UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4315
ORANGE AND ROCKLAND UTILITIES, INC.
(Exact name of registrant as specified in its charter)
New York 13-1727729
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Blue Hill Plaza, Pearl River, New York 10965
(Address of principal executive offices) (Zip Code)
(914) 352-6000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (l) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
class of common stock, as of the close of the latest practicable date.
Common Stock - $5 Par Value 13,653,899 Shares
(Class) (Outstanding at April 30, 1996)
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
at March 31, 1996 and December 31, 1995 1
Consolidated Statements of Income (Unaudited)
for the three months ended March 31, 1996
and March 31, 1995 3
Consolidated Cash Flow Statements (Unaudited)
for the three months ended March 31, 1996
and March 31, 1995 4
Notes to Consolidated Financial Statements 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 14
ITEM 4. Submission of Matters to a Vote of
Security Holders 14
ITEM 6. Exhibits and Reports on Form 8-K 15
Signatures 16
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Assets
March 31, December 31,
1996 1995
(Thousands of Dollars)
Utility Plant:
Electric $ 997,526 $ 993,926
Gas 212,115 211,135
Common 56,800 56,796
Utility Plant in Service 1,266,441 1,261,857
Less accumulated depreciation 428,424 419,844
Net Utility Plant in Service 838,017 842,013
Construction work in progress 33,195 31,655
Net Utility Plant 871,212 873,668
Non-utility Property:
Non-utility property 20,154 34,376
Less accumulated depreciation, depletion and amortization 3,282 12,945
Net Non-utility Property 16,872 21,431
Current Assets:
Cash and cash equivalents 5,481 5,164
Temporary cash investments 520 1,335
Customer accounts receivable, less allowance for
uncollectible accounts of $2,312 and $2,307 70,878 61,653
Accrued utility revenue 20,521 22,198
Other accounts receivable, less allowance for
uncollectible accounts of $148 and $169 9,601 9,752
Gas marketing accounts receivable, less allowance
for uncollectible accounts of $347 and $133 42,327 51,198
Materials and supplies (at average cost) 25,990 32,668
Prepaid property taxes 22,070 20,687
Prepayments and other current assets 23,192 26,463
Total Current Assets 220,580 231,118
Deferred Debits:
Income tax recoverable in future rates 72,252 72,631
Deferred revenue taxes 15,008 15,596
Deferred pension and other postretirement benefits 10,905 10,422
IPP settlements 39,685 40,034
Unamortized debt expense (amortized over
term of securities) 11,075 11,417
Other deferred debits 33,217 32,821
Total Deferred Debits 182,142 182,921
Total $1,290,806 $1,309,138
The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Capitalization and Liabilities
March 31, December 31,
1996 1995
(Thousands of Dollars)
Capitalization:
Common stock (13,653,754 and 13,653,613 shares
outstanding) $ 68,269 $ 68,268
Premium on capital stock 133,610 133,607
Capital stock expense (6,107) (6,107)
Retained earnings 188,972 184,008
Total Common Stock Equity 384,744 379,776
Non-redeemable preferred stock (428,443 shares
outstanding) 42,844 42,844
Non-redeemable cumulative preference stock (12,440
and 12,539 shares outstanding) 405 409
Total Non-Redeemable Stock 43,249 43,253
Redeemable preferred stock (13,896 shares outstanding) 1,390 1,390
Long-term debt 359,638 359,736
Total Capitalization 789,021 784,155
Non-current Liabilities:
Reserve for claims and damages 3,685 3,848
Postretirement benefits 14,421 13,756
Pension costs 39,940 38,740
Total Non-current Liabilities 58,046 56,344
Current Liabilities:
Notes Payable and obligations due within one year 58,479 68,550
Accounts payable 48,287 62,082
Gas marketing accounts payable 32,143 44,630
Accrued Federal income and other taxes 15,940 2,050
Refundable fuel and gas costs 19,916 11,314
Refunds to customers 16,699 13,903
Other current liabilities 29,557 38,192
Total Current Liabilities 221,021 240,721
Deferred Taxes and Other:
Deferred Federal income taxes 179,981 183,396
Deferred investment tax credits 16,014 16,217
Accrued IPP settlement agreements 17,500 17,500
Other deferred credits 9,223 10,805
Total Deferred Taxes and Other 222,718 227,918
Total $1,290,806 $1,309,138
The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
Three Months
Ended March 31,
1996 1995
(Thousands of Dollars)
Operating Revenues:
Electric $108,019 $107,904
Gas 78,944 59,121
