UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
______________________________
Commission file number 1-7629
HOUSTON INDUSTRIES INCORPORATED
(Exact name of registrant as specified in its charter)
Texas 74-1885573
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5 Post Oak Park
4400 Post Oak Parkway
Houston, Texas 77027
(Address of principal executive offices) (Zip Code)
(713) 629-3000
(Registrant's telephone number, including area code)
______________________________
Commission file number 1-3187
HOUSTON LIGHTING & POWER COMPANY
(Exact name of registrant as specified in its charter)
Texas 74-0694415
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
611 Walker Avenue
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 228-9211
(Registrant's telephone number, including area code)
______________________________
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
As of July 31, 1995, Houston Industries Incorporated had 131,336,234 shares of
common stock outstanding, including 7,438,726 ESOP shares not deemed outstanding
for financial statement purposes. As of July 31, 1995, all 1,100 shares of
Houston Lighting & Power Company's common stock were held, directly or
indirectly, by Houston Industries Incorporated.
HOUSTON INDUSTRIES INCORPORATED AND HOUSTON LIGHTING & POWER COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
This combined Form 10-Q is separately filed by Houston Industries Incorporated
and Houston Lighting & Power Company. Information contained herein relating to
Houston Lighting & Power Company is filed by Houston Industries Incorporated and
separately by Houston Lighting & Power Company on its own behalf. Houston
Lighting & Power Company makes no representation as to information relating to
Houston Industries Incorporated (except as it may relate to Houston Lighting &
Power Company) or to any other affiliate or subsidiary of Houston Industries
Incorporated.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements
Houston Industries Incorporated and Subsidiaries
Statements of Consolidated Income
Three Months and Six Months Ended
June 30, 1995 and 1994 ........................ 3
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994 ........... 5
Statements of Consolidated Cash Flows
Six Months Ended June 30, 1995 and 1994 ....... 7
Statements of Consolidated Retained Earnings
Three Months and Six Months Ended
June 30, 1995 and 1994 ........................ 8
Notes to Consolidated Financial Statements .... 14
Houston Lighting & Power Company
Statements of Income
Three Months and Six Months Ended
June 30, 1995 and 1994 ........................ 9
Balance Sheets
June 30, 1995 and December 31, 1994 ........... 10
Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994 ....... 12
Statements of Retained Earnings
Three Months and Six Months Ended
June 30, 1995 and 1994 ........................ 13
Notes to Financial Statements ................. 14
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations ................................ 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ......................... 33
Item 6. Exhibits and Reports on Form 8-K .......... 33
Signatures ......................................... 35
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(THOUSANDS OF DOLLARS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
(Restated) (Restated)
REVENUES.................................. $ 978,225 $1,004,906 $1,724,391 $1,826,487
---------- ---------- ---------- ----------
EXPENSES:
Fuel................................... 238,465 235,514 422,067 452,702
Purchased power........................ 50,822 103,906 116,410 202,455
Operation and maintenance.............. 217,650 204,089 416,179 397,940
Taxes other than income taxes.......... 64,616 62,959 135,566 126,071
Depreciation and amortization.......... 112,286 99,967 216,482 199,191
---------- ---------- ---------- ----------
Total................................ 683,839 706,435 1,306,704 1,378,359
---------- ---------- ---------- ----------
OPERATING INCOME.......................... 294,386 298,471 417,687 448,128
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Allowance for other funds used
during construction.................. 2,014 93 4,643 1,409
Other - net............................ (17,394) (6,349) (27,653) (13,429)
---------- ---------- ---------- ----------
Total................................ (15,380) (6,256) (23,010) (12,020)
---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES:
Interest on long-term debt............. 64,042 66,356 129,258 133,001
Other interest......................... 9,678 6,623 18,677 13,035
Allowance for borrowed funds used
during construction.................. (1,133) (129) (2,938) (1,817)
Preferred dividends of subsidiary...... 7,450 8,403 16,435 16,676
---------- ---------- ---------- ----------
Total................................ 80,037 81,253 161,432 160,895
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING............................. 198,969 210,962 233,245 275,213
INCOME TAXES.............................. 65,709 76,654 76,136 99,306
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING................... 133,260 134,308 157,109 175,907
DISCONTINUED OPERATIONS:
Loss from discontinued cable
television operations (net of
applicable income taxes)............. (7,583) (15,084)
Tax benefit from discontinued cable
television operations................ 90,607
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR POSTEMPLOYMENT
BENEFITS (NET OF INCOME TAXES OF
$4,415)................................ (8,200)
---------- ---------- ---------- ----------
NET INCOME................................ $ 133,260 $ 126,725 $ 247,716 $ 152,623
========== ========== ========== ==========
(continued)
-3-
EARNINGS PER COMMON SHARE:
CONTINUING OPERATIONS BEFORE
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING ......................... $ 1.08 $ 1.09 $ 1.27 $ 1.44
DISCONTINUED OPERATIONS:
Loss from discontinued cable
television operations............ (.06) (.12)
Tax benefit from discontinued
cable television operations...... .73
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR POSTEMPLOYMENT
BENEFITS............................ (.07)
--------- --------- --------- ---------
EARNINGS PER COMMON SHARE............. $ 1.08 $ 1.03 $ 2.00 $ 1.25
========= ========= ========= =========
DIVIDENDS DECLARED PER COMMON
SHARE............................... $ .75 $ .75 $ 1.50 $ 1.50
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (000)................... 123,769 122,508 123,684 122,465
See Notes to Consolidated Financial Statements.
-4-
HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
ASSETS
JUNE 30, DECEMBER 31,
1995 1994
------------- -------------
PROPERTY, PLANT AND EQUIPMENT - AT COST:
Electric plant:
Plant in service.................................... $ 11,936,270 $ 11,743,070
Construction work in progress....................... 320,253 333,180
Nuclear fuel........................................ 215,399 212,795
Plant held for future use........................... 201,764 201,741
Electric plant acquisition adjustments................ 3,166 3,166
Other property........................................ 69,739 85,529
------------- -------------
Total........................................... 12,746,591 12,579,481
Less accumulated depreciation and amortization........ 3,697,205 3,527,598
------------- -------------
Property, plant and equipment - net............. 9,049,386 9,051,883
------------- -------------
CURRENT ASSETS:
Cash and cash equivalents............................. 37,578 10,443
Special deposits...................................... 10 10
Accounts receivable - net............................. 55,745 22,149
Accrued unbilled revenues............................. 20,568 38,372
Fuel stock, at lifo cost.............................. 65,612 56,711
Materials and supplies, at average cost............... 148,866 148,007
Prepayments........................................... 11,790 14,398
------------- -------------
Total current assets............................ 340,169 290,090
------------- -------------
OTHER ASSETS:
Net assets of discontinued cable television
operations.......................................... 701,330 618,982
Deferred plant costs - net............................ 626,026 638,917
Deferred debits....................................... 303,216 281,204
Regulatory asset - net................................ 232,472 235,463
Unamortized debt expense and premium on
reacquired debt..................................... 157,915 161,885
Recoverable project costs - net....................... 89,216 98,954
Equity investment in foreign electric utility......... 26,286 25,699
------------- -------------
Total other assets.............................. 2,136,461 2,061,104
------------- -------------
Total........................................ $ 11,526,016 $ 11,403,077
============= =============
See Notes to Consolidated Financial Statements.
-5-
HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
CAPITALIZATION AND LIABILITIES
JUNE 30, DECEMBER 31,
1995 1994
------------- -------------
CAPITALIZATION:
Common Stock Equity:
Common stock, no par value............................. $ 2,438,573 $ 2,437,638
Unearned ESOP shares................................... (278,217) (289,611)
Retained earnings...................................... 1,283,326 1,221,221
------------- -------------
Total common stock equity....................... 3,443,682 3,369,248
------------- -------------
Preference Stock, no par value, authorized
10,000,000 shares; none outstanding
Cumulative Preferred Stock of Subsidiary, no par value:
Not subject to mandatory redemption.................. 351,345 351,345
Subject to mandatory redemption...................... 51,055 121,910
------------- -------------
Total cumulative preferred stock................ 402,400 473,255
------------- -------------
Long-Term Debt:
Debentures............................................. 548,821 548,729
Long-term debt of subsidiaries:
First mortgage bonds................................. 2,851,822 3,020,400
Pollution control revenue bonds...................... 155,262 155,247
Other .............................................. 7,774 9,757
------------- -------------
Total long-term debt............................ 3,563,679 3,734,133
------------- -------------
Total capitalization.......................... 7,409,761 7,576,636
------------- -------------
CURRENT LIABILITIES:
Notes payable............................................ 698,165 423,291
Accounts payable......................................... 159,235 159,225
Taxes accrued............................................ 108,261 169,690
Interest accrued......................................... 83,130 73,527
Dividends accrued........................................ 98,502 98,469
Accrued liabilities to municipalities.................... 19,507 21,307
Customer deposits........................................ 63,305 64,905
Current portion of long-term debt and preferred stock.... 179,460 49,475
Other.................................................... 62,258 64,026
------------- -------------
Total current liabilities..................... 1,471,823 1,123,915
------------- -------------
DEFERRED CREDITS:
Accumulated deferred federal income taxes................ 1,711,196 1,763,230
Unamortized investment tax credit........................ 401,865 411,580
Fuel-related credits..................................... 154,168 242,912
Other ................................................... 377,203 284,804
------------- -------------
Total deferred credits........................ 2,644,432 2,702,526
------------- -------------
COMMITMENTS AND CONTINGENCIES
Total...................................... $ 11,526,016 $ 11,403,077
============= =============
See Notes to Consolidated Financial Statements.
