Exhibit 13
Setting The Direction
(see appendix for artwork description)
Our People Making It Happen
(see appendix for photo description)
Neighbors Working Together
(see appendix for artwork description)
1993 Annual Report
(see appendix for artwork description)
Performing Responsibly
[cover]
DPL Inc.
DPL Inc. was formed in 1986 as a holding company. Its principal
subsidiary is The Dayton Power and Light Company ("DP&L"). DP&L sells
electricity and natural gas to residential, commercial, industrial and
governmental customers in a 6,000 square mile area of West Central
Ohio, and employs over 3,100 people. Electricity for DP&L's 24 county
service area is generated at eight power plants and is distributed to
464,000 retail customers. On a wholesale basis, electric energy is
supplied to 12 municipalities. Natural gas service is provided to
286,000 customers in 16 counties. DP&L also provides steam service to
200 customers in downtown Dayton for heating and industrial processing.
The corporate offices of DPL Inc. are located at Courthouse Plaza
Southwest, Dayton, Ohio 45402 (513) 224-6000
DP&L Service Area
(see appendix for description of artwork)
About This Report
The interests of shareholders, employees and the community are all
interrelated. These relationships are guided by the Board of Directors
and Management setting the direction and creating the strategies.
Those strategies are fulfilled by our employees making it happen and
working together with the community. Performing responsibly in all
these areas leads to greater value for the shareholder.
Contents
Setting The Direction..........................2-5
Our People Making It Happen....................6-9
Neighbors Working Together...................10-12
Financial Review..........................13,15-16
Financial & Statistical Summary.................14
Financial Statements & Notes.................17-27
Corporate Information...........................28
[inside cover]
FINANCIAL AND OPERATING HIGHLIGHTS
1993 1992 % change
- -------------------------------------------------------------------------------------------------------
Financial Performance:
Return on shareholders' equity . . . . . . . . . . . . . . % 13.7 13.0
Earnings per share of common stock . . . . . . . . . . . . $ 1.42 1.34 6
Dividends paid per share . . . . . . . . . . . . . . . . . $ 1.12 1.08 4
Return on total capital . . . . . . . . . . . . . . . . . . % 11.0 11.2
Market value per share at December 31 . . . . . . . . . . . $ 20-5/8 19-3/4 4
Book value per share at December 31 . . . . . . . . . . . . $ 10.51 9.75 8
Total electric and natural gas revenues (millions). . . . . $ 1,146.4 1,013.1 13
Taxes per share . . . . . . . . . . . . . . . . . . . . . . $ 1.95 1.72 13
Number of common shareholders . . . . . . . . . . . . . . . 53,275 54,023 (1)
Cash provided by operating activities (millions) . . . . . $ 235.3 173.3 36
First Mortgage Bond Ratings:
Duff & Phelps, Inc. . . . . . . . . . . . . . . . . . . . AA- A+
Moody's Investors Service . . . . . . . . . . . . . . . . A2 A2
Standard & Poor's Corporation . . . . . . . . . . . . . . A A
Capital Investment Performance:
Construction additions (millions) . . . . . . . . . . . . . $ 88.9 59.0 51
Construction expenditures paid from
internal funds . . . . . . . . . . . . . . . . . . . . . % 100 100
DP&L Operating Performance:
Electric--
Average price per kWh-retail and
wholesale customers (calendar year) . . . . . . . . cents 6.07 5.69 7
Fuel efficiency--
Heat rate--Btu per kWh . . . . . . . . . . . . . . . 9,793 9,766 -
Industry average . . . . . . . . . . . . . . . . . . 10,340 10,322 -
Fuel savings (millions) . . . . . . . . . . . . . . . $ 12.0 11.7 3
System peak load--MW (calendar year) . . . . . . . . . . 2,765 2,559 8
Reserve margin--capacity relative to peak load . . . . . % 9.1 17.9
Gas--
Average price per MCF--retail customers
(calendar year) . . . . . . . . . . . . . . . . . . . . $ 5.42 4.36 24
DPL Inc. 1993 Annual Report - 1
Setting
The Direction
A new era of competition, regulatory change and
business restructuring is proceeding at an accelerated
rate. As elected representatives of all shareholders,
your Board of Directors will continue to set the
direction for the Company in this rapidly changing
environment. The corporate governance process,
established more than a decade ago, defines the
Company's long-term business strategy that ensures a
fair rate of return for our shareholders, while
achieving industry-leading productivity and quality
service for our customers.
DPL Inc.'s Board of Directors has the primary responsibility of ensuring
the long-term success of the corporation and balancing the needs of both the
shareholders and customers. This is accomplished through the well-defined
structure of the committees highlighted below, as well as the high level of
commitment that each board member has to help shape the right decisions and to
take the necessary actions. The strong, independent composition of the Board
and the diversity of its members provide the leadership that keeps DP&L's
performance at the forefront of the industry.
Finance and Audit Review Committee
DPL Inc.'s actions have resulted in a solid financial foundation and
industry-leading financial performance in 1993. The Finance and Audit Review
Committee oversees the corporate financial plans and recommends policies and
actions that ensure these achievements. This committee also establishes the
corporate environment in relation to fiscal accountability and internal
controls. In addition, it acts as the communications link between our
independent auditors, the Board of Directors and the Company's internal
auditors.
Compensation and Management Review Committee
Development of corporate goals and reviewing the performance of officers
and key management employees at DPL Inc. is the primary focus of this
committee. Consisting entirely of
Robert J. Kegerreis
Ernie Green
Jane G. Haley
James F. Dicke, II
DPL Inc. 1993 Annual Report - 2
outside, non-employee members of the Board of Directors, this committee
establishes the overall compensation plans for officers and directors,
including performance-based incentive plans.
Executive Committee
Setting the direction for the Company's long-range strategic planning and
executive management development are the critical functions of the Executive
Committee. This committee is also involved in developing the organizational
structure to best achieve corporate objectives. Members are also on standby--
ready to respond immediately in the event of an emergency that requires
immediate action.
The non-employee members of this committee form the nominating committee
for the Board of Directors. The committee identifies and screens candidates
with the best overall qualifications and accomplishments. Selection is made
without regard to race, gender or religious affiliation and on the basis of the
individual's ability to make a significant contribution to the responsible and
profitable conduct of DPL Inc.'s business.
Community and External Relations Committee of The Dayton Power and Light
Company
Ensuring that the proper relationships between the Company and its many
constituents-- shareholders, customers, governmental agencies, elected
officials and the media-- remain strong is the key role of the Community and
External Relations Committee. With DP&L's continuing focus on customer
service, this committee plays a vital role in establishing new directions and
customer programs. In 1993, two new economic development programs and a
number of new scholarship programs were approved, further enhancing the
customer and community efforts of the Company.
Burnell R. Roberts
Thomas J. Danis
W August Hillenbrand
Directors
Thomas J. Danis (1)
Formerly Chairman and Chief Executive Officer,
The Danis Companies, Dayton, Ohio
James F. Dicke, II (2) (3)
President, Crown Equipment Corporation,
New Bremen, Ohio
Peter H. Forster (1) (3) (4)
Chairman, President and Chief Executive Officer, DPL Inc.
Chairman, DP&L, Dayton, Ohio
Ernie Green (1) (4)
President and Chief Executive Officer,
Ernie Green Industries, Dayton, Ohio
Jane G. Haley (1) (4)
President, Gosiger Inc., Dayton, Ohio
Allen M. Hill (1) (4)
President and Chief Executive Officer,
DP&L, Dayton, Ohio
W August Hillenbrand (1) (4)
President and Chief Executive Officer,
Hillenbrand Industries, Batesville, Indiana
Robert J. Kegerreis (1) (2) (3)
President Emeritus, Wright State University,
Dayton, Ohio
Burnell R. Roberts (2) (3)
Formerly Chairman and Chief Executive Officer,
The Mead Corporation, Dayton, Ohio
All Directors of DPL Inc. are also Directors of DP&L.
1993 Committee Assignments:
DPL Inc. - Finance and Audit Review (1)
Compensation and Management Review (2)
Executive (3)
DP&L - Community and External Relations (4)
DPL Inc. 1993 Annual Report - 3
Creating
The Strategies:
DPL Inc.'s management challenge is to maintain our position as a
Company which represents a low risk financial investment for our
shareholders in an increasingly competitive and higher risk industry
while providing superior total returns.
Peter H. Forster Allen M. Hill
Chairman & CEO, DPL Inc. President & CEO, DP&L
(see appendix for photo (see appendix for photo
description) description)
To Our Shareholders:
DPL Inc. stands uniquely positioned as one of the top energy companies in
the nation, dedicated and prepared to meet the challenges of the future. In
1993, contributions from our employees in every area combined to build on the
strong foundation to position your Company as a major competitive force in a
changing energy environment.
Industry leading financial performance set new records in 1993. DPL Inc.
achieved solid financial results in this year of unprecedented, industry-wide
change. Earnings improved to $1.42 per share, from $1.34 per share in 1992.
Return on shareholders' equity was 13.7%. Our market-to-book ratio of 196% is
among the top ten in the nation for energy companies, demonstrating exceptional
value. And, the price of DPL Inc. common stock reached an all-time high, with
total return, including reinvested dividends, of 160% over the last five
years. This compares to an industry average return of less than 70%.
In February, we demonstrated our commitment to provide the best current
return for you, our shareholders, by increasing the annual dividend by 5.4%, or
6 cents per share, representing the seventh annual increase in the last eight
years. Cash flow is expected to continue to improve over the next several
years, with our modest capital program and improved earnings quality. Earnings
and dividends are expected to increase as the economy in West Central Ohio
grows and we continue to hold the line on costs.
For the second consecutive year, the credit rating of The Dayton Power and
Light Company was upgraded in an industry that saw many downgrades in 1993.
The senior debt is now rated "AA-" by Duff & Phelps. This is a return to a
level of credit worthiness last achieved by DP&L over twenty years ago. DP&L
is one of only a handful of utilities whose debt ratings are trending upward in
this new, more competitive business environment.
In 1993, DP&L completed the largest financing program in its history. More
than 75% of the Company's one billion dollars of outstanding long-term debt was
affected. The program reduced the average cost of long-term debt to just under
8.0%, representing savings of approximately $8 million per year for many years
to come. Future financial risk was also minimized by the extension of average
maturities from fourteen years to nearly twenty-eight years.
DP&L received high marks in 1993 for its performance. The efficiency of
our generating plants, measured by heat rate, ranked third best in the nation
in 1992, our
DPL Inc. 1993 Annual Report - 4
highest ranking ever. Heat rate, which is the amount of energy it takes to
produce one kilowatt of electricity, was 9,793 Btu/kWh in 1993. Our efficiency
has been among the best in the industry historically, with top ten status in
nine of the last ten years.