Total Utility Revenues 186,963 167,025
Diversified activities 98,709 144,782
Total Operating Revenues 285,672 311,807
Operating Expenses:
Operations:
Fuel used in electric production 7,746 18,018
Electricity purchased for resale 25,936 11,460
Gas purchased for resale 47,637 29,991
Non-utility gas marketing purchases 95,901 142,125
Other expenses of operation 34,436 36,322
Maintenance 9,754 9,471
Depreciation and amortization 8,261 9,009
Amortization of property losses 982 1,540
Taxes other than income taxes 25,857 25,224
Federal income taxes 12,004 7,917
Deferred Federal income taxes (4,339) 210
Amortization of investment tax credit (29) (29)
Total Operating Expenses 264,146 291,258
Income from Operations 21,526 20,549
Other Income and (Deductions):
Allowance for other funds used
during construction 5 11
Investigation costs - (381)
Other - net 1,034 5,039
Taxes other than income taxes (91) (438)
Federal income taxes (110) 523
Deferred Federal income taxes (172) (2,152)
Amortization of investment tax credit 174 177
Total Other Income and (Deductions) 840 2,779
Income Before Interest Charges 22,366 23,328
Interest Charges:
Interest on long-term debt 6,236 6,926
Other interest 1,357 1,201
Amortization of debt premium and expense-net 365 340
Allowance for borrowed funds used during
construction (147) (460)
Total Interest Charges 7,811 8,007
Net Income 14,555 15,321
Dividends on preferred and preference stock,
at required rates 756 784
Earnings applicable to common stock $ 13,799 $ 14,537
Avg. number of common shares outstanding (000's) 13,654 13,653
Earnings per average common share outstanding $ 1.01 $ 1.06
Dividends declared per common share outstanding $ .645 $ .64
The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Cash Flow Statements (Unaudited)
Three Months Ended
March 31,
1996 1995
(Thousands of Dollars)
Cash Flow from Operations:
Net income $14,555 $15,321
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 9,723 9,384
Deferred Federal income taxes (4,167) 2,362
Deferred investment tax credit (203) (206)
Deferred and refundable fuel and gas costs 8,602 9,099
Allowance for funds used during construction (152) (471)
Other non-cash charges 1,773 1,891
Changes in certain current assets and liabilities:
Accounts and gas marketing accounts receivable,
net and accrued utility revenues 1,474 12,057
Materials and supplies 6,420 8,226
Prepaid property taxes (1,383) (1,916)
Prepayments and other current assets 3,271 5,170
Operating and gas marketing accounts payable (26,282) (49,064)
Accrued Federal Income and other taxes 13,890 6,290
Accrued interest (2,430) (3,379)
Refunds to customers 2,796 (56)
Other current liabilities (6,099) (298)
Other-net 3,691 (4,920)
Net Cash Provided from Operations 25,479 9,490
Cash Flow from Investing Activities:
Additions to plant (6,246) (6,610)
Temporary cash investments 815 1,235
Allowance for funds used during construction 152 471
Net Cash Used in Investing Activities (5,279) (4,904)
Cash Flow from Financing Activities:
Retirements of:
Long-term debt (112) (150)
Capital lease obligations (138) (127)
Net borrowings (repayments) under
short-term debt arrangements* (10,071) 10,330
Dividends on preferred and common stock (9,562) (9,524)
Net Cash Provided From (Used in) Financing Activities (19,883) 529
Net Change in Cash and Cash Equivalents 317 5,115
Cash and Cash Equivalents at Beginning of Period 5,164 16,081
Cash and Cash Equivalents at End of Period $ 5,481 $21,196
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 9,784 $11,019
* Debt with maturities of 90 days or less.
The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of March 31, 1996, the consolidated
statements of income for the three month periods ended March 31, 1996 and
1995, and the consolidated cash flow statements for the three month
periods then ended have been prepared by Orange and Rockland Utilities,
Inc. (the "Company") without an audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position and results of operations at
March 31, 1996, and for all periods presented, have been made. The
amounts in the consolidated balance sheet as of December 31, 1995 are
from audited financial statements.
2. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
unaudited consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
December 31, 1995 Annual Report to Shareholders. The results of
operations for the period ended March 31, 1996 are not necessarily
indicative of the results of operations for the full year.
