% for the comparative
third quarter, net income increased $8.2 million or 5% due
primarily to the effect of a provision for severance pay recorded
in 1995 and refinancings which reduced interest charges and
preferred stock dividends. Net income increased 14% or $56.5
million for the comparative year-to-date period due mainly to a 9%
increase in energy sales and refinancings of long-term debt and
retirements of preferred stock.
Income statement lines which changed significantly were:
Increase (Decrease)
Third Quarter Year-To-Date
(in millions) % (in millions) %
Operating Revenues . . . . . . $(39.0) (3) $158.2 4
Fuel and Purchased
Power Expense. . . . . . . . (40.0) (9) 36.8 3
Other Operation Expense. . . . (17.4) (5) 35.3 4
Maintenance Expense. . . . . . (2.0) (2) (19.5) (5)
Federal Income Taxes . . . . . 18.7 23 53.6 26
Interest Charges . . . . . . . (8.9) (9) (11.8) (4)
Preferred Stock Dividend
Requirements of Subsidiaries. (4.1) (29) (10.7) (25)
Operating revenues decreased for the third quarter as a result
of a 2% decrease in energy sales to retail customers due to milder
summer weather in 1996 as compared with the unseasonably warm
summer of 1995. Energy sales to weather-sensitive residential and
commercial customers declined 9% and 1%, respectively. Energy
sales to industrial and wholesale customers showed continued growth
with increases for the quarter of 3% and 17%, respectively.
Increased customer usage and the addition of a new large industrial
customer in late 1995 accounted for the rise in industrial sales.
The increase in wholesale sales can be attributed largely to new
wholesale energy transactions with power marketers.
The increase in operating revenues for the comparative year-to-date
period resulted from increased energy sales. Retail energy
sales increased 2% due to growth in the number of customers and
increased usage largely as a result of the unseasonable weather in
the first six months of 1996. Energy sales to wholesale customers
were up 39% due to wholesale energy transactions with power
marketers and weather-related demand for energy.
The decrease in fuel and purchased power expense for the
comparative third quarter and the increase for the comparative
year-to-date period were due mainly to the above noted weather-related changes
in energy demand. Also contributing to the decline
in fuel expense during the quarter was the availability in 1996 of
the Cook Nuclear Plant which had a maintenance and refueling outage
at one unit during the third quarter of 1995.
Other operation expense decreased for the comparative third
quarter due primarily to the effect of a $27.2 million ($17.7
million after-tax) provision for severance pay recorded in 1995.
The increase in other operation expense for the comparative year-to-date period
was due to increased pension and other employee
benefit expenses, rent and other operating costs of the recently
installed Gavin Plant scrubbers and amortization, commensurate with
recovery in rates, of previously deferred Gavin scrubber expenses.
The decline in maintenance expense for the comparative year-to-date
period was due primarily to the reversal in March 1996 of a
loss provision recorded in 1995 for deferred Virginia incremental
storm damage expenses, and workforce reductions and less contract
labor at the Company's nuclear plant.
Federal income tax expense attributable to operations increased
in both periods due to an increase in pre-tax operating income and
changes in certain book/tax differences accounted for on a flow-through basis
for ratemaking and financial reporting purposes.
Interest charges declined in both periods due to refinancing
programs of several subsidiaries which reduced the interest rate
for outstanding debt and reductions in long-term debt. Preferred
stock dividend requirements of the subsidiaries also decreased in
both comparative periods reflecting preferred stock redemptions in
November 1995 and the first half of 1996.
FINANCIAL CONDITION
Total plant and property additions including capital leases for
the first nine months were $466 million.
During the first nine months of 1996 subsidiaries issued $410
million principal amount of long-term debt at interest rates
ranging from 6-3/8% to 8-1/4%; retired $588 million principal
amount of long-term debt with interest rates ranging from 5% to
10.78%; redeemed 375,000 shares of $100 par value cumulative
preferred stock at 9.5% and 7.08% and decreased short-term debt by
$90 million.
AEP GENERATING COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
OPERATING REVENUES . . . . . . . . . . . $56,821 $58,916 $169,618 $172,910
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . 23,701 25,422 68,969 74,062
Rent - Rockport Plant Unit 2 . . . . . 17,070 17,070 51,218 49,689
Other Operation. . . . . . . . . . . . 3,036 2,944 9,147 8,621
Maintenance. . . . . . . . . . . . . . 3,154 2,618 10,530 8,959
Depreciation . . . . . . . . . . . . . 5,413 5,421 16,239 16,255
Taxes Other Than Federal Income Taxes. 821 897 2,703 2,175
Federal Income Taxes . . . . . . . . . 987 979 2,924 2,466
TOTAL OPERATING EXPENSES . . . 54,182 55,351 161,730 162,227
OPERATING INCOME . . . . . . . . . . . . 2,639 3,565 7,888 10,683
NONOPERATING INCOME. . . . . . . . . . . 1,018 1,012 2,642 2,757
INCOME BEFORE INTEREST CHARGES . . . . . 3,657 4,577 10,530 13,440
INTEREST CHARGES . . . . . . . . . . . . 1,042 1,977 3,186 6,787
NET INCOME . . . . . . . . . . . . . . . $ 2,615 $ 2,600 $ 7,344 $ 6,653
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . $2,184 $4,321 $1,955 $4,268
NET INCOME . . . . . . . . . . . . . . . 2,615 2,600 7,344 6,653
CASH DIVIDENDS DECLARED. . . . . . . . . 3,000 5,000 7,500 9,000
BALANCE AT END OF PERIOD . . . . . . . . $1,799 $1,921 $1,799 $1,921
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)
September 30, December 31,
1996 1995
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production. . . . . . . . . . . . . . . . . . . . . . . . $627,198 $627,298
General . . . . . . . . . . . . . . . . . . . . . . . . . 2,933 2,919
Construction Work in Progress . . . . . . . . . . . . . . 1,990 1,397
Total Electric Utility Plant. . . . . . . . . . . 632,121 631,614
Accumulated Depreciation. . . . . . . . . . . . . . . . . 233,330 218,055
NET ELECTRIC UTILITY PLANT. . . . . . . . . . . . 398,791 413,559
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . 2,153 22
Accounts Receivable . . . . . . . . . . . . . . . . . . . 19,356 19,028
Fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . 19,786 19,008
Materials and Supplies. . . . . . . . . . . . . . . . . . 4,771 4,820
Prepayments . . . . . . . . . . . . . . . . . . . . . . . 412 673
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . 46,478 43,551
REGULATORY ASSETS . . . . . . . . . . . . . . . . . . . . . 5,912 6,076
DEFERRED CHARGES. . . . . . . . . . . . . . . . . . . . . . 2,298 1,693
TOTAL . . . . . . . . . . . . . . . . . . . . . $453,479 $464,879
See Notes to Financial Statements.
AEP GENERATING COMPANY
BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
(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 . . . . . . . . . . . . . . . . . . . . . 47,235 47,735
Retained Earnings . . . . . . . . . . . . . . . . . . . . 1,799 1,955
Total Common Shareholder's Equity . . . . . . . . 50,034 50,690
Long-term Debt. . . . . . . . . . . . . . . . . . . . . . 89,550 89,538
TOTAL CAPITALIZATION. . . . . . . . . . . . . . . 139,584 140,228
OTHER NONCURRENT LIABILITIES. . . . . . . . . . . . . . . . 1,736 1,830
CURRENT LIABILITIES:
Short-term Debt - Notes Payable . . . . . . . . . . . . . - 21,725
Accounts Payable. . . . . . . . . . . . . . . . . . . . . 5,174 9,094
Taxes Accrued . . . . . . . . . . . . . . . . . . . . . . 5,198 2,997
Rent Accrued - Rockport Plant Unit 2. . . . . . . . . . . 23,427 4,963
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 2,026 4,508
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . 35,825 43,287
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2 . . . . . . . . . . . . . . . . . . 145,865 150,043
REGULATORY LIABILITIES:
Deferred Investment Tax Credits . . . . . . . . . . . . . 74,418 76,949
Amounts Due to Customers for Income Taxes . . . . . . . . 35,547 36,517
Other . . . . . . . . . . . . . . . . . . . . . . . . . . - 201
TOTAL REGULATORY LIABILITIES. . . . . . . . . . . 109,965 113,667
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . 20,504 15,824
TOTAL . . . . . . . . . . . . . . . . . . . . . $453,479 $464,879
See Notes to Financial Statements.
AEP GENERATING COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1996 1995
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 7,344 $ 6,653
Adjustments for Noncash Items:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 16,239 16,255
Deferred Federal Income Taxes. . . . . . . . . . . . . . 3,710 5,881
Deferred Investment Tax Credits. . . . . . . . . . . . . (2,531) (2,537)
Amortization of Deferred Gain on Sale
and Leaseback - Rockport Plant Unit 2. . . . . . . . . (4,178) (4,178)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable. . . . . . . . . . . . . . . . . . . (328) 184
Fuel, Materials and Supplies . . . . . . . . . . . . . . (729) 269
Accounts Payable . . . . . . . . . . . . . . . . . . . . (3,920) (1,332)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 2,201 (209)
Interest Accrued . . . . . . . . . . . . . . . . . . . . (133) (2,635)
Rent Accrued - Rockport Plant Unit 2 . . . . . . . . . . 18,464 16,937
Other (net). . . . . . . . . . . . . . . . . . . . . . . . (2,791) (3,989)
Net Cash Flows From Operating Activities . . . . . . 33,348 31,299
INVESTING ACTIVITIES - Construction Expenditures . . . . . . (1,492) (3,127)
FINANCING ACTIVITIES:
Capital Contributions Returned to Parent Company . . . . . (500) -
Issuance of Long-term Debt . . . . . . . . . . . . . . . . - 88,368
Change in Short-term Debt (net). . . . . . . . . . . . . . (21,725) 3,825
Retirement of Long-term Debt . . . . . . . . . . . . . . . - (111,347)
Dividends Paid . . . . . . . . . . . . . . . . . . . . . . (7,500) (9,000)
Net Cash Flows Used For Financing Activities . . . . (29,725) (28,154)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 2,131 18
Cash and Cash Equivalents at Beginning of Period . . . . . . 22 7
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 2,153 $ 25
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $3,009,000 and
$9,136,000 and for income taxes was $(1,374,000) and $(2,136,000) in 1996 and
1995, respectively.