Combined high levels of efficiency and productivity keep our energy prices
low and save customers millions of dollars every year. Over the last five
years, our performance has saved customers a combined total of more than
$145 million. In this competitive environment, operating a generating system
which is consistently reliable and efficiently managed to meet customer needs
at all times is vital to our future success. When we hit an all-time electric
usage peak of 2,765 MW last July, we demonstrated our ability to meet the
challenge and had every unit on-line to provide the necessary energy for our
customers.
In our Customer Service areas, we continue to actively manage operations
and are seeing the results of our aggressive customer programs. All of our
vital service results and comparisons reflected a successful year for our
customer service team.
Significant progress was made in 1993 to meet the energy needs of West
Central Ohio in an environmentally safe and competitively priced manner. Our
long-term energy and environmental plans were approved by the Public Utilities
Commission of Ohio and in cooperation with many other parties involved in the
proceedings. The implementation of these plans will be accomplished with lower
amounts of capital provided entirely by internally generated funds. This
strategy, in turn, will make our energy prices even more competitive.
Our efforts and planning over the last decade have built financial
strength, operational excellence and a strong commitment to customer service.
This is what differentiates DPL Inc. from the rest of an increasingly
competitive energy industry. These accomplishments will ensure a fair rate of
return for the shareholder while providing quality service and competitive
prices to every customer as we continue to build upon our strengths.
As a final note, Dr. Robert J. Kegerreis will be retiring as a Director
after the Annual Meeting of Shareholders in April. Dr. Kegerreis has served as
a Director since 1975, making significant and lasting contributions during the
most challenging and successful period of your Company's history. We offer our
sincere appreciation to Dr. Kegerreis on behalf of all of our Shareholders,
Directors, Customers and Employees and wish him well in his future endeavors.
His wisdom and leadership will be greatly missed.
PETER H. FORSTER
Peter H. Forster
Chairman & CEO,
DPL Inc.
Return On Shareholders' Equity
Percent
(see appendix for graph description)
Earnings Per Share
Dollars
(see appendix for graph description)
Dividends Per Share
Dollars
(see appendix for graph description)
Total Return--Five Year
Average Annual Return
Percent (with reinvested dividends)
(see appendix for graph description)
DPL Inc. 1993 Annual Report - 5
Our
People
Making It
Happen
Our employees are dedicated to achieve the results that are
necessary for us to compete through the balance of this decade
and beyond. Our primary goals are to remain a low cost energy
producer, provide top level quality customer service and
competitive prices, and develop and implement plans which
increase shareholder value. Through these efforts we will
achieve the financial success for you our shareholder and stand
apart as a leader in the energy industry.
Our outstanding 1993 results demonstrated the exceptional and dedicated
efforts of our employees. Rankings in the top ten nationally for the
efficiency and productivity of our generating facilities distinguishes us as
industry leaders once again.
We developed and implemented plans that successfully manage changing
regulatory and legislative requirements. Financial achievements in 1993
included a major debt refunding program that significantly reduced the cost of
debt and lessened future financial risk.
The performance of DP&L's generating facilities continues to be among the
best in the utility industry. A compelling example of our outstanding record
of successful operations is in power plant efficiency. Our system heat rate, a
measure of the amount of energy it takes to produce one kilowatt of
electricity, was 9,793 Btu/kWh, substantially better than the industry average
of 10,340 Btu/kWh. This performance ranked third in the nation, the highest
ranking ever achieved by the Company and the ninth time in the last decade that
we have been rated in the top ten. High operational standards and planning
ahead contributed to the exceptional reliability of our generating units in
1993. DP&L units achieved an equivalent forced outage rate ("EFOR") of 4.9%,
compared to the industry average of 7.2%. EFOR measures the amount of time
that an unplanned outage occurs at a generating unit when its capacity is
needed by customers.
High levels of efficiency and productivity contribute to competitive
prices. Over the last five years, performance in these areas has saved our
customers more than $145 million. In July, our customers consumed more energy
than in any single month in our history. Setting an all time peak for electric
usage of 2,765 MW, we surpassed our previous peak of 2,730 MW, set in July
1991.
Customer service continues to exceed expectations and set new standards for
success. A strong emphasis placed on superior performance in fundamental areas
is the foundation of our competitive strength. Overall customer satisfaction
with our service measured a strong 96% in 1993. Appointments kept was higher
than 99%, phones answered topped 96%, and meters read
Heat Rate
BTU/kWh
(see appendix for graph description)
DPL Inc. 1993 Annual Report - 6
was more than 94%. These results prove that we're there when our customers
need us, consistently delivering one of the best energy products to be found
anywhere.
DPL Inc. achieved its financial goals in 1993, as the West Central Ohio
economy continued to outperform Ohio and the nation as a whole. Earnings
increased to $1.42 per share. Return on shareholders' equity was 13.7% in 1993
versus 13.0% last year. Key factors included area unemployment rates that
measured consistently below 6% for the year, well below the state and the
nation, and steady growth in sales to business customers. In addition, a
return to more normal weather and careful management of costs also contributed
to our strong and improved financial results.
We will continue to make aggressive contributions to the development of our
customer base and promote the strengths of West Central Ohio. DP&L has been
successful in developing and implementing effective programs, helping to create
over 53,000 jobs since 1986. TargetSearch, a new program in 1993, assists area
communities in matching their strengths with compatible industries from all
over the country. Aimed at attracting new businesses, TargetSearch is an
effective development tool to help the communities we serve grow and prosper.
Economic development will continue to be a vital component of our long-term
competitive strategy.
WorkSmart, another new economic development program, and the first of its
kind, was also unveiled in 1993 and is designed to link energy efficiency with
job growth. With this program, DP&L business and governmental customers who
create new jobs receive a credit based on their monthly electric bill. By
creating at least ten new jobs, customers will receive a credit of up to 20% of
their electric bill. Accumulated credits can then be used to pay for projects
that increase each company's energy efficiency and productivity. Credits vary
based on the number of jobs created by both new and existing business and
governmental customers.
Over the past year we continued to strengthen the commitment of our
demand-side management ("DSM") program. This unique program is a key part of
our long-term energy resource strategy and helps us reach out to thousands of
customers to provide individualized energy services. By offering energy
conservation
Caption to photo:
Committed to providing reliable service, DP&L employees work through
potentially hazardous conditions to Make it Happen. DP&L service
restoration people provide immediate action to outages and ensure quick
response during storm situations.
(see appendix for photo description)
Caption to photo:
Company-sponsored programs encourage and promote a healthy lifestyle,
resulting in long-term benefits for employees and enhanced job performance
for our customers.
(see appendix for photo description)
DPL Inc. 1993 Annual Report - 7
programs, we're helping to inform customers about how to use energy wisely.
Since inception, our initiatives have been highly successful with over twenty
programs in place and more than 125,000 participants.
Our state-of-the-art Energy Resource Center is designed to further
complement our extensive customer programs. The Center showcases the latest in
energy saving technology. Major areas include lighting, home and business
applications and a comprehensive Energy Workshop and Resource Library. In
addition, this unique center is home to all of our DSM programs and provides
hands-on information about the best energy values. As a result, our customers
can make informed energy choices that can add to the quality and comfort of
their business and personal lifestyles and save money in the long term.
Remaining competitive and meeting customer energy requirements includes
planning for future energy requirements. DP&L's Integrated Resource Plan
("IRP"), approved by the Public Utilities Commission of Ohio ("PUCO") this
year, outlines the future mix of supply-side and customer programs. Our plans
include continuing customer energy programs, operating our generating
facilities at high levels of productivity and efficiency and adding a small
number of peaking units as needed by our customers. These new peaking units
will be clean, dual-fired, combustion turbines that can burn natural gas and
low sulfur fuel oil. Because of their small size, the units can be built
relatively quickly and brought on-line economically, providing the flexibility
needed to efficiently meet the increasing energy demands of our customers.
The Company's Clean Air Act Compliance Plan was also approved by the PUCO
this year. DP&L's least cost strategy, which is also supported by our customer
programs, includes the continued use of low sulfur coal, a practice which DP&L
began over twenty years ago. The cost impact in Phase I, which will begin
January 1, 1995, is expected to be relatively small. Contracts for low sulfur
coal are in place and should not affect prices to customers by more than 1-2%.
Capital spending will primarily be for emissions monitors and low nitrogen
oxide burner technology and will be funded internally, allowing us to maintain
our competitive price position.
DP&L also completed the nation's first full-scale testing of an
environmental technology that reduces nitrogen oxide emissions. Working with
the Department of Energy, the Ohio
DPL Inc. 1993 Annual Report - 8
Coal Development Office and eight other companies, DP&L showed that these newly
developed nitrogen oxide cell burners can cost-effectively reduce emissions
without any sacrifice of plant performance.
Significant steps were undertaken in 1993 to enhance the management of our
natural gas supply. The implementation, in 1993, of Federal Energy Regulatory
Commission Order Number 636 ("Order 636") significantly modified the structure
of the nation's interstate pipeline operations and shifted additional supply
responsibility to distribution companies such as DP&L. Through pipeline
acquisition and extensive diversification to five pipelines and over forty
natural gas supply sources, we have attained great flexibility in this new
environment. This flexibility provides the foundation for meeting the
requirements of Order 636. Supply choices, manageable exposure to transition
costs and storage provisions reduce the purchase risk of Order 636 and ensure
reliable and competitively priced natural gas for our customers.
Our new six year labor agreement further supplements the productive and
cooperative work environment at DP&L. The consultative working relationships
reinforced in this agreement continue to focus on productivity and team effort
while providing continuity to our compensation and manpower needs.
DP&L continues to strengthen its commitment to provide the finest training
possible, enabling employees to expand their knowledge and increase their skill
level. Through our Skills Enhancement Program, employees can further their
education and work toward a degree right at a DP&L work location. Working with
a local community college to offer a wide variety of educational opportunities,
this program is slated for expansion in 1994.
The people of Team DP&L demonstrate their commitment to shareholders, and
to all of West Central Ohio by giving their best, resulting in the excellent
accomplishments of 1993. It is this dedication that allows us to balance the
needs of all those we serve and to meet the challenges ahead.
Caption to photo:
DP&L's Energy Resource Center features the latest in energy saving
technologies for residential and business customers. The Commercial
Technology Center displays lighting and manufacturing choices available for
industrial applications. Kim Steel, Kyle King and Walt Hibner, Energy
Resource Center employees.
(see appendix for photo description)
Caption to photo:
Energy efficient lighting is one of the most effective ways to improve
energy value. This fluorescent bulb uses two-thirds less energy than a
standard incandescent bulb, representing real savings for residential
customers.
(see appendix for photo description)
Caption to photo:
The Meals-on-Wheels program is an example of how DP&L employees generously
offer their time to help the citizens of West Central Ohio.