3. The consolidated financial statements include the accounts of the
Company, all subsidiaries and the Company's pro rata share of an
unincorporated joint venture. All significant intercompany balances and
transactions have been eliminated.
4. Contingencies at March 31, 1996 are substantially the same as the
contingencies described in the "Notes to Consolidated Financial
Statements" included in the Company's December 31, 1995 Annual Report to
Shareholders, which material is incorporated by reference to the
Company's December 31, 1995 Form 10-K Annual Report, except the status of
regulatory matters is updated in Part I, Item 2. under the caption
"Rate Activities".
5. Certain amounts from prior years have been reclassified to conform with
the current year presentation.
6. The Company has discontinued its gas production business, which it
operated through its subsidiary O&R Energy Development, Inc. ("ORED").
ORED sold all of its oil and gas interests effective December 1, 1995 and
has ceased operations. This will not have a material effect on the
Company's results of operations.
7. In March 1995, the Financial Accounting Standards Board issued SFAS
No. 121, "Accounting for Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of". This Statement imposes criteria for the
continued recognition of regulatory assets by requiring that such assets
be probable of future recovery at each balance sheet date. The Company
adopted this standard on January 1, 1996. Based on the current
regulatory structure in which the Company operates, the adoption did not
have any effect on the financial position or results of operations of the
Company. This conclusion may change in the future as competitive factors
influence wholesale and retail pricing in this industry.
8. The Internal Revenue Service ("IRS") has completed their examination of
the Company's tax returns for 1990, 1991 and 1992. The Company and IRS
have agreed, during the second quarter, to an assessment for a tax
deficiency of approximately $1.7 million plus interest, which primarily
relates to the misuse and misappropriation of Company funds during this
period. After offsetting the assessment with established reserves and
other related items, this settlement will have a minimal effect on the
operating results of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition:
Financial Performance
The Company's consolidated earnings per average common share outstanding for
the first quarter of 1996 were $1.01 as compared to $1.06 for the first
quarter of 1995. Fluctuations within the components of earnings are discussed
in the "Results of Operations". The average number of common shares
outstanding were 13.7 million for the first quarters of both 1996 and 1995.
The current quarterly dividend rate of $.645 is equivalent to an annual
dividend rate of $2.58 per share. Dividends declared during the twelve months
ended March 31, 1996 amounted to $2.575 with a dividend payout ratio of
101.57% as compared to $2.55 a year ago with a payout ratio of 98.46%.
The return on average common equity for the twelve months ended March 31, 1996
was 9.16% as compared to 9.33% for the twelve months ended March 31, 1995.
Capital Resources and Liquidity
At March 31, 1996, the Company and its utility subsidiaries had unsecured bank
lines of credit totaling $67.5 million. The Company may borrow under the
lines of credit through the issuance of promissory notes to the banks. The
Company, however, utilizes such lines of credit to fully support commercial
paper borrowings. The aggregate amount of borrowings through the issuance of
promissory notes and commercial paper cannot exceed the aggregate lines of
credit. In addition, non-utility lines of credit amounted to $20.0 million at
March 31, 1996, and the non-utility subsidiaries may undertake short-term
borrowings or make short-term investments. The average daily balance of
short-term borrowings for the three months ended March 31, 1996 amounted to
$61.7 million at an effective interest rate of 5.8% as compared to $38.6
million at an effective interest rate of 6.4% for the same period of 1995.
The level of temporary cash investments for the three months ended March 31,
1996 decreased to an average daily balance of $1.5 million at an effective
interest rate of 5.2% from $17.1 million at an effective interest rate of
5.8% for the same period of 1995.
The New York Public Service Commission ("NYPSC") has authorized the Company to
issue up to 750,000 shares of common stock under its Dividend Reinvestment and
Stock Purchase Plan ("DRP") and its Employee Stock Purchase and Dividend
Reinvestment Plan ("ESPP"). At the option of the Company, however, common
stock used to satisfy the requirements of the DRP and ESPP may be purchased on
the open market. Effective November 1, 1994, common stock needed to satisfy
the DRP and ESPP requirements is being purchased on the open market.