See Notes to Financial Statements.
AEP GENERATING COMPANY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
GENERAL
The accompanying unaudited financial statements should be read in
conjunction with the 1995 Annual Report as incorporated in and filed with
the Form 10-K.
AEP GENERATING COMPANY
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
THIRD QUARTER 1996 vs. THIRD QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
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 was virtually unchanged for the comparative quarter and
increased $0.7 million or 10% for the comparative year-to-date period. The
increase in year-to-date net income resulted from the increased recoveries of
interest expense through the return on the other capital component of the
unit power bills as compared to 1995.
Income statement lines which changed significantly were as follows:
Increase (Decrease)
Third Quarter Year-To-Date
(in millions) % (in millions) %
Operating Revenues. . . . . $(2.1) (4) $(3.3) (2)
Fuel Expense. . . . . . . . (1.7) (7) (5.1) (7)
Rent Expense-Rockport
Plant Unit 2. . . . . . . - - 1.5 3
Other Operation Expense . . 0.1 3 0.5 6
Maintenance Expense . . . . 0.5 20 1.6 18
Taxes Other Than
Federal Income Taxes. . . (0.1) (8) 0.5 24
Federal Income Taxes. . . . - - 0.5 19
Interest Charges. . . . . . (0.9) (47) (3.6) (53)
The decrease in operating revenues for both periods reflects a decrease
in recoverable operating expenses as well as a reduction in the return on
other capital due to a decrease in interest expense on long-term debt.
A reduction in generation coupled with a decline in the average price per
ton of coal consumed caused the decrease in fuel expense. The reduction in
generation was due to reduced demand for wholesale power as customers
obtained power from lower priced sources and in the year-to-date period due
to an outage of Rockport Plant Unit 2 for planned boiler inspection and
repair. The decline in the average price per ton of coal consumed resulted
from a $1.6 million credit received in settlement of disputed coal
transportation charges.
Rent expense for Rockport Plant Unit 2 increased in the year-to-date
period due to the effect of a favorable determination by the Indiana
Department of Revenue that resulted in a reduction in rent expense in 1995.
The increase in both periods for other operation expense was due to an
increase in the FERC assessment fee.
The increase in maintenance expense during the third quarter was due to
an increase in AEP Service Corporation billings for managerial, engineering
and other professional services and a write-off of obsolete materials. The
increase in the year-to-date period was also due to boiler inspection and
repairs performed on Rockport Unit 2 during the previously mentioned outage.
Taxes other than federal income taxes increased for the year-to-date
period due to the effect of a favorable Indiana property tax accrual
adjustment recorded in the second quarter of 1995. Federal income taxes
attributable to operations increased for the comparative year-to-date period
due to an increase in pretax book income.
Interest charges declined in both periods as a result of the refinancing
of $90 million of long-term debt at lower variable interest rates and the
retirement of $20 million of long-term debt in third quarter 1995.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
OPERATING REVENUES . . . . . . . . . . . $393,797 $403,786 $1,214,656 $1,151,259
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . 82,432 98,091 263,935 270,066
Purchased Power. . . . . . . . . . . . 84,388 82,526 252,025 219,378
Other Operation. . . . . . . . . . . . 53,561 57,689 177,370 163,604
Maintenance. . . . . . . . . . . . . . 28,279 32,550 87,655 101,976
Depreciation and Amortization. . . . . 33,450 33,535 99,491 99,963
Taxes Other Than Federal Income Taxes. 29,758 29,489 90,074 88,831
Federal Income Taxes . . . . . . . . . 20,670 14,545 55,991 44,097
TOTAL OPERATING EXPENSES . . . 332,538 348,425 1,026,541 987,915
OPERATING INCOME . . . . . . . . . . . . 61,259 55,361 188,115 163,344
NONOPERATING INCOME (LOSS) . . . . . . . (240) 25 336 (4,614)
INCOME BEFORE INTEREST CHARGES . . . . . 61,019 55,386 188,451 158,730
INTEREST CHARGES . . . . . . . . . . . . 26,380 27,008 82,082 79,929
NET INCOME . . . . . . . . . . . . . . . 34,639 28,378 106,369 78,801
PREFERRED STOCK DIVIDEND REQUIREMENTS. . 4,099 4,102 12,300 12,303
EARNINGS APPLICABLE TO COMMON STOCK. . . $ 30,540 $ 24,276 $ 94,069 $ 66,498
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . $208,399 $195,165 $199,021 $206,361
NET INCOME . . . . . . . . . . . . . . . 34,639 28,378 106,369 78,801
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . 27,075 26,709 81,225 80,127
Cumulative Preferred Stock . . . . . 3,914 3,918 11,748 11,755
Capital Stock Expense. . . . . . . . . 184 184 552 548
BALANCE AT END OF PERIOD . . . . . . . . $211,865 $192,732 $211,865 $192,732
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)
September 30, December 31,
1996 1995
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $1,867,474 $1,857,621
Transmission . . . . . . . . . . . . . . . . . . . . 1,048,420 1,041,415
Distribution . . . . . . . . . . . . . . . . . . . . 1,469,249 1,409,407
General. . . . . . . . . . . . . . . . . . . . . . . 186,375 169,602
Construction Work in Progress. . . . . . . . . . . . 81,106 80,391
Total Electric Utility Plant . . . . . . . . 4,652,624 4,558,436
Accumulated Depreciation and Amortization. . . . . . 1,762,800 1,694,746
NET ELECTRIC UTILITY PLANT . . . . . . . . . 2,889,824 2,863,690
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 29,776 31,523
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 9,825 8,664
Accounts Receivable. . . . . . . . . . . . . . . . . 154,595 142,411
Allowance for Uncollectible Accounts . . . . . . . . (1,119) (2,253)
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 61,777 69,037
Materials and Supplies . . . . . . . . . . . . . . . 53,821 55,756
Accrued Utility Revenues . . . . . . . . . . . . . . 43,955 65,078
Prepayments. . . . . . . . . . . . . . . . . . . . . 14,216 8,579
TOTAL CURRENT ASSETS . . . . . . . . . . . . 337,070 347,272
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 432,945 435,352
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 40,527 57,541
TOTAL. . . . . . . . . . . . . . . . . . . $3,730,142 $3,735,378
See Notes to Consolidated Financial Statements.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
(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. . . . . . . . . . . . . . . . . . . 550,676 525,051
Retained Earnings. . . . . . . . . . . . . . . . . . 211,865 199,021
Total Common Shareholder's Equity. . . . . . 1,022,999 984,530
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . . . . 54,857 55,000
Subject to Mandatory Redemption. . . . . . . . . . 165,225 190,085
Long-term Debt . . . . . . . . . . . . . . . . . . . 1,365,637 1,278,433
TOTAL CAPITALIZATION . . . . . . . . . . . . 2,608,718 2,508,048
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 98,678 102,178
CURRENT LIABILITIES:
Cumulative Preferred Stock Due Within One Year . . . 25,007 150
Long-term Debt Due Within One Year . . . . . . . . . - 7,251
Short-term Debt. . . . . . . . . . . . . . . . . . . 20,700 125,525
Accounts Payable . . . . . . . . . . . . . . . . . . 81,815 82,224
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 35,996 48,666
Customer Deposits. . . . . . . . . . . . . . . . . . 13,800 14,411
Interest Accrued . . . . . . . . . . . . . . . . . . 31,645 19,057
Other. . . . . . . . . . . . . . . . . . . . . . . . 61,325 75,153
TOTAL CURRENT LIABILITIES. . . . . . . . . . 270,288 372,437
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 653,486 656,006
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 85,497 89,682
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 13,475 7,027
CONTINGENCIES (Note 4)
TOTAL. . . . . . . . . . . . . . . . . . . $3,730,142 $3,735,378
See Notes to Consolidated Financial Statements.