-6-
HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(THOUSANDS OF DOLLARS)
SIX MONTHS ENDED
JUNE 30,
------------------------
1995 1994
---------- ----------
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations.......................... $ 157,109 $ 175,907
Adjustments to reconcile income from continuing
operations to net cash provided by operating
activities:
Depreciation and amortization........................... 216,482 199,191
Amortization of nuclear fuel............................ 13,912 5,421
Deferred income taxes................................... 38,573 28,265
Investment tax credit................................... (9,715) (9,695)
Allowance for other funds used during
construction ......................................... (4,643) (1,409)
Fuel cost (refund) and over/(under) recovery - net...... (83,337) 27,408
Net cash provided by discontinued cable television
operations............................................ 5,495 20,122
Changes in other assets and liabilities:
Accounts receivable and accrued unbilled revenues..... (15,792) (6,070)
Inventory............................................. (9,760) 548
Other current assets.................................. 2,608 12,304
Accounts payable...................................... 10 (41,769)
Interest and taxes accrued............................ (51,826) (62,300)
Other current liabilities............................. (5,165) 2,094
Other - net........................................... 90,115 72,304
---------- ----------
Net cash provided by operating activities......... 344,066 422,321
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Electric capital and nuclear fuel expenditures
(including allowance for borrowed funds used
during construction).................................... (133,151) (191,637)
Non-regulated electric power project expenditures.......... (12,378) (406)
Corporate headquarters expenditures (including
capitalized interest)................................... (56,899) (12,253)
Net cash used in discontinued cable television
operations.............................................. (47,045) (36,949)
Other - net................................................ (7,552) (16,269)
---------- ----------
Net cash used in investing activities............. (257,025) (257,514)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of matured bonds................................... (19,500)
Redemption of preferred stock.............................. (91,400) (20,000)
Payment of common stock dividends.......................... (185,581) (183,735)
Increase in notes payable - net............................ 274,874 58,415
Extinguishment of long-term debt........................... (20,273)
Net cash used in discontinued cable television
operations.............................................. (40,798) (10,384)
Other - net................................................ 3,272 3,611
---------- ----------
Net cash used in financing activities............. (59,906) (171,593)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... 27,135 (6,786)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.............. 10,443 14,884
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................... $ 37,578 $ 8,098
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Payments:
Interest (net of amounts capitalized)................... $ 188,852 $ 186,935
Income taxes............................................ 30,525 65,090
See Notes to Consolidated Financial Statements.
-7-
HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
(THOUSANDS OF DOLLARS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Balance at Beginning of Period............ $1,242,925 $1,125,253 $1,221,221 $1,191,230
Net Income for the Period................. 133,260 126,725 247,716 152,623
---------- ---------- ---------- ----------
Total.............................. 1,376,185 1,251,978 1,468,937 1,343,853
Common Stock Dividends.................... (92,859) (91,898) (185,611) (183,773)
---------- ---------- ---------- ----------
Balance at End of Period.................. $1,283,326 $1,160,080 $1,283,326 $1,160,080
========== ========== ========== ==========
See Notes to Consolidated Financial Statements.
-8-
HOUSTON LIGHTING & POWER COMPANY
STATEMENTS OF INCOME
(THOUSANDS OF DOLLARS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
OPERATING REVENUES...................... $ 978,225 $ 1,004,906 $ 1,724,391 $ 1,826,487
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Fuel.................................. 238,465 235,514 422,067 452,702
Purchased power....................... 50,822 103,906 116,410 202,455
Operation............................. 153,606 141,835 294,926 274,802
Maintenance........................... 64,044 62,254 121,253 123,138
Depreciation and amortization......... 111,961 99,675 215,874 198,604
Income taxes.......................... 77,292 81,921 96,310 108,994
Other taxes........................... 64,616 62,959 135,566 126,071
----------- ----------- ----------- -----------
Total............................. 760,806 788,064 1,402,406 1,486,766
----------- ----------- ----------- -----------
OPERATING INCOME........................ 217,419 216,842 321,985 339,721
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Allowance for other funds used
during construction................. 2,014 93 4,643 1,409
Other - net........................... (9,055) (2,773) (10,508) (5,759)
----------- ----------- ----------- -----------
Total............................. (7,041) (2,680) (5,865) (4,350)
----------- ----------- ----------- -----------
INCOME BEFORE INTEREST CHARGES.......... 210,378 214,162 316,120 335,371
----------- ----------- ----------- -----------
INTEREST CHARGES:
Interest on long-term debt............ 61,399 61,557 122,917 123,399
Other interest........................ 789 1,853 3,924 4,749
Allowance for borrowed funds used
during construction................. (1,133) (129) (2,938) (1,817)
----------- ----------- ----------- -----------
Total............................. 61,055 63,281 123,903 126,331
----------- ----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING.................. 149,323 150,881 192,217 209,040
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR POSTEMPLOYMENT
BENEFITS (NET OF INCOME TAXES OF
$4,415)............................... (8,200)
----------- ----------- ----------- -----------
NET INCOME.............................. 149,323 150,881 192,217 200,840
DIVIDENDS ON PREFERRED STOCK............ 7,450 8,403 16,435 16,676
----------- ----------- ----------- -----------
INCOME AFTER PREFERRED DIVIDENDS........ $ 141,873 $ 142,478 $ 175,782 $ 184,164
=========== =========== =========== ===========
See Notes to Financial Statements.
-9-
HOUSTON LIGHTING & POWER COMPANY
BALANCE SHEETS
(THOUSANDS OF DOLLARS)
ASSETS
JUNE 30, DECEMBER 31,
1995 1994
------------ --------------
PROPERTY, PLANT AND EQUIPMENT - AT COST:
Electric plant in service............................. $ 11,936,270 $ 11,743,070
Construction work in progress......................... 320,253 333,180
Nuclear fuel.......................................... 215,399 212,795
Plant held for future use............................. 201,764 201,741
Electric plant acquisition adjustments................ 3,166 3,166
------------ ------------
Total............................................. 12,676,852 12,493,952
Less accumulated depreciation and
amortization........................................ 3,687,185 3,517,923
------------ ------------
Property, plant and equipment - net............... 8,989,667 8,976,029
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents............................. 94,403 235,867
Special deposits...................................... 10 10
Accounts receivable:
Affiliated companies................................ 2,339 4,213
Others.............................................. 30,992 8,896
Accrued unbilled revenues............................. 20,568 38,372
Inventory:
Fuel stock, at lifo cost............................ 65,612 56,711
Materials and supplies, at average cost............. 148,449 147,922
Prepayments........................................... 8,833 9,665
------------ ------------
Total current assets.............................. 371,206 501,656
------------ ------------
OTHER ASSETS:
Deferred plant costs - net............................ 626,026 638,917
Deferred debits....................................... 254,333 241,611
Unamortized debt expense and premium on
reacquired debt..................................... 155,814 158,351
Regulatory asset - net................................ 232,472 235,463
Recoverable project costs - net....................... 89,216 98,954
------------ ------------
Total other assets................................ 1,357,861 1,373,296
------------ ------------
Total........................................... $ 10,718,734 $ 10,850,981
============ ============
See Notes to Financial Statements.
-10-
HOUSTON LIGHTING & POWER COMPANY
BALANCE SHEETS
(THOUSANDS OF DOLLARS)
CAPITALIZATION AND LIABILITIES
JUNE 30, DECEMBER 31,
1995 1994
------------- -------------
CAPITALIZATION:
Common Stock Equity:
Common stock, class A; no par value..................... $ 1,524,949 $ 1,524,949
Common stock, class B; no par value..................... 150,978 150,978
Retained earnings....................................... 2,164,391 2,153,109
------------- -------------
Total common stock equity............................ 3,840,318 3,829,036
------------- -------------
Cumulative Preferred Stock:
Not subject to mandatory redemption.................... 351,345 351,345
Subject to mandatory redemption........................ 51,055 121,910
------------- -------------
Total cumulative preferred stock..................... 402,400 473,255
------------- -------------
Long-Term Debt:
First mortgage bonds................................... 2,851,822 3,020,400
Pollution control revenue bonds........................ 155,262 155,247
Other.................................................. 7,774 9,757
------------- -------------
Total long-term debt................................. 3,014,858 3,185,404
------------- -------------
Total capitalization............................... 7,257,576 7,487,695
------------- -------------
CURRENT LIABILITIES:
Accounts payable......................................... 146,272 148,042
Accounts payable to affiliated companies................. 6,731 10,936
Taxes accrued............................................ 132,616 181,043
Interest accrued......................................... 71,283 64,732
Accrued liabilities to municipalities.................... 19,507 21,307
Customer deposits........................................ 63,305 64,905
Current portion of long-term debt and preferred stock.... 179,460 49,475
Other.................................................... 57,899 59,912
------------- -------------
Total current liabilities.......................... 677,073 600,352
------------- -------------
DEFERRED CREDITS:
Accumulated deferred federal income taxes................ 1,917,233 1,876,300
Unamortized investment tax credit........................ 401,865 411,580
Fuel-related credits..................................... 154,168 242,912
Other.................................................... 310,819 232,142
------------- -------------
Total deferred credits............................. 2,784,085 2,762,934
------------- -------------
COMMITMENTS AND CONTINGENCIES
Total........................................... $ 10,718,734 $ 10,850,981
============= =============
See Notes to Financial Statements.
