UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
1-11377 CINERGY CORP. 31-1385023
(A Delaware Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030
(An Ohio Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-3543 PSI ENERGY, INC. 35-0594457
(An Indiana Corporation)
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611
2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080
(A Kentucky Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
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
This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati
Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power
Company. Information contained herein relating to any individual registrant
is filed by such registrant on its own behalf. Each registrant makes no
representation as to information relating to the other registrants.
The Union Light, Heat and Power Company meets the conditions set forth in
General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its
company specific information with the reduced disclosure format.
As of April 30, 1997, shares of Common Stock outstanding for each registrant
were as listed:
Company Shares
Cinergy Corp., par value $.01 per share 157,679,129
The Cincinnati Gas & Electric Company, par value
$8.50 per share 89,663,086
PSI Energy, Inc., without par value, stated value $.01
per share 53,913,701
The Union Light, Heat and Power Company, par value
$15.00 per share 585,333
TABLE OF CONTENTS
Item Page
Number Number
Glossary of Terms . . . . . . . . . . . . . . . . . . . 3
PART I. FINANCIAL INFORMATION
1 Financial Statements
Cinergy Corp.
Consolidated Balance Sheets . . . . . . . . . . . . . 6
Consolidated Statements of Income . . . . . . . . . . 8
Consolidated Statements of Changes in Common9
Stock Equity. . . . . . . . . . . . . . . . . . . . 9
Consolidated Statements of Cash Flows . . . . . . . . 10
Results of Operations . . . . . . . . . . . . . . . . 11
The Cincinnati Gas & Electric Company
Consolidated Balance Sheets . . . . . . . . . . . . . 19
Consolidated Statements of Income . . . . . . . . . . 21
Consolidated Statements of Cash Flows . . . . . . . . 22
Results of Operations . . . . . . . . . . . . . . . . 23
PSI Energy, Inc.
Consolidated Balance Sheets . . . . . . . . . . . . . 27
Consolidated Statements of Income . . . . . . . . . . 29
Consolidated Statements of Cash Flows . . . . . . . . 30
Results of Operations . . . . . . . . . . . . . . . . 31
The Union Light, Heat and Power Company
Balance Sheets. . . . . . . . . . . . . . . . . . . . 34
Statements of Income. . . . . . . . . . . . . . . . . 36
Statements of Cash Flows. . . . . . . . . . . . . . . 37
Results of Operations . . . . . . . . . . . . . . . . 38
Notes to Financial Statements . . . . . . . . . . . . . 40
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 42
PART II. OTHER INFORMATION
1 Legal Proceedings . . . . . . . . . . . . . . . . . . . 43
4 Submission of Matters to a Vote of Security Holders . . 43
6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 44
Signature . . . . . . . . . . . . . . . . . . . . . . . 46
GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text of this combined Form
10-Q are defined below:
TERM DEFINITION_________________________
1996 Form Combined 1996 Annual Report on Form 10-K filed separately by
10-K Cinergy, CG&E, PSI, and ULH&P
AEP American Electric Power Company, Inc.
Avon Energy Avon Energy Partners Holdings, an Unlimited Liability
Company and its wholly-owned subsidiary Avon Energy
Partners PLC, a Limited Liability Company
Beckjord CG&E's W. C. Beckjord Station
CG&E The Cincinnati Gas & Electric Company (a subsidiary of
Cinergy)
Cinergy or Cinergy Corp.
