1995 ANNUAL REPORT
(see appendix for logo description)
Caption to photograph:
EXCELLING IN A COMPETITIVE ENVIRONMENT
(see appendix for photograph description)
[cover]
KEY FACTORS FOR HIGH PERFORMANCE
RETURN TO SHAREHOLDERS. Deliver above average and sustainable earnings
and dividend growth--maximize shareholder value.
SUPERIOR OPERATIONS. Achieve consistent, superior operations with the
most efficient use of existing assets.
COMPETITIVE PRICES. Keep prices competitive relative to the state and
the region.
STRONG FINANCIAL PERFORMANCE. Produce strong financial performance while
minimizing risk.
GROWING SERVICE AREA ECONOMY. Enhance strong partnership with West
Central Ohio to achieve economic growth.
MANAGING COSTS. Manage costs at all levels while achieving performance
goals.
ABOUT THE COVER
Excelling in a Competitive Environment--A rich tradition in manufacturing
technology and quality educational and training programs support the
dynamic business climate of West Central Ohio. The Advanced Integrated
Manufacturing Center, shown on the cover, is jointly sponsored by
Sinclair Community College and The University of Dayton. Its
accomplishments include an award-winning student project in manufacturing
design.
This Report highlights DPL Inc.'s industry-leading performance in 1995,
and its partnership with the people and businesses of West Central Ohio
to achieve high performance in a competitive world.
DP&L SERVICE AREA
WEST CENTRAL OHIO
(see appendix for artwork description)
CORPORATE PROFILE
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.
Electricity for DP&L's 24 county service area is generated at eight power
plants and is distributed to 476,000 retail customers. Natural gas
service is provided to 294,000 customers in 16 counties. The corporate
offices of DPL Inc. are located at:
Courthouse Plaza Southwest, Dayton, Ohio 45402
(513) 224-6000.
[inside front cover]
FINANCIAL & OPERATING HIGHLIGHTS
1995 1994 % change
- -----------------------------------------------------------------------------
FINANCIAL PERFORMANCE
Earnings per share of common stock $ 1.63 1.54 6
Dividends paid per share $ 1.24 1.18 5
Return on equity of regulated business % 13.2 13.1
Return on total capital % 11.5 11.3
Market value per share at December 31 $ 24 3/4 20 1/2 21
Book value per share at December 31 $ 11.54 11.17 3
Total electric and natural gas revenues
(millions) $ 1,249.6 1,180.6 6
Taxes per share $ 2.25 2.21 2
Number of common shareholders 48,919 51,270 (5)
Cash provided by operating activities
(millions) $ 305.3 286.9 6
FIRST MORTGAGE BOND RATINGS:
Duff & Phelps, Inc. AA AA
Standard & Poor's Corporation AA- AA-
Moody's Investor Service Aa3 A1
CAPITAL INVESTMENT PERFORMANCE:
Construction additions (millions) $ 87.3 101.1 (14)
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 6.59 (8)
Fuel efficiency--
Heat rate - Btu per kWh 9,773 9,836 (1)
Industry average 10,425 10,351 1
Fuel savings (millions) $ 14.3 11.0 30
System peak load - MW (calendar year) 2,961 2,824 5
Gas--
Average price per MCF - retail
customers (calendar year) $ 4.90 5.44 (10)
DPL 1 1995
EXCELLING IN A COMPETITIVE ENVIRONMENT
RETURN TO SHAREHOLDERS
Total financial return to shareholders in 1995 was 27%, and has averaged
more than 21% annually over the last five years, compared to an industry
average of less than 8%.
Dear Shareholders:
We enjoy being in the electric and gas business, interacting in a
positive way with our customers, being a part of the communities we serve
and each and every one of us at "Team DPL" works hard at making West
Central Ohio a better place to work and live.
So it comes as no surprise to you that in 1995 at DPL we continued to
focus on doing what we do best, providing energy to West Central Ohio and
working to create reasonable growth of earnings, dividends and stock
price. It was a good year, we were able to reach or surpass almost all
of our operating and financial goals.
Earnings were up to $1.63 per share, 5.8% over the $1.54 per share earned
in 1994. On January 30, 1996 we increased the annual dividend rate by
six cents per share to $1.30 per share, a 4.8% increase over 1995's
dividend rate. This increase is the ninth in the last ten years and is
part of our effort to provide you a meaningful, competitive return every
year. Our stock price closed 1995 at $24 3/4 per share, increasing 21%
over year end 1994 and near our all-time high of $25 5/8. Our total
return to you in 1995 was 27% and our five year compounded annual total
return is over 21%.
A growing service area economy is vital and, thanks to the one and a half
million people in West Central Ohio, our regional economy is among the
best in the nation. Growth is both expansive and diverse providing the
basis for continued sales increases and a degree of insurance against the
risk of a downturn in the economy. Electric sales to our business
customers were up 5% in 1995 over 1994 sales, and the number of customers
we serve continues to grow. In fact, this summer contained nine of our
top ten peak days in DP&L's history, as a result of our strong economy
and warmer than usual temperatures. I'm especially proud of the efforts
of DP&L in developing partnerships with our communities, educational
institutions, industries and individuals. Our new program, "Partners in
Business," joins together business, education and government to
strengthen the economy and helps to constantly upgrade an already well-
trained workforce in West Central Ohio.
We continued our extensive investor analyst effort in 1995 to communicate
our business plans directly to these decision makers across the nation.
We visited with more than 300 analysts in 26 cities, ensuring that our
operating belief is heard...
DPL 2 1995
...and understood. The foundation of this belief is unchanged since 1978--
we are in the business of selling a commodity, and a commodity sells on
price.
In order to succeed in the commodity business, plant operations have to
be among the best in the industry, and reserves must be low but adequate
to meet our customers' needs. Costs must be closely managed, in order to
have competitive prices--one of our highest priorities. We believe it is
beneficial to be a combination electric and natural gas company, and we
intend to take full advantage of our position as a low cost gas provider
to produce the best energy package for each of our customers. Finally,
strong financial performance accompanied by a clean, sound balance sheet
help to protect against future financial and regulatory risk and ensure
the growth of the Company.
Working together and shared success have been a key part of our belief in
the past. We enjoyed working for you, our shareholders, in 1995 and will
continue to stick with the basics in 1996.
Best regards,
Peter H. Forster
Peter H. Forster
Chairman & CEO
DPL Inc.
Caption to photogragh:
PICTURED FROM LEFT TO RIGHT ARE: BURNELL R. ROBERTS, DAVID R. HOLMES,
JAMES F. DICKE, II, PETER H. FORSTER, W AUGUST HILLENBRAND, JANE G.
HALEY, ALLEN M. HILL, THOMAS J. DANIS, ERNIE GREEN
(see appendix for photograph description)
Earnings
Per Share
Dollars
(see appendix for graph description)
Dividends
Per Share
Dollars
(see appendix for graph description)
DPL 3 1995
EXCELLING IN A COMPETITIVE ENVIRONMENT
SUPERIOR OPERATIONS
DPL maintains a national leadership position in power plant efficiency
and productivity, overall system reliability, and customer satisfaction.
DPL Inc. will continue to focus on a commitment to strong financial
performance, quality customer service, efficient operations and effective
cost management efforts. By keeping energy prices competitive while
meeting the total energy needs of our customers, we will continue to
improve in an ever-changing environment.
During 1995, DPL Inc. again produced solid financial returns for
shareholders to remain one of the nation's top-performing energy
companies. The formula for transitioning this success to a potentially
more competitive and less regulated environment will be much the same --
a strong West Central Ohio economy combined with a quality product and
excellent customer service.
The West Central Ohio economy continues to outperform many areas in the
nation. Productivity and expansion is accelerating in all sectors of our
service territory's diverse economy, including high technology, research
and development, light manufacturing, distribution and transportation and
professional services. This growth means additional value-added jobs for
our region that supports further economic development opportunities and
expansion. In 1995, the average unemployment rate for the areas we serve
was 4.4%, compared to 4.7% in Ohio and 5.7% nationally.