-11-
HOUSTON LIGHTING & POWER COMPANY
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(THOUSANDS OF DOLLARS)
SIX MONTHS ENDED
JUNE 30,
--------------------------
1995 1994
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 192,217 $ 200,840
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization...................... 215,874 198,604
Amortization of nuclear fuel....................... 13,912 5,421
Deferred income taxes.............................. 40,933 36,588
Investment tax credits............................. (9,715) (9,695)
Allowance for other funds used during
construction..................................... (4,643) (1,409)
Fuel cost (refund) and over/(under) recovery
- net............................................ (83,337) 27,408
Cumulative effect of change in accounting for
postemployment benefits.......................... 8,200
Changes in other assets and liabilities:
Accounts receivable - net........................ (2,418) 1,731
Material and supplies............................ (527) 2,915
Fuel stock....................................... (8,901) (2,337)
Accounts payable................................. (5,975) (21,769)
Interest and taxes accrued....................... (41,876) (45,250)
Other current liabilities........................ (3,311) 3,547
Other - net...................................... 72,415 58,217
------------ -----------
Net cash provided by operating activities..... 374,648 463,011
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital and nuclear fuel expenditures
(including allowance for borrowed funds
used during construction).......................... (218,151) (191,637)
Other - net.......................................... (6,940) (6,355)
------------ -----------
Net cash used in investing activities......... (225,091) (197,992)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of matured bonds............................. (19,500)
Payment of dividends................................. (183,057) (181,885)
Decrease in notes payable............................ (57,600)
Redemption of preferred stock ....................... (91,400) (20,000)
Extinguishment of long-term debt..................... (20,273)
Other - net.......................................... 3,709 1,981
------------ -----------
Net cash used in financing activities......... (291,021) (277,004)
------------ -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS............... (141,464) (11,985)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........ 235,867 12,413
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............. $ 94,403 $ 428
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Payments:
Interest (net of amounts capitalized).............. $ 123,563 $ 131,236
Income taxes....................................... 34,974 57,913
See Notes to Financial Statements.
-12-
HOUSTON LIGHTING & POWER COMPANY
STATEMENTS OF RETAINED EARNINGS
(THOUSANDS OF DOLLARS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
Balance at Beginning of
Period...................... $ 2,104,768 $ 1,990,614 $ 2,153,109 $ 2,028,924
Net Income for the Period...... 149,323 150,881 192,217 200,840
----------- ----------- ----------- -----------
Total....................... 2,254,091 2,141,495 2,345,326 2,229,764
----------- ----------- ----------- -----------
Deductions - Cash Dividends:
Preferred................... 7,450 8,403 16,435 16,676
Common...................... 82,250 84,499 164,500 164,495
----------- ----------- ----------- -----------
Total.................... 89,700 92,902 180,935 181,171
----------- ----------- ----------- -----------
Balance at End of Period....... $ 2,164,391 $ 2,048,593 $ 2,164,391 $ 2,048,593
=========== =========== =========== ===========
See Notes to Financial Statements.
-13-
HOUSTON INDUSTRIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AND
HOUSTON LIGHTING & POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) GENERAL
(a) DISCONTINUED OPERATIONS. On July 6, 1995, Houston Industries
Incorporated (Company) sold KBLCOM Incorporated, its cable television
subsidiary (KBLCOM), to Time Warner Inc. (Time Warner). For a
description of the sale, see Note 10 to these financial statements. The
Company's consolidated financial statements for the first and second
quarters of 1995 reflect KBLCOM as a discontinued operation. The
Company's consolidated financial statements and certain other financial
information contained in the Company's and Houston Lighting & Power
Company's (HL&P) Annual Report on Form 10-K for the year ended December
31, 1994 (1994 Combined Form 10-K), were restated for consistency to
reflect KBLCOM as a discontinued operation. See the Company's and HL&P's
Combined Form 8-K (File Nos. 1-7629 and 1-3187) dated May 12, 1995
(Combined Form 8-K). The sale of KBLCOM did not affect the financial
statements of HL&P.
(b) REGULATORY PROCEEDINGS AND LITIGATION. The information presented in the
following Notes in this Form 10-Q should be read in conjunction with the
Combined Form 8-K, including the Notes to the Company's Consolidated and
HL&P's Financial Statements. Notes 1(a), 1(f), 2, 3, 4 and 5 to the
Company's Consolidated and HL&P's Financial Statements in the Combined
Form 8-K, as updated by the description of developments in the
regulatory and litigation matters contained in the notes to these
financial statements, are incorporated herein by reference as they
relate to the Company and HL&P, respectively.
(2) JOINTLY-OWNED NUCLEAR PLANT
(a) HL&P INVESTMENT. HL&P is the project manager (and one of four co-owners)
of the South Texas Project Electric Generating Station (South Texas
Project), which consists of two 1,250 megawatt (MW) nuclear generating
units. HL&P has a 30.8 percent interest in the project and bears a
corresponding share of capital and operating costs associated with the
project. As of June 30, 1995, HL&P's investments (net of $414.2 million
accumulated plant depreciation and $127.8 million nuclear fuel
amortization) in the South Texas Project and in nuclear fuel, including
allowance for funds used during construction, were $2.1 billion and
$87.6 million, respectively.
(b) UNITED STATES NUCLEAR REGULATORY COMMISSION (NRC) INSPECTIONS AND
OPERATIONS. HL&P removed both generating units at the South Texas
Project from service in February 1993 when a problem was encountered
with certain of the units' auxiliary feedwater pumps. The units were
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out of service from February 1993 to February 1994, when Unit No. 1 was
returned to service. Unit No. 2 was returned to service in May 1994. In
June 1993, the NRC placed the South Texas Project on its "watch list" of
plants with weaknesses that warrant increased attention after a review
of the South Texas Project operations. In February 1995, the NRC removed
the South Texas Project from its "watch list".
For a discussion concerning litigation by certain current and former
employees or contractors of HL&P asserting that their employment was
terminated or disrupted in retaliation for their having made
safety-related complaints to the NRC, see Note 2(b) of the notes to the
financial statements included in the Combined Form 8-K and Note 2(b) to
the financial statements included in the Company's and HL&P's Combined
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995
(Combined Form 10-Q).
While no prediction can be made at this time as to the ultimate outcome
of these matters, the Company and HL&P do not believe that they will
have a material adverse effect on the Company's or HL&P's financial
condition or results of operations.
(c) LITIGATION WITH CO-OWNERS OF THE SOUTH TEXAS PROJECT. In February 1994,
the City of Austin (Austin), one of the four co-owners of the South
Texas Project, filed suit (Austin II Litigation) against HL&P. That suit
is now pending in the 11th District Court of Harris County, Texas,
having recently been transferred from the 152nd District. It is not
currently anticipated that the trial will commence before March 1996.
Austin alleges that the outages at the South Texas Project from early
1993 to early 1994 were due to HL&P's failure to perform obligations it
owed to Austin under the Participation Agreement among the four
co-owners of the South Texas Project (Participation Agreement). Austin
also asserts that HL&P breached certain undertakings voluntarily assumed
by HL&P on behalf of the co-owners under the terms and conditions of the
NRC Operating Licenses and Technical Specifications relating to the
South Texas Project. Under its amended pleadings, Austin claims that
such failures have caused Austin damages of at least $150 million due to
the incurrence of increased operating and maintenance costs, the cost of
replacement power and lost profits on wholesale transactions that did
not occur.
In May 1994, the City of San Antonio (San Antonio), another co-owner of
the South Texas Project, intervened in the litigation filed by Austin
against HL&P and asserted claims similar to those asserted by Austin.
Although San Antonio has not specified the damages sought in its
complaint, expert reports filed in the litigation have indicated that
San Antonio's claims may be in excess of $275 million. HL&P is
contesting San Antonio's intervention and has called for arbitration of
San Antonio's claim under the arbitration provisions of the
Participation Agreement. The trial court denied HL&P's motions to strike
San Antonio's intervention and to compel San Antonio to arbitrate its
claims against HL&P and in April 1995, the Court of Appeals of the First
District of Texas affirmed the trial court's decision. HL&P is seeking
further review of these decisions by the Texas Supreme Court.