/TABLE
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1996 1995
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 106,369 $ 78,801
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . 100,471 101,123
Deferred Federal Income Taxes. . . . . . . . . . . . . . 838 (2,975)
Deferred Investment Tax Credits. . . . . . . . . . . . . (3,614) (3,645)
Provision for Rate Refunds . . . . . . . . . . . . . . . (5,547) 11,425
Storm Damage Expense Amortization (Deferrals). . . . . . (1,395) 13,184
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (13,318) (3,983)
Fuel, Materials and Supplies . . . . . . . . . . . . . . 9,195 4,560
Accrued Utility Revenues . . . . . . . . . . . . . . . . 21,123 7,162
Prepayments. . . . . . . . . . . . . . . . . . . . . . . (5,637) (7,980)
Accounts Payable . . . . . . . . . . . . . . . . . . . . (409) (6,748)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . (12,670) (188)
Interest Accrued . . . . . . . . . . . . . . . . . . . . 12,588 17,164
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 7,898 3,505
Net Cash Flows From Operating Activities . . . . . . 215,892 211,405
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (120,761) (151,498)
Proceeds from Sale of Property . . . . . . . . . . . . . . 1,546 7,284
Net Cash Flows Used For Investing Activities . . . . (119,215) (144,214)
FINANCING ACTIVITIES:
Capital Contributions from Parent Company. . . . . . . . . 25,000 30,000
Issuance of Long-term Debt . . . . . . . . . . . . . . . . 273,340 128,785
Change in Short-term Debt (net). . . . . . . . . . . . . . (104,825) (57,650)
Retirement of Cumulative Preferred Stock . . . . . . . . . (146) -
Retirement of Long-term Debt . . . . . . . . . . . . . . . (195,909) (74,950)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (81,225) (80,127)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (11,751) (11,755)
Net Cash Flows Used For Financing Activities . . . . (95,516) (65,697)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 1,161 1,494
Cash and Cash Equivalents at Beginning of Period . . . . . . 8,664 5,297
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 9,825 $ 6,791
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $67,073,000 and $60,835,000
and for income taxes was $54,583,000 and $46,449,000 in 1996 and 1995, respectively.
Noncash acquisitions under capital leases were $10,741,000 and $11,339,000 in 1996
and 1995, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial state
-ments should be read in conjunction with the 1995 Annual Report
as incorporated in and filed with the Form 10-K.
2. RATE MATTERS
Under the terms of a 1993 settlement agreement in the West
Virginia jurisdiction, the Company agreed to a 3-year base rate
freeze and suspension of the Public Service Commission of West
Virginia (WVPSC) Expanded Net Energy Cost (ENEC) recovery
mechanism until October 31, 1996. The Company has been engaged
in negotiations with the interested parties and on November 12,
1996, the parties filed a settlement agreement with the WVPSC.
Under the terms of the settlement agreement, the Company would
reduce base rates by $5 million annually, reduce the ENEC rates
by $28 million annually and not request a rate increase to
become effective prior to January 1, 2000. The proposed rate
reductions would be retroactive to November 1, 1996. During
the period rates are fixed, ENEC cost variances would be
subject to deferral accounting and a cumulative ENEC recovery
balance would be maintained. The parties agreed that
regardless of the actual balance in this cumulative recovery
balance at December 31, 1999, ratepayers will not be
responsible for any cumulative underrecovery. ENEC
overrecoveries during the annual periods through December 31,
1999 in excess of $10 million per period would be shared
equally between the Company and its ratepayers. The settlement
agreement is subject to WVPSC approval.
3. FINANCING ACTIVITIES
During the first nine months of 1996, the Company issued
two series of first mortgage bonds of $100 million each with
rates of 6-3/8% and 6.80% due in 2001 and 2006. The Company
also issued $75 million of 8-1/4% Series Junior Subordinated
Deferrable Interest Debentures due in 2026.
Also in the first nine months, eight series of long-term
debt were redeemed: seven series of first mortgage bonds
totaling $187 million with rates ranging from 7-1/2% to 9-7/8%
due 1998 through 2022 and $7 million of 6% Series Sinking Fund
Debentures due March 1996.
As a result of the early redemption of the 7-1/2% Series
First Mortgage Bonds, the restriction on the use of retained
earnings for common stock dividends was removed.
In June 1996, the Company received a $25 million cash
capital contribution from its parent which was credited to
paid-in capital.
The Company called for redemption of $25 million of its
7.40% Cumulative Preferred Stock on November 1, 1996.
Therefore the preferred stock was classified as a current
liability on the balance sheet.
4. CONTINGENCIES
The Company continues to be involved in certain matters
discussed in its 1995 Annual Report.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRD QUARTER 1996 vs. THIRD QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
RESULTS OF OPERATIONS
Net income increased $6.3 million or 22% in the third quarter
due mainly to a reduction in operating expenses. For the year-to-date
period net income increased $27.6 million or 35% mainly as a
result of weather-related demand for energy by residential,
commercial and wholesale customers and customer growth in the
residential and commercial sectors.
Income statement items which changed significantly were:
Increase (Decrease)
Third Quarter Year-to-Date
(in millions) % (in millions) %
Operating Revenues . . . . $(10.0) (2) $ 63.4 6
Fuel Expense . . . . . . . (15.7) (16) (6.1) (2)
Purchased Power Expense. . 1.9 2 32.6 15
Other Operation Expense. . (4.1) (7) 13.8 8
Maintenance Expense. . . . (4.3) (13) (14.3) (14)
Federal Income Taxes . . . 6.1 42 11.9 27
The decrease in revenues for the comparative third quarter
period was largely due to a 10% decrease in residential energy
sales reflecting a return to normal summer weather as compared with
unusually hot weather in 1995. Although the cooler summer weather
reduced the demand for wholesale energy, wholesale revenues
remained relatively unchanged as reduced sales to unaffiliated
wholesale customers were offset by increased energy supplied to the
AEP System Power Pool (Power Pool) and new wholesale energy
transactions with unaffiliated power marketers. Revenues increased
in the comparative year-to-date period primarily due to a
substantial increase in wholesale energy sales and a 3% increase in
sales to retail customers. Unseasonable weather in the first six
months of 1996 was mainly responsible for the increased energy
consumption as sales to unaffiliated utilities by the Power Pool
increased and usage by weather-sensitive residential customers rose
more than offsetting the decline in the third quarter.
Fuel expense decreased for both the comparative periods as
coal-fired generation declined. The reduction in energy demand by
retail customers in the third quarter was responsible for the
generation decrease. Increased purchases of energy from the Power
Pool to meet the increased demand for energy experienced during the
first six months of 1996 contributed to the reduction in internal
generation and accounted for the rise in purchased power expense
for the year-to-date comparative period.
Other operation expense decreased during the quarter due to the
recognition of gains on the sale of emission allowances and the
effect of a provision for severance pay recorded in 1995. In the
comparative year-to-date period the increase in other operation
expense was due to an increase in employee benefit costs and the
recognition of previously deferred research costs and capitalized
software costs in expense as a result of a final rate order from
the Virginia State Corporation Commission (Virginia SCC). These
items more than offset the aforementioned third quarter recognition
of gains on the sale of emission allowances and the effect of the
severance pay provision.
Reduced levels of maintenance activity led to a decline in the
quarter's maintenance expense. While the levels of maintenance
were reduced in the year-to-date period as well, the primary reason
for the decrease in maintenance expense was the reversal in March
1996 of a $7.9 million loss provision for deferred Virginia retail
incremental storm damage expenses recorded in March 1995. The
provision was reversed as a result of a Virginia SCC Hearing
Examiner's Report.
The increase in federal income tax expense attributable to
operations was primarily due to an increase in pre-tax operating
income in both periods and in the quarter the increase was also due
to changes in certain book/tax differences accounted for on a flow-through
basis for ratemaking and financial reporting purposes.
FINANCIAL CONDITION
Total plant and property additions including capital leases for
the first nine months of 1996 were $132 million.
During the first nine months of 1996, the Company issued two
series of first mortgage bonds of $100 million each with rates of
6-3/8% and 6.80% due in 2001 and 2006, respectively. The Company
also issued $75 million of 8-1/4% Series Junior Subordinated
Deferrable Interest Debentures due in 2026.
The proceeds of these issuances were used to redeem seven
series of first mortgage bonds totaling $187 million with rates
ranging from 7-1/2% to 9-7/8% due 1998 through 2022 and $7 million
of 6% Series Sinking Fund Debentures due March 1996. Also, short-term debt
decreased $105 million from year end.
As a result of the early redemption of the 7-1/2% Series First
Mortgage Bonds, the restriction on the use of retained earnings for
the payment of common stock dividends was removed.
In June 1996, the Company received a $25 million cash capital
contribution from its parent which was credited to paid-in capital.
The Company called for redemption of $25 million of its 7.40%
Cumulative Preferred Stock on November 1, 1996. Therefore the
preferred stock was classified as a current liability on the
balance sheet.
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
OPERATING REVENUES . . . . . . . . . . . $303,270 $310,141 $843,333 $813,311
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . 47,189 40,854 139,864 128,908
Purchased Power. . . . . . . . . . . . 47,099 51,607 130,539 124,706
Other Operation. . . . . . . . . . . . 55,609 49,630 146,617 139,233
Maintenance. . . . . . . . . . . . . . 17,053 18,082 48,385 52,071
Depreciation . . . . . . . . . . . . . 22,072 21,386 65,829 63,840
Amortization of Zimmer Plant
Phase-in Costs . . . . . . . . . . . 9,699 10,026 26,112 25,549
Taxes Other Than Federal Income Taxes. 29,985 26,740 86,180 80,932
Federal Income Taxes . . . . . . . . . 22,159 25,274 51,803 47,914
TOTAL OPERATING EXPENSES . . . 250,865 243,599 695,329 663,153
OPERATING INCOME . . . . . . . . . . . . 52,405 66,542 148,004 150,158
NONOPERATING INCOME (LOSS) . . . . . . . 1,164 197 (1,356) 2,636
INCOME BEFORE INTEREST CHARGES . . . . . 53,569 66,739 146,648 152,794
INTEREST CHARGES . . . . . . . . . . . . 18,810 19,607 59,267 59,587
NET INCOME . . . . . . . . . . . . . . . 34,759 47,132 87,381 93,207
PREFERRED STOCK DIVIDEND REQUIREMENTS. . 1,493 3,308 4,537 9,714
EARNINGS APPLICABLE TO COMMON STOCK. . . $ 33,266 $ 43,824 $ 82,844 $ 83,493
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . $ 86,019 $50,625 $ 74,320 $46,976
NET INCOME . . . . . . . . . . . . . . . 34,759 47,132 87,381 93,207
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . 18,969 17,975 56,907 53,925
Cumulative Preferred Stock . . . . . 1,422 3,203 4,266 9,609
Capital Stock Expense. . . . . . . . . 71 35 212 105
BALANCE AT END OF PERIOD . . . . . . . . $100,316 $76,544 $100,316 $76,544
The common stock of the Company is wholly owned by American Electric Power Company,Inc.