Business activity showed strength over a broad base of industrial and
commercial customers. This year, General Motors added more than one
thousand new positions at one of their largest Dayton area plants. The
plant, which builds the popular Chevy Blazer, Oldsmobile Bravada and GMC
Jimmy, employs three shifts working six days per week. Significant
economic expansion is also occurring at Emery Worldwide Inc., Panasonic,
F&P America, Whirlpool, Honda of America and The Chrysler Corporation.
Putting this growth into a broader perspective, in 1995, with a total of
911 new and expanded facilities constructed over a twelve month time
period, the State of Ohio was once again declared the winner for economic
growth and development. That's almost 400 facilities more than its
closest competitor, North Carolina, and significantly more than Texas and
California. Ohio's success is driven in part by the fact that West
Central Ohio businesses invested over $720 million in new plant and
expanded facilities. This trend of impressive economic growth and
expansion will provide a solid base for future financial growth and
ongoing success for the Company.
Caption to logo:
Way To Go is the umbrella name for our award winning energy efficiency
programs, many of which feature the popular Lucky the Dog.
(see appendix for logo description)
DPL 4 1995
Caption to photograph:
EMERY WORLDWIDE, A SUBSIDIARY OF CONSOLIDATED FREIGHTWAYS, INC., HAS ITS
OPERATIONAL NORTH AMERICAN HUB IN DAYTON, OHIO. EACH NIGHT, EMERY
TRANSPORTS UP TO FOUR MILLION POUNDS OF FREIGHT VIA NEARLY SEVENTY
AIRCRAFT. EMERY IS CURRENTLY EXPANDING ITS RUNWAY FACILITIES AND ADDING A
NEW LOGISTICS WAREHOUSE FACILITY.
(see appendix for photograph description)
DPL 5 1995
EXCELLING IN A COMPETITIVE ENVIRONMENT
COMPETITIVE PRICES
As a combination electric and natural gas company, we can meet our
customers' total energy needs at a competitive price.
DP&L works closely with large and small companies to provide incentives
for growth. In September, DP&L unveiled "Partners in Business", a program
designed to help stimulate the economy by awarding credits to new or
existing customers that expand or create new jobs. The credits, which
are based on energy use, can be used to strengthen employee skills,
enhance productivity or increase efficiency. Overall, since 1986, our
energy incentive programs have supported the creation of 57,000 new jobs
in West Central Ohio.
A total customer focus throughout the Company continues to be a priority
at DP&L. To exceed our customers' expectations and accomplish our
customer service goals, we start with the basics -- hardworking,
dedicated employees. DP&L's twenty-one customer service centers located
throughout West Central Ohio ensure our customers receive reliable,
quality service around-the-clock, seven days a week. To monitor and
improve customer satisfaction, customers are frequently surveyed and all
employees have incentive compensation tied to the quality of customer
service as well as cost control.
To keep energy prices competitive in the region, DP&L remains committed
to managing costs at all levels in the Company while continuing to
achieve high operational standards. The effective use of resources in
the generating part of our business combined with predictive and
preventative maintenance results in some of the best operating units in
the country. By effectively scheduling maintenance and repairs during
off-peak periods, DP&L keeps purchased power costs to a minimum and
reduces the need for new plant construction.
Highlighting the importance of this strategy, DP&L customers established
several new records for utility usage throughout the summer months. On
August 14, an all-time peak demand of 2,961,000 kilowatts of electricity
was set, marking the third consecutive year there has been record demand
on the Company's electric system. Throughout the year, the Company
maintained high levels of electric system reliability, despite extreme
summer weather and the multiple system peaks.
In order to meet the growing energy needs of West Central Ohio, the first
of a small number of combustion peaking units was placed in service in
June -- just in time to assist in meeting the record-setting demands for
electricity by our customers.
Caption to logo:
West Central Ohio plays a significant role in Ohio's number one ranking
nationally for new business development and expansion.
(see appendix for logo description)
DPL 6 1995
Caption to photograph:
THE PANASONIC FACILITY IN TROY, OHIO ASSEMBLES, TESTS AND SHIPS
TELEVISION SCREENS TO MANUFACTURERS THROUGHOUT THE COUNTRY. A $120
MILLION EXPANSION CURRENTLY IN PROGRESS WILL SPECIALIZE IN 31" AND 35"
SCREENS, MORE THAN DOUBLING THE SIZE OF THE FACILITY AND ADDING 350 JOBS.
(see appendix for photograph description)
DPL 7 1995
Caption to photograph:
SPECTRA-PHYSICS LASERPLANE, HEADQUARTERED IN DAYTON, OHIO, IS THE WORLD
LEADER IN LEVELING, ALIGNING, AND GRADE CONTROL SYSTEMS. EMPLOYING OVER
600 PEOPLE IN THE DAYTON AREA, SPECTRA-PHYSICS IS A PARTICIPANT IN DP&L'S
PARTNERS IN BUSINESS PROGRAM.
(see appendix for photograph description)
EXCELLING IN A COMPETITIVE ENVIRONMENT
STRONG FINANCIAL PERFORMANCE
DPL earnings and dividend growth continue to rank among the best in the
industry. In 1995 earnings per share were $1.63, representing 5.8%
growth over 1994 and dividends were increased to $1.24 per share,
representing a 5.1% higher dividend rate than in 1994.
Completed ahead of schedule and below its expected cost, this natural gas-
fired unit has a capacity of 75 megawatts and can be brought on-line
quickly to meet peak energy requirements. With their small size, the
units can be built economically, providing the flexibility to meet energy
usage growth as it occurs.
Efficient operation of power plants also helps to meet customer demand
for energy. DP&L has repeatedly been recognized for its production
efficiency, as measured by heat rate. The Company's 1995 heat rate,
which measures the amount of energy it takes to produce one kilowatt of
electricity, of 9,773 Btu/kWh is expected to be among the industry
leaders once again. Over the past ten years, we have saved our customers
almost $250 million through our efficiency and productivity improvements.
To further improve reliability, DP&L worked closely with local government,
community groups and customers to install new transmission lines throughout
our service territory. The teamwork between DP&L employees and the community
enables projects to be completed as planned, strengthening the Company's
overall transmission system and improving reliability.
Positioning itself as a low-risk investment in the energy industry, DP&L
remains committed to produce the majority of its energy from coal.
Flexible coal procurement contracts are in place and take advantage of
plentiful, quality coal supplies in the region. In addition, DP&L's long-
standing practice of using low sulfur coal finds the Company well-
positioned to meet the requirements of the Clean Air Act Amendments. Due
to the flexibility built into our coal contracts, the compliance plan for
the Clean Air Act Amendments is fully implemented, with little or no
impact on energy prices for Phase I or Phase II, creating a significant
competitive advantage.
A total energy provider with easy access to five major gas pipelines, our
gas business strengthens our competitive position within the region. As
a combination electric and natural gas company, we can provide our
customers the best total energy package in terms of both their existing
and future energy needs and at a competitive price.
Reflecting DP&L's outstanding performance and cost management efforts,
Moody's Investors Service upgraded our credit rating in March 1995 from
"A1" to "Aa3". This upgrade marks the third increase by Moody's since
1992 and is the highest...
Caption to logo:
Partners in Business is DP&L's innovative and new economic development
program awarding energy credits to companies that expand or create new
jobs.
(see appendix for logo description)
DPL 9 1995
EXCELLING IN A COMPETITIVE ENVIRONMENT
GROWING SERVICE AREA ECONOMY
The growth in the West Central Ohio economy continues to be robust and
diverse. As a result, sales to business customers in 1995 increased 5%
over 1994 totals.
...credit rating we've achieved with that agency in more than twenty
years. DP&L is one of only two companies in the industry that has been
upgraded to "Aa3" or higher by Moody's over the past two years. This
increase follows credit rating upgrades in 1994 by both Duff & Phelps and
Standard and Poor's ("S&P"). Duff & Phelps currently rates DP&L's senior
debt as "AA" and S&P as "AA-".