For a discussion of a previous lawsuit relating to the South Texas
Project filed in 1983 by Austin against the Company and HL&P (in which
the Company and HL&P prevailed), of certain claims by San Antonio
against the Company and HL&P and the related arbitration thereof, and
of the
-15-
settlement entered into by the Company, HL&P and Central and South West
Corporation, see Note 2(c) of the notes to the financial statements
included in the Combined Form 8-K.
Although HL&P and the Company do not believe there is merit to either
Austin's or San Antonio's claims and have opposed San Antonio's
intervention in the Austin II Litigation, there can be no assurance as
to the ultimate outcome of these matters.
(d) NUCLEAR INSURANCE. For a discussion of the nuclear property and nuclear
liability insurance maintained in connection with the South Texas
Project and potential assessments associated therewith, see Note 2(d) of
the notes to the financial statements included in the Combined Form 8-K.
(e) NUCLEAR DECOMMISSIONING. For a discussion of nuclear decommissioning
costs, the Company's decommissioning funding level and the accounting
for debt and equity securities held by the decommissioning trust, see
Note 2(e) of the notes to financial statements included in the Combined
Form 8-K.
(f) DEFERRED PLANT COSTS. For a discussion of deferred plant costs, see Note
1(f) of the notes to the financial statements included in the Combined
Form 8-K. The amortization of these deferrals totaled $6.4 million and
$12.9 million for the three and six months ended June 30, 1995,
respectively, and is included on the Company's Statements of
Consolidated Income and HL&P's Statements of Income in depreciation and
amortization expense.
(3) RATE REVIEW, FUEL RECONCILIATION AND OTHER PROCEEDINGS
In February 1994, the Public Utility Commission of Texas (Utility
Commission) initiated a proceeding (Docket No. 12065) to determine whether
HL&P's existing rates are just and reasonable and to reconcile HL&P's fuel
costs from April 1, 1990 to July 31, 1994. The Utility Commission also
initiated a separate proceeding (Docket No. 13126) to review issues
regarding the prudence of operation of the South Texas Project from the date
of commercial operation through the present (a period including the outage
at the South Texas Project during 1993 and 1994).
In February 1995, all major parties to these proceedings signed an agreement
resolving the issues with respect to HL&P, including the prudence issues
related to operation of the South Texas Project (Proposed Settlement). In
July 1995, an Administrative Law Judge (ALJ) recommended that the Utility
Commission issue a final order consistent with the Proposed Settlement. A
decision is expected by the Utility Commission at a Final Order Meeting
scheduled for August 30, 1995.
Under the Proposed Settlement, HL&P's base rates would be reduced by
approximately $62 million per year, effective retroactively to January 1,
1995, and HL&P would be precluded from seeking rate increases for three
years, subject to certain conditions. Under the Proposed Settlement, HL&P
would amortize its remaining investment ($211 million as of June 30, 1995)
in the cancelled Malakoff Electric Generating Station (Malakoff) plant over
a period not to exceed
-16-
seven years. HL&P also would increase its decommissioning expense for the
South Texas Project by $9 million per year.
The Proposed Settlement also provides HL&P the option to write down a
portion of its investment in the South Texas Project during the five-year
period commencing January 1, 1995. The parties to the Proposed Settlement
agreed that up to $50 million per year of any write down would be treated as
a reasonable and necessary expense during routine reviews of HL&P's earnings
and any rate review proceeding initiated against HL&P. In the second quarter
of 1995, HL&P recorded a $7 million write down of its investment in the
South Texas Project pursuant to this provision of the Proposed Settlement,
which amount is included on the Company's Consolidated and HL&P's Statements
of Income in depreciation and amortization expense.
Until the approval of the Proposed Settlement by the Utility Commission,
HL&P's existing rates will continue in effect; however, HL&P's financial
statements for 1995 reflect the estimated effects of the Proposed
Settlement. In the second quarter and first six months of 1995, HL&P's
pre-tax earnings were reduced by approximately $39 million and $56 million,
respectively, which represent the estimated effects of the Proposed
Settlement on revenues and expenses. Included in these reductions are
charges of $7 million related to the South Texas Project investment as
discussed above and a one-time, pre-tax charge of $9 million incurred in
connection with certain mine-related costs which were not previously
recorded and are not recoverable under the terms of the Proposed Settlement.
(See Note 5 to these financial statements.) Deferred revenues are included
on the Company's Consolidated and HL&P's Balance Sheets in other deferred
credits subject to refund in the event the Proposed Settlement is approved.
Under the terms of the Proposed Settlement, HL&P previously agreed that
approximately $70 million of fuel expenditures and related interest incurred
during the fuel reconciliation period would not be recoverable from
ratepayers. This $70 million was recorded in December 1994 as a one-time,
pre-tax charge to reconcilable fuel revenues and will be refunded to
ratepayers in the event that the Proposed Settlement is approved by the
Utility Commission.
For additional information regarding Docket Nos. 12065 and 13126, see Note 3
to the financial statements included in the Combined Form 10-Q, which note
is incorporated herein by reference.
(4) APPEALS OF PRIOR UTILITY COMMISSION RATE ORDERS
Pursuant to a series of applications filed by HL&P in recent years, the
Utility Commission has granted HL&P rate increases to reflect in electric
rates HL&P's substantial investment in new plant construction, including the
South Texas Project. Although Utility Commission action on those
applications has been completed, judicial review of a number of the Utility
Commission orders is pending. In the event the courts ultimately reverse
actions of the Utility Commission in any of these proceedings, such matters
would be remanded to the Utility Commission for action in light of the
courts' orders. Because of the number of variables which can affect the
ultimate resolution of such matters on remand, the Company and HL&P
generally are not in a position at this time to predict the outcome of the
matters on appeal or the ultimate effect that adverse action by the courts
could have on the Company and HL&P.
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(a) 1991 RATE CASE. In HL&P's 1991 rate case (Docket No. 9850), the Utility
Commission approved a non-unanimous settlement agreement providing for a
$313 million increase in HL&P's base rates, termination of deferrals
granted with respect to Unit No. 2 of the South Texas Project and of the
qualified phase-in plan deferrals granted with respect to Unit No. 1 of
the South Texas Project, and recovery of deferred plant costs. The
settlement authorized a 12.55 percent return on common equity for HL&P.
Rates contemplated by the settlement agreement were implemented in May
1991 and remain in effect (subject to the outcome of the current rate
proceeding described in Note 3 to these financial statements).
The Utility Commission's order in Docket No. 9850 was affirmed on review
by a District Court, and the Court of Appeals for the 3rd District at
Austin (Austin Court of Appeals) affirmed that decision on procedural
grounds due to the failure of the Appellant to file the statement of
facts with the court in a timely manner. On review, the Texas Supreme
Court has remanded the case to the Austin Court of Appeals for
consideration of any asserted errors of law that may be evident from the
face of the Utility Commission's order. The Appellant has raised issues
regarding deferred accounting, the treatment of federal income tax
expense and certain other matters. As to federal tax issues, in an
appeal involving GTE-SW (to which HL&P was not a party), the Texas
Supreme Court held in April 1995 that the Utility Commission is not
required by the Public Utility Regulatory Act of 1975, as amended (PURA)
to take into account the tax effects of expenses disallowed for rate
making purposes in determining a utility's federal income tax expense
for rate making purposes, that the Utility Commission has discretion in
determining the utility's "fair share" of tax savings when a utility
pays federal income taxes as part of a consolidated group, and is not
required to reduce utility tax expense by savings resulting from
unregulated activities. The GTE-SW opinion clarified a 1987 Texas
Supreme Court decision in an HL&P case and rejected arguments that the
HL&P decision required utility tax expense to be calculated on the basis
of "actual taxes paid". Although no assurance can be given in this
matter, the Company believes that if the principles and rationale of the
GTE-SW decision discussed above were applied, the Utility Commission's
treatment of the tax issue in Docket No. 9850 should be upheld.
For a discussion of another recent Texas Supreme Court decision
upholding deferred accounting treatment, see Note 4(c) of the notes to
the financial statements included in the Combined Form 8-K.
Because the Utility Commission's order in Docket No. 9850 found that
HL&P would have been entitled to rate relief greater than the $313
million agreed to in the settlement, HL&P believes that any disallowance
that might be required if the Austin Court of Appeals concludes that the
Utility Commission's inclusion of deferred accounting costs in the
settlement was improper would be offset by that greater amount.
The parties to the Proposed Settlement have agreed to withdraw their
appeals of the Utility Commission's orders in such docket, subject to
HL&P's dismissing its appeal in Docket No. 6668. (See Note 4(d) to these
financial statements.)
(b) 1988 RATE CASE. In HL&P's 1988 rate case (Docket No. 8425), the Utility
Commission granted HL&P a $227 million increase in base revenues,
allowed a 12.92 percent return on common equity, authorized a qualified
phase-in for Unit No. 1 of the South Texas Project (including
-18-
approximately 72 percent of HL&P's investment in Unit No. 1 of the South
Texas Project in rate base) and authorized HL&P to use deferred
accounting for Unit No. 2 of the South Texas Project. Rates
substantially corresponding to the increase granted were implemented by
HL&P in June 1989 and remained in effect until May 1991.