See Notes to Consolidated Financial Statements.
/TABLE
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $1,490,153 $1,481,309
Transmission . . . . . . . . . . . . . . . . . . . . 320,689 314,413
Distribution . . . . . . . . . . . . . . . . . . . . 874,568 843,228
General. . . . . . . . . . . . . . . . . . . . . . . 126,046 117,185
Construction Work in Progress. . . . . . . . . . . . 63,947 64,073
Total Electric Utility Plant . . . . . . . . 2,875,403 2,820,208
Accumulated Depreciation . . . . . . . . . . . . . . 1,004,700 953,170
NET ELECTRIC UTILITY PLANT . . . . . . . . . 1,870,703 1,867,038
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 24,389 25,950
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 13,816 10,577
Accounts Receivable (net). . . . . . . . . . . . . . 80,603 65,853
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 19,463 24,316
Materials and Supplies . . . . . . . . . . . . . . . 23,841 23,519
Accrued Utility Revenues . . . . . . . . . . . . . . 29,568 40,389
Prepayments. . . . . . . . . . . . . . . . . . . . . 30,584 32,116
TOTAL CURRENT ASSETS . . . . . . . . . . . . 197,875 196,770
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 394,845 438,005
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 20,389 66,363
TOTAL. . . . . . . . . . . . . . . . . . . $2,508,201 $2,594,126
See Notes to Consolidated Financial Statements.
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
(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. . . . . . . . . . . . . . . . . . . 574,638 574,427
Retained Earnings. . . . . . . . . . . . . . . . . . 100,316 74,320
Total Common Shareholder's Equity. . . . . . 715,980 689,773
Cumulative Preferred Stock - Subject to
Mandatory Redemption . . . . . . . . . . . . . . . 75,000 75,000
Long-term Debt . . . . . . . . . . . . . . . . . . . 897,164 990,796
TOTAL CAPITALIZATION . . . . . . . . . . . . 1,688,144 1,755,569
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 38,056 34,571
CURRENT LIABILITIES:
Preferred Stock Due Within One Year. . . . . . . . . - 7,500
Short-term Debt. . . . . . . . . . . . . . . . . . . 59,075 34,325
Accounts Payable . . . . . . . . . . . . . . . . . . 53,667 52,029
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 79,566 120,093
Interest Accrued . . . . . . . . . . . . . . . . . . 26,299 17,016
Other. . . . . . . . . . . . . . . . . . . . . . . . 26,235 30,955
TOTAL CURRENT LIABILITIES. . . . . . . . . . 244,842 261,918
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 446,988 464,413
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 58,274 61,010
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 31,897 16,645
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . $2,508,201 $2,594,126
See Notes to Consolidated Financial Statements.
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1996 1995
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 87,381 $ 93,207
Adjustments for Noncash Items:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 65,549 63,556
Deferred Federal Income Taxes. . . . . . . . . . . . . . (9,777) (510)
Deferred Investment Tax Credits. . . . . . . . . . . . . (2,736) (2,752)
Deferred Fuel Cost (net) . . . . . . . . . . . . . . . . 6,032 (7,969)
Amortization of Zimmer Plant Operating Expenses and
Carrying Charges . . . . . . . . . . . . . . . . . . . 24,539 22,244
Amortization of Deferred Property Taxes. . . . . . . . . 45,673 43,314
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (14,750) (23,733)
Fuel, Materials and Supplies . . . . . . . . . . . . . . 4,531 9,209
Accrued Utility Revenues . . . . . . . . . . . . . . . . 10,821 6,949
Accounts Payable . . . . . . . . . . . . . . . . . . . . 1,638 (8,434)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . (40,527) (48,873)
Interest Accrued . . . . . . . . . . . . . . . . . . . . 9,283 9,665
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 17,432 1,762
Net Cash Flows From Operating Activities . . . . . . 205,089 157,635
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (61,321) (74,400)
Proceeds from Sale and Leaseback Transactions and Other. . 2,624 2,922
Net Cash Flows Used For Investing Activities . . . . (58,697) (71,478)
FINANCING ACTIVITIES:
Issuance of Long-term Debt . . . . . . . . . . . . . . . . - 72,526
Change in Short-term Debt (net). . . . . . . . . . . . . . 24,750 -
Retirement of Cumulative Preferred Stock . . . . . . . . . (7,500) -
Retirement of Long-term Debt . . . . . . . . . . . . . . . (99,053) (50,000)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (56,907) (53,925)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (4,443) (9,609)
Net Cash Flows Used For Financing Activities . . . . (143,153) (41,008)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 3,239 45,149
Cash and Cash Equivalents at Beginning of Period . . . . . . 10,577 14,065
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 13,816 $ 59,214
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $47,124,000 and $46,745,000
and for income taxes was $46,943,000 and $45,117,000 in 1996 and 1995, respectively.
Noncash acquisitions under capital leases were $9,707,000 and $8,914,000 in 1996 and
1995, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements should
be read in conjunction with the 1995 Annual Report as incorporated in and
filed with the Form 10-K.
2. FINANCING ACTIVITIES
In June 1996 the Company redeemed the entire $50 million outstanding
principal amount of its 9.625% Series First Mortgage Bonds Due 2021 at
the regular redemption price of 107.22%.
In August 1996 the Company redeemed the entire $30 million
outstanding principal amount of the 9.31% Series First Mortgage Bonds Due
2001 at the regular redemption price of 102.66%.
3. CONTINGENCIES
The Company continues to be involved in certain matters discussed in
its 1995 Annual Report.
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
THIRD QUARTER 1996 vs. THIRD QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
Net income decreased 26% for the third quarter due mainly to a decrease
in retail sales as a result of milder summer weather in 1996. The 6%
decrease in year-to-date net income resulted from increased operating
expenses and a decrease in first quarter nonoperating income.
Income statement lines which changed significantly were:
Increase (Decrease)
Third Quarter Year-to-Date
(in millions) % (in millions) %
Operating Revenues. . . . . $(6.9) (2) $30.0 4
Fuel Expense. . . . . . . . 6.3 16 11.0 8 Purchased
Power Expense . . (4.5) (9) 5.8 5
Other Operation Expense . . 6.0 12 7.4 5
Maintenance Expense . . . . (1.0) (6) (3.7) (7)
Taxes Other Than
Federal Income Taxes. . . 3.2 12 5.2 6
Federal Income Taxes. . . . (3.1) (12) 3.9 8
Nonoperating Income . . . . 1.0 N.M. (4.0) N.M.
N.M. = Not Meaningful
The 2% decrease in operating revenues for the comparative third quarter
period was due mainly to a return to normal temperatures in the summer of
1996 as compared with the hot summer of 1995. Energy sales to weather-sensitive
residential customers declined 8%. Revenues from wholesale
customers decreased 12% during the third quarter of 1996 as a result of a
reduction in energy supplied to the AEP System Power Pool (Power Pool) and
reduced sales to unaffiliated wholesale customers due to decreased
weather-related demand. In the year-to-date comparative period operating
revenues rose 4% due to increased energy sales to commercial and wholesale
customers. Growth in the number of commercial customers and unseasonable weather
in the first six months of 1996 led to the increased demand. The increase
in energy sales to wholesale customers was due primarily to an increase in sales
made by the Power Pool to unaffiliated utilities as a result of the unseasonable
weather in the first six months of 1996. Energy sales to residential
customers were virtually unchanged in the year-to-date period as the effect
of unseasonable weather in the first six months of the year was offset by the
return to more normal temperatures in the third quarter of 1996.
The increase in fuel expense in both periods was due mainly to the
operation of the fuel clause adjustment mechanism whereby the amortization of
previously underecovered fuel costs resulted in an increase in fuel expense
commensurate with recovery in rates. Purchased power expense declined for
the comparative third quarter due predominantly to decreased demand from
retail customers. On a year-to-date basis purchased power expense increased
due to additional energy purchases from the Power Pool during the first half
of 1996 to supply the increased energy demands of retail and wholesale
customers.
The increase in both periods in other operation expense was due to
increased employee benefit expenses as a result of a provision recorded in
the third quarter for contributions made to an employee benefits trust fund
that are not included in base rates.
Maintenance expense decreased due mainly to the effect of workforce
reductions at the Company's power plants and reduced plant maintenance work.
Last year's maintenance expense included expenditures associated with outages
at the Conesville and Picway plants.
The increase in taxes other than federal income taxes was due primarily
to higher gross receipts taxes which increased due to higher revenues during
the assessment period and increased property taxes due to increases in the
tax base and tax rates.