(see appendix for photo description)
Caption to photo:
WorkSmart, the first program of its kind in Ohio, forms a direct
relationship between job growth and improved energy efficiency.
Beginning with a comprehensive on-site evaluation, the program includes an
energy audit and recommendations. Shaffer Manufacturing Corp. is a
manufacturer of commercial baking mixers and participates in the program to
add jobs while earning credits towards energy efficient improvements.
Pictured here are Mike Serrer, Manager of the Sidney Customer Energy Center
and Mike Shaffer, President of Shaffer Manufacturing Corp.
Available to all business and governmental customers, WorkSmart is one way
we're Working Together to make West Central Ohio stronger.
(see appendix for photo description)
Caption to graph:
Consistently high customer satisfaction ratings demonstrate our
Company-wide commitment to customer service.
Customer Satisfaction
Percent
(see appendix for graph description)
DPL Inc. 1993 Annual Report - 9
Neighbors
Working
Together
Dayton Power and Light and West Central Ohio enjoy a tradition
of partnership in finding unique solutions to difficult
challenges. Fundamental change in the energy industry has
introduced profound new challenges and opportunities. DPL Inc.
will continue to work for solutions that minimize potential
risks and increase the quality of life in West Central Ohio.
DP&L's long standing management philosophy to proactively develop
community, governmental and regulatory relationships has been a key to our
success. In the new, dynamic environment shaped by comprehensive regulatory
initiatives and competitive forces in the energy industry, successful solutions
will be reached together, and not in isolation.
The employees of Team DP&L continue to take a leadership role in responding
to the challenges of local communities throughout West Central Ohio. Over the
past year, more than 2,300 hours have been contributed to community service.
Employee participation in volunteer activities such as Meals-on-Wheels, the
United Way and the March of Dimes Walk-a-Thon and others benefit thousands of
area citizens. In addition, dozens of employees attended over 1,000 town and
village council meetings throughout our service area to make sure we are ready
to help. This type of community support is an essential part of West Central
Ohio's growth and development and strengthens the link between the Company and
all of our customers.
One of our greatest successes has been our role in the economic development
of West Central Ohio. Since 1986, DP&L has offered programs to give incentives
to our business and governmental customers who create new jobs, or to new
customers who locate in the area. This partnership with area commerce has
helped to generate over 53,000 jobs through new businesses or expansion of
existing businesses. United Retail Group, a distributor of women's clothing,
is a prime example of the level of success of these programs. In 1993 they
created over 150 jobs while participating in our Investment in Business
Program, and have plans to expand to 1,500 jobs. We now have an economy that
is widely diversified from its industrial intensive profile of the mid-1970's.
DP&L works comprehensively with large customers in the area to ensure that
their current and future energy needs will be met. Their ongoing presence is
crucial to the economic vitality of West Central Ohio and it is our goal to
support them in their own global business challenges. DP&L Energy Managers
work with each of these major customers to provide the latest in energy
technology for their business environment. This ensures that they receive the
best energy value to help them bring competitive products and services to the
market.
Wright-Patterson Air Force Base ("WPAFB") is one of the largest Air Force
bases in the world, and is an important national strategic and research site.
During the recent past, the
DPL Inc. 1993 Annual Report - 10
Air Force Logistics Command and the Systems Command were merged, resulting in
the formulation of the Air Force Materiel Command with Headquarters at WPAFB.
As a result, Dayton is the world center for Air Force research and logistics
support.
In 1993, we worked extensively with WPAFB to supply compressed natural gas
for use as a vehicular fuel. This partnership will result in fuel cost savings
for WPAFB as well as reduced emissions from the use of cleaner natural gas
vehicles.
General Motors maintains its significant presence in the West Central Ohio
area. During 1993, General Motors invested $200 million in a new clear coat
paint line at a major assembly plant in the area. They have also recently
developed a new air bag production facility just north of Dayton. As a result,
approximately 250 employees have been added to GM's Dayton-based workforce, and
GM's future participation in the Dayton economy appears solid. DP&L assisted
General Motors in 1993 in identifying and implementing numerous energy savings
opportunities through comprehensive audits and demand-side management
programs. These efforts will result in significant and ongoing savings for
General Motors.
The northern corridor of our service area continues to make strong
contributions to the area economy as well. Home to Honda facilities and many
component manufacturers, this area has already experienced exceptional growth
and the outlook remains positive. Honda's Acura Division has announced that a
new 1996 Acura model will be built in the Honda East Liberty Plant. This both
strengthens Honda's commitment to our service area and provides the opportunity
for an increase in local supplier business with Honda.
The opening of "The Mall at Fairfield Commons" (the "Mall"), a new upscale
shopping mall, offers both a real and symbolic sign of the vitality of the West
Central Ohio economy. To facilitate the opening of the Mall, DP&L teams worked
side by side over the past few years with the Mall planners and businesses to
provide the complex with comprehensive electric and natural gas services to
meet the Mall's great energy requirements. The Mall contains over 1.2 million
square feet of shopping space, representing an investment of over $100 million
and the creation of more than 3,000 jobs.
Economic growth in the area has helped individual businesses to prosper and
has led to an abundance of quality of life enhancements.
Caption to photograph:
The "Mall at Fairfield Commons" represents more than 3,000 new jobs and
enhanced retail choices for Miami Valley residents. Pat Swanke, DP&L
Research Park Energy Center Manager and Chris Lavender, Manager of
Fairfield Commons, work together to ensure that the energy requirements of
the new mall are met.
(see appendix for photo description)
Caption to artwork and photograph:
DP&L works closely with state commissions and agencies to develop plans
that provide balanced solutions to the energy challenges of the future.
(see appendix for artwork and photo description)
Caption to photographs:
Major customers in our service area include General Motors, with several
important manufacturing and assembly facilities, and Wright Patterson Air
Force Base, world center for Air Force research and logistics support.
(see appendix for photo description)
DPL Inc. 1993 Annual Report - 11
In addition to the convenience of new retail services, the cultural scene
is thriving throughout the Miami Valley. Performance centers such as the Fraze
Pavilion have brought top level music and drama attractions to our community.
Dayton Power and Light continues its partnership with the Arts groups in the
area to promote and make possible these important cultural and educational
opportunities.
An effective and productive relationship continues to exist between DP&L,
state regulatory officials and our local community representatives. This was
demonstrated in 1993 by successful agreements on the major issues involved in
our long term resource and environmental plans. The agreements represented the
combined efforts of a broad-based group of businesses, elected officials and
governmental agencies. The result of this cooperation is the best, most
cost-effective programs for our customers that will continue to provide a fair
return to our shareholders while reducing uncertainty and risk. As we move
towards future challenges and opportunities, we will work hard to continue to
enhance these relationships.
DP&L has a long-standing tradition of working with local schools, colleges
and universities in developing educational programs and providing opportunities
for area students. This tradition was further enhanced in 1993 with several
new programs. New scholarship programs were initiated at Maysville College,
and Wright State and Miami Universities, providing assistance for area students
for years to come. Our co-op program continues to be successful, highlighted
in 1993 by one of our co-op employees being named Ohio Student of the Year. In
addition, our Energy Conservation efforts assisting over 65 schools in 1993
were recognized by Ohio Governor George Voinovich.
As we look ahead to a future of rapidly increasing competitiveness, change,
and complexity, working together will be the key to getting the job done. We
remain committed to working with all of our neighbors to make West Central Ohio
a better place to work and live.
Caption to photograph:
The Fraze Pavilion exemplifies the vitality of Dayton area cultural
attractions, presenting top level entertainers and performances in a
splendid outdoor setting.
(see appendix for photo description)
Caption to artwork:
"Way-to-Go", the umbrella theme for our residential customer energy
programs, symbolizes the wide range of programs available to our customers
to help them make energy-efficient choices.
(see appendix for artwork description)
DPL Inc. 1993 Annual Report - 12
Financial Review
Average Price-Electric
Electric Sales Electric Revenues Calendar Year
GWH $ in millions cents/kWh
(see appendix (see appendix (see appendix
for graph for graph for graph
description) description) description)
Average Price-Gas
Gas Sales Gas Revenues Calendar Year
Millions of MCF $ in millions $/MCF
(see appendix (see appendix (see appendix
for graph for graph for graph
description) description) description)
Construction Costs Operating Expenses Capital Structure
$ in millions $ in millions $ in millions
(see appendix (see appendix (see appendix
for graph for graph for graph
description) description) description)
DPL Inc. 1993 Annual Report - 13
DPL Inc.
FINANCIAL AND STATISTICAL SUMMARY
1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------
For the years ended December 31,
DPL Inc.: Return on shareholders' equity . . . . . . . % 13.7 13.0 11.0 14.7 15.2
Earnings per share of common stock . . . . . $ 1.42 1.34 1.15 1.49 1.45
Dividends paid per share . . . . . . . . . . $ 1.12 1.08 1.08 1.04 0.99
Dividend payout ratio . . . . . . . . . . . % 78.9 80.6 93.9 69.8 68.3
Net income (millions) . . . . . . . . . . . $ 139.0 138.8 119.2 153.0 136.4
Utility service revenues (millions) . . . . $ 1,151.3 1,017.3 995.6 945.5 956.3
Construction additions (millions) . . . . . $ 88.9 59.0 117.4 249.2 266.4
Market value per share at December 31 . . . $ 20-5/8 19-3/4 17-1/4 12-7/8 13-1/2
DP&L: Electric sales (millions of kWh)--
Residential . . . . . . . . . . . . . . . 4,558 4,260 4,571 4,125 4,321
Commercial . . . . . . . . . . . . . . . . 3,006 2,896 2,945 2,738 2,717
Industrial . . . . . . . . . . . . . . . . 4,089 3,938 3,949 3,958 3,774
Other . . . . . . . . . . . . . . . . . . 3,023 2,960 1,850 1,807 1,772
------ ------ ------ ------ ------
Total . . . . . . . . . . . . . . . . . 14,676 14,054 13,315 12,628 12,584
Gas sales (thousands of MCF)--
Residential . . . . . . . . . . . . . . . 28,786 27,723 26,594 25,486 29,917
Commercial . . . . . . . . . . . . . . . . 8,468 8,642 8,368 8,259 9,125
Industrial . . . . . . . . . . . . . . . . 3,056 4,914 6,014 5,934 6,670
Other . . . . . . . . . . . . . . . . . . 3,171 3,402 3,187 3,076 3,347
Transportation gas delivered . . . . . . . 13,401 10,811 8,494 8,093 7,252
------ ------ ------ ------ ------
Total . . . . . . . . . . . . . . . . . 56,882 55,492 52,657 50,848 56,311
At December 31,
DPL Inc.: Book value per share . . . . . . . . . . . . $ 10.51 9.75 10.38 10.31 9.84
Total assets (millions) . . . . . . . . . . $ 3,305.0 2,976.7 2,972.7 2,914.8 2,784.8
Long-term debt and preferred stock with
mandatory redemption provisions
(millions) . . . . . . . . . . . . . . . . $ 1,132.9 990.6 1,047.1 1,055.5 1,064.0
DP&L: First mortgage bond ratings--
Duff & Phelps, Inc. . . . . . . . . . . . AA- A+ BBB+ BBB+ BBB+
Moody's Investors Service . . . . . . . . A2 A2 A3 A3 A3
Standard & Poor's Corporation . . . . . . A A BBB+ BBB+ BBB+
Number of Shareholders
DPL Inc.: Common . . . . . . . . . . . . . . . . . . . 53,275 54,023 53,846 53,030 53,197
DP&L: Preferred . . . . . . . . . . . . . . . . . 1,873 1,969 2,034 2,100 2,166
DPL Inc. 1993 Annual Report - 14
FINANCIAL REVIEW
The 1993 earnings are $1.42 per share, compared to earnings per share of
$1.34 in 1992 and $1.15 in 1991. The return on shareholders' equity was 13.7%
in 1993 compared to 13.0% in 1992 and 11.0% in 1991.