In August 1994, the Austin Court of Appeals affirmed the Utility
Commission's order in Docket No. 8425 on all matters other than the
Utility Commission's treatment of tax savings associated with deductions
taken for expenses disallowed from cost of service. The court held that
the Utility Commission had failed to require that such tax savings be
passed on to ratepayers. Both HL&P and other parties sought review by
the Texas Supreme Court, which granted discretionary review as to the
issue of certain Malakoff plant expenditures treated as "Plant Held for
Future Use", and brought the entire case before it for consideration,
including the tax issue raised by HL&P. The case has been scheduled for
oral argument in September 1995 by the Texas Supreme Court.
Although no assurance can be given in this matter, the Company believes
that if the principles and rationale of the GTE-SW decision discussed in
Note 4(a) above were applied, the Utility Commission's treatment of the
tax issue in Docket No. 8425 should be upheld.
(c) DEFERRED ACCOUNTING. For information regarding deferred accounting
treatment granted for certain costs associated with the South Texas
Project, see Note 4(c) of the notes to the financial statements included
in the Combined Form 8-K and Note 2(f) to these financial statements.
The Office of the Public Utility Counsel (OPUC) has agreed, pursuant to
the Proposed Settlement, to withdraw and dismiss its appeal of the
Utility Commission's order granting deferred accounting if the Proposed
Settlement becomes effective and on the condition that HL&P dismisses
its appeal in Docket No. 6668. However, the appeal of the State of Texas
remains pending.
(d) PRUDENCE REVIEW OF THE CONSTRUCTION OF THE SOUTH TEXAS PROJECT. For a
discussion of the Utility Commission's inquiry into the prudence of the
planning, management and construction of the South Texas Project (Docket
No. 6668), see Note 4(d) of the notes to the financial statements
included in the Combined Form 8-K.
Under the Proposed Settlement, OPUC, HL&P and the City of Houston each
has agreed to dismiss its respective appeals of Docket No. 6668. A
separate party to this appeal, however, has not agreed to dismiss its
appeal. If this party does not elect to dismiss its appeal, HL&P may
elect to maintain its appeal, whereupon OPUC and the City of Houston
shall also be entitled to maintain their appeals.
(5) MALAKOFF
For a discussion of the current and Proposed Settlement rate treatment of
HL&P's investment in Malakoff and related matters, see Note 3 of the notes
to these financial statements and Note 5 of the notes to the financial
statements included in the Combined Form 8-K.
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(6) COMMON STOCK
(a) COMPANY. At June 30, 1995 and December 31, 1994, the Company had
authorized 400,000,000 shares of common stock, of which 123,876,880 and
123,526,350 shares, respectively, were outstanding. Outstanding shares
exclude the unallocated Employee Stock Ownership Plan shares which as of
June 30, 1995 and December 31, 1994 were 7,459,354 and 7,770,313,
respectively.
(b) HL&P. All issued and outstanding Class A voting common stock of HL&P is
held by the Company and all issued and outstanding Class B non-voting
common stock of HL&P is held by Houston Industries (Delaware)
Incorporated (HI Delaware), a wholly-owned subsidiary of the Company.
(7) HL&P PREFERRED STOCK
At June 30, 1995, and December 31, 1994, HL&P had 10,000,000 shares of
preferred stock authorized, of which 4,318,397 and 5,232,397 shares,
respectively, were outstanding.
In April 1995, HL&P redeemed, at $100 per share, 514,000 shares of its
$9.375 cumulative preferred stock. The redemption included 257,000 shares in
satisfaction of mandatory sinking fund requirements, and an additional
257,000 shares as an optional retirement.
In June 1995, HL&P redeemed, at $100 per share, all 400,000 shares of its
$8.50 cumulative preferred stock. The redemption included 200,000 shares in
satisfaction of mandatory sinking fund requirements, and the remaining
200,000 shares as an optional retirement.
(8) HL&P LONG-TERM DEBT
In June 1995, HL&P purchased from a third party $19.0 million aggregate
principal amount of its 8 3/4% first mortgage bonds due 2022 for a total
purchase price of $20.7 million.
Reference is made to Note 12(b) to these financial statements with respect
to HL&P's redemption and refunding of $150,850,000 aggregate principal
amount of pollution control revenue bonds subsequent to June 30, 1995.
(9) EARNINGS PER COMMON SHARE
(a) COMPANY. Earnings per common share for the Company is computed by
dividing net income by the weighted average number of shares outstanding
during the respective period.
(b) HL&P. Earnings per share data for HL&P is not computed since all of its
common stock is held by the Company and HI Delaware.
-20-
(10) DISCONTINUED CABLE TELEVISION OPERATIONS
On July 6, 1995, the Company closed its sale of KBLCOM to Time Warner in a
tax-deferred, stock-for-stock merger valued at approximately $2.4 billion.
In anticipation of the sale, effective January 1, 1995, the operations of
KBLCOM have been accounted for as discontinued and prior periods were
restated for consistency in reflecting KBLCOM as a discontinued operation.
The Company recorded a $90.6 million tax benefit in the first quarter of
1995 in recognition of the deferred tax asset arising from the Company's
excess tax basis in KBLCOM stock. Based on a Time Warner common stock price
of $43.25 on July 6, 1995, the Company will recognize in the third quarter
of 1995 an additional after-tax gain estimated to be $690 million, which is
subject to post closing adjustments. For additional information regarding
the sale of KBLCOM, see the Company's Current Report on Form 8-K (File No.
1-7629) dated July 6, 1995, which is incorporated herein by reference. For
a presentation of the Company's financial statements for the years 1992
through 1994 which reflects KBLCOM on a discontinued operations basis,
reference is made to the Company's Consolidated Financial Statements
contained in the Combined Form 8-K.
Operating results from discontinued operations for the six months ended
June 30, 1995 and 1994 were as follows:
SIX MONTHS ENDED JUNE 30,
------------------------
1995 1994
--------- ---------
(Thousands of Dollars)
Revenues...................................................... $139,440 $ 122,274
Operating expenses (1)........................................ 84,487 78,150
-------- ---------
Gross operating margin (1).................................... 54,953 44,124
Depreciation, amortization, interest and other 75,063 63,652
Income tax benefit............................................ (4,174) (4,444)
Deferred loss (2)............................................. (15,936)
-------- ---------
Loss from discontinued operations (3)......................... $ 0 ($ 15,084)
======== =========
------------
(1) Exclusive of depreciation and amortization.
(2) The net loss from discontinued operations of KBLCOM for the six
months ended June 30, 1995 was deferred by the Company until the
sale is recognized in the third quarter of 1995. The deferred loss
is included on the Company's Consolidated Balance Sheets in net
assets of discontinued cable television operations.
(3) Loss from discontinued operations of KBLCOM excludes the effects of
corporate overhead charges and includes interest expense relating to
the amount of intercompany debt that Time Warner purchased from the
Company.
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Net assets of discontinued operations were as follows:
JUNE 30, 1995 DECEMBER 31, 1994
------------- -----------------
(Thousands of Dollars)
Assets:
Cable television property, net of accumulated
depreciation of $179,200 and $161,402 for
1995 and 1994, respectively................. $ 297,829 $ 276,624
Equity in cable television partnerships....... 185,368 160,363
Intangible assets............................. 1,007,243 1,029,440
Other assets.................................. 49,894 43,625
----------- -----------
Total assets................................ 1,540,334 1,510,052
Less:
Cable television debt......................... (463,782) (504,580)
Accumulated deferred income taxes............. (313,585) (316,241)
Other liabilities............................. (61,637) (70,249)
----------- -----------
Net assets.................................. $ 701,330 $ 618,982
=========== ===========
In March 1995, KBL Cable, Inc. (KBL Cable), a subsidiary of KBLCOM, made a
scheduled repayment of $15.8 million principal amount of its senior notes
and senior subordinated notes. In the first quarter of 1995, KBL Cable
repaid borrowings under its senior bank credit facility in the amount of
$25.0 million.
(11) CHANGE IN ACCOUNTING FOR THE COMPANY AND HL&P
The Company and HL&P recorded in the first quarter of 1994 a one-time,
after-tax charge to income of $8.2 million resulting from the Company's and
HL&P's adoption of Statement of Financial Accounting Standards (SFAS) No.
112, "Employer's Accounting for Postemployment Benefits", effective January
1, 1994. For additional information regarding SFAS No. 112, see Note 9 to
the financial statements included in the Combined Form 10-Q.
(12) SUBSEQUENT EVENTS
(a) COMPANY. The Company offered eligible employees (excluding officers)
of the Company, HL&P and Houston Industries Energy, Inc. (HI Energy)
who were 55 years of age or older and had at least 10 years of service
as of July 31, 1995 an incentive program to retire early. For
employees electing early retirement, the program would add five years
of service credit and five years in age up to 35 years of service and
age 65, respectively, in determining an employee's pension. Each
participating employee (under age 62) would also receive a
supplemental benefit to age 62. During July 1995, the early retirement
incentive was accepted by approximately 290 employees.
Pension benefits and supplemental benefits (if applicable) are being
paid out from the Houston Industries Incorporated Retirement Trust.