A decrease in the third quarter in federal income tax expense
attributable to operations was primarily due to a decrease in pre-tax
operating income offset in part by changes in certain book/tax differences
accounted for on a flow-through basis for ratemaking and financial reporting
purposes. On a year-to-date basis federal income taxes attributable to
operations increased primarily due to changes in certain book/tax differences
accounted for on a flow-through basis and an increase in pre-tax operating
book income.
Nonoperating income declined for the comparative year-to-date period due
to after tax provisions recorded in the first quarter of $2.2 million for
certain deferred demand side management program costs and $0.9 million for
the clean-up of underground fuel storage tanks at one of the Company's
facilities.
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
OPERATING REVENUES . . . . . . . . . . . $339,847 $334,846 $993,224 $969,843
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . 59,546 53,967 176,101 173,584
Purchased Power. . . . . . . . . . . . 33,887 39,745 103,203 93,156
Other Operation. . . . . . . . . . . . 74,853 78,992 232,349 226,628
Maintenance. . . . . . . . . . . . . . 28,269 34,319 84,818 98,893
Depreciation and Amortization. . . . . 35,193 34,800 105,171 103,883
Amortization of Rockport Plant Unit 1
Phase-in Plan Deferrals. . . . . . . 3,911 3,911 11,733 11,733
Taxes Other Than Federal Income Taxes. 19,823 19,254 58,184 55,087
Federal Income Taxes . . . . . . . . . 23,242 15,458 57,094 44,782
TOTAL OPERATING EXPENSES . . . 278,724 280,446 828,653 807,746
OPERATING INCOME . . . . . . . . . . . . 61,123 54,400 164,571 162,097
NONOPERATING INCOME (LOSS) . . . . . . . (255) 736 (620) 1,387
INCOME BEFORE INTEREST CHARGES . . . . . 60,868 55,136 163,951 163,484
INTEREST CHARGES . . . . . . . . . . . . 16,322 17,732 50,131 53,912
NET INCOME . . . . . . . . . . . . . . . 44,546 37,404 113,820 109,572
PREFERRED STOCK DIVIDEND REQUIREMENTS. . 2,406 3,031 8,264 8,843
EARNINGS APPLICABLE TO COMMON STOCK. . . $ 42,140 $ 34,373 $105,556 $100,729
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . $242,269 $227,505 $235,107 $216,658
NET INCOME . . . . . . . . . . . . . . . 44,546 37,404 113,820 109,572
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . 28,127 27,713 84,381 83,139
Cumulative Preferred Stock . . . . . 2,359 2,890 7,608 8,670
Capital Stock Expense. . . . . . . . . 47 58 656 173
BALANCE AT END OF PERIOD . . . . . . . . $256,282 $234,248 $256,282 $234,248
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)
September 30, December 31,
1996 1995
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $2,518,216 $2,507,667
Transmission . . . . . . . . . . . . . . . . . . . . 877,834 867,541
Distribution . . . . . . . . . . . . . . . . . . . . 688,591 666,810
General (including nuclear fuel) . . . . . . . . . . 199,549 186,959
Construction Work in Progress. . . . . . . . . . . . 79,103 90,587
Total Electric Utility Plant . . . . . . . . 4,363,293 4,319,564
Accumulated Depreciation and Amortization. . . . . . 1,834,768 1,751,965
NET ELECTRIC UTILITY PLANT . . . . . . . . . 2,528,525 2,567,599
NUCLEAR DECOMMISSIONING AND SPENT NUCLEAR FUEL
DISPOSAL TRUST FUNDS. . . . . . . . . . . . . . . . . 466,942 433,619
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 160,729 150,994
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 8,120 13,723
Accounts Receivable (net). . . . . . . . . . . . . . 125,853 115,431
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 26,515 29,093
Materials and Supplies . . . . . . . . . . . . . . . 75,488 72,861
Accrued Utility Revenues . . . . . . . . . . . . . . 30,347 43,937
Prepayments. . . . . . . . . . . . . . . . . . . . . 9,930 10,191
TOTAL CURRENT ASSETS . . . . . . . . . . . . 276,253 285,236
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 421,381 458,525
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 22,181 32,364
TOTAL. . . . . . . . . . . . . . . . . . . $3,876,011 $3,928,337
See Notes to Consolidated Financial Statements.
/TABLE
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
(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. . . . . . . . . . . . . . . . . . . 731,214 731,102
Retained Earnings. . . . . . . . . . . . . . . . . . 256,282 235,107
Total Common Shareholder's Equity. . . . . . 1,044,080 1,022,793
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . . . . 21,977 52,000
Subject to Mandatory Redemption. . . . . . . . . . 135,000 135,000
Long-term Debt . . . . . . . . . . . . . . . . . . . 1,039,819 1,034,048
TOTAL CAPITALIZATION . . . . . . . . . . . . 2,240,876 2,243,841
OTHER NONCURRENT LIABILITIES:
Nuclear Decommissioning. . . . . . . . . . . . . . . 295,755 269,392
Other. . . . . . . . . . . . . . . . . . . . . . . . 187,683 184,103
TOTAL OTHER NONCURRENT LIABILITIES . . . . . 483,438 453,495
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . . . . - 6,053
Short-term Debt. . . . . . . . . . . . . . . . . . . 40,425 89,975
Accounts Payable . . . . . . . . . . . . . . . . . . 34,994 60,706
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 64,898 71,696
Interest Accrued . . . . . . . . . . . . . . . . . . 18,608 16,158
Rent Accrued - Rockport Plant Unit 2 . . . . . . . . 23,427 4,963
Obligations Under Capital Leases . . . . . . . . . . 33,523 31,776
Other. . . . . . . . . . . . . . . . . . . . . . . . 67,500 69,500
TOTAL CURRENT LIABILITIES. . . . . . . . . . 283,375 350,827
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 584,638 612,147
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 149,257 155,202
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2. . . . . . . . . . . . . . . . 97,052 99,832
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 37,375 12,993
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . $3,876,011 $3,928,337
See Notes to Consolidated Financial Statements.
/TABLE
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1996 1995
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 113,820 $ 109,572
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . 110,934 111,209
Amortization of Rockport Plant Unit 1
Phase-in Plan Deferrals. . . . . . . . . . . . . . . . 11,733 11,733
Deferred Federal Income Taxes. . . . . . . . . . . . . . (19,438) (11,166)
Deferred Investment Tax Credits. . . . . . . . . . . . . (5,945) (5,989)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (10,422) 2,028
Fuel, Materials and Supplies . . . . . . . . . . . . . . (49) 4,054
Accrued Utility Revenues . . . . . . . . . . . . . . . . 13,590 5,423
Accounts Payable . . . . . . . . . . . . . . . . . . . . (25,712) (11,557)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . (6,798) (16,732)
Rent Accrued - Rockport Plant Unit 2 . . . . . . . . . . 18,464 16,937
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 31,674 (17,091)
Net Cash Flows From Operating Activities . . . . . . 231,851 198,421
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (58,283) (78,957)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 979 1,151
Net Cash Flows Used For Investing Activities . . . . (57,304) (77,806)
FINANCING ACTIVITIES:
Issuance of Long-term Debt . . . . . . . . . . . . . . . . 38,579 96,819
Retirement of Cumulative Preferred Stock . . . . . . . . . (30,568) -
Retirement of Long-term Debt . . . . . . . . . . . . . . . (46,091) (101,122)
Change in Short-term Debt (net). . . . . . . . . . . . . . (49,550) (28,200)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (84,381) (83,139)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (8,139) (8,670)
Net Cash Flows Used For Financing Activities . . . . (180,150) (124,312)
Net Decrease in Cash and Cash Equivalents. . . . . . . . . . (5,603) (3,697)
Cash and Cash Equivalents at Beginning of Period . . . . . . 13,723 9,907
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 8,120 $ 6,210
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $45,635,000 and $49,511,000
and for income taxes was $87,746,000 and $75,420,000 in 1996 and 1995, respectively.
Noncash acquisitions under capital leases were $44,848,000 and $19,500,000 in 1996
and 1995, respectively. In connection with the early termination of a western coal
land sublease the Company will receive cash payments from the lessee of $30.8
million over a ten year period which has been recorded at a net present value of
$22.8 million.
See Notes to Consolidated Financial Statements.
/TABLE
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial
statements should be read in conjunction with the 1995 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 the first nine months of 1996, the Company issued $40
million of 8% Junior Subordinated Deferrable Interest
Debentures and retired $40 million of 9.50% First Mortgage
Bonds and $6 million of Sinking Fund Debentures. Additionally,
the Company retired 300,000 shares of 7.08% Cumulative
Preferred Stock, par value $100.
3. CONTINGENCIES
The Company continues to be involved in certain matters
discussed in its 1995 Annual Report.
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRD QUARTER 1996 vs. THIRD QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
RESULTS OF OPERATIONS
Net income increased $7.1 million or 19% for the comparative
quarter and $4.2 million or 4% for the comparative year-to-date
period due largely to increased wholesale revenues, a reduction in
maintenance expense and reduced financing costs due to the
refinancing at lower interest rates of long-term debt.
Operating revenues increased in the third quarter reflecting
increased wholesale sales to the AEP System Power Pool (Power Pool)
due to increased internal generation being available for sale in
1996 as one of the Company's nuclear generating units was out-of-service for
maintenance and refueling in the third quarter of 1995.
The increase in wholesale sales was partially offset by reduced
sales to weather-sensitive residential and unaffiliated wholesale
customers due to the milder summer weather in 1996 as compared with
unusually hot weather in 1995.