Electric revenues increased 11% in 1993 and 2% in 1992. Warm summer
temperatures contributed to the 4% sales increase. Implementation of the
second phase of the electric rate increase of 6.4% in January 1993 also
contributed to the increase in revenues. (See Financial Statement Note 2.) An
overall sales increase of 6% in 1992 reflected strong sales to other utilities
despite mild temperatures throughout the year.
Gas revenues increased 20% in 1993 due to significantly higher gas cost
rates. A 6.2% increase in base rates in March 1992 contributed to the
increased revenues. Gas sales increased by 3%. Gas revenues increased 1% in
1992 with lower gas cost rates offsetting increased weather-related sales of
5%.
In 1993, interest and other income included $6 million of interest income
associated with a federal income tax refund from the 1986-1988 audit period.
Operating and administrative expenses increased 17% in 1993 and decreased
6% in 1992. Included are redemption premiums and other refinancing costs of
$23 million in 1993 and $9 million in 1992. Maintenance expense increased 17%
in 1993 and decreased 16% in 1992 reflecting changes in the level of planned
maintenance programs on the Company's production and distribution equipment.
Operating, administrative and maintenance expenses are expected to stabilize in
1994.
Regulatory deferrals decreased in 1993 with the January implementation of
the second phase of DP&L's electric price increase. With this increase,
current prices reflect more cost recovery and reduce the deferral needed to
recognize the full revenue requirements of the phase-in plan. The phase-in
plan established a baseline return on equity of 13% (subject to upward
adjustment). In the event the return exceeds the allowed return by between one
to two percent, then one half of the excess return will be used to reduce the
cost of demand-side management programs, and any return that exceeds the
allowed return by more than two percent will be entirely credited to these
programs.
Allowance for Funds Used During Construction ("AFC") relating to the
William H. Zimmer Generating Station ("Zimmer") ceased upon its completion in
March 1991. Prior to this essentially all AFC related to Zimmer.
Total income taxes increased in 1993 and 1992 resulting from higher
pre-tax income. Additionally, in 1993, the corporate tax rate was increased to
35% as enacted by the Omnibus Budget Reconciliation Act of 1993, increasing
income taxes by $3 million.
Adopting Financial Accounting Standards Board Statement No. 109 resulted
in changes to the consolidated balance sheet. The increase in total assets is
due to an increase in deferred interest-Zimmer (see Financial Statement Note 2)
of $23 million and the recognition of income taxes recoverable through future
revenues of $260 million. Offsetting these assets were additional deferred tax
liabilities of $282 million.
Credit Ratings
In July 1993, the Company's bond and preferred stock ratings were raised
by Duff & Phelps, a credit rating agency. First mortgage bonds are now rated
"AA-" and preferred stock is rated "A+". This upgrade reflects the Company's
significantly improved financial performance and favorable qualitative credit
factors.
During the first quarter of 1992, the Company's bond, preferred stock and
commercial paper ratings were upgraded by three credit rating agencies. Bonds
were upgraded to "A2" by Moody's Investors Service, "A+" by Duff & Phelps and
"A" by Standard & Poor's. These upgrades reflect the positive outcome of the
Zimmer coal conversion project and rate settlement agreement. Each of these
bond ratings is considered investment grade.
Income Statement Highlights
$ in millions except per share amounts 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------
Electric Utility:
Revenues . . . . . . . . . . . . . . . . . . . . $899 $807 $788
Fuel used in production . . . . . . . . . . . . 225 219 235
--- --- ---
Net revenues . . . . . . . . . . . . . . . . 674 588 553
Gas Utility:
Revenues . . . . . . . . . . . . . . . . . . . . 245 204 201
Gas purchased for resale . . . . . . . . . . . . 156 118 130
--- --- ---
Net revenues . . . . . . . . . . . . . . . . 89 86 71
Interest and other income . . . . . . . . . . . . 26 22 19
Operating and administrative . . . . . . . . . . . 185 158 168
Maintenance of equipment and facilities . . . . . 90 77 92
Regulatory deferrals . . . . . . . . . . . . . . . (26) (59) (43)
Income taxes . . . . . . . . . . . . . . . . . . . 78 68 41
Net income . . . . . . . . . . . . . . . . . . . . 139 139 119
Earnings per share of common stock . . . . . . . . 1.42 1.34 1.15
Return on shareholders' equity . . . . . . . . . . 13.7% 13.0% 11.0%
DPL Inc. 1993 Annual Report - 15
Construction Program and Financing
Construction additions were $89 million, $59 million and $117 million in
1993, 1992 and 1991, respectively. For the period 1994 through 1998, total
construction additions are projected to be $518 million with a total of
$109 million occurring in 1994. During this same period, a total of
$111 million will be required for sinking funds and mandatory redemptions for
preferred stock, bonds and notes.
During 1993, total cash provided by operating activities was
$235 million. At year end, cash and temporary investments were $82 million and
short-term borrowings were $25 million.
During late 1992 and early 1993, DP&L took advantage of favorable market
conditions to reduce its cost of debt and extend maturities through early
refundings. Overall, five new series of First Mortgage Bonds were issued,
aggregating approximately $766 million with an average interest rate of 7.9%.
The proceeds were used to finance the redemption of a similar principal amount
of debt securities with an average interest rate of 8.7%.
Issuance of additional amounts of First Mortgage Bonds by DP&L is limited
by provisions of its mortgage. At December 31, 1993, more than $500 million of
additional bonds could have been issued. The amounts and timing of future
financings will depend upon market and other conditions, rate increases, levels
of sales and construction plans.
DPL Inc. has a revolving credit agreement, renewable through 1998, which
allows total borrowings by DPL Inc. and its subsidiaries of $200 million. At
year end 1993, DPL Inc. had no borrowings outstanding under this credit
agreement. At December 31, 1992, DPL Inc. had $90 million outstanding under
the revolving credit agreement which was used to fund share purchases for DPL
Inc.'s Employee Stock Ownership Plan. These borrowings were repaid in January
1993 with the proceeds from the issuance of $90 million of DPL Inc. 7.83% Notes
due 2007. (See Financial Statement Notes 5 and 8.)
DP&L also has $97 million available in short-term lines of credit. At
year end, DP&L had $10 million outstanding from these lines of credit at a
weighted average interest rate of 3.68% and $15 million in commercial paper
outstanding at weighted average interest rate of 3.34%.
Issues and Financial Risks
As a public utility, DP&L is subject to processes which determine the
rates it charges for energy services. Regulators determine which costs are
eligible for recovery in the rate setting process and when the recovery will
occur. They also establish the rate of return on utility investments which are
valued under Ohio law based on historical costs. The utility industry is
subject to inflationary pressures similar to those experienced by other
capital-intensive industries. Because rates for regulated services are based
on historical costs, cash flows may not cover the total future costs of
providing services. Construction costs over the next five years average
$104 million annually which approximates the projected depreciation over the
same period.
The passage of the National Energy Policy Act allows the federal
government to mandate access by others to a utility's transmission system and
may accelerate competition in the supply of electricity.
In 1992, the Federal Energy Regulatory Commission ("FERC") issued Order
636 (the "Order") amending its regulations governing the service obligations,
rate design and cost recovery of interstate pipelines. In response to the
Order, the Public Utilities Commission of Ohio ("PUCO") has approved interim
guidelines for its implementation and is continuing efforts to examine the
Order's impact via round-table discussions. In 1993, DP&L implemented the
requirements of Order.
In January 1994, DP&L, the Staff of the PUCO and the Office of the Ohio
Consumers' Counsel submitted to the PUCO an agreement which resolves issues
relating to the recovery of "transition costs" to be billed to DP&L by
interstate pipeline companies. The agreement, which is subject to PUCO
approval, provides for the full recovery of these transition costs from DP&L
customers. The interstate pipelines will file with the FERC in 1994 for
authority to recover these transition costs, the exact magnitude of which has
not been established.
The Federal Environmental Protection Agency ("EPA") has estimated total
costs of $56 million for its preferred clean-up plans of three hazardous waste
sites in Ohio. The EPA notified numerous parties, including DP&L, that they
are considered "Potentially Responsible Parties" for cleanup of these sites.
The final resolution of these investigations will not have a material effect on
DP&L's financial position, earnings or cash flow.
Changing environmental regulations continue to increase the cost of
providing service in the utility industry. The Clean Air Act Amendments of
1990 (the "Act") limit sulfur dioxide and nitrogen oxide emissions nationwide.
The Act will restrict emissions in two phases with the Phase I compliance
completed by 1995 and Phase II completed by 2000.
In May 1993, the PUCO approved DP&L's Clean Air Act Compliance Plan. This
plan outlines the methods by which the emission reduction requirements will be
met. Overall compliance is expected to have a minimal 1% to 2% price impact.
DP&L anticipates that costs to comply with the Act will be eligible for
recovery in future fuel hearings and other regulatory proceedings.
DPL Inc. 1993 Annual Report - 16
DPL Inc.
CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
$ in millions except For the years ended December 31,
per share amounts 1993 1992 1991
- ----------------------------------------------------------------------------------------------------
Income
Utility service revenues . . . . . . . . . . . . . . $1,151.3 $1,017.3 $ 995.6
Interest and other income . . . . . . . . . . . . . 26.2 22.0 19.0
-------- -------- --------
Total income . . . . . . . . . . . . . . . . . . 1,177.5 1,039.3 1,014.6
-------- -------- --------
Expenses
Fuel used in electric and steam production . . . . . 226.6 220.7 237.4
Gas purchased for resale . . . . . . . . . . . . . . 156.4 117.6 130.4
Operating and administrative (Note 1). . . . . . . . 184.6 157.8 167.8
Maintenance of equipment and facilities . . . . . . 90.2 77.3 92.0
Depreciation and amortization . . . . . . . . . . . 110.9 105.6 96.4
General taxes . . . . . . . . . . . . . . . . . . . 112.0 108.5 95.4
Interest expense . . . . . . . . . . . . . . . . . . 97.0 94.3 93.9
Regulatory deferrals (Note 2). . . . . . . . . . . . (25.8) (58.7) (43.0)
Allowance for funds used during construction . . . . (0.5) (0.3) (25.6)
Preferred dividend requirements of
The Dayton Power and Light Company . . . . . . . . 8.7 9.4 9.7
-------- -------- --------
Total expenses . . . . . . . . . . . . . . . . . 960.1 832.2 854.4
Income Before Income Taxes . . . . . . . . . . . . . 217.4 207.1 160.2
Income taxes (Notes 1 and 3) . . . . . . . . . . . . 78.4 68.3 41.0
-------- -------- --------
Net Income . . . . . . . . . . . . . . . . . . . . . $ 139.0 $ 138.8 $ 119.2
======== ======== ========
Average Number of Common Shares
Outstanding (millions) (Note 8) . . . . . . . . . . 97.7 103.5 103.5
Earnings Per Share of Common Stock . . . . . . . . . $ 1.42 $ 1.34 $ 1.15
Dividends Paid Per Share of Common Stock . . . . . . $ 1.12 $ 1.08 $ 1.08
Return on Shareholders' Equity . . . . . . . . . . . 13.7% 13.0% 11.0%
See Notes to Consolidated Financial Statements.
DPL Inc. 1993 Annual Report - 17
DPL Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended December 31,
$ in millions 1993 1992 1991
- ---------------------------------------------------------------------------------------------------
Operating Activities
Cash received from utility customers . . . . . . . . . . $1,137.5 $1,003.8 $994.3
Other operating cash receipts . . . . . . . . . . . . . 26.4 23.5 19.6
Cash paid for:
Fuel and purchased power . . . . . . . . . . . . . . . (216.6) (234.0) (223.3)
Purchased gas . . . . . . . . . . . . . . . . . . . . (146.9) (137.5) (124.0)
Operation and maintenance labor . . . . . . . . . . . (83.3) (84.2) (81.9)
Nonlabor operating expenditures . . . . . . . . . . . (232.7) (152.7) (172.5)
Interest (net of amounts capitalized) . . . . . . . . (83.3) (96.8) (84.9)
Income taxes . . . . . . . . . . . . . . . . . . . . . (54.4) (50.1) (48.5)
Property, excise and payroll taxes . . . . . . . . . . (111.4) (98.7) (92.4)
------- ------- ------
Net cash provided by operating activities . . . . . . . 235.3 173.3 186.4
------- ------- ------
Investing Activities
Net cash used for property expenditures and other . . . (113.6) (63.0) (107.6)
------- ------- ------
Financing Activities
Dividends paid on common stock . . . . . . . . . . . . . (109.5) (110.8) (111.8)
Retirement of long-term debt . . . . . . . . . . . . . . (439.2) (321.0) (4.6)
Retirement of stock . . . . . . . . . . . . . . . . . . (8.5) (4.4) (4.2)
Issuance of long-term debt . . . . . . . . . . . . . . . 536.0 320.4 -
Issuance (retirement) of short-term debt . . . . . . . . (127.0) 67.5 40.4
Receipt of funds on deposit with trustee . . . . . . . . - 21.7 -
Common stock held by ESOP . . . . . . . . . . . . . . . - (90.0) -
------- ------- ------
Net cash used for financing activities . . . . . . . . . (148.2) (116.6) (80.2)
------- ------- ------
Net decrease in cash and temporary cash investments . . (26.5) (6.3) (1.4)
Cash and temporary cash investments at beginning of
year . . . . . . . . . . . . . . . . . . . . . . . . . 108.1 114.4 115.8
------- ------- ------
Cash and temporary cash investments at end of year . . . $ 81.6 $ 108.1 $ 114.4
======= ======= ======
See Notes to Consolidated Financial Statements
DPL Inc. 1993 Annual Report - 18
DPL Inc.
CONSOLIDATED BALANCE SHEET
At December 31,
$ in millions 1993 1992
- -----------------------------------------------------------------------------------------------------------
ASSETS
Utility property and plant . . . . . . . . . . . . . . . . . $3,204.7 $3,128.4
Other property and plant . . . . . . . . . . . . . . . . . . 49.3 39.2
Construction work in progress . . . . . . . . . . . . . . . . 35.8 42.7
-------- --------
3,289.8 3,210.3
Less--
Accumulated depreciation and amortization . . . . . . . . . (977.2) (881.8)
-------- --------
Net property and plant . . . . . . . . . . . . . . . . . . 2,312.6 2,328.5
-------- --------
Current Assets
Cash and temporary cash investments (at cost) . . . . . . . . 81.6 108.1
Accounts receivable, less provision for uncollectible
accounts of $9.1 and $10.5, respectively . . . . . . . . . . 135.0 128.8
Inventories, at average cost . . . . . . . . . . . . . . . . 86.4 86.6
Taxes applicable to subsequent years . . . . . . . . . . . . 72.8 70.6
Gas costs recoverable . . . . . . . . . . . . . . . . . . . . 23.1 11.7
Prepayments and other . . . . . . . . . . . . . . . . . . . . 41.7 48.9
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . 440.6 454.7
-------- --------
Other Assets
Regulatory deferrals (Note 2) . . . . . . . . . . . . . . . . 172.8 103.8
Income taxes recoverable through future revenues (Note 3) . . 269.1 -
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 109.9 89.7
-------- --------
Total other assets . . . . . . . . . . . . . . . . . . . . 551.8 193.5
-------- --------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . $3,305.0 $2,976.7
======== ========
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity (Note 8)--
Common stock . . . . . . . . . . . . . . . . . . . . . . . . $ 1.0 $ 1.0
Other paid-in capital . . . . . . . . . . . . . . . . . . . 708.1 708.0
Common stock held by employee plans . . . . . . . . . . . . (105.2) (103.0)
Earnings reinvested in the business . . . . . . . . . . . . 423.4 394.0
-------- --------
Total common shareholders' equity . . . . . . . . . . . . 1,027.3 1,000.0
Preferred stock of The Dayton Power and Light Company
(Note 9)--
Without mandatory redemption provisions . . . . . . . . . . 82.9 82.9
With mandatory redemption provisions . . . . . . . . . . . . 30.0 38.5
Long-term debt (Note 5) . . . . . . . . . . . . . . . . . . . 1,102.9 952.1
-------- --------
Total capitalization . . . . . . . . . . . . . . . . . . . 2,243.1 2,073.5
-------- --------
Current Liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 113.1 98.2
Short-term debt (Note 6) . . . . . . . . . . . . . . . . . . 25.0 152.0
Current portion of first mortgage bonds
and preferred stock . . . . . . . . . . . . . . . . . . . . 9.0 59.0
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . 114.4 105.5
Accrued interest . . . . . . . . . . . . . . . . . . . . . . 24.3 12.5
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.4 52.0
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . 337.2 479.2
-------- --------
Deferred Credits and Other
Deferred taxes (Note 3) . . . . . . . . . . . . . . . . . . . 519.3 232.3
Unamortized investment tax credit . . . . . . . . . . . . . . 85.1 87.7
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120.3 104.0
-------- --------
Total deferred credits and other . . . . . . . . . . . . . 724.7 424.0
-------- --------
Total Capitalization and Liabilities . . . . . . . . . . . . $3,305.0 $2,976.7
======== ========
See Notes to Consolidated Financial Statements.
DPL Inc. 1993 Annual Report - 19
DPL Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
The accounts of DPL Inc. and its wholly-owned subsidiaries are included in
the accompanying consolidated financial statements. The consolidated financial
statements of DPL Inc. principally reflect the results of operations and
financial condition of DPL Inc.'s public utility subsidiary, The Dayton Power
and Light Company ("DP&L"). DP&L is a public utility engaged in the business
of selling electric energy, natural gas and steam. The results of operations
of DPL Inc.'s non-utility subsidiaries currently do not have a material
financial impact on the consolidated results.
Revenues and Fuel
Revenues include amounts charged to customers through fuel and gas recovery
clauses, which are adjusted periodically for changes in such costs. Related
costs that are recoverable or refundable in future periods are deferred along
with the related income tax effects. Also included in revenues are amounts
charged to customers through a surcharge for recovery of arrearages from
certain eligible low-income households.
DP&L records revenue for services provided but not yet billed to more
closely match revenues with expenses. "Accounts Receivable" on the
Consolidated Balance Sheet includes unbilled revenue of (in millions) $30.0 in
1993 and $27.8 in 1992.
Allowance for Funds Used During Construction ("AFC")
AFC represents the cost of capital funds (equity and debt) used to finance
construction projects. This cost is included in construction work in progress
along with other construction costs. Essentially all AFC ceased upon
completion of the William H. Zimmer Generating Station ("Zimmer") in March
1991. The average rate for 1991 was 10.3%, compounded semi-annually, net of
income taxes.
Operating and Administrative
Operating and administrative expense includes $22.8 million in 1993 and
$9.1 million in 1992 of redemption premiums and other costs relating to the
refinancing of various bond issues. (See Note 5.)
Property and Plant, Maintenance and Depreciation
Property and plant is shown at its original cost. When a unit of property
is retired, the original cost of that property plus the cost of removal less
any salvage value is charged to accumulated depreciation. Maintenance costs
and replacements of minor items of property are charged to expense.
Depreciation expense is calculated using the straight-line method, which
depreciates the cost of property over its estimated useful life, at an annual
rate which approximates 3.4% for 1993, 1992 and 1991.
Income Taxes
In 1993, DPL Inc. implemented Financial Accounting Standards Board ("FASB")
Statement No. 109, "Accounting for Income Taxes." The new statement requires a
change from the deferral method to the liability method for income tax
accounting. Under the liability method, deferred taxes are provided for all
differences between the financial statement basis and the tax basis of assets
and liabilities using the enacted tax rate. Additional deferred income taxes
and offsetting regulatory assets or liabilities are recorded to recognize that
the income taxes will be recoverable/refundable through future revenues. (See
Note 3.)
Consolidated Statement of Cash Flows
The temporary cash investments presented on this Statement consist of
liquid investments with an original maturity of three months or less.
Fair Value of Financial Instruments
The reported value of short-term financial instruments and other
investments on the balance sheet approximates fair value. The long-term debt
and preferred stock fair values are disclosed in Notes 5 and 9, respectively.