Rate Activities
New York
Gas:
On January 16, 1992, the Company filed an application for an increase in gas
rates with the NYPSC. The Settlement Agreement in that case, which was
approved by the NYPSC on September 30, 1992 provided, among other things, for
multi-year rate adjustments through 1996 and for certain gas incentives. The
second adjustment to gas rates under the Settlement Agreement, which amounted
to an increase of $3.8 million or 2.5%, was to become effective on January 1,
1994. As a result of the ongoing investigation of alleged financial
improprieties, however, the increase was first extended to June 30, 1994 and
then further extended to December 30, 1994. On November 4, 1994, the NYPSC
issued an Order terminating the Settlement Agreement effective December 31,
1994. The Order denies the Company the opportunity for rate adjustments in
the third and fourth years (1995 and 1996) of the four-year Settlement
Agreement. However, the Order authorizes the Company to defer the second-
stage rate adjustments and all previously authorized reconciliations
pertaining to periods prior to December 31, 1994, pending review and audit by
the NYPSC Staff and the conclusion of the NYPSC's investigation of alleged
financial improprieties. In addition, on February 7, 1995, the Accounting and
Finance Division of the NYPSC issued an interpretation of the November 4, 1994
termination order which stated that the gas incentive mechanism related to the
attainment of certain goals is no longer available. The Company did not
contest this interpretation.
On October 2, 1995, the Company, the NYPSC Staff and the New York State
Consumer Protection Board ("CPB"), reached a settlement which resolves all
outstanding issues relating to the NYPSC investigation of alleged financial
improprieties as described below. The settlement provides for, among other
things, the cancellation of the second stage gas base rate increase discussed
above. All deferred balances resulting from expense reconciliations and
deferral of the second stage rate adjustment are to be offset with an equal
amount of deferred credits resulting from certain changes approved as part of
the original multi-year rate plan. In addition, the settlement provides for
the recognition in gas rates of the change in accounting required by SFAS 106
- - Employer Accounting for Postretirement Benefits Other Than Pensions. The
annual cost increase due to gas operations as a result of SFAS 106 will be
offset by an equal amount of previously deferred credits. On January 25,
1996, the Administrative Law Judge ("ALJ") recommended approval of the
settlement. On May 3, 1996 the NYPSC issued an order approving the
settlement.
Electric:
On June 10, 1994, the NYPSC issued an Order (the "June Order") which
terminated the Company's January 1993 electric rate increase application. The
June Order provided, among other things, for a reduction in the threshold for
measuring excess earnings from 12.0% to 10.6% effective retroactively to
January 1, 1994. All earnings in excess of 10.6% were to be deferred for
future disposition pending the conclusion of the ongoing investigation.
On September 19, 1994, the Company filed an appeal with the Supreme Court of
New York challenging the legality of the June Order. The appeal argued that
by changing the excess earnings threshold from 12.0% to 10.6% for the first
six months of 1994, the NYPSC engaged in retroactive ratemaking. The appeal
also argued that there was no evidence in the record to support a
determination that the cost of equity was 10.6%. This appeal was withdrawn
pursuant to a Stipulation approved by the NYPSC on August 1, 1995, as
described below.
On February 17, 1995, O&R submitted a compliance filing regarding the
operation of the Revenue Decoupling Mechanism ("RDM"). The filing included a
proposal to reduce the RDM Adjustment Factor from $7.7 million to $0 effective
May 1, 1995 reflecting the completion of the recovery of an RDM
undercollection applicable to the year 1993. This equates to a 2.3% annual
reduction in revenues. In addition, the filing requested that a net RDM
overcollection of $0.7 million for the year 1994 be retained by the Company as
a future rate moderator, subject to NYPSC verification. On April 19, 1995,
the NYPSC approved the proposals, and the reduction of $7.7 million in the RDM
Adjustment Factor became effective on May 1, 1995.
On May 25, 1995, the Company filed with the NYPSC for a decrease in electric
revenues of $6.1 million to be effective April 1, 1996 (Case 95-E-0491). This
equates to an overall reduction of 1.8 percent in annual retail revenues. The
filing reflects a reduction in operating expenses due to the complete recovery
of the Company's share of the Sterling Nuclear Project and other cost
reductions. The Company proposed a multi-year rate plan covering the three-
year period ending on March 31, 1999 with no base rate increases in the second
and third year of the plan. The Company proposed an overall return on capital
of 9.17% with a sharing mechanism governing any return on common equity above
11.2%.