In the year-to-date comparative period operating revenues
increased as a result of increased wholesale and industrial sales.
Sales to the Company's non-affiliated municipal and cooperative
wholesale customers and sales by the Power Pool to unaffiliated
utilities allocated to the Company increased due mainly to colder
winter weather and unseasonable spring weather. The rise in
industrial sales can be attributed to the addition of a major new
industrial customer in late 1995.
Operating expense line items which changed significantly were:
Increase (Decrease)
Third Quarter Year-to-Date
(in millions) % (in millions) %
Fuel Expense. . . . . . . $ 5.6 10 $ 2.5 1
Purchased Power Expense . (5.9) (15) 10.0 11
Other Operation Expense . (4.1) (5) 5.7 3
Maintenance Expense . . . (6.1) (18) (14.1) (14)
Taxes Other Than Federal
Income Taxes . . . . . . 0.6 3 3.1 6
Federal Income Taxes. . . 7.8 50 12.3 27
The increase in fuel expense for the comparative third quarter
resulted from the outage related increase in availability of
nuclear generation in 1996.
Purchased power expense decreased during the quarter but
increased for the year-to-date comparative period. The reduction
in purchased power expense was due to a decline in purchases from
the Power Pool reflecting the increased availability of nuclear
generation and a reduction of purchases from unaffiliated utilities
for pass-through sales to other unaffiliated utilities. The
increase for the year-to-date comparative period reflects
additional purchases under an agreement with an affiliated company,
Ohio Valley Electric Corporation, and increased purchases from the
Power Pool to support the Company's allocated share of the
increased Power Pool wholesale transactions.
The reduction in other operation expense for the quarter
reflects the recognition of a $6.8 million gain from the sale of
pollution control emission allowances.
Maintenance expense decreased significantly in both periods as
a result of a reduction in the number of generation employees and
reduced contract labor at the Company's nuclear power plant.
The increase in taxes other than federal income taxes for the
year-to-date comparative period was the result of a favorable
accrual adjustment for Indiana real and personal property taxes
recorded in 1995.
Federal income taxes attributable to operations increased
significantly in both periods due to an increase in pre-tax
operating income and changes in certain book/tax differences
accounted for on a flow-through basis for ratemaking and financial
reporting purposes.
FINANCIAL CONDITION
Total plant and property additions including capital leases for
the year-to-date period were $104 million. During the first nine
months of 1996 short-term debt outstanding declined by $49.6
million.
During the first nine months of 1996, the Company redeemed
300,000 shares of 7.08% Cumulative Preferred Stock, par value $100,
at $101.85. Also, the Company redeemed $40 million of 9.5% First
Mortgage Bonds due 2021 and $6,053,000 of Sinking Fund Debentures
and issued $40 million of 8% Junior Subordinated Debentures due
2026.
KENTUCKY POWER COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
OPERATING REVENUES . . . . . . . . . . . . $78,499 $79,532 $245,818 $237,533
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . 16,821 15,654 58,611 55,390
Purchased Power. . . . . . . . . . . . . 23,643 24,819 68,264 67,446
Other Operation. . . . . . . . . . . . . 9,774 10,854 34,104 33,135
Maintenance. . . . . . . . . . . . . . . 7,485 7,016 22,839 20,675
Depreciation and Amortization. . . . . . 6,288 6,117 18,809 18,236
Taxes Other Than Federal Income Taxes. . 2,246 2,078 6,364 6,098
Federal Income Taxes . . . . . . . . . . 1,849 823 4,975 2,177
TOTAL OPERATING EXPENSES. . . . . 68,106 67,361 213,966 203,157
OPERATING INCOME . . . . . . . . . . . . . 10,393 12,171 31,852 34,376
NONOPERATING LOSS. . . . . . . . . . . . . (97) (57) (526) (157)
INCOME BEFORE INTEREST CHARGES . . . . . . 10,296 12,114 31,326 34,219
INTEREST CHARGES . . . . . . . . . . . . . 5,855 6,114 17,760 17,857
NET INCOME . . . . . . . . . . . . . . . . $ 4,441 $ 6,000 $ 13,566 $ 16,362
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . $88,374 $88,075 $91,381 $89,173
NET INCOME . . . . . . . . . . . . . . . . 4,441 6,000 13,566 16,362
CASH DIVIDENDS DECLARED. . . . . . . . . . 6,066 5,730 18,198 17,190
BALANCE AT END OF PERIOD . . . . . . . . . $86,749 $88,345 $86,749 $88,345
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)
September 30, December 31,
1996 1995
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $231,074 $230,054
Transmission . . . . . . . . . . . . . . . . . . . . 263,624 261,619
Distribution . . . . . . . . . . . . . . . . . . . . 317,063 313,783
General. . . . . . . . . . . . . . . . . . . . . . . 63,086 59,611
Construction Work in Progress. . . . . . . . . . . . 41,941 14,590
Total Electric Utility Plant . . . . . . . . 916,788 879,657
Accumulated Depreciation and Amortization. . . . . . 284,803 270,590
NET ELECTRIC UTILITY PLANT . . . . . . . . . 631,985 609,067
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 6,372 6,438
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 1,387 1,031
Accounts Receivable. . . . . . . . . . . . . . . . . 31,678 30,172
Allowance for Uncollectible Accounts . . . . . . . . (49) (259)
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 5,124 3,526
Materials and Supplies . . . . . . . . . . . . . . . 11,970 12,481
Accrued Utility Revenues . . . . . . . . . . . . . . 5,059 13,500
Prepayments. . . . . . . . . . . . . . . . . . . . . 1,878 1,701
TOTAL CURRENT ASSETS . . . . . . . . . . . . 57,047 62,152
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 82,552 82,388
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 7,666 12,153
TOTAL. . . . . . . . . . . . . . . . . . . $785,622 $772,198
See Notes to Financial Statements.
KENTUCKY POWER COMPANY
BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock - $50 Par Value:
Authorized - 2,000,000 Shares
Outstanding - 1,009,000 Shares . . . . . . . . . . $ 50,450 $ 50,450
Paid-in Capital. . . . . . . . . . . . . . . . . . . 88,750 78,750
Retained Earnings. . . . . . . . . . . . . . . . . . 86,749 91,381
Total Common Shareholder's Equity. . . . . . 225,949 220,581
First Mortgage Bonds . . . . . . . . . . . . . . . . 179,278 224,235
Notes Payable. . . . . . . . . . . . . . . . . . . . 75,000 -
Subordinated Debentures. . . . . . . . . . . . . . . 38,884 38,854
TOTAL CAPITALIZATION . . . . . . . . . . . . 519,111 483,670
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 17,352 15,031
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . . . . - 29,436
Short-term Debt. . . . . . . . . . . . . . . . . . . 33,250 27,050
Accounts Payable . . . . . . . . . . . . . . . . . . 14,784 21,766
Customer Deposits. . . . . . . . . . . . . . . . . . 3,454 3,704
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 9,204 7,972
Interest Accrued . . . . . . . . . . . . . . . . . . 6,442 5,853
Other. . . . . . . . . . . . . . . . . . . . . . . . 14,306 13,283
TOTAL CURRENT LIABILITIES. . . . . . . . . . 81,440 109,064
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 146,136 145,005
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 17,464 18,397
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 4,119 1,031
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . $785,622 $772,198
See Notes to Financial Statements.
KENTUCKY POWER COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1996 1995
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 13,566 $ 16,362
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . 18,864 18,291
Deferred Federal Income Taxes. . . . . . . . . . . . . . (16) (1,693)
Deferred Investment Tax Credits. . . . . . . . . . . . . (933) (943)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (1,716) (2,288)
Fuel, Materials and Supplies . . . . . . . . . . . . . . (1,087) 2,836
Accrued Utility Revenues . . . . . . . . . . . . . . . . 8,441 3,741
Accounts Payable . . . . . . . . . . . . . . . . . . . . (6,982) (651)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 1,232 (2,283)
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 9,048 (4,749)
Net Cash Flows From Operating Activities . . . . . . 40,417 28,623
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (38,561) (26,169)
Proceeds from Sales of Property. . . . . . . . . . . . . . 250 -
Net Cash Flows Used For Investing Activities . . . . (38,311) (26,169)
FINANCING ACTIVITIES:
Capital Contributions from Parent Company. . . . . . . . . 10,000 -
Issuance of Long-term Debt . . . . . . . . . . . . . . . . 74,985 38,647
Change in Short-term Debt (net). . . . . . . . . . . . . . 6,200 (23,850)
Retirement of Long-term Debt . . . . . . . . . . . . . . . (74,737) -
Dividends Paid . . . . . . . . . . . . . . . . . . . . . . (18,198) (17,190)
Net Cash Flows Used For Financing Activities . . . . (1,750) (2,393)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 356 61
Cash and Cash Equivalents at Beginning of Period . . . . . . 1,031 879
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 1,387 $ 940
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $16,920,000 and $17,126,000
and for income taxes was $4,585,000 and $4,092,000 in 1996 and 1995, respectively.
Noncash acquisitions under capital leases were $4,571,000 and $2,693,000 in 1996
and 1995, respectively.
See Notes to Financial Statements.
KENTUCKY POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited financial statements should be read in
conjunction with the 1995 Annual Report as incorporated in and filed with
the Form 10-K.