In September, DP&L took advantage of low interest rates and further
reduced the cost of its long-term debt. By refinancing $110 million of
9.50% Pollution Control Bonds with a series of 6.10% Air Quality
Development Bonds due 2030, the Company will save nearly $4 million in
annual interest costs and effectively reduce the embedded cost of debt to
below 7.6%. The average maturity of all of our debt is extended to
nearly 28 years. This refinancing further strengthens our balance sheet
and reduces future financial risk. In total, our financial performance
provides the flexibility and resources to achieve a lowest quartile cost
position in our region while supporting quality customer service efforts
and efficient power plant operations. Based on the Company's strong
operations and DPL's solid financial performance, we are able to provide
shareholders with above average earnings and dividend growth.
DP&L supports our customers through our Way To Go programs, including
community and volunteer initiatives. Our goal is to use our resources to
benefit the overall quality of life in West Central Ohio. The Company's
Way To Go energy efficiency programs continue to reach a broad section of
our customer base providing information, rebates and technology relating
to energy-efficient lighting, motors and construction techniques. Over
the past four years, 125,000 business and residential customers have been
introduced to the value of energy efficiency through our energy-and money-
saving initiatives. In addition, our employee volunteers staffed more
than 40 community events attended by more than 230,000 people giving us
the opportunity to talk with our customers about the benefits of the
energy-saving services we provide.
We are also recognizing those business customers who are taking strides
to improve the efficiency of their operations. Over the past two years,
sixteen companies, representing the industrial, commercial, government,
small business and community sectors, have been named DP&L Way To Go
Energy Leaders.
Caption to logo:
DP&L invests in area communities through numerous education activities
and volunteer efforts of employees, supporting West Central Ohio's
quality of life and business environment.
(see appendix for logo description)
DPL 10 1995
Caption to photograph:
WEST CENTRAL OHIO PROVIDES GREAT EDUCATIONAL OPPORTUNITIES FOR YOUTH,
WITH A DIVERSITY OF OPTIONS FOR CULTURAL AND ATHLETIC ACTIVITIES. IN
TOTAL, THERE ARE APPROXIMATELY 90 HIGH SCHOOLS AND OVER 20 COLLEGES AND
UNIVERSITIES IN THE AREA. DP&L'S STRONG COMMITMENT TO EDUCATION INCLUDES
NUMEROUS ENVIRONMENTAL, SAFETY AND ENERGY AWARENESS PROGRAMS THAT REACHED
MORE THAN 50,000 STUDENTS IN 1995.
(see appendix for photograph description)
DPL 11 1995
EXCELLING IN A COMPETITIVE ENVIRONMENT
MANAGING COSTS
The Company's success in managing costs results in stable enery prices
for our customers and sustainable earnings for our shareholders.
Showcasing the latest in energy-saving technology, DP&L's Energy Resource
Center continues to set the industry standard for offering innovative
workshops and seminars to help our business customers become more energy-
efficient and competitive. From hosting energy conferences for
organizations like Delphi's Worldwide Facilities Group to working one-on-
one with facility managers, Energy Resource Center staff have helped more
than 12,000 customers and energy professionals improve the energy
efficiency of West Central Ohio businesses.
DP&L's education programs continue to make a positive impact on energy
users throughout our service territory. In Concert With the Environment
teaches students about energy efficiency and protection of the
environment using hands-on computer applications. Our one-of-a-kind
scouting program highlights the fundamentals of energy conservation,
electric generation, transmission and distribution and awards scouts Way
To Go energy conservation patches for completing the workshop. And
DP&L's Think Hot! initiative ensures students learn the importance of
electric and gas safety in the classroom. In total, we have reached
almost 50,000 students and teachers last year with our messages on energy
conservation, the environment and safety education.
DP&L's Way To Go Scholars combines academic excellence with valuable on-
the-job experience. Since 1991, DP&L has instituted programs at eleven
area universities and colleges, providing nearly thirty students each year
with tuition assistance and cooperative education opportunities.
DP&L employee volunteers were also present at virtually every city,
township and county elected officials meetings within our service
territory to insure that we stay informed on the critical issues facing
the communities we serve. In this same spirit, DP&L employees volunteer
significant time in their local communities through individual
participation in educational, charitable, religious, and civic
organizations.
As the energy industry environment evolves, the combination of a strong
West Central Ohio economy, top of the industry operational achievements
and excellent financial performance will continue to distinguish DPL Inc.
as a leader in the industry. In order to attain our future goals, our
focus will remain on the fundamentals, specifically, the Company's
underlying commitments to quality customer service and furnishing our
shareholders with a low-risk investment that provides above average
returns and dividend growth.
Caption to logo:
DP&L recognizes those companies who improve their business position through
energy efficiency.
(see appendix for logo description)
DPL 12 1995
FINANCIAL REVIEW
Electric Revenues Gas Revenues Total Taxes
$ in millions $ in millions $ in millions
(see appendix for (see appendix for (see appendix for
graph description) graph description) graph description)
Electric Sales Gas Sales Operating Revenues
Thousands of GWH Millions of MCF $ in millions
(see appendix for (see appendix for (see appendix for
graph description) graph description) graph description)
Average Price-Electric Average Price-Gas Construction Costs
Calendar Year Calendar Year $ in millions
cents/kWh $/MCF (see appendix for
(see appendix for (see appendix for graph description)
graph description) graph descripiton)
DPL 13 1995
FINANCIAL AND STATISTICAL SUMMARY DPL INC.
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------
For the years ended
DPL December 31,
Inc.: Earnings per share of
common stock $ 1.63 1.54 1.42 1.34 1.15
Dividends paid per share $ 1.24 1.18 1.12 1.08 1.08
Dividend payout ratio % 76.1 76.6 78.9 80.6 93.9
Net income (millions) $ 164.7 154.9 139.0 138.8 119.2
Utility service revenues
(millions) $1,255.1 1,187.9 1,151.3 1,017.3 995.6
Construction additions $ 87.3 101.1 88.9 59.0 117.4
(millions)
Market value per share
at December 31 $ 24-3/4 20-1/2 20-5/8 19-3/4 17-1/4
DP&L: Electric sales (millions
of kWh) --
Residential 4,871 4,465 4,558 4,260 4,571
Commercial 3,425 3,068 3,006 2,896 2,945
Industrial 4,401 4,388 4,089 3,938 3,949
Other 4,117 2,298 3,023 2,960 1,850
------- ------- ------- ------- -------
Total 16,814 14,219 14,676 14,054 13,315
Gas sales (thousands of
MCF) --
Residential 29,397 27,911 28,786 27,723 26,594
Commercial 8,307 8,081 8,468 8,642 8,368
Industrial 2,584 3,150 3,056 4,914 6,014
Other 3,006 2,909 3,171 3,402 3,187
Transported gas 16,376 15,147 13,401 10,811 8,494
------- ------- ------- ------- -------
Total 59,670 57,198 56,882 55,492 52,657
DPL At December 31,
Inc.: Book value per share $ 11.54 11.17 10.51 9.75 10.38
Total assets (millions) $3,322.8 3,232.7 3,302.0 2,976.7 2,972.7
Long-term debt and
preferred stock with
mandatory redemption
provisins (millions) $1,081.5 1,093.7 1,132.9 990.6 1,047.1
DP&L: First mortgage bond
ratings--
Duff & Phelps, Inc. AA AA AA- A+ BBB+
Standard & Poor's
Corporation AA- AA- A A BBB+
Moody's Investors
Service Aa3 A1 A2 A2 A3
Number of Shareholders
DPL
Inc.: Common 48,919 51,270 53,275 54,023 53,846
DP&L: Preferred 733 795 1,873 1,969 2,034
DPL 14 1995
FINANCIAL REVIEW
The 1995 earnings increased to $1.63 per share, compared to earnings
per share of $1.54 in 1994 and $1.42 in 1993.