Upon adoption of the early retirement plan, the projected benefit
obligations pertaining to HL&P's retirement plan and supplemental
benefits
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will be increased by approximately $27 million and $5 million,
respectively. Pursuant to SFAS No. 71, "Accounting for the Effects of
Certain Types of Regulation", HL&P will defer the costs associated
with the increases in these benefit obligations and will amortize the
costs over a period which corresponds to the estimated period over
which savings will offset these additional costs.
(b) HL&P. During July 1995, the Brazos River Authority and the Matagorda
County Navigation District Number One issued on behalf of HL&P
$150,850,000 aggregate principal amount of revenue refunding bonds
collateralized by HL&P's first mortgage bonds. The new bonds bear an
initial interest rate of 5.8%, variable at HL&P's option after a
five-year no-call period, and mature in 2015. Proceeds from these
issuances will be used in 1995 to redeem, at 102% of their aggregate
principal amount, pollution control revenue bonds aggregating
$150,850,000 and bearing a weighted average interest rate of 9.9%.
(13) INTERIM PERIOD RESULTS: RECLASSIFICATIONS
The results of interim periods are not necessarily indicative of results
expected for the year due to the seasonal nature of HL&P's business. In
the opinion of management, the interim information reflects all
adjustments (consisting only of normal recurring adjustments) necessary
for a full presentation of the results for the interim periods. Certain
amounts from the previous year have been reclassified to conform to the
1995 presentation of financial statements. Such reclassifications do not
affect earnings.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
CURRENT ISSUES
HL&P
RATE REVIEW, FUEL RECONCILIATION AND OTHER PROCEEDINGS. In February 1994, the
Utility Commission initiated a proceeding (Docket No. 12065) to determine
whether HL&P's existing rates are just and reasonable and to reconcile HL&P's
fuel costs from April 1, 1990 to July 31, 1994. The Utility Commission initiated
a separate proceeding (Docket No. 13126) to review issues regarding the prudence
of operation of the South Texas Project from the date of commercial operation
through the present. In February 1995, all major parties to these proceedings
signed a settlement agreement resolving the issues with respect to HL&P,
including the prudence issues related to the operation of the South Texas
Project. In July 1995, an ALJ recommended that the Utility Commission issue a
final order consistent with the Proposed Settlement. A decision is expected by
the Utility Commission at a Final Order Meeting scheduled for August 30, 1995.
Under the Proposed Settlement, HL&P's base rates would be reduced by
approximately $62 million per year, effective retroactively to January 1, 1995,
and HL&P would be precluded from seeking rate increases for three years, subject
to certain conditions. Under the Proposed Settlement, HL&P would amortize its
remaining investment ($211 million as of June 30, 1995) in the cancelled
Malakoff plant, over a period not to exceed seven years. The Proposed Settlement
also provides HL&P the option to write down a portion of its investment in the
South Texas Project during the five-year period commencing January 1, 1995. The
parties to the Proposed Settlement agreed that up to $50 million per year of any
write down would be treated as a reasonable and necessary expense during routine
reviews of HL&P's earnings and any rate review proceeding initiated against
HL&P. Decommissioning expenses for the South Texas Project would increase by $9
million per year under the Proposed Settlement.
The estimated effects of the Proposed Settlement have been recorded on HL&P's
financial statements effective as of January 1, 1995. In the second quarter and
first six months of 1995, the Proposed Settlement reduced HL&P's pre-tax
earnings by approximately $39 million and $56 million, respectively. These
reductions reflect HL&P's decision in the second quarter to write off (i) $7
million of its investment in the South Texas Project discussed above and (ii)
the one-time, pre-tax charge of $9 million incurred in connection with certain
mine-related costs which were not previously recorded and are not recoverable
under the terms of the Proposed Settlement.
Under the terms of the Proposed Settlement, HL&P previously agreed that
approximately $70 million of fuel expenditures and related interest incurred
during the fuel reconciliation period would not be recoverable from ratepayers.
This $70 million was recorded in December 1994 as a one-time, pre-tax charge to
reconcilable fuel revenues and will be refunded to ratepayers in the event that
the Proposed Settlement is approved by the Utility Commission. For additional
information regarding the Proposed Settlement, see Note 3 to the Company's
Consolidated and HL&P's Financial Statements (Financial Statements) in Item 1 of
this Report.
-24-
COMPETITION. HL&P and other members of the electric utility industry, like other
regulated industries, continue to be subject to technological, regulatory and
economic pressures that are increasing competition and offer the possibility for
fundamental changes in the industry and its regulation.
In its 1995 session, pursuant to Sunset legislation, the Texas Legislature
considered the reenactment of PURA, the basic statute governing the regulation
of electric utilities in Texas. During that legislative debate, a number of
proposals were made by utilities and others to change various provisions of the
regulatory structure, particularly in response to developing competition in the
industry. Although a number of administrative and procedural changes were made
to PURA, the law as reenacted generally preserves the basic regulatory framework
that has existed with respect to electric utilities such as HL&P. However, new
provisions were added allowing for increased competition in connection with
wholesale sales, including the recognition of wholesale generators and
power marketers, who may engage in sales activities without regulation as
electric utilities. Provisions regarding access by non-utility generators to
transmission facilities were added, as were new provisions regarding rates
charged by utilities for transmission of power for themselves and for third
parties. The effect of these revisions likely will be an increase in competition
for wholesale sales in Texas, but HL&P's wholesale sales traditionally have
accounted for less than 1% of its total revenues.
For additional information regarding the impact of competition on HL&P's
business, see "Business of HL&P - Competition" and "Regulation of the Company -
Federal" in Part I of the 1994 Combined Form 10-K and Note 1(a) of the notes to
the financial statements included in the Combined Form 8-K, which information is
incorporated herein by reference.
DISCONTINUED CABLE TELEVISION OPERATIONS
On July 6, 1995, the Company closed its sale of KBLCOM to Time Warner in a
tax-deferred, stock-for-stock merger valued at approximately $2.4 billion. In
anticipation of the sale, effective January 1, 1995, the operations of KBLCOM
have been accounted for as discontinued and prior periods were restated for
consistency in reflecting KBLCOM as a discontinued operation. The Company
recorded a $90.6 million tax benefit in the first quarter of 1995 in recognition
of the deferred tax asset arising from the Company's excess tax basis in KBLCOM
stock. Based on a Time Warner common stock price of $43.25 on July 6, 1995, the
Company will recognize in the third quarter of 1995 an additional after-tax gain
estimated to be $690 million, which is subject to post closing adjustments. For
additional information regarding the sale of KBLCOM, see the Company's Current
Report on Form 8-K (File No. 1-7629) dated July 6, 1995, which is incorporated
herein by reference. For a presentation of the Company's financial statements
for the years 1992 through 1994 which reflects KBLCOM on a discontinued
operations basis, reference is made to the Company's Consolidated Financial
Statements contained in the Combined Form 8-K.
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RESULTS OF OPERATIONS
COMPANY
Summary of selected financial data for the Company and its subsidiaries is set
forth below:
THREE MONTHS ENDED JUNE 30,
--------------------------- PERCENT
1995 1994 CHANGE
------------ ------------ ------
(Restated)
(Thousands of Dollars)
Revenues......................... $ 978,225 $1,004,906 (3)
Operating Expenses............... 683,839 706,435 (3)
Operating Income................. 294,386 298,471 (1)
Interest and Other Charges....... 80,037 81,253 (1)
Income Taxes..................... 65,709 76,654 (14)
Discontinued Operations.......... (7,583) -
Net Income....................... 133,260 126,725 5
SIX MONTHS ENDED JUNE 30,
----------------------------- PERCENT
1995 1994 CHANGE
------------- ------------ ------
(Restated)
(Thousands of Dollars)
Revenues......................... $1,724,391 $1,826,487 (6)
Operating Expenses............... 1,306,704 1,378,359 (5)
Operating Income................. 417,687 448,128 (7)
Interest and Other Charges....... 161,432 160,895 -
Income Taxes..................... 76,136 99,306 (23)
Discontinued Operations.......... 90,607 (15,084) -
Net Income....................... 247,716 152,623 62
The Company had consolidated earnings per share of $1.08 for the second quarter
of 1995, compared to consolidated earnings per share of $1.03 for the second
quarter of 1994. Consolidated earnings per share for the six months ended June
30, 1995 was $2.00 per share, compared to $1.25 per share for the same period in
1994. The increase in earnings for the six months ended June 30, 1995 is due to
the recognition in the first quarter of 1995 of a $90.6 million tax benefit in
recognition of the deferred tax asset arising from the Company's excess tax
basis in KBLCOM stock, partially offset by the estimated effects of HL&P's
Proposed Settlement which reduced operating income as discussed below. The
Company's earnings per share for the six months ended June 30, 1995 would have
been $1.27 per share without the tax benefit.