2. FINANCING ACTIVITIES
The Company received from its parent a cash capital contribution of
$10 million in March 1996 which was credited to paid-in capital. In
April 1996 the Company refinanced $45 million of 7-7/8% first mortgage
bonds due in 2002 with the proceeds of two $25 million term loan
agreements due in 1999 and 2000 at 6.42% and 6.57% annual interest rates.
The redemption of this series of first mortgage bonds removed the
restriction on the use of retained earnings for common stock dividends.
In September 1996 the Company refinanced short-term debt with a $25
million term loan agreement due in 2002 at a 7.445% annual interest rate.
3. CONTINGENCIES
The Company continues to be involved in certain matters discussed in
its 1995 Annual Report.
KENTUCKY POWER COMPANY
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
THIRD QUARTER 1996 vs. THIRD QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
Net income decreased $1.6 million or 26% in the comparative third quarter
as a result of decreased energy sales to retail customers attributable to
milder summer weather in 1996 and increased federal income tax expense.
Although operating revenues increased 3%, net income decreased $2.8 million
or 17% for the year-to-date period mainly due to increases in maintenance and
federal income tax expenses.
Income statement items that changed significantly were:
Increase (Decrease)
Third Quarter Year-To-Date
(in millions) % (in millions) %
Operating Revenues. . . . . $(1.0) (1) $8.3 3
Fuel Expense. . . . . . . . 1.2 7 3.2 6
Purchased Power Expense . . (1.2) (5) 0.8 1
Other Operation Expense . . (1.1) (10) 1.0 3
Maintenance Expense . . . . 0.5 7 2.2 10
Federal Income Taxes. . . . 1.0 125 2.8 129
For the quarter residential and commercial energy sales declined 11% and
5%, respectively, due to the decreased demand as a result of milder summer
temperatures. Although the cooler summer weather reduced the demand for
energy, wholesale revenues remained relatively unchanged as a decline in
weather-related sales to unaffiliated wholesale customers was offset by new
wholesale energy transactions with unaffiliated power marketers. Operating
revenues increased for the year-to-date period due to increased energy sales
to unaffiliated utilities by the AEP System Power Pool (Power Pool) mainly as
a result of weather-related demand in the first six months of the year.
Revenues from retail customers were unchanged as the effects of milder summer
weather largely offset the impact of colder winter and April weather and
warmer May weather.
Fuel expense rose in the quarter due to the operation of the fuel clause
adjustment mechanism partly offset by decreased generation as a result of a
scheduled boiler inspection and repair outage at Big Sandy Plant Unit 2.
Under the fuel clause adjustment mechanism the Company defers fuel expense to
the extent it varies from the allowed fuel rate. The increase in fuel
expense for the year-to-date period was mainly due to increased generation to
meet the increase demand for energy in the first six months of 1996.
The decrease in purchased power expense for the quarter resulted from
a decline in energy purchases from an affiliate under a long-term unit power
agreement, reflecting the weather related reduction in demand by retail
customers, and decreased energy purchases from unaffiliated utilities for
pass-through sales, reflecting the milder summer weather. The increase in
year-to-date purchased power expense resulted mainly from increased energy
purchases from the Power Pool as a result of increased weather-related demand
by unaffiliated utilities during the first six months of the year.
Other operation expense decreased in the quarter due to the recognition
of gains on the sale of emission allowances. In the year-to-date period
other operation expense increased due to a provision for deferred demand side
management program costs and the accrual of uncollectible accounts expense,
corporate-owned life insurance and AEP Service Corporation billings for
engineering and other professional services.
Maintenance expense rose in both comparative periods reflecting an
increased level of scheduled steam plant maintenance work at the Big Sandy
Plant.
The increase in federal income tax expense attributable to operations in
the comparative quarter and year-to-date periods was primarily due to changes
in certain book/tax differences accounted for on a flow-through basis for
ratemaking and financial reporting purposes and the completion in March 1996
of Kentucky Public Service Commission ordered amortization of deferred
federal income taxes in excess of the statutory tax rate.
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
OPERATING REVENUES . . . . . . . . . . . $483,957 $507,516 $1,438,081 $1,360,319
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . 162,606 185,612 485,358 458,591
Purchased Power. . . . . . . . . . . . 17,086 19,315 48,326 49,118
Other Operation. . . . . . . . . . . . 83,518 96,623 245,394 238,429
Maintenance. . . . . . . . . . . . . . 43,645 34,751 114,795 105,951
Depreciation and Amortization. . . . . 34,499 34,001 103,142 101,730
Taxes Other Than Federal Income Taxes. 43,214 44,312 125,949 131,466
Federal Income Taxes . . . . . . . . . 30,137 24,624 90,738 71,557
TOTAL OPERATING EXPENSES . . . 414,705 439,238 1,213,702 1,156,842
OPERATING INCOME . . . . . . . . . . . . 69,252 68,278 224,379 203,477
NONOPERATING INCOME. . . . . . . . . . . 4,338 3,886 6,600 9,295
INCOME BEFORE INTEREST CHARGES . . . . . 73,590 72,164 230,979 212,772
INTEREST CHARGES . . . . . . . . . . . . 18,670 23,356 65,574 70,424
NET INCOME . . . . . . . . . . . . . . . 54,920 48,808 165,405 142,348
PREFERRED STOCK DIVIDEND REQUIREMENTS. . 2,201 3,860 6,681 11,578
EARNINGS APPLICABLE TO COMMON STOCK. . . $ 52,719 $ 44,948 $ 158,724 $ 130,770
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . $552,605 $499,330 $518,029 $483,222
NET INCOME . . . . . . . . . . . . . . . 54,920 48,808 165,405 142,348
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . 35,714 34,857 107,142 104,571
Cumulative Preferred Stock . . . . . 2,167 3,826 6,555 11,476
Capital Stock Expense. . . . . . . . . 43 34 136 102
BALANCE AT END OF PERIOD . . . . . . . . $569,601 $509,421 $569,601 $509,421
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)
September 30, December 31,
1996 1995
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $2,544,263 $2,534,893
Transmission . . . . . . . . . . . . . . . . . . . . 814,041 798,854
Distribution . . . . . . . . . . . . . . . . . . . . 851,689 833,944
General (including mining assets). . . . . . . . . . 681,143 688,253
Construction Work in Progress. . . . . . . . . . . . 71,981 59,278
Total Electric Utility Plant . . . . . . . . 4,963,117 4,915,222
Accumulated Depreciation and Amortization. . . . . . 2,188,562 2,091,148
NET ELECTRIC UTILITY PLANT . . . . . . . . . 2,774,555 2,824,074
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 106,933 107,510
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 72,967 44,000
Accounts Receivable (net). . . . . . . . . . . . . . 212,008 199,293
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 120,157 126,952
Materials and Supplies . . . . . . . . . . . . . . . 78,476 80,468
Accrued Utility Revenues . . . . . . . . . . . . . . 32,522 40,100
Prepayments. . . . . . . . . . . . . . . . . . . . . 44,473 42,286
TOTAL CURRENT ASSETS . . . . . . . . . . . . 560,603 533,099
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 543,806 562,329
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 70,811 129,552
TOTAL. . . . . . . . . . . . . . . . . . . $4,056,708 $4,156,564
See Notes to Consolidated Financial Statements.
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
(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. . . . . . . . . . . . . . . . . . . 460,567 459,474
Retained Earnings. . . . . . . . . . . . . . . . . . 569,601 518,029
Total Common Shareholder's Equity. . . . . . 1,351,369 1,298,704
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . . . . 38,532 41,240
Subject to Mandatory Redemption. . . . . . . . . . 115,000 115,000
Long-term Debt . . . . . . . . . . . . . . . . . . . 1,002,495 1,138,425
TOTAL CAPITALIZATION . . . . . . . . . . . . 2,507,396 2,593,369
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 237,890 214,726
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . . . . 67,294 89,207
Short-term Debt. . . . . . . . . . . . . . . . . . . 83,337 9,400
Accounts Payable . . . . . . . . . . . . . . . . . . 100,676 102,580
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 84,028 161,430
Interest Accrued . . . . . . . . . . . . . . . . . . 26,311 20,807
Obligations Under Capital Leases . . . . . . . . . . 23,917 25,172
Other. . . . . . . . . . . . . . . . . . . . . . . . 77,005 80,507
TOTAL CURRENT LIABILITIES. . . . . . . . . . 462,568 489,103
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 737,801 731,959
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 47,318 49,860
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 63,735 77,547
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . $4,056,708 $4,156,564
See Notes to Consolidated Financial Statements.