In 1995, electric revenues increased 9% with a 5% growth in sales to business
customers reflecting the continued strength of the West Central Ohio economy.
Higher sales to other public utilities and increased residential sales due to
weather conditions also contributed to the revenue increase. Fuel and
purchased power expense increased 17% primarily related to the increased
electric sales. In 1994, electric revenues increased 5% with a 2% increase in
retail sales. Implementation of the last step of the electric rate increase
phase-in of 6.4% also caused 1994 revenues to increase. (See Financial
Statement Note 2.)
Gas revenues and gas purchased for resale decreased 6% and 12%,
respectively, in 1995, as lower gas costs offset the 4% growth in
volumes. Gas revenues decreased 3% in 1994. An overall sales increase
of 1% reflected strong sales to transportation gas customers despite
mild temperatures in late 1994.
Operation and maintenance expenses increased 11% in 1995 over 1994
primarily due to higher compensation and benefit expenses, computer
system development and bond redemption costs. Operation and maintenance
expense decreased 11% in 1994 from 1993 principally due to bond
redemption costs incurred in 1993.
Regulatory assets recorded during the phase-in of electric rates are
being amortized and recovered in current rates. In addition, deferred
interest charges on the William H. Zimmer Generating Station ("Zimmer")
are being amortized at $3 million per year over the projected life of
the asset.
A 1992 Public Utilities Commission of Ohio ("PUCO")-approved
settlement agreement and a subsequent stipulation in 1995 allowed
accelerated recovery of demand-side management costs and, thereafter,
production plant costs in the event that DP&L return on equity exceeds
a baseline 13% (subject to upward adjustment). If the return exceeds
the baseline return by one to two percent, one-half of the excess will
be used to accelerate recovery of these costs. If the return is
greater than two percent over the baseline, the entire excess will be
used for such purpose.
Preferred stock dividends decreased $4 million in 1995 and 1994 due
to redemptions of several series of preferred stock in 1994.
Total income taxes increased slightly in 1995 after a 29% increase in
1994 resulting from higher pre-tax earnings.
Credit Ratings
In March 1995, DP&L's senior debt credit rating was upgraded to "Aa3"
from "A1" by Moody's Investors Service. This marks the third credit
rating increase from Moody's since 1992 and the highest credit rating
with the agency since 1974. The Moody's upgrade follows upgrades in
1994 by both Duff & Phelps and Standard & Poors ("S&P"). Duff & Phelps
now rates DP&L's senior debt as "AA" and S&P as "AA-". Duff & Phelps
had previously upgraded the Company's credit ratings in 1993. All of
these upgrades are considered investment grade and reflect the Company's
strong financial performance, cost reductions and competitive position.
INCOME STATEMENT HIGHLIGHTS
$ in millions except per share amounts 1995 1994 1993
- ------------------------------------------------------------------
ELECTRIC UTILITY:
Revenues $1,028 $944 $899
Fuel and purchased power 256 218 225
----- ----- -----
Net revenues 772 726 674
GAS UTILITY:
Revenues 222 237 245
Gas purchased for resale 133 151 156
----- ----- -----
Net revenues 89 86 89
Interest and other income 30 30 27
Operation and maintenance expense 272 246 275
Amortization (deferral) of regulatory
assets, net 15 11 (26)
Income taxes 102 101 78
Net income 165 155 139
Earnings per share of common stock 1.63 1.54 1.42
DPL 15 1995
Construction Program and Financing
Construction additions were $87 million, $101 million and $89 million
in 1995, 1994 and 1993, respectively.
During 1995, total cash provided by operating activities was $305
million. At year-end, cash and temporary cash investments were $150
million.
In September 1995, a new series of Air Quality Development Revenue
Refunding Bonds was issued in principal amount of $110 million with an
interest rate of 6.10%. Proceeds from the financing were used to redeem
a similar principal amount of first mortgage bonds with an interest rate
of 9.5%.
In March 1994, DPL Inc. issued 3,200,000 shares of common stock through
a public offering. Proceeds from the sale were used in connection with
the redemption of all outstanding shares of DP&L's Preferred Stock
Series D, E, F, H and I.
The capital program for the five years ending 2000 consists of
construction costs of $631 million, which includes a series of 75 MW
combustion turbine generating units, and debt maturities and sinking
fund payments of $81 million.
Issuance of additional amounts of first mortgage bonds by DP&L is
limited by provisions of its mortgage. The amounts and timing of future
financings will depend upon market and other conditions, rate increases,
levels of sales and construction plans. DPL Inc. anticipates that it
has sufficient capacity to issue DP&L first mortgage bonds to satisfy
its requirements in connection with its capital program during 1996-
2000.
In addition, DPL Inc. has a revolving credit agreement, renewable
through 1999, which allows total borrowings by DPL Inc. and its
subsidiaries of $200 million. At year-end 1995, DPL Inc. had no
borrowings outstanding under this credit agreement.
DP&L also has $97 million available in short-term lines of credit. At
year-end, DP&L had no borrowings outstanding from these lines of credit
and no commercial paper outstanding.
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. Projected
construction costs over the next five years approximate projected
depreciation over the same period.
In March 1995, the Federal Energy Regulatory Commission ("FERC") issued
a Notice of Proposed Rulemaking ("NOPR") that seeks comments on FERC's
initiative to create a more competitive wholesale electric power market.
In this NOPR, FERC states its intention to require all electric
utilities that own or control transmission facilities to file open
access transmission tariffs. Open access transmission tariffs provide
third parties non-discriminatory transmission service comparable to what
the utility provides itself. In this proposed rulemaking, FERC also
states that it will enact a principle that will entitle utilities to
full recovery of legitimate and verifiable stranded costs on both the
state and federal level.
The PUCO is holding roundtable discussions on the introduction of
competition in the electric industry. Furthermore, legislative
proposals have been introduced in Ohio concerning wholesale and retail
wheeling which are designed to increase competition. These factors
increase the risk that the Company's production plant and/or regulatory
assets may not be fully recovered in rates.
A stipulation approved by the PUCO allows accelerated recovery of
demand-side management and production plant costs to the extent that
future DP&L income exceeds the allowed return.
The Federal Environmental Protection Agency ("EPA") has notified
numerous parties, including DP&L, that they are considered "Potentially
Responsible Parties" for clean up of four hazardous waste sites in Ohio.
The EPA has estimated total costs of $56 million for its preferred
clean-up plans at three of these sites and has not established an
estimated cost for the fourth site. The final resolution of these
investigations will not have a material effect on DP&L's financial
position, earnings or cash flow.
Also, the Company partially insures against losses for business risks
through its wholly-owned captive insurance company and third party
carriers.
DPL 16 1995
CONSOLDIATED STATEMENT OF OPERATIONS DPL INC.
For the years ended December 31,
$ in millions except per share amounts 1995 1994 1993
- ------------------------------------------------------------------------------
INCOME
Utility service revenues $1,255.1 $1,187.9 $1,151.3
Interest and other income 29.7 30.1 26.7
-------- -------- --------
Total income 1,284.8 1,218.0 1,178.0
-------- -------- --------
EXPENSES
Fuel and purchased power 257.5 220.7 226.6
Gas purchased for resale 133.2 150.8 156.4
Operation and maintenance (Note 1) 272.3 245.8 274.8
Depreciation and amortization (Note 1) 118.9 114.7 110.9
Amortization (deferral) of regulatory
assets, net (Note 2) 15.4 10.9 (25.8)
General taxes 125.2 121.1 112.0
Interest expense 94.3 93.2 97.0
Preferred dividend requirements of
The Dayton Power and Light Company
(Note 9) 0.9 4.7 8.7
-------- -------- --------
Total expenses 1,017.7 961.9 960.6
-------- -------- --------
INCOME BEFORE INCOME TAXES 267.1 256.1 217.4
Income taxes (Notes 1 and 3) 102.4 101.2 78.4
-------- -------- --------
NET INCOME $ 164.7 $ 154.9 $ 139.0
======== ======== ========
Average Number of Common Shares
Outstanding (millions) (Note 8) 101.1 100.4 97.7
Earnings Per Share of Common Stock $ 1.63 $ 1.54 $ 1.42
Dividends Paid Per Share of Common Stock $ 1.24 $ 1.18 $ 1.12
See Notes to Consolidated Financial Statements.