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HL&P
Summary of selected financial data for HL&P is set forth below:
THREE MONTHS ENDED JUNE 30,
---------------------------- PERCENT
1995 1994 CHANGE
------------ ------------ ------
(Thousands of Dollars)
Revenues......................... $ 978,225 $1,004,906 (3)
Operating Expenses (1)........... 760,806 788,064 (3)
Operating Income (1)............. 217,419 216,842 -
Interest Charges................. 61,055 63,281 (4)
Income After Preferred Dividends. 141,873 142,478 -
SIX MONTHS ENDED JUNE 30,
----------------------------- PERCENT
1995 1994 CHANGE
------------- ------------ ------
(Thousands of Dollars)
Revenues......................... $1,724,391 $1,826,487 (6)
Operating Expenses (1)........... 1,402,406 1,486,766 (6)
Operating Income (1)............. 321,985 339,721 (5)
Interest Charges................. 123,903 126,331 (2)
Income After Preferred Dividends. 175,782 184,164 (5)
---------------
(1) Inclusive of income taxes
In the second quarter and first six months of 1995, HL&P's pre-tax earnings were
reduced by approximately $39 million and $56 million, respectively, which
represents the estimated effects of the Proposed Settlement on revenues and
expenses. For information regarding HL&P's current regulatory proceedings and
the Proposed Settlement, see "CURRENT ISSUES - HL&P - Rate Review, Fuel
Reconciliation and Other Proceedings" above and Note 3 to the Financial
Statements in Item 1 of this Report.
OPERATING REVENUES AND SALES
Operating revenues decreased $26.7 million for the second quarter of 1995 and
$102.1 million for the first six months of 1995, compared to the same periods in
1994. The decreases were primarily due to decreases in reconcilable fuel
revenues of $49.9 million and $114.9 million, respectively, and the effects of
the settlement-related rate reduction of $19.7 million and $33.6 million,
respectively, for these same comparative periods. These decreases were partially
offset by increases in kilowatt-hour (KWH) sales during the periods. For the
second quarter and first six months of 1995, residential KWH sales increased 8%
and 4%, respectively, compared to the same periods in 1994, while commercial KWH
sales increased 4% and 5%, respectively, for the same periods. The increases in
residential and commercial sales were due to growth in the number of customers
and usage within these classes. Additionally, warmer weather experienced in the
second quarter of 1995 compared to 1994 contributed to increased residential
sales. Firm
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industrial KWH sales decreased 4% and 3% for the second quarter and
first six months of 1995, respectively, compared to the same periods in 1994.
However, industrial base revenues for these periods were essentially flat due to
the expiration in December 1994 of HL&P's discounted economic development
tariff. Firm industrial sales exclude electricity sold at a reduced rate under
agreements which allow HL&P to interrupt service under some circumstances.
FUEL AND PURCHASED POWER EXPENSES
Fuel expenses, while relatively unchanged for the second quarter, decreased
$30.6 million for the first six months of 1995 compared to the same period of
1994. The decrease was primarily due to a decrease in the unit cost of gas and
an increase in nuclear generation which has a per unit fuel cost that is
substantially lower than HL&P's other fuel sources. The average cost of fuel for
the second quarter and first six months of 1995 was $1.66 per million British
Thermal Units (MMBtu) and $1.65 per MMBtu, respectively, compared to $1.63 per
MMBtu and $1.71 per MMBtu for the same periods in 1994. Purchased power expense
decreased $53.1 million and $86.0 million for the second quarter and first six
months of 1995 when compared to the same period in 1994 primarily due to the
expiration of firm purchased power contracts.
OPERATION AND MAINTENANCE, DEPRECIATION AND AMORTIZATION, AND OTHER
Operation and maintenance expense for the second quarter and first six months of
1995 increased $13.6 million and $18.2 million, respectively, compared to the
same periods in 1994. Substantially all of the increase in operation and
maintenance expense resulted from a lump sum wage increase under a union
contract and increased litigation expenses. Depreciation and amortization
expense for the second quarter and first six months of 1995 increased $12.3
million and $17.3 million, respectively, compared to 1994, primarily due to an
increase in depreciable property and increases recorded as a result of the
Proposed Settlement (see "CURRENT ISSUES - HL&P - Rate Review, Fuel
Reconciliation and Other Proceedings" above and Note 3 to the Financial
Statements in Item 1 of this Report). Other taxes increased $9.5 million in the
first six months of 1995 compared to the same period in 1994, primarily due to
increased state franchise tax obligations. Substantially all of the increase in
the loss attributable to other-net was the one-time, pre-tax charge of $9
million incurred in connection with certain mine-related costs which were not
previously recorded and are not recoverable under the terms of the Proposed
Settlement.
LIQUIDITY AND CAPITAL RESOURCES
COMPANY
GENERAL
The Company's cash requirements stem primarily from operating expenses, capital
expenditures, payment of common stock dividends, payment of preferred stock
dividends and interest and principal payments on debt. Net cash provided by
operating activities totaled $344.1 million for the six months ended June 30,
1995.
Net cash used in investing activities for the six months ended June 30, 1995,
totaled $257.0 million, primarily due to electric capital expenditures of $133.2
million (including allowance for borrowed
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funds used during construction), corporate headquarters expenditures (including
capitalized interest) of $56.9 million and discontinued cable television
operations expenditures of $47.0 million.
Financing activities for the first six months of 1995 resulted in a net cash
outflow of $59.9 million. The Company's primary financing activities were the
increase in short-term borrowings offset by the payment of dividends, the
redemption of preferred stock and the extinguishment and repayment of long-term
debt. For information with respect to these matters, reference is made to Notes
7, 8, and 10 to the Financial Statements in Item 1 of this Report.
SOURCES OF CAPITAL RESOURCES AND LIQUIDITY
The Company has registered with the Securities and Exchange Commission (SEC)
$250 million of debt securities which remain unissued. Proceeds from any sales
of these securities are expected to be used for general corporate purposes
including investments in and loans to subsidiaries.
The Company also has registered with the SEC five million shares of its common
stock. Proceeds from the sale of these securities will be used for general
corporate purposes, including, but not limited to, the redemption, repayment or
retirement of outstanding indebtedness of the Company or the advance or
contribution of funds to one or more of the Company's subsidiaries to be used
for their general corporate purposes, including, without limitation, the
redemption, repayment or retirement of indebtedness or preferred stock.
The Company's outstanding commercial paper at June 30, 1995 was approximately
$698.2 million, which is supported by an $800 million bank credit facility.
On July 6, 1995, the Company closed its sale of KBLCOM to Time Warner in a
tax-deferred, stock-for-stock merger. In exchange for KBLCOM's common stock,
Time Warner issued to the Company one million shares of its common stock and 11
million shares of a newly-issued series of its convertible preferred stock. Such
securities were valued at approximately $1.1 billion based, in part, on the
closing price of Time Warner common stock on July 6 ($43.25 per share). In
addition, Time Warner purchased from the Company for cash approximately $621
million of KBLCOM's outstanding intercompany indebtedness and assumed
approximately $650 million of KBLCOM's external debt and other liabilities. The
preferred stock is convertible into approximately 22.9 million shares of Time
Warner common stock. Until the earlier of conversion or July 6, 1999, the terms
of the preferred stock provide for the payment of an annual dividend of at least
$3.75 per share. After four years, Time Warner will have the right to exchange
the preferred stock for common stock at the stated conversion rate. After five
years, Time Warner will have the right to redeem all or part of the preferred
stock at its liquidation preference of $100 per share, plus accrued and unpaid
dividends thereon to the date fixed for redemption. The Company believes that
the transaction will improve its liquidity by exchanging the Company's
investment in KBLCOM for cash and marketable securities. For more information
concerning the sale, see the Company's Current Report on Form 8-K dated July 6,
1995, which is incorporated herein by reference.
The Company recorded a $90.6 million tax benefit in the first quarter of 1995 in
recognition of the deferred tax asset arising from the Company's excess tax
basis in KBLCOM stock. Based, in part, on a Time Warner common stock price of
$43.25 on July 6, 1995, the Company will recognize in
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the third quarter of 1995 an additional after-tax gain estimated to be $690
million, which is subject to post closing adjustments.
In accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," the Time Warner stock will be classified as
"available-for-sale securities" and recorded by the Company at fair value.
Unrealized holding gains and losses will be excluded from earnings and reported
as a component of shareholders' equity until the securities are sold.
The $621 million of proceeds received in connection with the sale of KBLCOM has
initially been used to retire short-term indebtedness of the Company under its
commercial paper program. It is anticipated that the proceeds ultimately will be
used for general corporate purposes, including but not limited to the redemption
of or retirement of indebtedness of the Company, the advance or contribution of
funds to one or more subsidiaries to be used for their general corporate
purposes or (depending on market and other conditions) the possible repurchase
of outstanding shares of the Company's common stock.
In June 1995, a subsidiary of HI Energy, the Company's non-regulated electric
power subsidiary, entered into an agreement to construct, own and operate a 160
MW cogeneration facility to be built adjacent to a steel plant in San Nicolas,
Argentina. The projected completion date for the project is October 15, 1997.
The plant is to be constructed by a consortium composed of GE Power Systems,
Inc. and an Argentine construction company. The construction contract provides,
subject to certain adjustments, for a contract price of approximately $65
million to be paid in installments during the construction of the project. Upon
completion, the project will sell steam to the steel plant and sell electricity
on the wholesale Argentina electricity market. The project is subject to the
satisfaction of certain conditions precedent, prior to September 15, 1995,
including the obtaining of required regulatory permits and an exemption from
certain Argentine customs duties.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges for the six and twelve months
ended June 30, 1995 were 2.34 and 2.77, respectively. The Company believes that
the ratio for the six-month period is not necessarily indicative of the ratio
for a twelve-month period due to the seasonal nature of HL&P's business.