Reclassifications
Reclassifications have been made in certain prior years' amounts to conform
to the current reporting presentation.
DPL Inc. 1993 Annual Report - 20
- -------------------------------------------------------------------------------
2. Electric Rate Matters
Pursuant to a Public Utilities Commission of Ohio ("PUCO")-approved
settlement agreement among DP&L and various consumer groups, an electric rate
increase was phased in with annual increases of 6.4% effective February 1992,
January 1993 and January 1994. Deferrals (including carrying charges) during
the phase-in period of $28.1 million in 1993 and $57.7 million in 1992 were
capitalized and will be recovered over seven years commencing in 1994. The
phase-in plan meets the requirements of FASB Statement No. 92.
This settlement included an agreement by DP&L to undertake cost-effective
demand-side management ("DSM") programs with an average annual cost of
$15 million for four years commencing in 1992. The amount recovered in rates
was $4.6 million in 1992. This amount increases to $7.8 million in 1993 and
subsequent years. The difference between expenditures and amounts recovered
through rates is deferred and is eligible for future recovery in accordance
with existing PUCO rulings.
The agreement established a baseline return on equity of 13% (subject to
upward adjustment). In the event that the return exceeds the allowed return by
between one to two percent, then one half of the excess return will be used to
reduce the cost of DSM programs, and any return that exceeds the allowed return
by more than two percent will be entirely credited to these programs.
DP&L also deferred interest charges, net of income taxes, on its
investment in Zimmer from the March 30, 1991, commercial in-service date
through January 31, 1992, pursuant to PUCO approval. Deferred interest charges
on the investment in Zimmer have been adjusted to a before tax basis in 1993 as
a result of FASB Statement No. 109. Amounts deferred are being amortized over
the life of Zimmer.
Regulatory deferrals on the balance sheet were:
At December 31,
$ in millions 1993 1992
- ------------------------------------------------------
Phase-in $ 85.8 $ 57.7
DSM 23.3 2.2
Deferred interest-Zimmer 63.7 43.9
------ -----
Total $172.8 $103.8
====== =====
- -------------------------------------------------------------------------------
3. Income Taxes
Adopting FASB Statement No. 109 at January 1, 1993, resulted in an
increase in deferred interest-Zimmer (see Note 2) of $22.6 million and the
recognition of income taxes recoverable through future revenues of
$259.6 million. Offsetting these assets were additional deferred tax
liabilities of $281.9 million.
For the years ended
December 31,
$ in millions 1993 1992 1991
- -------------------------------------------------------
Computation of Tax Expense
Statutory income tax rate . . 35% 34% 34%
Federal income tax (a) . . . $79.1 $74.1 $65.3
Increases (decreases) in tax from -
Regulatory deferrals . . . (6.1) (12.4) -
Depreciation . . . . . . . 10.2 9.3 (0.2)
Investment tax credit amortized (3.0) (3.0) (3.3)
Other, net. . . . . . . . . (1.8) 1.7 1.4
---- ---- ----
Total Tax Expense . . . . . $78.4 $69.7 $63.2
==== ==== ====
Effective Tax Rate . . . . 35% 32% 33%
Components of Tax Expense
Taxes currently payable . . . $61.2 $38.4 $46.8
Deferred taxes--
Regulatory deferrals. . . . 8.1 9.2 22.2
Liberalized depreciation
and amortization . . . . . 17.6 18.6 13.2
Property taxes . . . . . . (6.1) (5.9) (4.9)
Fuel and gas costs . . . . 5.8 10.5 (7.9)
Other . . . . . . . . . . . (5.6) 2.4 (4.6)
Deferred investment tax
credit, net . . . . . . . . (2.6) (3.5) (1.6)
---- ---- ----
Total Tax Expense . . . . . $78.4 $69.7 $63.2
Classification of Tax Expense
Income taxes . . . . . . . . $78.4 $68.3 $41.0
Regulatory deferrals . . . . - 1.4 22.2
---- ---- -----
Total Tax Expense . . . . . $78.4 $69.7 $63.2
==== ==== ====
(a) Statutory rates applied to pretax income before preferred dividends and
before tax expenses included in regulatory deferrals.
Components of Deferred Tax Assets and Liabilities
At December 31,
$ in millions 1993
- ----------------------------------------------------
Depreciation/property basis $(429.5)
Regulatory deferrals (57.4)
Income taxes recoverable (93.8)
Investment tax credit 29.7
Other 31.7
------
Net non-current liability $(519.3)
======
Net current liability $ (13.4)
======
DPL Inc. 1993 Annual Report - 21
- -------------------------------------------------------------------------------
4. Pension and Postretirement Benefits
A. Pensions
Substantially all DP&L employees participate in pension plans paid for by
the Company. Employee benefits are based on their years of service, age at
retirement, and for salaried employees, their compensation. The plans are
funded in amounts actuarially determined to provide for these benefits.
An interest rate of 6.0% was used in 1993 and 1992 in developing the
amounts in the following tables. Actual returns on plan assets for 1993 and
1992, respectively, were 6.2% and 8.8%. Increases in compensation levels
approximating 5% were used for all years.
The following table presents the components of pension cost (portions of
which were capitalized):
$ in millions 1993 1992 1991
- --------------------------------------------------------
Service cost-benefits earned $ 5.4 $4.3 $ 3.5
Interest cost 12.0 12.5 11.8
Expected return on plan
assets of 7.5% in each year (16.9) (15.2) (14.1)
Amortization amounts, net (2.0) (2.6) (2.9)
----- ----- -----
Net pension cost $ (1.5) $(1.0) $(1.7)
===== ===== =====
The following table sets forth the plans' funded status at December 31:
$ in millions 1993 1992
- --------------------------------------------------------
Plan assets at fair value (a) $255.0 $236.3
Less -
Actuarial present value of
projected benefit obligation 230.6 210.5
----- -----
Plan assets in excess of
projected benefit obligation $ 24.4 $ 25.8
===== =====
Vested benefit obligation $183.9 $166.2
Accumulated benefit obligation
without projected wage
increases $207.4 $187.1
(a) Invested in guaranteed investment contracts, fixed income investments and
equities including $22.5 million and $21.6 million of DPL Inc. common
stock in 1993 and 1992, respectively.
The following table shows the amounts recorded in Other Assets in the
Consolidated Balance Sheet at December 31:
$ in millions 1993 1992
- --------------------------------------------------------
Plan assets in excess of
projected benefit obligation $24.4 $25.8
Transitional adjustments for
amounts not reflected on the
Consolidated Balance Sheet:
Unamortized transition amount (28.0) (32.1)
Prior service cost 22.9 12.0
Changes in plan assumptions
and actuarial gains and losses 25.1 23.5
---- ----
Net pension assets $44.4 $29.2
==== ====
- -------------------------------------------------------------------------------
B. Postretirement Benefits
In 1993, DP&L adopted FASB Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Previously, DP&L had used an
accrual method to recognize these costs which approximated FASB Statement No.
106 amounts. Implementation did not create regulatory deferrals or have a
material impact on expense.
Qualified employees who retired prior to 1987 and their dependents are
eligible for health care and life insurance benefits. The unamortized
transition obligation associated with these benefits is being amortized over
the approximate average remaining life expectancy of the retired employees.
Active employees are eligible for life insurance benefits, and this unamortized
transition obligation is being amortized over the average remaining service
period.
The following table sets forth the accumulated postretirement benefit amounts
at December 31:
$ in millions 1993
- ------------------------------------------------------
Accumulated postretirement benefit
obligation:
- retirees and dependents $63.1
- active employees 1.2
----
Total 64.3
Unamortized transition obligation 27.7
----
Accrued postretirement benefit liability $36.6
====
The following table presents the components of postretirement benefit costs:
$ in millions 1993
- ------------------------------------------------------
Interest cost $3.7
Amortization of transition obligation 3.0
---
Net periodic postretirement benefit cost $6.7
===
The assumed health care cost trend rate used in measuring the unfunded
accumulated postretirement benefit obligation is 15.0% for 1993 and decreases
to 8.0% by 2004. A one percentage point increase in each future year's assumed
health care trend rate would increase net periodic postretirement benefit cost
by $0.4 million annually and would increase the accumulated postretirement
benefit obligation by $6.4 million. The weighted average discount rate used in
determining the accumulated postretirement benefit obligation was 6.0%.
DPL Inc. 1993 Annual Report - 22
- -------------------------------------------------------------------------------
5. Long-term Debt
At December 31,
$ in millions 1993 1992
- ------------------------------------------------------
First mortgage bonds maturing:
1997 5-5/8 . . . . . . $ 40.0 $ 40.0
1998 7.06% and 7.22%(a) 29.0 31.7
1999-2003 8.41% and 8.51%(a) 49.0 210.0
2022-2026 8.14% and 8.67%(a) 671.0 450.0
Pollution control series
maturing through 2027
- 7.97% . . . . . . . . . . 218.8 219.1
------- ------
1,007.8 950.8
Unamortized debt discount
and premium (net) . . . . . (2.5) (6.5)
------- ------
1,005.3 944.3
Notes due 2007 - 7.83% . . . 90.0 -
Mortgage note due in install-
ments through 2012-10.0% . 7.6 7.8
------- ------
Total . . . . . . . . . . . $1,102.9 $ 952.1
======= =======
Fair value (including
current portion)-based
upon quoted market prices
or debt with similar
characteristics . . . . . $1,189.0 $1,066.2
======= =======
(a) Weighted average interest rates for 1993 and 1992, respectively.
The amounts of maturities and mandatory redemptions for first mortgage bonds
and notes are (in millions) $4.7 in 1994, 1995 and 1996, $46.8 in 1997 and
$28.4 in 1998. Substantially all property and plant of DP&L is subject to the
mortgage lien securing the first mortgage bonds.
New debt was issued during 1993 as follows:
Principal Amount
Issuances ($ in millions)
- -----------------------------------------------------
DP&L First Mortgage Bonds:
8.15% Series due 2026 $226.0
7-7/8% Series due 2024 220.0
DPL Inc.:
7.83% Notes due 2007 90.0
------
Total $536.0
======
Proceeds of these financings were used to call several series of bonds and to
repay short-term debt. There are no sinking fund provisions associated with
any of these new debt issues.
- -------------------------------------------------------------------------------
6. Notes Payable and Compensating Balances
DPL Inc. and its subsidiaries have $200 million available through a
revolving credit agreement. This agreement with a consortium of banks is
renewable through 1998. Commitment fees are approximately $350,000 per year,
depending upon the aggregate unused balance of the loan.
At December 31, 1993, DPL Inc. had no outstanding borrowings under this
credit agreement.
DP&L also has $97.1 million available in short-term informal lines of
credit. To support these lines of credit, DP&L is required to maintain average
daily compensating balances of approximately $700,000 and also pay $189,000 per
year in fee compensation.