DPL 17 1995
CONSOLIDATED STATEMENT OF CASH FLOWS DPL INC.
For the years ended December 31,
$ in millions 1995 1994 1993
- ------------------------------------------------------------------------------
OPERATING ACTIVITIES
Cash received from utility customers $1,203.5 $1,199.0 $1,137.5
Other operating cash receipts 28.7 25.4 26.4
Cash paid for:
Fuel and purchased power (249.8) (226.0) (216.6)
Purchased gas (131.7) (142.8) (146.9)
Operation and maintenance labor (89.3) (90.0) (83.3)
Nonlabor operating expenditures (136.9) (159.4) (232.7)
Interest (net of amounts capitalized) (91.9) (92.1) (83.3)
Income taxes (103.1) (105.8) (54.4)
Property, excise and payroll taxes (124.2) (121.4) (111.4)
-------- -------- --------
Net cash provided by operating activities
(Note 11) 305.3 286.9 235.3
-------- -------- --------
INVESTING ACTIVITIES
Net cash used for property expenditures
and other (101.6) (94.3) (113.6)
-------- -------- --------
FINANCING ACTIVITIES
Dividends paid on common stock (124.9) (118.3) (109.5)
Retirement of long-term debt (126.7) (9.2) (439.2)
Issuance of long-term debt 108.8 - 536.0
Purchase of treasury stock (6.1) (9.4) -
Redemption of preferred stock - (94.2) (8.5)
Retirement of short-term debt - (25.0) (127.0)
Issuance of common stock - 77.5 -
-------- -------- --------
Net cash used for financing activities (148.9) (178.6) (148.2)
-------- -------- --------
Cash and temporary cash investments --
Net change 54.8 14.0 (26.5)
Balance at beginning of year 95.6 81.6 108.1
-------- -------- --------
Balance at end of year $ 150.4 $ 95.6 $ 81.6
======== ======== ========
See Notes to Consolidated Financial Statements.
DPL 18 1995
CONSOLIDATED BALANCE SHEET DPL INC.
At December 31,
$ in millions 1995 1994
- --------------------------------------------------------------------------
ASSETS
Property
Utility property $3,370.7 $3,254.1
Other property 55.4 62.3
Construction work in progress 23.5 68.6
-------- --------
3,449.6 3,385.0
Less--
Accumulated depreciation and amortization (1,167.8) (1,072.8)
-------- --------
Net Property 2,281.8 2,312.2
-------- --------
Current Assets
Cash and temporary cash investments 150.4 95.6
Accounts receivable, less provision for
uncollectible accounts of $6.5 and $7.8,
respectively 148.0 103.4
Inventories, at average cost 82.7 84.6
Taxes applicable to subsequent years 82.4 78.3
Prepayments and other 39.7 24.9
-------- --------
Total current assets 503.2 386.8
-------- --------
Other Assets
Income taxes recoverable through future
revenues (Note 1) 238.6 249.3
Regulatory assets (Note 2) 155.7 168.8
Other assets 143.5 115.6
-------- --------
Total other assets 537.8 533.7
-------- --------
TOTAL ASSETS $3,322.8 $3,232.7
======== ========
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity (Note 8)--
Common stock $ 1.1 $ 1.1
Other paid-in capital 771.4 776.6
Common stock held by employee plans (107.2) (108.7)
Earnings reinvested in the business 499.5 459.3
-------- --------
Total common shareholders' equity 1,164.8 1,128.3
Preferred stock (Note 9) 22.9 22.9
Long-term debt (Note 7) 1,081.5 1,093.7
-------- --------
Total capitalization 2,269.2 2,244.9
-------- --------
Current Liabilities
Accounts payable 97.0 75.3
Accrued taxes 119.4 123.9
Accrued interest 24.9 24.0
Other 43.5 31.7
-------- --------
Total current liabilities 284.8 254.9
-------- --------
Deferred Credits and Other
Deferred taxes (Note 3) 516.3 511.8
Unamortized investment tax credit 79.6 81.5
Other 172.9 139.6
-------- --------
Total deferred credits and other 768.8 732.9
-------- --------
TOTAL CAPITALIZATION AND LIABILITIES $3,322.8 $3,232.7
======== ========
See Notes to Consolidated Financial Statements.
DPL 19 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DPL INC.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Nature of Operations
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
primarily engaged in the business of selling electric energy and natural
gas to residential, commercial, industrial and governmental customers in
a 6,000 square mile area of West Central Ohio. The majority of DPL
Inc.'s earnings come from electricity and natural gas sales. Earnings
from other operations 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)
$40.7 in 1995 and $13.1 in 1994.
Operation and Maintenance
Operation and maintenance expenses include $4.7 million in 1995 and
$22.8 million in 1993 of redemption premiums and other costs relating to
the refinancing of bond issues.
Property, Maintenance and Depreciation
Property is shown at its original cost. Cost includes direct labor and
material and allocable overhead costs.
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 a rate of 3.4%.
The Financial Accounting Standards Board issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which is required to be adopted by 1996. The
implementation of this Statement will not have a material impact on the
Company's financial statements.
Income Taxes
Income taxes are deferred under the liability method. Deferred income
taxes are provided for all temporary 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.
Investment tax credits, previously deferred, are being amortized over
the lives of the related properties.
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.
Reclassifications
Reclassifications have been made in certain prior years' amounts to
conform to the current reporting presentation.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions related to future events.
DPL 20 1995
- ------------------------------------------------------------------------------
2. REGULATORY MATTERS
Regulatory assets on the Consolidated Balance Sheet were:
At December 31,
$ in millions 1995 1994
- -------------------------------------
a. Phase-in $ 61.4 $ 75.9
b. DSM 36.2 31.9
c. Deffered interest 58.1 61.0
------ ------
Total $155.7 $168.8
====== ======
a. As part of a 1992 PUCO-approved settlement agreement ("Agreement")
among DP&L and various consumer groups, the third and final phase
of an electric rate increase of 6.4% took effect in January 1994.
Deferrals (including carrying charges) during the phase-in period
are being recovered in current rates.
b. As part of the Agreement, DP&L undertook cost-effective demand-side
management ("DSM") programs with an average annual cost of
$15 million for 1992-1995. These costs are deferred and are being
recovered at approximately $9 million per year.
The Agreement, as updated by a subsequent stipulation approved by
the PUCO in 1995, allowed accelerated recovery of DSM costs and,
thereafter, production plant costs in the event that DP&L return on
equity exceeds a baseline 13% (subject to upward adjustment). If
the return exceeds the baseline return by one to two percent, one-
half of the excess will be used to accelerate recovery of these
costs. If the return is greater than two percent over the
baseline, the entire excess will be used for such purpose.
c. Interest charges related to Zimmer which were previously deferred
pursuant to PUCO approval are being amortized at $2.8 million per
year over the projected life of the asset.