HL&P
GENERAL
HL&P's cash requirements stem primarily from operating expenses, capital
expenditures, payment of dividends and interest and principal payments on debt.
HL&P's net cash provided by operating activities for the first six months of
1995 totaled $374.6 million.
Net cash used in HL&P's investing activities for the first six months of 1995
totaled $225.1 million. HL&P's capital and nuclear fuel expenditures (excluding
allowance for funds used during construction) for the first six months of 1995
totaled $215.2 million out of the $449 million revised
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annual budget. HL&P expects to finance substantially all of its 1995 capital
expenditures through funds generated internally from operations.
HL&P's financing activities for the first six months of 1995 resulted in a net
cash outflow of approximately $291.0 million. Included in these activities were
the payment of dividends, the redemption of preferred stock, and the
extinguishment of long-term debt. For information with respect to these matters,
reference is made to Notes 7 and 8 to the Financial Statements in Item 1 of this
Report.
SOURCES OF CAPITAL RESOURCES AND LIQUIDITY
HL&P has registered with the SEC $230 million aggregate liquidation value of
preferred stock and $580 million aggregate principal amount of debt securities
that may be issued as first mortgage bonds and/or as debt securities
collateralized by first mortgage bonds. Proceeds from any sale of these
securities are expected to be used for general corporate purposes including the
purchase, redemption (to the extent permitted by the terms of the outstanding
securities), repayment or retirement of outstanding indebtedness or preferred
stock of HL&P.
At June 30, 1995, HL&P had approximately $94 million in cash and cash
equivalents invested in short-term investments. In addition, HL&P has a
commercial paper program supported by a bank credit facility of $400 million.
HL&P had no commercial paper outstanding at June 30, 1995.
RATIOS OF EARNINGS TO FIXED CHARGES
HL&P's ratios of earnings to fixed charges for the six and twelve months ended
June 30, 1995 were 3.17 and 3.70, respectively. HL&P's ratios of earnings to
fixed charges and preferred dividends for the six and twelve months ended June
30, 1995, were 2.67 and 3.12, respectively. HL&P believes that the ratios for
the six-month period are not necessarily indicative of the ratios for a
twelve-month period due to the seasonal nature of its business.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1994, the Financial Accounting Standards Board (FASB) issued SFAS
No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments," effective for fiscal years ending after December 15,
1994. SFAS No. 119 extends current disclosure practices set forth in SFAS
No. 105 "Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of
Credit Risk" and SFAS No. 107 "Disclosures about Fair Value of Financial
Instruments." SFAS No. 119 requires companies to disclose information about
the amounts, nature and terms for all derivative financial instruments not
within the scope of SFAS No. 105. The Company and HL&P adopted SFAS No. 119
with no effect on the Company or HL&P's financial condition or results of
operations.
In March 1995, FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This accounting
standard, effective for fiscal years beginning after December 15, 1995, requires
companies to review certain assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable (such determination generally being made on the basis of whether net
cash
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flows expected to result from such assets will recover the carrying amount of
the assets). If an impairment is found to exist, the impairment loss to be
recognized is the amount by which the carrying amount exceeds the fair value.
The Company and HL&P are currently reviewing the provisions of SFAS No. 121,
but, based on current estimates, the Company and HL&P do not expect the adoption
of SFAS No. 121 to have a material impact on the Company's or HL&P's financial
condition or results of operations.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
For a description of legal proceedings affecting the Company and its
subsidiaries, including HL&P, reference is made to the information set
forth in Item 3 of the 1994 Combined Form 10-K, Item 1 of Part II of the
Combined Form 10-Q, Notes 2, 3 and 4 to the Company's Consolidated and
HL&P's Financial Statements in the Combined Form 8-K and Notes 2(b) and
3 to the Company's Consolidated and HL&P's Financial Statements in the
Combined Form 10-Q, which information, as qualified and updated by the
description of developments in regulatory and litigation matters
contained in Notes 2, 3 and 4 of the Notes to the Financial Statements
included in Part I of this Report, is incorporated herein by reference.
GULF STATES UTILITIES CO. V. HOUSTON LIGHTING & POWER CO., ET AL.,
formerly pending in the United States District Court for the Southern
District of Texas, Houston Division, was dismissed upon joint
stipulation of all the parties in June 1995. Under the terms of the
Agreement of Compromise and Settlement, HL&P bears its own fees, costs
and expenses, but is not required to pay any other amounts.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
HOUSTON INDUSTRIES INCORPORATED:
Exhibit 10(a) - Sixth Amendment to the Houston Industries Incorporated
Executive Incentive Compensation Plan (As Amended and
Restated Effective January 1, 1991), Effective August 1,
1995.
Exhibit 10(b) - Sixth Amendment to the Houston Industries Incorporated
Deferred Compensation Plan (As Amended and Restated
Effective January 1, 1991), Effective August 1, 1995.
Exhibit 10(c) - Fifth Amendment to the Houston Industries Incorporated
Deferred Compensation Plan (As Amended and Restated
Effective January 1, 1989), Effective August 1, 1995.
Exhibit 10(d) - Fifth Amendment to the Houston Industries Incorporated
Deferred Compensation Plan (As Established Effective
September 1, 1985), Effective August 1, 1995.
Exhibit 10(e) - First Amendment to Houston Industries Incorporated Executive
Life Insurance Plan (Effective January 1, 1994), Executed
June 16, 1995.
Exhibit 11 - Computation of Earnings per Common Share and Common
Equivalent Share.
Exhibit 12 - Computation of Ratios of Earnings to Fixed Charges.
Exhibit 27 - Financial Data Schedule.
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Exhibit 99(a) - Notes 1(a), 1(f), 2, 3, 4 and 5 to the Company's
Consolidated Financial Statements included on pages 39
through 67 of the Combined Form 8-K.
Exhibit 99(b) - Notes 2, 3, and 4 to the Company's Consolidated and HL&P's
Financial Statements included on pages 71 through 81 of the
1994 Combined Form 10-K.
Exhibit 99(c) - Notes 2(b), 3 and 9 to the Company's Consolidated and HL&P's
Financial Statements included on pages 14 through 18 and 22
of the Combined Form 10-Q.
Exhibit 99(d) - Part I, Item 3 - Legal Proceedings included on pages 31
through 32 of the 1994 Combined Form 10-K.
Exhibit 99(e) - Part II, Item 1 - Legal Proceedings included on page 32 of
the Combined Form 10-Q.
Exhibit 99(f) - Part I, Item 1 - Business of HL&P - Competition and
Regulation of the Company - Federal included on pages 5
through 7 and 26 of the 1994 Combined Form 10-K.
Exhibit 99(g) - First Amendment to the Houston Industries Incorporated
Savings Plan (As Amended and Restated Effective July 1,
1995), Effective June 30, 1995.
HOUSTON LIGHTING & POWER COMPANY:
Exhibit 12 - Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges and Preferred Dividends.
Exhibit 27 - Financial Data Schedule.
Exhibit 99(a) - Notes 1(f), 2, 3, 4 and 5 to the Company's Consolidated
Financial Statements included on pages 39 through 50 of the
Combined Form 8-K.
Exhibit 99(b) - Notes 2, 3 and 4 to the Company's Consolidated and HL&P's
Financial Statements included on pages 71 through 81 of the
1994 Combined Form 10-K.
Exhibit 99(c) - Notes 2(b), 3 and 9 to the Company's Consolidated and HL&P's
Financial Statements included on pages 14 through 18 and 22
of the Combined Form 10-Q.
Exhibit 99(d) - Part I, Item 3 - Legal Proceedings included on pages 31
through 32 of the 1994 Combined Form 10-K.
Exhibit 99(e) - Part II, Item 1 - Legal Proceedings included on page 32 of
the Combined Form 10-Q.
Exhibit 99(f) - Part I, Item 1 - Business of HL&P - Competition and
Regulation of the Company - Federal included on pages 5
through 7 and 26 of the 1994 Combined Form 10-K.
(b) Reports on Form 8-K.
HOUSTON INDUSTRIES INCORPORATED:
Current Report on Form 8-K dated July 6, 1995 (Item 2. Acquisition or
Disposition of Assets).
HOUSTON INDUSTRIES INCORPORATED AND HOUSTON LIGHTING & POWER COMPANY:
Current Report on Form 8-K dated May 12, 1995 (Item 5. Other Events).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOUSTON INDUSTRIES INCORPORATED
(Registrant)
/s/ MARY P. RICCIARDELLO
Mary P. Ricciardello
Comptroller and
Principal Accounting Officer
Date: August ___, 1995
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOUSTON LIGHTING & POWER COMPANY
(Registrant)
/s/ KEN W. NABORS
Ken W. Nabors
Vice President and Comptroller
and Principal Accounting Officer
Date: August ____, 1995
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