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1996 1995
(in thousands)
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 165,405 $ 142,348
Adjustments for Noncash Items:
Depreciation, Depletion and Amortization . . . . . . . . 123,326 114,836
Deferred Federal Income Taxes. . . . . . . . . . . . . . 14,291 14,489
Deferred Investment Tax Credits. . . . . . . . . . . . . (2,542) (2,532)
Deferred Fuel Costs (net). . . . . . . . . . . . . . . . (8,933) (21,126)
Amortization of Deferred Property Taxes. . . . . . . . . 59,738 50,437
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (12,715) (39,285)
Fuel, Materials and Supplies . . . . . . . . . . . . . . 8,787 12,568
Accrued Utility Revenues . . . . . . . . . . . . . . . . 7,578 2,806
Prepayments. . . . . . . . . . . . . . . . . . . . . . . (2,187) (6,846)
Accounts Payable . . . . . . . . . . . . . . . . . . . . (1,904) (30,378)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . (77,402) (56,890)
Interest Accrued . . . . . . . . . . . . . . . . . . . . 5,504 7,370
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 15,526 30,155
Net Cash Flows From Operating Activities . . . . . . 294,472 217,952
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (72,288) (87,302)
Proceeds from Sale of Property and Other . . . . . . . . . 7,113 2,571
Net Cash Flows Used For Investing Activities . . . . (65,175) (84,731)
FINANCING ACTIVITIES:
Change in Short-term Debt (net). . . . . . . . . . . . . . 73,937 14,965
Retirement of Cumulative Preferred Stock . . . . . . . . . (1,752) -
Retirement of Long-term Debt . . . . . . . . . . . . . . . (158,818) (44,188)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (107,142) (104,571)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (6,555) (11,476)
Net Cash Flows Used For Financing Activities . . . . (200,330) (145,270)
Net Increase (Decrease) in Cash and Cash Equivalents . . . . 28,967 (12,049)
Cash and Cash Equivalents at Beginning of Period . . . . . . 44,000 30,700
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 72,967 $ 18,651
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $57,949,000 and $61,043,000
and for income taxes was $79,932,000 and $51,487,000 in 1996 and 1995, respectively.
Noncash acquisitions under capital leases were $19,903,000 and $25,908,000 in 1996
and 1995, respectively.
See Notes to Consolidated Financial Statements.
OHIO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial state-ments should be
read in conjunction with the 1995 Annual Report
as incorporated in and filed with the Form 10-K.
2. FINANCING ACTIVITY
During the first nine months of 1996, the Company and a
subsidiary retired three series of long-term debt at maturity:
$8 million of 5-1/8% Series Sinking Fund Debentures, $39
million of 5% Series First Mortgage Bonds and $8 million of
5.79% Notes Payable.
The Company also retired six series of long-term debt
before maturity: four series of first mortgage bonds totaling
$94 million with rates ranging from 7-5/8% to 9-7/8% and two
series of sinking fund debentures totaling $9 million with
rates of 6-5/8% and 7-7/8%.
As a result of the early redemption of the 9-7/8% Series
First Mortgage Bonds due in 2020, the restriction on the use
of retained earnings for common stock dividends was reduced
from $156.5 million to $23.9 million.
3. CONTINGENCIES
The Company continues to be involved in certain matters
discussed in the 1995 Annual Report.
OHIO POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRD QUARTER 1996 vs. THIRD QUARTER 1995
AND
YEAR-TO-DATE 1996 vs. YEAR-TO-DATE 1995
RESULTS OF OPERATIONS
Although energy sales decreased 4% in the third quarter, net
income increased $6.1 million or 13% primarily due to the effect of
a $7.2 million after-tax provision for severance pay recorded in
1995 and a reduction in interest charges. Net income increased 16%
or $23.1 million in the year-to-date period reflecting a 15%
increase in energy sales.
Income statement lines which changed significantly were:
Increase (Decrease)
Third Quarter Year-To-Date
(in millions) % (in millions) %
Operating Revenues. . . . . $(23.6) (5) $ 77.8 6
Fuel Expense. . . . . . . . (23.0) (12) 26.8 6
Other Operation Expense . . (13.1) (14) 7.0 3
Maintenance Expense . . . . 8.9 26 8.8 8
Federal Income Taxes. . . . 5.5 22 19.2 27
Interest Charges. . . . . . (4.7) (20) (4.9) (7)
Operating revenues decreased in the third quarter as a result
of decreased energy sales due predominantly to more normal
temperatures during the summer of 1996 as compared with the
unseasonably warm summer of 1995. Energy sales to weather-sensitive
residential and commercial customers declined 10% and 2%,
respectively. Sales to wholesale customers decreased 6% during the
third quarter of 1996 as a result of a reduction in energy supplied
to the AEP System Power Pool (Power Pool) reflecting the weather-related
decrease in demand for electricity by customers of the
affiliated members of the Power Pool. Energy usage by industrial
customers increased slightly during the period.
Year-to-date energy sales increased 15% primarily as a result
of a 45% increase in energy sales to wholesale customers and
increased energy sales to all major retail customer classes. The
significant rise in wholesale sales reflects an increase in energy
supplied to the Power Pool primarily due to increased weather-related demand
for electricity. The unseasonable winter weather in
the first quarter of 1996 significantly increased demand for
electricity and more than offset the decrease in sales during the
third quarter of 1996. Wholesale energy sales by the Power Pool to
unaffiliated utilities also increased largely as a result of the
weather-related demand for energy during the winter months. Retail
energy sales for the comparative nine month period rose 1%
reflecting increased usage due to the unseasonable winter weather
in 1996 and growth in the number of customers. A retail base rate
increase in March 1995 also contributed to the higher revenues in
the year-to-date period.
The decrease in fuel expense in the third quarter and the
increase in the year-to-date period was mainly due to the effect on
generation of the weather-related changes in demand.
Other operation expense declined in the third quarter primarily
due to the effect of the $11.1 million ($7.2 million after-tax)
provision for severance pay recorded in 1995. The increase in
other operation expense during the first nine months of 1996 was
mainly due to rent and other operating costs of the recently
installed Gavin Plant scrubbers and amortization, commensurate with
recovery in rates, of previously deferred Gavin scrubber expenses.
The increases in maintenance expense for both periods were
mainly due to increased boiler plant maintenance and maintenance on
the new scrubbers. Federal income tax expense attributable to
operations also increased in both periods due to an increase in
pre-tax operating income and changes in certain book/tax
differences accounted for on a flow-through basis for ratemaking
and financial reporting purposes.
Interest charges declined in both periods due to a reduction
in the average levels of long-term debt outstanding and a decrease
in commission authorized carrying charges recorded on deferred
gains on the sale of emission allowances.
FINANCIAL CONDITION
Total plant and property additions including capital leases for
the first nine months of 1996 were $93 million.
During the first nine months of 1996, the Company and a
subsidiary retired $158 million principal amount of long-term debt
with interest rates ranging from 5% to 9-7/8% and increased short-term debt by
$74 million.
As a result of the early redemption of the remaining $2.5
million outstanding balance of the 9-7/8% Series First Mortgage
Bonds due in 2020, the restriction on the use of retained earnings
for the payment of common stock dividends was reduced from $156.5
million to $23.9 million.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
American Electric Power Company, Inc. ("AEP") and Ohio Power
Company ("OPCo")
Reference is made to page 33 of the Annual Report on Form
10-K for the year ended December 31, 1995 ("1995 10-K") for a
discussion of litigation instituted by Ormet Primary Aluminum
Corporation ("Ormet"), formerly known as Ormet Corporation,
regarding the ownership of certain SO2 allowances which OPCo
received for its Kammer Plant pursuant to the Clean Air Act
Amendments of 1990. On October 23, 1996, the Fourth Circuit
issued its opinion reversing the District Court, holding that
Ormet's claim raised a federal question justifying federal juris-
diction and remanding the case for further proceedings. On
November 6, 1996, OPCo filed a Petition for Rehearing and Sugges-
tion for Rehearing in banc with the Fourth Circuit.
Item 5. Other Information.
AEP and OPCo
Reference is made to page 6 of the 1995 10-K for a discus-
sion of the contracts with Ravenswood Aluminum Corporation
("Ravenswood") and Ormet for the power requirements of their
aluminum reduction plants.
On October 3, 1996, The Public Utilities Commission of Ohio
("PUCO") approved, with some exceptions, a contract pursuant to
which OPCo will continue to provide electric service to Ravens-
wood for the period July 1, 1996, through July 31, 2003. On
November 1, 1996, OPCo and Ravenswood filed a request with the
PUCO for reconsideration of those exceptions.
On September 19, 1996, OPCo filed with the PUCO for its
approval (i) an interim agreement pursuant to which OPCo will
continue to provide electric service to Ormet for the period
December 1, 1997 through December 31, 1999 and (ii) a joint peti-
tion with an electric cooperative to transfer the right to serve
Ormet to the electric cooperative after December 31, 1999. As
part of the territorial transfer, OPCo and Ormet entered into an
agreement which contains penalties and other provisions designed
to avoid having OPCo provide involuntary back-up power to Ormet.
AEP
Reference is made to page 10 of the 1995 10-K for a discus-
sion of AEP's non-regulated business development. AEP Resources
International, Limited ("AEPRI"), through a subsidiary, has
entered into a joint venture with two Chinese companies to
develop and own two 125-megawatt coal-fired units in Henan Pro-
vince, China. AEPRI's subsidiary will hold a 70 percent interest
and the Chinese partners will hold an aggregate interest of 30
percent. The approximate cost of the facility is $172,000,000.
Both units are expected to be operational in 1999.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
AEP, Appalachian Power Company ("APCo") and OPCo
Exhibit 10 - Performance Share Incentive Plan as
Amended and Restated through November 1, 1996.
APCo, Columbus Southern Power Company ("CSPCo"), Indiana
Michigan Power Company ("I&M"), Kentucky Power Company
("KEPCo") and OPCo
Exhibit 12 - Statement re: Computation of Ratios.
AEP, AEP Generating Company ("AEGCo"), APCo, CSPCo, I&M,
KEPCo and OPCo
Exhibit 27 - Financial Data Schedule.
(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 September 30, 1996.
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.
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, Controller
and Secretary
AEP GENERATING COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
APPALACHIAN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
COLUMBUS SOUTHERN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
INDIANA MICHIGAN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
KENTUCKY POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
OHIO POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
Date: November 12, 1996
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