- ------------------------------------------------------------------------------
3. INCOME TAXES
For the years ended
December 31,
$ in millions 1995 1994 1993
- -------------------------------------------------------
Computation of Tax Expense
Statutory income tax rate 35% 35% 35%
Federal income tax (a) $ 93.8 $ 91.3 $ 79.1
Increases (decreases) in
tax from --
Regulatory assets 3.3 2.2 (6.1)
Depreciation 10.8 10.4 10.2
Investment tax credit
amortized (3.0) (3.7) (3.0)
Other, net (2.5) 1.0 (1.8)
------ ------ ------
Total tax expense $102.4 $101.2 $ 78.4
====== ====== ======
Components of Tax Expense
Taxes currently payable $ 93.0 $107.9 $ 61.2
Deferred taxes--
Regulatory assets (1.7) 1.6 7.1
Liberalized depreciation
and amortization 14.1 17.2 17.6
Property taxes - (6.1) (6.1)
Fuel and gas costs (3.1) (12.7) 5.8
Other 1.9 (3.1) (4.6)
Deferred investment tax
credit, net (1.8) (3.6) (2.6)
------ ------ ------
Total tax expense $102.4 $101.2 $ 78.4
====== ====== ======
(a) Statutory rates applied to pre-tax income before preferred dividends.
Components of Deferred Tax Assets and Liabilities
At December 31,
$ in millions 1995 1994
- -----------------------------------------------
Non-Current Liabilities
Depreciation/property basis $(450.9) $(437.4)
Income taxes recoverable (82.9) (88.9)
Regulatory assets (52.3) (57.0)
Investment tax credit 27.8 28.4
Other 42.0 43.1
------- -------
Net non-current liability $(516.3) $(511.8)
======= =======
Net Current Asset $ 6.1 $ 2.3
======= =======
DPL 21 1995
- ------------------------------------------------------------------------------
4. PENSIONS AND POSTRETIREMENT BENEFITS
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.
In developing the amounts in the following tables, an interest
rate of 6.25% was used in 1995 and 1994 and 6.0% in 1993.
Actual returns on plan assets for 1995, 1994 and 1993 were
25.6%, 0.9% and 6.2%, respectively. 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 1995 1994 1993
- ------------------------------------------------------
Service cost--benefits earned $ 6.2 $ 6.1 $ 5.4
Interest cost 14.4 13.4 12.0
Expected return on plan assets
of 7.5% in each year (17.8) (18.2) (16.9)
Net amortization (0.9) (1.5) (2.0)
----- ----- -----
Net pension cost $ 1.9 $(0.2) $(1.5)
===== ===== =====
The following table sets forth the plans' funded status and amounts
recorded in Other assets on the Consolidated Balance Sheet at December 31:
$ in millions 1995 1994
- ------------------------------------------------------
Plan assets at fair value (a) $298.3 $247.6
Actuarial present value of projected
benefit obligation 245.5 229.9
------ ------
Plan assets in excess of projected
benefit obligation 52.8 17.7
Unamortized transition obligation (19.6) (23.8)
Prior service cost 18.1 20.2
Changes in plan assumptions and
actuarial gains and losses (5.0) 32.8
------ ------
Net pension assets $ 46.3 $ 46.9
====== ======
Vested benefit obligation $190.1 $179.7
Accumulated benefit obligation without
projected wage increases $227.7 $211.1
(a) Invested in fixed income investments, equities including $27.0
million and $22.4 million of DPL Inc. common stock in 1995 and 1994,
respectively, and guaranteed investment contracts.
Postretirement Benefits
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.
In 1995, DP&L funded $12.0 million of the union-eligible health
benefit using a Voluntary Employee Beneficiary Association Trust.
The following table presents the components of postretirement benefit
cost:
$ in millions 1995 1994 1993
- -------------------------------------
Interest cost $3.6 $3.7 $3.7
Net amortization 2.9 3.0 3.0
---- ---- ----
Postretirement
benefit cost $6.5 $6.7 $6.7
==== ==== ====
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation is 10% for 1995 and
decreases to 5% by 2005. A one percentage point increase in each
future year's assumed health care trend rate would increase
postretirement benefit cost by $0.3 million annually and would increase
the accumulated postretirement benefit obligation by $3.4 million. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 6.25% in 1995 and 1994 and 6.0%
in 1993.
The following table sets forth the accumulated postretirement benefit
amounts at December 31:
$ in millions 1995 1994
- ---------------------------------------------------
Accumulated postretirement benefit
obligation:
-- retirees and dependents $43.2 $61.4
-- active employees 1.0 1.1
----- -----
Total 44.2 62.5
Plan assets at fair value (a) 12.0 -
----- -----
Projected benefit obligation in excess
of plan assets 32.2 62.5
Unamortized transition obligation (21.8) (24.8)
Actuarial gains and losses 22.1 3.0
Accrued postretirement benefit ----- -----
liability $32.5 $40.7
===== =====
(a) Invested in money market securities.
DPL 22 1995
- ------------------------------------------------------------------------------
5. 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, 1995, DP&L had $4.3 million of commonly
owned facilities under construction. DP&L's share of expenses is
included in the Consolidated Statement of Results of Operations.
The following table presents DP&L's share of the commonly owned
facilities at December 31, 1995:
DP&L
DP&L Share Investment
---------------- -----------
Owner- Prod. Gross Plant
ship Capacity in Service
(%) (MW) ($ in mil.)
- -----------------------------------------------------
Production Units:
Beckjord Unit 6 50.0 210 54
Conesville Unit 4 16.5 129 30
East Bend Station 31.0 186 149
Killen Station 67.0 402 406
Miami Fort Units 7&8 36.0 360 116
Stuart Station 35.0 820 242
Zimmer Station 28.1 365 985
Transmission (at
varying percentages) 67
- ------------------------------------------------------------------------------
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 1999. Commitment fees are approximately $250,000
per year, depending upon the aggregate unused balance of the loan.
At December 31, 1995, DPL Inc. had no outstanding borrowings under
this credit agreement.
DP&L also has $96.6 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 $94,000 per year in fees.
At year-end, DP&L had no borrowings from these lines of credit and no
commercial paper outstanding.
- ------------------------------------------------------------------------------
7. LONG-TERM DEBT
At December 31,
$ in millions 1995 1994
- --------------------------------------------------------
First mortgage bonds maturing:
1997 5-5/8% $ 40.0 $ 40.0
1998 6.75% and 6.87% (a) 25.0 26.4
1999-2003 8.00% and 8.16% (a) 40.0 43.0
2022-2026 8.14% 671.0 671.0
Pollution control series
maturing through 2027 -
6.43% and 7.97% (a) 107.9 218.4
-------- --------
883.9 998.8
Unamortized debt discount
and premium (net) (2.4) (2.5)
-------- --------
881.5 996.3
Guarantee of Air Quality
Development Obligations 6.10%
Series Due 2030 110.0 -
Notes due 2007 - 7.83% 90.0 90.0
Mortgage note - 10% - 7.4
-------- --------
Total $1,081.5 $1,093.7
======== ========
(a) Weighted average interest rates for 1995 and 1994, respectively.
The amounts of maturities and mandatory redemptions for first mortgage
bonds and notes are (in millions) $0.5 in 1996, $42.4 in 1997, $28.4 in
1998, $4.4 in 1999 and $5.4 in 2000. Substantially all property of
DP&L is subject to the mortgage lien securing the first mortgage bonds.
During 1995, $110 million of a new series of Air Quality Development
Revenue Refunding Bonds was issued due 2030, with an interest rate of
6.10%. Proceeds of the financing were used to redeem a similar
principal amount of first mortgage bonds that secured a series of
pollution control bonds with an interest rate of 9.5%.
DPL 23 1995
- ----------------------------------------------------------------------------------------------------
8. COMMON SHAREHOLDERS' EQUITY
Common
Stock
Common Stock (a) Held By Earnings
---------------------------- Other Paid- Employee Reinvested in
$ in millions Outstanding Shares Amount in Capital Plans the Business Total
- ----------------------------------------------------------------------------------------------------
1993: Beginning balance 103,509,998 $1.0 $708.0 $(103.0) $394.0 $1,000.0
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
1994: Net income 154.9 154.9
Common stock dividends (118.3) (118.3)
Public offering 3,200,000 0.1 63.1 63.2
Dividend reinvestment
plan 720,225 - 14.4 14.4
Treasury stock (478,600) - (9.4) (9.4)
Employee stock plans 0.2 (3.5) (3.3)
Other 0.2 (0.7) (0.5)
----------- ---- ------ ------- ------ --------
Ending balance 106,951,623 1.1 776.6 (108.7) 459.3 1,128.3
1995: Net income 164.7 164.7
Common Stock dividends (124.9) (124.9)
Treasury stock (254,700) - (6.1) (6.1)
Employee stock plans 0.7 1.5 2.2
Other 0.2 0.4 0.6
----------- ---- ------ ------- ------ --------
Ending balance 106,696,923 $1.1 $771.4 $(107.2) $499.5 $1,164.8
=========== ==== ====== ======= ====== ========
(a) $0.01 par value, 250,000,000 shares authorized.