Company
Cinergy UK Cinergy UK, Inc., formerly M.E. Holdings, Inc., (a
subsidiary of Cinergy Investments, Inc.) which holds
Cinergy's 50% investment in Avon Energy
Clean Coal A joint arrangement by PSI and Destec Energy, Inc. for a
Project 262-megawatt clean coal power generating facility located
at Wabash River Generating Station
Coal Supply An agreement to purchase coal from Eagle Coal Company
Agreement
December 1996 A PUCO order issued in December 1996 on CG&E's gas rate
Order proceeding
December 1996 An Indiana Utility Regulatory Commission order issued in
DSM Order December 1996 on PSI's DSM proceeding
DSM Demand-side management
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Gibson PSI's Gibson Generating Station
KPSC Kentucky Public Service Commission
kwh Kilowatt-hour
M&R Fund Maintenance and Replacement Fund
Mcf Thousand cubic feet
Merger Order The FERC's order approving the merger of CG&E and PSI
Resources, Inc. to form Cinergy
GLOSSARY OF TERMS (Continued)
TERM DEFINITION_________________________
Miami Fort CG&E's Miami Fort Generating Station
Midlands Midlands Electricity plc
Opinion 15 Accounting Principles Board Opinion 15, Earnings Per Share
PSI PSI Energy, Inc. (a subsidiary of Cinergy)
PUCO Public Utilities Commission of Ohio
PUHCA Public Utility Holding Company Act of 1935
S&P Standard & Poor's
September 1996 An Indiana Utility Regulatory Commission order issued in
Order September 1996 on PSI's retail rate proceeding
Statement 128 Statement of Financial Accounting Standards No. 128,
Earnings Per Share
ULH&P The Union Light, Heat and Power Company (a wholly-owned
subsidiary of CG&E)
Woodsdale CG&E's Woodsdale Generating Station
Zimmer CG&E's William H. Zimmer Generating Station
CINERGY CORP.
AND SUBSIDIARY COMPANIES
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
March 31 December 31
1997 1996
(dollars in thousands)
Utility Plant - Original Cost
In service
Electric $8,858,361 $8,809,786
Gas 720,227 713,829
Common 185,302 185,255
9,763,890 9,708,870
Accumulated depreciation 3,650,395 3,591,858
6,113,495 6,117,012
Construction work in progress 160,687 172,614
Total utility plant 6,274,182 6,289,626
Current Assets
Cash and temporary cash investments 15,294 19,327
Restricted deposits 1,723 1,721
Accounts receivable less accumulated provision for
doubtful accounts of $11,315 at March 31, 1997,
and $10,618 at December 31, 1996 206,113 199,361
Materials, supplies, and fuel - at average cost
Fuel for use in electric production 66,666 71,730
Gas stored for current use 11,030 32,951
Other materials and supplies 76,578 80,292
Property taxes applicable to subsequent year 92,685 123,580
Prepayments and other 41,730 37,049
511,819 566,011
Other Assets
Regulatory assets
Amounts due from customers - income taxes 375,914 377,194
Post-in-service carrying costs and deferred
operating expenses 184,423 186,396
Phase-in deferred return and depreciation 93,794 95,163
Coal contract buyout costs 134,378 138,171
Deferred demand-side management costs 127,860 134,742
Deferred merger costs 92,444 93,999
Unamortized costs of reacquiring debt 69,474 70,518
Other 63,315 72,483
Investment in unconsolidated subsidiary 593,099 592,660
Other 240,406 231,551
1,975,107 1,992,877
$8,761,108 $8,848,514
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</FN>
CINERGY CORP.