On August 1, 1995, the NYPSC approved a Stipulation which provides for the
early implementation of the Company's proposed annual rate reduction of $6.1
million. As a result, reduced rates became effective August 1, 1995, which
produced a revenue reduction of approximately $3.8 million for the period
August 1, 1995 to March 31, 1996. The Stipulation also increased the excess
earnings threshold from 10.6% to 11.3%, with equal sharing of earnings above
11.3% between shareholders and ratepayers for the period January 1, 1995
through March 31, 1996. The Stipulation also provided that the Company would
withdraw its September 19, 1994 appeal to the Supreme Court of New York
challenging the June Order.
The revenue reduction has been offset by the deferred revenue associated
with the 1994 electric equity return in excess of 10.6% and the customers'
share of earnings under the new sharing mechanism effective January 1,
1995. On April 2, 1996, the Company, NYPSC Staff, the CPB and the Industrial
Energy Users Association ("IEUA") reached a settlement agreement which
resolves all the remaining outstanding revenue requirement issues in the
electric rate proceeding (Case 95-E-0491). Under the agreement, the Company
will reduce its annual retail revenues from electric utility service by an
additional $7.75 million, or 2.3% effective May 1, 1996. The base rate
decrease will remain effective until April 30, 1999.
For the three year term of the settlement agreement, the authorized return on
equity will be 10.4% and the Company will be permitted to retain all earnings
up to 10.9%. Earnings in excess of 10.9% will be shared equally between
customers and shareholders.
The agreement also provides for the recovery of all non-utility generator
contract termination costs over approximately a four year amortization period.
In addition, the settlement agreement contains several performance mechanisms
(related to service reliability and customer service), a service guarantee pro-
gram as well as a retail access pilot program called "PowerPickTM"(trademark).
The PowerPickTM(trademark) pilot program will allow a limited number of
customers to choose an alternative supplier of energy. The Company will
continue to provide all other services such as reliability, customer service
and billing. PowerPickTM(trademark) is designed to have a minimal impact on
shareholders and non-participating customers. The settlement agreement also
eliminates all revenue and expense reconciliation provisions of the RDM.
On May 3, 1996 the NYPSC issued an order approving the settlement agreement.
Other:
On November 10, 1994, the Company filed with the NYPSC, a quantification of
the rate-making effects of its ongoing investigation into prior financial
improprieties. The Company requested that the NYPSC approve a refund of
approximately $3.4 million to its New York electric and gas customers. That
amount is in addition to the $369,000 already refunded by the Company. This
amount was charged to operations in the fourth quarter of 1994. The NYPSC has
instituted a proceeding (Case 93-M-0849) to provide the opportunity for other
parties, including the NYPSC Staff which was conducting an independent
investigation of the Company, to be heard on this matter. On July 6, 1995,
the NYPSC issued an order stating that the issues of the amount, timing and
allocation of New York ratepayer refunds as a result of the investigation in
Case 93-M-0849 should be considered in the context of the Company's current
electric base rate case and ordered the consolidation of the two cases.
On October 2, 1995, the Company, the NYPSC Staff, the CPB and IEUA reached a
settlement which resolves all outstanding issues relating to the NYPSC
investigation of alleged financial improprieties. The settlement provides for
a total of $8.5 million in rate relief for the Company's New York customers.
The amount attributable to electric operations is $6.5 million and the amount
attributable to gas operations is $2.0 million. The full impact of the
settlement is reflected in the Company's results of operations after recording
a charge of approximately $2.8 million during the third quarter of 1995. On
January 25, 1996, the ALJ recommended approval of the settlement. On May 3,
1996 the NYPSC issued an order approving the settlement.
New Jersey
Under an agreement with the New Jersey Board of Public Utilities ("NJBPU") to
return to customers any funds found to be misappropriated or otherwise
questionable as a result of its investigation of certain Company officers and
former employees, Rockland Electric Company ("RECO"), a wholly-owned utility
subsidiary of the Company, refunded to New Jersey ratepayers $93,000 through
reductions in the applicable fuel adjustment charges in February and March
1994. In December 1994, RECO submitted a proposal to the NJBPU to refund an
additional $704,000. By order dated January 27, 1995, the NJBPU approved this
proposal and the refund was made in February 1995.
On November 3, 1993, the NJBPU commenced its periodic management audit of
RECO. The NJBPU audit included, in addition to a standard review of operating
procedures, policies and practices, a review of the posture of RECO management
regarding business ethics and a determination regarding the effect of such
events on RECO ratepayers. The audit findings are contained in a report
titled "Final Report on An Ethics Review of Rockland Electric Company" (Docket
No. EA900302-48) dated December 1, 1994. The NJBPU subsequently initiated an
examination of senior management appointments and changes to the composition
of the Company's Board of Directors and the development of an ethics program.