At year-end, DP&L had $10.0 million outstanding from these lines of credit
at a weighted average interest rate of 3.68% and $15.0 million in commercial
paper outstanding at a weighted average interest rate of 3.34%.
- -------------------------------------------------------------------------------
7. Commonly Owned Facilities
DP&L owns certain electric generating and transmission facilities as tenants in
common with other Ohio utilities. Each utility is obligated to pay its
ownership share of construction and operation costs of each facility. As of
December 31, 1993, DP&L had $12.3 million of commonly owned facilities under
construction. DP&L's share of expenses is included in the Consolidated
Statement of Results of Operations.
The following table presents DP&L's share of the commonly owned facilities:
DP&L
DP&L Share Investment
--------------- ---------
Owner- Prod. Plant in
ship Capacity Service
(%) (MW) ($ in mil.)
- ------------------------------------------------------
Production Units:
Beckjord Unit 6 . . . . 50.0 210 50
Conesville Unit 4 . . . 16.5 129 29
East Bend Station . . . 31.0 186 147
Killen Station . . . . 67.0 402 405
Miami Fort Units 7 & 8. 36.0 360 112
Stuart Station . . . . 35.0 820 226
Zimmer Generating
Station . . . . . . . 28.1 365 985
Transmission (at
varying percentages) . . 66
DPL Inc. 1993 Annual Report - 23
- -------------------------------------------------------------------------------------------------------------------------
8. Common Shareholders' Equity
Other Common
Common Stock Paid-in Stock
-------------------- Capital Held By Earnings
Outstanding (premium, net Employee Reinvested in
$ in millions Shares Amount of expense) Plans the Business Total
- -------------------------------------------------------------------------------------------------------------------------
1991: Beginning balance . . . . . 69,010,903 $ 0.7 $707.9 - $359.0 $1,067.6
Net income . . . . . . . . 119.2 119.2
Common stock dividends . . (111.8) (111.8)
Other . . . . . . . . . . 0.2 (0.2) -
------------- ----- ----- ----- ----- -------
Ending balance . . . . . . 69,010,903 $ 0.7 $708.1 - $366.2 $1,075.0
1992: Net income . . . . . . . . 138.8 138.8
Common stock dividends . . (110.8) (110.8)
Three-for-two stock split 34,499,095 0.3 (0.3) -
Employee stock plans . . . (103.0) (103.0)
Other . . . . . . . . . . 0.2 (0.2) -
------------- ----- ----- ----- ----- -------
Ending balance . . . . . . 103,509,998 $ 1.0 $708.0 $(103.0) $394.0 $1,000.0
1993: Net income . . . . . . . . 139.0 139.0
Common stock dividends . . (109.5) (109.5)
Employee stock plans . . . (2.2) (2.2)
Other . . . . . . . . . . 0.1 (0.1) -
------------- ----- ----- ----- ----- -------
Ending balance . . . . . . 103,509,998 $ 1.0 $708.1 $(105.2) $423.4 $1,027.3
============= ===== ===== ===== ===== =======
In 1993, shareholders of DPL Inc. approved a proposal to increase
authorized shares from 120 million to 250 million.
DPL Inc. had 2,827,548 and 232,007 authorized but unissued shares reserved
for the dividend reinvestment and employee stock plans, respectively, at
December 31, 1993. These plans provide that either original issue shares or
shares purchased on the open market may be used to satisfy plan requirements.
Stock market purchases were used to satisfy the requirements of these plans
from 1991 through 1993.
DPL Inc. established a leveraged Employee Stock Ownership Plan ("ESOP") in
1992 to provide benefits to eligible employees. DPL Inc. loaned the ESOP trust
$90.0 million for the purchase of 4.7 million shares of common stock on the
open market. Common shareholders' equity has been reduced for the cost of
shares held by the trust and for 1.2 million shares related to another employee
plan. Beginning in 1993, qualified employee contributions to the Company's
401(k) retirement savings plan are matched by DPL Inc. with ESOP common stock.
Union employees also receive an annual Company contribution in ESOP stock.
Dividends
received by the ESOP are used to repay the loan to DPL Inc. As debt service
payments are made on the loan, shares are released on a pro-rata basis.
Dividends on the allocated shares are charged to retained earnings, and
dividends on the unallocated shares reduce accrued interest.
In 1993, the FASB approved and DPL Inc. adopted a new Statement of Position
on ESOP accounting. Implementation of this accounting change reduced net
income by $2.5 million and reduced the number of common shares used in the
calculation of earnings per share by 4.7 million, resulting in an overall $0.04
increase in earnings per share. During 1993, 0.1 million ESOP shares were
allocated to employees and are outstanding for the calculation of earnings per
share. Compensation expense, which is based on the fair value of the shares
allocated, amounted to $2.0 million. The market value of unallocated shares at
December 31, 1993 was $95.0 million.
DPL Inc. has a Shareholder Rights Plan pursuant to which two-thirds of a
Right is attached to and trades with each outstanding DPL Inc. Common Share.
The Rights would separate from the Common Shares and become exercisable in the
event of certain attempted business combinations.
DPL Inc. 1993 Annual Report - 24
- ------------------------------------------------------------------------------------------------------------------
9. Preferred Stock
DPL Inc.: No par value, 8,000,000 shares authorized, no shares outstanding.
DP&L: $25 par value, 4,000,000 shares authorized, no shares outstanding; and $100 par value, 4,000,000 shares
authorized, 1,170,998 shares outstanding.
Without Mandatory With Mandatory
Redemption Provisions Redemption Provisions (a)
-----------------------------------------------------------
Current Current (millions)
Series/ Redemption Shares At December 31, At December 31,
Rate Price Outstanding 1993 1992 1993 1992
- ------------------------------------------------------------------------------------------------------------------
A 3.75% $102.50 93,280 $ 9.3 $ 9.3
B 3.75% $103.00 69,398 7.0 7.0
C 3.90% $101.00 65,830 6.6 6.6
D 7.48% $103.23 150,000 15.0 15.0
E 7.70% $101.00 199,990 20.0 20.0
F 7.375% $101.00 250,000 25.0 25.0
H 8-5/8% $101.00 120,000 $12.0 $16.0
I 9-3/8% $104.00 (b) 180,000 18.0 22.5
---- ---- ---- ----
Total . . . . . . . . . . . . . . . . . . . . . . . $82.9 $82.9 $30.0 $38.5
==== ==== ==== ====
Fair value (including current portion)-
based upon quoted market prices $34.6 $44.1
==== ====
(a) Exclusive of sinking fund payment due within one year.
(b) Prior to May 1, 1994 and $101.00 thereafter.
The shares without mandatory redemption provisions may be redeemed at the
option of DP&L at the per share prices indicated, plus accrued dividends.
The shares with mandatory redemption provisions are redeemable pursuant to
mandatory sinking fund requirements, but may also be redeemed at the option of
DP&L at the per share prices indicated, plus accrued dividends. The annual
sinking fund requirements for Series H and I are 5% of the original amount of
each issue. Over the next five years, mandatory redemptions are $4.3 million
(42,500 shares) per year. Shares redeemed or purchased to meet sinking fund
requirements may not be reissued.
Sinking fund requirements and redemptions of outstanding shares were
85,000 shares in 1993 and 42,500 in 1992 and 1991.
- ------------------------------------------------------------------------------------------------------------------
10. Reconciliation of Net Income to Net Cash Provided by Operating Activities
For the years ended December 31,
$ in millions 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $139.0 $138.8 $119.2
Adjustments for noncash items:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 110.9 105.6 96.4
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 17.2 29.9 (5.8)
Allowance for equity funds used during construction . . . . . . . . . . (0.2) (0.2) (18.5)
Regulatory deferrals . . . . . . . . . . . . . . . . . . . . . . . . . (25.8) (58.7) (43.0)
Changes in working capital:
Accounts receivable and unbilled revenue . . . . . . . . . . . . . . . (2.5) (2.9) 4.9
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.0 3.0 (15.9)
Deferred gas costs . . . . . . . . . . . . . . . . . . . . . . . . . . (7.9) (28.8) 9.7
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.8 (4.2) 0.1
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.4 (11.2) 12.0
DSM deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . (23.3) (2.2) -
Other operating activities . . . . . . . . . . . . . . . . . . . . . . . (9.3) 4.2 27.3
----- ----- -----
Net cash provided by operating activities . . . . . . . . . . . . . . . $235.3 $173.3 $186.4
===== ===== =====
DPL Inc. 1993 Annual Report - 25
- ------------------------------------------------------------------------------------------------------------
11. Financial Information by Business Segments
For the years ended December 31,
$ in millions 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
Utility service revenues
Electric . . . . . . . . . . . . . . . . . . . $ 898.9 $ 806.9 $ 788.2
Gas . . . . . . . . . . . . . . . . . . . . . . 245.1 203.8 201.0
Other . . . . . . . . . . . . . . . . . . . . . 7.3 6.6 6.4
------- ------- -------
Total utility service revenues . . . . . . . . . . . 1,151.3 1,017.3 995.6
Interest and other income . . . . . . . . . . . . . . 26.2 22.0 19.0
------- ------- -------
Total income . . . . . . . . . . . . . . . . . . . $1,177.5 $1,039.3 $1,014.6
======= ======= ========
Operating profit before tax
Electric . . . . . . . . . . . . . . . . . . . $ 282.2 $ 224.3 $ 193.5
Gas . . . . . . . . . . . . . . . . . . . . . . 19.9 22.1 0.7
Other . . . . . . . . . . . . . . . . . . . . . 7.6 10.1 (6.9)
------- ------- ------
Total operating profit before tax . . . . . . . . . . 309.7 256.5 187.3
Other income, net (a) . . . . . . . . . . . . . . . . 13.4 54.3 76.5
Interest expense . . . . . . . . . . . . . . . . . . 97.0 94.3 93.9
Preferred dividends . . . . . . . . . . . . . . . . . 8.7 9.4 9.7
------- ------- -------
Income before income taxes . . . . . . . . . . . . $ 217.4 $ 207.1 $ 160.2
======= ======= =======
Depreciation and amortization
Electric . . . . . . . . . . . . . . . . . . . $ 102.4 $ 97.9 $ 87.9
Gas . . . . . . . . . . . . . . . . . . . . . . 5.7 5.6 6.0
Other . . . . . . . . . . . . . . . . . . . . . 2.8 2.1 2.5
------ ------- -------
Total depreciation and amortization . . . . . . . . $ 110.9 $ 105.6 $ 96.4
====== ======= =======
Construction additions
Electric . . . . . . . . . . . . . . . . . . . $ 66.3 $ 46.6 $ 103.4
Gas . . . . . . . . . . . . . . . . . . . . . . 11.9 11.0 12.4
Other . . . . . . . . . . . . . . . . . . . . . 10.7 1.4 1.6
------ ------ ------
Total construction additions . . . . . . . . . . . $ 88.9 $ 59.0 $ 117.4
====== ====== ======
Assets
Electric . . . . . . . . . . . . . . . . . . . $2,825.5 $2,522.8 $2,521.1
Gas . . . . . . . . . . . . . . . . . . . . . . 236.0 219.5 217.6
Other (b) . . . . . . . . . . . . . . . . . . . 243.5 234.4 234.0
------- ------- -------
Total assets at year end . . . . . . . . . . . . . $3,305.0 $2,976.7 $2,972.7
======= ======= =======
(a) Includes primarily interest income, AFC, regulatory deferrals and bond
redemption costs.