CAPITALIZATION AND LIABILITIES
March 31 December 31
1997 1996
(dollars in thousands)
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding shares -
157,679,129 at March 31, 1997, and
December 31, 1996 $ 1,577 $ 1,577
Paid-in capital 1,579,934 1,590,735
Retained earnings 1,035,390 992,273
Cumulative foreign currency translation
adjustment (1,166) (131)
Total common stock equity 2,615,735 2,584,454
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 194,195 194,232
Long-term Debt 2,375,694 2,534,978
Total capitalization 5,185,624 5,313,664
Current Liabilities
Long-term debt due within one year 274,000 140,000
Notes payable 705,177 713,617
Accounts payable 244,686 305,420
Accrued taxes 341,339 323,059
Accrued interest 58,827 55,590
Other 85,880 114,653
1,709,909 1,652,339
Other Liabilities
Deferred income taxes 1,139,112 1,146,263
Unamortized investment tax credits 173,517 175,935
Accrued pension and other postretirement
benefit costs 271,882 263,319
Other 281,064 296,994
1,865,575 1,882,511
$8,761,108 $8,848,514
CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Twelve Months Ended
March 31 March 31
1997 1996 1997 1996
(in thousands, except per share amounts)
Operating Revenues
Electric $ 817,914 $ 684,840 $2,901,780 $2,664,953
Gas 212,266 199,155 487,145 434,796
1,030,180 883,995 3,388,925 3,099,749
Operating Expenses
Fuel used in electric production 175,746 191,452 697,544 722,297
Gas purchased 123,968 93,225 279,859 204,982
Purchased and exchanged power 160,592 27,621 291,809 69,587
Other operation 163,412 146,134 615,712 549,985
Maintenance 45,854 43,642 196,120 181,500
Depreciation 71,556 70,195 284,124 276,498
Amortization of phase-in deferrals 3,371 3,400 13,569 12,491
Amortization of post-in-service
deferred operating expenses - net 1,091 (843) 425 (1,339)
Income taxes 63,919 73,983 208,205 232,893
Taxes other than income taxes 68,372 65,737 260,450 257,322
877,881 714,546 2,847,817 2,506,216
Operating Income 152,299 169,449 541,108 593,533
Other Income and Expenses - Net
Allowance for equity funds used
during construction 191 351 1,065 1,361
Post-in-service carrying costs - 343 880 961
Phase-in deferred return 2,002 2,093 8,281 8,496
Equity in earnings of
unconsolidated subsidiary 26,500 - 51,930 -
Income taxes 791 3,218 17,109 9,482
Other - net (2,627) (7,676) (35,415) (9,676)
26,857 (1,671) 43,850 10,624
Income Before Interest and Other
Charges 179,156 167,778 584,958 604,157
Interest and Other Charges
Interest on long-term debt 49,275 49,135 190,757 207,985
Other interest 13,867 2,871 42,165 18,386
Allowance for borrowed funds
used during construction (1,342) (1,138) (6,387) (6,892)
Preferred dividend requirements of
subsidiaries 3,239 6,769 19,650 28,965
65,039 57,637 246,185 248,444
Net Income $ 114,117 $ 110,141 $ 338,773 $ 355,713
Costs of Reacquisition of Preferred
Stock of Subsidiary - - (18,391) - __
Net Income Applicable to Common
Stock $ 114,117 $ 110,141 $ 320,382 $ 355,713
Average Common Shares Outstanding 157,679 157,675 157,679 157,113
Earnings Per Common Share
Net income $.72 $.70 $2.14 $2.27
Costs of reacquisition of
preferred stock of subsidiary - - (.12) -__
Net income applicable to common
stock $.72 $.70 $2.02 $2.27
Dividends Declared Per Common Share $.45 $.43 $1.76 $1.72
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(unaudited)
Cumulative
Foreign
Currency
Common Paid-in Retained Translation Total Common
Stock Capital Earnings Adjustment Stock Equity
(dollars in thousands)
Quarter Ended March 31, 1997
Balance January 1, 1997 $1,577 $1,590,735 $ 992,273 $ (131) $2,584,454
Net income 114,117 114,117
Dividends on common stock (see
page 8 for per share amounts) (71,000) (71,000)
Translation adjustments (1,035) (1,035)
Other (10,801) (10,801)
Balance March 31, 1997 $1,577 $1,579,934 $1,035,390 $(1,166) $2,615,735
Quarter Ended March 31, 1996
Balance January 1, 1996 $1,577 $1,597,050 $ 950,216 $ - $2,548,843
Net income 110,141 110,141
Issuance of 8,988 shares of
common stock - net 311 311
Dividends on common stock (see
page 8 for per share amounts) (67,799) (67,799)
Other (1,926) (1,926)
Balance March 31, 1996 $1,577 $1,595,435 $ 992,558 $ - $2,589,570