The results of this examination are contained in a report titled "Final Report
of an Ethics Oversight Review of Rockland Electric Company".
The final Management Audit, Ethics Review, and Oversight Ethics Review reports
were approved by the NJBPU on July 7, 1995. The Oversight Ethics Review
report acknowledges that the NJBPU has approved refunds to the Company's
New Jersey customers and generally comments favorably about the changes
instituted by the Company. On February 21, 1996, the NJBPU approved RECO's
1996 Levelized Energy Adjustment Clause ("LEAC") filing whereby RECO will pass
back an additional $482,000 of refunds related to the investigation of certain
former officers of the Company, making the total amount refunded to RECO's
customers $1,279,000. The Company believes that this is the final refund
applicable to RECO. In addition, as part of this LEAC filing, RECO has been
granted full recovery of its share of buyout costs associated with non-utility
generator contracts entered into by the Company.
QUARTERLY COMPARISON
Results of Operations:
Earnings per average common share outstanding for the first quarter of 1996
amounted to $1.01 per share as compared to $1.06 per share for the first
quarter of 1995.
While the Company experienced improvements in this quarter's utility and
diversified operations, the lower earnings result from the impact of the gain
realized on the formation of NORSTAR Holdings, Inc. ("NORSTAR") which was
reflected in the first quarter of 1995.
Electric and Gas Revenues
Electric and gas operating revenues, including fuel cost and purchased gas
cost recoveries, increased by $19.9 million in the first quarter of 1996 as
compared to the same quarter of 1995.
Electric operating revenues during the current quarter were $108.0 million as
compared to $107.9 million for the first quarter of 1995, an increase of $0.1
million. Revenues were increased by $7.8 million as a result of increased
sales volume changes of $4.0 million and fuel cost recoveries of $3.8 million.
This was offset by price changes of $1.5 million and regulatory
reconciliations, including the RDM revenue target reconciliation, of $6.2
million.
Actual total sales of electric energy to retail customers during the first
quarter of 1996 were 1,128,698 megawatt hours ("Mwh"), compared with 1,072,163
Mwh during the comparable period a year ago. This increase is attributable to
increased usage and average number of customers when compared to the same
period a year ago. Before reflecting the effect of the RDM revenues in the
Company's New York jurisdiction, electric revenues associated with these sales
were $111.6 million during the current quarter compared to $105.2 million
during the first quarter of 1995, an increase of $6.4 million.
New York electric revenue targets under the Company's RDM, as established in a
base rate case, net of fuel and taxes, amounted to $46.9 million for the first
quarter of 1996. In accordance with RDM procedures, deviations between
revenue targets and actual sales revenue are either recovered from or returned
to customers. The variation between the target revenue and the Company's
actual sales revenue of $50.3 million for the first quarter of 1996 was $3.4
million, which was recorded as a reduction to revenues. In the first quarter
of 1995, the Company recorded $.1 million as a reduction to revenue.
Pending the final NYPSC decision on the settlement agreement, which is
expected in early May 1996, the Company anticipates elimination of all revenue
and expense reconciliation provisions of the RDM. Reference is made to the
information contained under the caption "Rate Activities" in this Part I, Item
2, Management's Discussion and Analysis of Financial Condition and Results of
Operations, of this Quarterly Report on Form 10-Q.
Gas operating revenues during the quarter were $78.9 million compared to $59.1
million for the first quarter of 1995, an increase of $19.8 million. Revenues
were increased by gas cost recoveries of $14.5 million and sales volume
changes of $6.6 million. This was offset by price changes of $1.3 million.
Gas sales to firm customers during the first quarter of 1996 totaled 9,943
million cubic feet ("Mmcf"), compared with 8,802 Mmcf during the same period a
year ago. Gas revenues from firm customers were $72.8 million, compared with
$56.1 million in the first quarter of 1995.
Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas
Marketing
The cost of fuel used in the production of electricity and purchased
electricity costs increased by $4.2 million during the first quarter of 1996
when compared to the same quarter of 1995. This increase reflects the
increase in the cost of fuel and purchased power as well as increased demand.
Purchased gas costs for utility operations were $47.6 million in the first
quarter of 1996 compared to $30.0 million in 1995, an increase of $17.6
million. This increase in gas costs is attributable to the volume of gas
purchased for resale and higher price.