(b) Includes primarily cash, temporary cash investments, and certain deferred
items.
DPL Inc. 1993 Annual Report - 26
Report of Independent Accountants
Price Waterhouse [logo]
To the Board of Directors and Shareholders of DPL Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of results of operations and of cash flows present
fairly, in all material respects, the financial position of DPL Inc. and its
subsidiaries at December 31, 1993 and 1992, and the results of their operations
and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993.
PRICE WATERHOUSE
Dayton, Ohio
January 25, 1994
SELECTED QUARTERLY INFORMATION
For the Three Months Ended
$ in millions except March 31, June 30, September 30, December 31,
per share amounts 1993 1992 1993 1992 1993 1992 1993 1992
- --------------------------------------------------------------------------------------------------------------
$ $ $ $ $ $ $ $
Utility service revenues . . . . 345.8 285.9 238.0 225.4 262.0 223.4 305.5 282.6
Income before income taxes . . . 80.0 76.7 47.0 46.0 55.7 47.6 34.7 36.8
Net income . . . . . . . . . . . 53.2 51.2 31.4 30.6 33.1 31.7 21.3 25.3
Earnings per share of common stock 0.54 0.49 0.33 0.30 0.33 0.31 0.22 0.24
Dividends paid per share . . . . 0.28 0.27 0.28 0.27 0.28 0.27 0.28 0.27
Common stock market price-High . 21-1/4 17-3/8 21 17-3/8 21-7/8 19-1/2 21-5/8 20
-Low . . 19-1/4 15-3/4 19 15-1/2 20-3/8 17 19 18-3/8
Earnings per share for the first three quarters of 1993 have been restated to reflect adoption of a new Statement
of Position on ESOP accounting.
DPL Inc. 1993 Annual Report - 27
Corporate Information
Transfer Agent and Register-
Common Stock and DP&L Preferred Stock
Securities Transfer & Shareholder Inquiries:
The First National Bank of Boston
Mail Stop: 45-02-09
Box 644
Boston, MA 02102-0644
Dividend Reinvestment:
The First National Bank of Boston
Mail Stop: 45-01-06
Box 1681
Boston, MA 02105-1681
Also dividend paying agent
Trustee-DP&L First Mortgage Bonds
The Bank of New York
Corporate Trust Administration
101 Barclay Street
New York, New York 10286
Also interest paying agent
Securities Listing
The New York Stock Exchange is the only national securities exchange on which
DPL Inc. Common Stock and DP&L First Mortgage Bonds and Preferred Stock are
listed. The trading symbol of the Common Stock is DPL.
Federal Income Tax Status of 1993 Dividend Payments
Dividends paid in 1993 on Common and Preferred Stock are fully taxable as
dividend income.
Annual Meeting
The Annual Meeting of Shareholders will be held at 10:00 a.m., Tuesday,
April 19, 1994, at The Victoria Theatre, Dayton, Ohio.
Communications
DPL Inc. staffs and Investor Relations Department to meet the information needs
of shareholders and investors. Inquiries are welcomed by telephone, letter or
postcard. Communications relating to shareholder accounts should be directed
to the DPL Investor Relations Department (Telephone (513) 259-7150 or toll-free
(800) 322-9244) or to The First National Bank of Boston (Telephone (617)
575-2900 or toll-free (800) 442-2001).
Form 10-K Report
DPL Inc. reports details concerning its operations and other matters annually
to the Securities and Exchange Commission on Form 10-K, which will be supplied
upon request. Please direct inquiries to the Investor Relations Department.
Officers-DPL Inc. and DP&L
(Age/Years of Service)
Peter H. Forster (51/20)
Chairman, President and Chief Executive Officer--DPL Inc.
Chairman--DP&L
Allen M. Hill (48/26)
President and Chief Executive Officer--DP&L
Paul R. Anderson (51/15)
Controller--DP&L
Stephen P. Bramlage (47/25)
Assistant Vice President--DP&L
Robert E. Buerger (49/28)
Group Vice President--DP&L
Robert M. Combs (48/3)
Treasurer--DP&L
Georgene H. Dawson (44/19)
Assistant Vice President--DP&L
Jeanne S. Holihan (37/13)
Assistant Vice President--DP&L
Thomas M. Jenkins (42/16)
Group Vice President and Treasurer--DPL Inc.
Group Vice President--DP&L
Stephen F. Koziar, Jr. (49/26)
Group Vice President--DPL Inc. and DP&L
Judy W. Lansaw (42/15)
Group Vice President and Secretary--DPL Inc. and DP&L
Lloyd E. Lewis, Jr. (67/13)
Assistant Vice President--DP&L
Bryce W. Nickel (37/13)
Assistant Vice President--DP&L
H. Ted Santo (43/22)
Group Vice President--DP&L
DPL Inc. 1993 Annual Report - 28
As required by Rule 304 of Regulation S-T, the following appendix lists the
graphic material contained in the 1993 DPL Inc. Annual Report to Shareholders.
This graphic material, which appears in the paper copy of the report, was
omitted from the electronically filed copy of the report.
APPENDIX
Page Item Description
- ------- ---------- ----------------------------------------------------
Cover:
Artwork: Bar chart, depicting increase over three periods.
Chart is not set to any scale and is not titled.
Photograph: Man and woman in athletic wear, running
Artwork: logo - "Way To Go", Company's umbrella name for
conservation programs
Artwork: logo - DPL Inc.
Inside Cover:
Artwork: Map of the State of Ohio, with DP&L service territory
highlighted.
Page 1:
No photographs or artwork
Page 2:
Photographs: The following are pictured with their names appearing
below the photo.
Robert J. Kegerreis, Ernie Green, Jane G. Haley,
James F. Dicke, II.
Page 3:
Photographs: The following Directors are pictured with their names
appearing below the photo.
Burnell R. Roberts, Thomas J. Danis, W August
Hillenbrand.
Page 4:
Photographs: The following Directors are pictured with their names
appearing below the photo.
Peter H. Forster, Chairman & CEO, DPL Inc. Allen M.
Hill, President & CEO, DP&L
Page 5:
Bar Charts:
Return on Shareholders' Equity
Percent
1991 11.0%
1992 13.0%
1993 13.7%
Page Item Description
- ------- ---------- ----------------------------------------------------
Page 5:
(cont.)
Bar Charts: Earnings Per Share
Dollars
1991 $1.15
1992 $1.34
1993 $1.42
Dividends Per Share
Dollars
1991 $1.08
1992 $1.08
1993 $1.12
Total Return - Five Year
Average Annual Return
Percent (with reinvested dividends)
1991 17.7%
1992 22.6%
1993 21.1%
Page 6:
Bar Chart:
Heat Rate
Btu/kWh
1991 9,912
1992 9,766
1993 9,793
Page 7:
Photograph: Utility worker in a storm situation.
Photograph: Man and woman in athletic wear, running. This
photograph also appears on the cover.
Page Item Description
- ------- ---------- ----------------------------------------------------
Page 8:
Photograph: Two men and a woman in discussion over business plans
with an industrial lighting display in the background.
Photograph: Circular fluorescent light bulb
Photograph: Two women standing, holding a tray of food
Page 9:
Photograph: Two men in discussion with a large commercial mixer in
the background.
Bar Chart: Customer Satisfaction
Percent
1991 96%
1992 96%
1993 96%
Page 10:
Artwork: The Great Seal of The State of Ohio
Photograph: Coal Barge
Page 11:
Photograph: Man and woman in conversation in a shopping mall.
Photograph: Logo - General Motors Truck and Bus Group
Photograph: Logo - Air Force Materiel Command Headquarters
Page 12:
Photograph: Concert performance in amphitheater facility.
Artwork: Logo - "Way To Go", Company's umbrella name for
conservation programs. This artwork also appears on the
cover.
Page Item Description
- ------- ---------- ----------------------------------------------------
Page 13:
Bar Charts:
Electric Sales, GWH
Year
--------------------------
1991 1992 1993
----- ----- -----
Residential 4,571 4,260 4,558
Commercial 2,945 2,896 3,006
Industrial 3,949 3,938 4,089
Other 1,850 2,960 3,023
Total 13,315 14,054 14,676
Electric Revenues
$ in millions
Year
---------------------------
1991 1992 1993
----- ----- -----
Residential 332 326 374
Commercial 179 181 200
Industrial 187 190 206
Other 93 112 121
Total 791 809 901
Average Price-Electric
Calendar Year
cents/kWh
--------------------------
1991 5.87
1992 5.69
1993 6.07
Gas Sales
Millions of MCF
Year
--------------------------
1991 1992 1993
----- ----- -----
Residential 27 28 29
Commercial 8 8 8
Industrial 6 5 3
Other 12 14 17
Total 53 55 57
Page Item Description
- ------- ---------- ----------------------------------------------------
Page 13
(cont.)
Bar Charts:
Gas Revenues
$ in millions
Year
---------------------------
1991 1992 1993
----- ----- -----
Residential 125 128 161
Commercial 35 36 44
Industrial 22 19 15
Other 19 21 25
Total 201 204 245
Average Price-Gas
Calendar Year
dollars/MCF
--------------------------
1991 4.39
1992 4.36
1993 5.42
Construction Costs
$ in millions
--------------------------
1991 117
1992 59
1993 89
Operating Expenses
$ in millions
Year
--------------------------
1991 1992 1993
----- ----- -----
Fuel Used in
Production 237 221 227
Gas Purchased for
Resale 130 118 156
Operating &
Administrative 168 158 185
Maintenance 92 77 90
Total 627 574 658
Page Item Description
- ------- ---------- ----------------------------------------------------
Page 13:
(cont.)
Bar Charts:
Capital Structure
$ in millions
---------------------------
1991 1992 1993
----- ----- -----
Common
Shareholders' equity 49% 48% 46%
Preferred Stock 6% 6% 5%
Long-term Debt 45% 46% 49%
Total $2,205 $2,074 $2,243
Page 27:
Artwork: logo - Price Waterhouse (Independent Auditors)