DPL Inc. has a leveraged Employee Stock Ownership Plan ("ESOP") to fund
matching contributions to the Company's 401(k) retirement savings plan and
certain other payments to full-time employees. Common shareholders' equity
is reduced for the cost of 4,190,301 unallocated shares held by the trust
and for 1,546,474 shares related to another employee plan. These shares
reduce the number of common shares used in the calculation of earnings per
share.
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.
Cumulative shares allocated to employees and outstanding for the
calculation of earnings per share were 516,249 in 1995 and 309,779 in
1994. Compensation expense, which is based on the fair value of the
shares allocated, amounted to $4.2 million in 1995, $4.0 million in 1994
and $2.0 million in 1993.
DPL Inc. had 2,107,323 authorized but unissued shares reserved for the
dividend reinvestment plan at December 31, 1995. The plan provides that
either original issue shares or shares purchased on the open market may
be used to satisfy plan requirements.
DPL Inc. has a Shareholder Rights Plan pursuant to which two-thirds of
a Right is attached to and trades with each outstanding DPL Inc. Common
Share. The Rights would separate from the Common Shares and become
exercisable in the event of certain attempted business combinations.
DPL 24 1995
- -------------------------------------------------------------------------------------------------------
9. PREFERRED STOCK
Current Current Par Value
DPL Inc.: No par value, 8,000,000 Series/ Redemption Shares At December 31, 1995 and 1994
shares authorized, no Rate Price Outstanding ($ in millions)
shares outstanding. ------- ---------- ----------- -----------------------------
DP&L: $25 par value, 4,000,000
shares authorized, no A 3.75% $102.50 93,280 $ 9.3
shares outstanding; and B 3.75% $103.00 69,398 7.0
$100 par value, 4,000,000 C 3.90% $101.00 65,830 6.6
shares authorized, 228,508 ------- -----
shares without mandatory
redemption provisions Total 228,508 $22.9
outstanding. ======= =====
The shares may be redeemed at the option of DP&L at the per share prices indicated,
plus cumulative accrued dividends.
- ---------------------------------------------------------------------------------
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31,
1995 1994
-------------------- -------------------
$ in millions Fair Value Cost Fair Value Cost
- ---------------------------------------------------------------------------------
$ $ $ $
Assets (a)
Available for sale securities 11.5 10.8 6.6 7.6
Held to maturity securities,
including short-term cash 188.0 186.6 124.8 125.3
investments of $141.3 in
1995 and $93.7 in 1994
Liabilities (b)
Debt 1,174.9 1,082.0 1,043.3 1,098.5
Capitalization
Unallocated stock in ESOP 103.7 80.1 90.1 84.1
(a) Maturities range from 1996 to 2005.
(b) Includes current maturities.
Available for sale marketable equity securities are carried at market; the
remaining financial instruments are carried at cost. The fair value is
based upon quoted market prices or securities with similar characteristics.
- ------------------------------------------------------------------------------
11. RECONCILITION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
For the years ended December 31,
$ in millions 1995 1994 1993
- ------------------------------------------------------------------------------
Net income $164.7 $154.9 $139.0
Adjustments for noncash items:
Depreciation and amortization 118.9 114.7 110.9
Deferred income taxes 9.2 (6.7) 17.2
Amortization (deferral) of regulatory
assets, net 15.4 10.9 (25.8)
Changes in working capital:
Accounts receivable (44.6) 27.9 (2.5)
Accounts payable 21.8 (40.0) 15.0
Deferred gas costs 1.7 28.7 (7.9)
Accrued interest 1.0 (0.3) 11.8
Other - 3.5 10.2
DSM deferred costs (9.1) (14.4) (20.3)
Other operating activities 26.3 7.7 (12.3)
------ ------ ------
Net cash provided by operating activities $305.3 $286.9 $235.3
====== ====== ======
DPL 25 1995
- ------------------------------------------------------------------------------
12. FINANCIAL INFORMATION BY BUSINESS SEGMENTS
For the years ended December 31,
$ in millions 1995 1994 1993
- ------------------------------------------------------------------------
Utility service revenues
Electric $1,027.5 $ 943.5 $ 898.9
Gas 222.0 237.1 245.1
Other 5.6 7.3 7.3
-------- -------- --------
Total utility service revenues 1,255.1 1,187.9 1,151.3
Interest and other income 29.7 30.1 26.7
-------- -------- --------
Total income $1,284.8 $1,218.0 $1,178.0
======== ======== ========
Operating profit before tax
Electric $ 335.8 $ 325.2 $ 310.8
Gas 18.9 10.3 19.9
Other 3.8 6.5 5.4
-------- -------- --------
Total operating profit before tax 358.5 342.0 336.1
Other income, net (a) 3.8 12.0 (13.0)
Interest expense (94.3) (93.2) (97.0)
Preferred dividends (0.9) (4.7) (8.7)
-------- -------- --------
Income before income taxes $ 267.1 $ 256.1 $ 217.4
======== ======== ========
Depreciation and amortization
Electric $ 108.1 $ 104.8 $ 102.4
Gas 6.4 6.2 5.7
Other 4.4 3.7 2.8
-------- -------- --------
Total depreciation and amortization $ 118.9 $ 114.7 $ 110.9
======== ======== ========
Construction additions
Electric $ 66.6 $ 82.1 $ 66.3
Gas 11.7 11.6 11.9
Other 9.0 7.4 10.7
-------- -------- --------
Total construction additions $ 87.3 $ 101.1 $ 88.9
======== ======== ========
Assets
Electric $2,763.1 $2,772.3 $2,822.5
Gas 223.7 201.7 236.0
Other (b) 336.0 258.7 243.5
-------- -------- --------
Total assets at year-end $3,322.8 $3,232.7 $3,302.0
======== ======== ========
(a) Includes primarily interest income less bond redemption costs in 1995
and 1993.
(b) Includes primarily cash, temporary cash investments and certain deferred
items.
DPL 26 1995
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP (see appendix for logo description)
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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, 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.
Price Waterhouse LLP
Dayton, Ohio
January 18, 1996
SELECTED QUARTERLY INFORMATION
For the Three Months Ended
March 31, June 30, September 30, December 31,
$ in millions except 1995 1994 1995 1994 1995 1994 1995 1994
per share amounts $ $ $ $ $ $ $ $
- ------------------------------------------------------------------------------------
Utility service
revenues 355.6 372.1 265.9 257.3 300.0 263.3 333.6 295.2
Income before income
taxes 97.0 92.6 53.7 56.9 66.1 61.7 50.3 44.9
Net income 60.8 55.4 34.6 34.9 39.5 36.9 29.8 27.7
Earnings per share of
common stock 0.60 0.57 0.34 0.34 0.39 0.36 0.30 0.27
Dividends paid per
share 0.31 0.295 0.31 0.295 0.31 0.295 0.31 0.295
Common stock market
price -- High 22 21-1/4 23 21-5/8 23-1/8 20-3/4 25-3/8 21
-- Low 20-1/8 19-3/8 20-7/8 18-7/8 21-7/8 18-5/8 23-1/8 19
DPL 27 1995
CORPORATE INFORMATION
TRANSFER AGENT AND REGISTRAR -- COMMON STOCK AND DP&L PREFERRED STOCK
Securities Transfer & Shareholder Inquires:
The First National Bank of Boston
c/o Boston EquiServe
Mail Stop: 45-02-64
Box 644
Boston, MA 02102-0644
(617) 575-3100
(800) 736-3001
Dividend Reinvestment:
The First National Bank of Boston
c/o Boston EquiServe
Mail Stop: 45-01-06
Box 1681
Boston, MA 02105-1681
Also dividend paying agent
(617) 575-3100
(800) 736-3001
Trustee - DP&L First Mortgage Bonds
The Bank of New York
Corporate Trust Administration
101 Barclay Street
New York, NY 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 are listed.