Other Operating and Maintenance Expenses
The Company's total operating and maintenance expenses excluding fuel,
purchased power and gas purchased for resale for the first quarter, decreased
by $2.7 million compared with the same period in 1995. The decrease in
expenses associated with utility operating expenses amounted to $2.5 million.
The change in diversified operation and maintenance expenses was a decrease of
$.2 million.
The decrease in other utility operation and maintenance expense is the result
of a decrease in operation expenses of $2.1 million, of which $.7 million is
attributable to Demand Side Management costs, a decrease in depreciation and
amortization of $.9 million and a decrease in Federal income taxes of $.4
million. These decreases were offset by increases in maintenance expense of
$.3 million and other taxes of $.6 million.
Diversified Activities
The Company's diversified activities consist of gas marketing and land
development businesses conducted by wholly owned non-utility subsidiaries.
Revenues from diversified activities decreased by $46.1 million for the first
quarter of 1996 as compared to the same quarter of 1995. The decrease in
operating expenses for all diversified activities of $46.4 million is the
result of decreased gas purchases of $46.2 million and by decreased operation
expenses of $.2 million. The primary reason for the decrease in revenues and
gas purchases is a result of restructuring the gas marketing business from
large volume, low margin, wholesale customers towards securing higher margin
retail customers.
Other Income, Deductions and Interest Charges - Net
Other income, net of interest charges and other deductions, decreased by $1.7
million during the first quarter of 1996 when compared to the same quarter of
1995. The decrease reflects the impact of the gain realized on the formation
of NORSTAR in the first quarter of 1995 which amounted to $2.9 million,
somewhat offset by decreases in interest charges of $.5 million and
investigation charges of $.4 million.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Regulatory Matters
Reference is made to the information contained under the caption
"Rate Activities" in Part I, Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations, of this Quarterly Report on
Form 10-Q for background on the Company's electric base rate case filed with
the NYPSC (Case 95-E-0491) on May 25, 1995.
Item 4. Submission of Matters to a Vote of Security Holders:
(a) The Company's Annual Meeting of Shareholders was held on April 10,
1996.
(b) The following directors were elected at the Annual Meeting of
Shareholders on April 10, 1996: Jon F. Hanson was elected for a one-
year term expiring at the Annual Meeting of Shareholders in 1997,
and Ralph M. Baruch, Michael J. Del Giudice and Frederic V. Salerno
were elected for three-year terms expiring at the Annual Meeting of
Shareholders in 1999. The following Directors have continued in
office after the meeting: J. Fletcher Creamer, James F. O'Grady,
Jr., Kenneth D. McPherson, D. Louis Peoples, Linda C. Taliaferro and
H. Kent Vanderhoef.
(c) The following matters were submitted to a vote of security holders
at the Company's Annual Meeting of Shareholders held on April 10,
1996:
1. The Company's nominees for election as Directors were elected by
the following vote:
Shares Shares Broker
For Withheld Non-Votes
Jon F. Hanson 11,291,978 225,261 N/A
Ralph M. Baruch 11,212,931 304,308 N/A
Michael J. Del Giudice 11,253,140 264,099 N/A
Frederic V. Salerno 11,267,311 249,928 N/A
2. A proposal to appoint the firm of Arthur Andersen LLP, independent
public accountants, to audit the books, records and accounts of
the Company and its subsidiaries for the year 1996 was approved by
the following vote:
Shares Shares Shares Broker
For Against Abstaining Non-Votes
11,100,422 143,461 273,356 N/A
3. A proposal to amend Article Second of the Company's Certificate of
Incorporation to increase the number of shares of authorized
Common Stock of the Company to 50,000,000 shares was approved by
the following vote:
Shares Shares Shares Broker
For Against Abstaining Non-Votes
9,238,288 1,887,662 390,606 683
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.3 Certificate of Amendment of the Certificate of
Incorporation dated April 11, 1996.
3.4 Restated Certificate of Incorporation dated May 7, 1996.
(b) Reports on Form 8-K
None.
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.
ORANGE AND ROCKLAND UTILITIES, INC.
(Registrant)
Date: May 13, 1996 By ROBERT J. MCBENNETT
Robert J. McBennett
Treasurer
Date: May 13, 1996 By EDWARD M. MCKENNA
Edward M. McKenna
Controller