The trading symbol of the Common Stock is DPL.
FEDERAL INCOME TAX STATUS OF 1995 DIVIDEND PAYMENTS
Dividends paid in 1995 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 16, 1996, at Twin Valley South School, West Alexandria, Ohio.
Communications
DPL Inc. staffs an Investor Relations Department to meet the information
needs of shareholders and investors. Inquires are welcomed.
Communications relating to shareholder accounts should be directed to the
DPL Investor Relations Department (513) 259-7150 or (800) 322-9244 or to
Boston EquiServe (617) 575-3100 or (800) 736-3001.
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 inquires to the Investor
Relations Department.
OFFICERS--DPL INC. AND DP&L
(Age/Years of Service)
Peter H. Forster (53/22)
Chairman and Chief Executive Officer--DPL Inc.
Chairman--DP&L
Allen M. Hill (50/28)
President--DPL Inc.
President and Chief Executive Officer--DP&L
Paul R. Anderson (53/17)
Controller--DP&L
Stephen P. Bramlage (49/27)
Assistant Vice President--DP&L
Robert M. Combs (50/5)
Vice President--DP&L
Georgene H. Dawson (46/21)
Assistant Vice President--DP&L
Jeanne S. Holihan (39/15)
Assistant Vice President--DP&L
Thomas M. Jenkins (44/18)
Group Vice President and Treasurer--DPL Inc.
Group Vice President--DP&L
Stephen F. Koziar, Jr. (51/28)
Group Vice President and Secretary--DPL Inc. and DP&L
Judy W. Lansaw (44/17)
Group Vice President--DPL Inc. and DP&L
Arthur G. Meyer (45/3)
Treasurer--DP&L
Bryce W. Nickel (39/15)
Assistant Vice President--DP&L
H. Ted Santo
Group Vice President--DP&L
DIRECTORS
Burnell R. Roberts (2) (3)
Retired Chairman and Chief Executive Officer, The Mead Corporation,
Dayton, Ohio
David R. Holmes (1) (4)
Chairman, President and Chief Executive Officer, The Reynolds and
Reynolds Company, Dayton, Ohio
James F. Dicke, II (2) (3)
President, Crown Equipment Corporation, New Bremen, Ohio
Peter H. Forster (1) (3) (4)
Chairman and Chief Executive Officer, DPL Inc.; Chairman, DP&L, Dayton,
Ohio
W August Hillenbrand (2) (3)
President and Chief Executive Officer, Hillenbrand Industries,
Batesville, Indiana
Jane G. Haley (1) (4)
President and CEO, Gosiger, Inc., Dayton, Ohio
Allen M. Hill (1) (4)
President--DPL Inc., President and Chief Executive Officer, DP&L, Dayton,
Ohio
Thomas J. Danis (1)
Former Chairman and Chief Executive Officer, The Danis Companies, Dayton,
Ohio
Ernie Green (1) (4)
President and Chief Executive Officer, Ernie Green Industries, Dayton,
Ohio
All Directors of DPL Inc. are also Directors of DP&L.
1995 Committee Assignments:
DPL Inc.--Finance and Audit Review (1)
Compensation and Management Review (2)
Executive (3)
DP&L--Community and External Relations (4)
DPL 28 1995
DPL INC.
Courthouse Plaza Southwest
Dayton, Ohio 45402
(see appendix for photograph description)
[back cover]
As required by Rule 304 of Regulation S-T, the following appendix lists the
graphic material contained in the 1995 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: Logo - DPL Inc.
Photo: Picture of a young man working with computer equipment.
Inside
Cover:
Artwork: Map of the State of Ohio, with DP&L service
territory highlighted.
Page 3:
Photo: The directors of DPL Inc. are pictured with their names
appearing above the photograph as follows:
Burnell R. Roberts, David R. Holmes, James F. Dicke, II,
Peter H. Forster, W August Hillenbrand, Jane G. Haley,
Allen M. Hill, Thomas J. Danis, Ernie Green
Bar Chart: Earnings
Per Share
Dollars
-----------
1993 $1.42
1994 $1.54
1995 $1.63
Bar Chart: Dividends
Per Share
Dollars
-----------
1993 $1.12
1994 $1.18
1995 $1.24
Page 4:
Artwork: " DP&L" logo and "Way To Go" logo, the umbrella
name for energy conservation programs of the Company.
Logo contains the phrase, "Energy Smart Money Wise."
along with a picture of the head of Lucky the Dog, the
promotional mascot of the programs.
Page 5:
Photo: Emery Worldwide aircraft being loaded with cargo.
Page 6:
Artwork: "DP&L" logo and "Way To Go" logo, the umbrella
name for energy conservation programs of the Company.
Logo contains the phrase, "West Central Ohio".
Page 7:
Photo: View of construction work at the site of Panasonic
facility expansion.
Page 8:
Photo: Assembly work being performed at Spectra-Physics
Laserplane.
Page 9:
Artwork: "DP&L" logo and "Way To Go" logo, the umbrella
name for energy conservation programs of the Company.
Logo contains the phrase, "Partners in Business".
Page10:
Artwork: "DP&L" logo and "Way To Go" logo, the umbrella
name for energy conservation programs of the Company.
Logo contains the phrase, "School Programs".
Page 11:
Photo: Women's high school soccer game.
Page 12:
Artwork: "DP&L" logo and "Way To Go" logo, the umbrella
name for energy conservation programs of the Company.
Logo contains the phrase, "Energy Leader".
Page 13:
Bar Charts: Electric Revenues
$ in millions
Year
---------------
1993 1994 1995
---- ---- ----
Residential 374 390 422
Commercial 200 218 238
Industrial 206 229 224
Other 121 109 146
---- ---- ----
Total 901 946 1030
Gas Revenues
$ in millions
Year
--------------
1993 1994 1995
---- ---- ----
Residential 161 157 149
Commercial 44 42 39
Industrial 15 15 11
Transportation
& Other 25 23 23
---- ---- ----
Total 245 237 222
Total Taxes
$ in millions
Year
-------------
1993 190
1994 222
1995 228
Electric Sales
Thousands of GWH
Year
---------------
1993 1994 1995
---- ---- ----
Residential 4.6 4.4 4.9
Commercial 3.0 3.1 3.4
Industrial 4.1 4.4 4.4
Other 3.0 2.3 4.1
---- ---- ----
Total 14.7 14.2 16.8
Gas Sales
Millions of MCF
Year
---------------
1993 1994 1995
---- ---- ----
Residential 29 28 29
Commercial 8 8 8
Industrial 3 3 3
Transportation
& Other 17 18 20
-- -- --
Total 57 57 60
Operating Expenses
$ in millions
Year
--------------
1993 1994 1995
---- ---- ----
Fuel Used In Production 227 221 258
Gas Purchased for Resale 156 151 133
Operating & Maintenance 275 245 272
---- ---- ----
Total 658 617 663
Average Price-Electric
Calendar Year
cents/kWh
----------------------
1993 6.07
1994 6.59
1995 6.07
Average Price-Gas
Calendar Year
$/MCF
-----------------
1993 5.42
1994 5.44
1995 4.90
Construction Costs
$ in millions
Year
------------------
1993 89
1994 101
1995 87
Page 27:
Artwork: Logo for Price Waterhouse LLP (Independent Auditors).
Back
Cover: Photo: Three high school soccer players.