Twelve Months Ended March 31, 1997
Balance April 1, 1996 $1,577 $1,595,435 $ 992,558 $ - $2,589,570
Net income 338,773 338,773
Dividends on common stock (see page
8 for per share amounts) (277,559) (277,559)
Translation adjustments (1,166) (1,166)
Costs of reacquisition of preferred
stock of subsidiary (18,391) (18,391)
Other (15,501) 9 (15,492)
Balance March 31, 1997 $1,577 $1,579,934 $1,035,390 $(1,166) $2,615,735
Twelve Months Ended March 31, 1996
Balance April 1, 1995 $1,559 $1,553,478 $ 911,857 $ - $2,466,894
Net income 355,713 355,713
Issuance of 1,758,652 shares of
common stock - net 18 42,650 42,668
Common stock issuance expenses (45) (45)
Dividends on common stock (see page
8 for per share amounts) (269,836) (269,836)
Other (648) (5,176) (5,824)
Balance March 31, 1996 $1,577 $1,595,435 $ 992,558 $ - $2,589,570
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date Twelve Months Ended
March 31 March 31
1997 1996 1997 1996
(in thousands)
Operating Activities
Net income $ 114,117 $ 110,141 $ 338,773 $ 355,713
Items providing (using) cash currently:
Depreciation 71,556 70,195 284,124 276,498
Deferred income taxes and investment tax
credits - net (6,889) 16,978 24,045 43,620
Allowance for equity funds used during
construction (191) (351) (1,065) (1,361)
Regulatory assets - net 9,608 9,961 (73) 11,933
Changes in current assets and current
liabilities
Restricted deposits (2) (24) (336) (1,074)
Accounts receivable, net of reserves on
receivables sold (8,498) 143,778 (19,527) 51,886
Materials, supplies, and fuel 30,699 29,169 45,535 63,553
Accounts payable (60,734) 12,675 (36,128) 94,809
Litigation settlement - - (80,000) -
Accrued taxes and interest 21,517 (7,203) 34,189 12,208
Other items - net (16,844) (16,003) 11,575 (17,210)
Net cash provided by operating activities 154,339 369,316 601,112 890,575
Financing Activities
Issuance of common stock - 311 - 42,623
Issuance of long-term debt 35,000 - 209,817 344,280
Funds on deposit from issuance of long-term debt - 973 - 5,231
Retirement of preferred stock of subsidiaries (25) (5) (212,507) (93,471)
Redemption of long-term debt (61,880) (150,289) (148,774) (461,605)
Change in short-term debt (8,440) (69,500) 608,877 (133,801)
Dividends on common stock (71,000) (67,799) (277,559) (269,836)
Net cash provided by (used in)
financing activities (106,345) (286,309) 179,854 (566,579)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (58,909) (49,760) (332,162) (296,451)
Deferred demand-side management costs - net 6,882 (737) 2,277 (17,061)
Investment in unconsolidated subsidiary - - (503,349) -
Sale of investment in Argentine utility - - - 19,799
Net cash used in investing activities (52,027) (50,497) (833,234) (293,713)
Net increase (decrease) in cash and
temporary cash investments (4,033) 32,510 (52,268) 30,283
Cash and temporary cash investments at
beginning of period 19,327 35,052 67,562 37,279
Cash and temporary cash investments at
end of period $ 15,294 $ 67,562 $ 15,294 $ 67,562
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
CINERGY CORP.
Below is information concerning the consolidated results of operations for
Cinergy for the quarter and twelve months ended March 31, 1997. For
information concerning the results of operations for each of the other
registrants for the same quarter, see the discussion under the heading RESULTS
OF OPERATIONS following the financial statements of each company.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1997
Kwh Sales
Kwh sales increased 35.8% for the quarter ended March 31, 1997, from the
comparable period of last year primarily reflecting increased activity in
Cinergy's power marketing and trading operations which led to higher non-firm
power sales for resale. Also contributing to the higher kwh sales levels was
an increase in industrial sales primarily reflecting growth in the primary
metals sector. These increases were partially offset by decreased residential
and commercial sales for the first quarter of 1997, as compared to the same
period last year, as a result of mild weather.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the first quarter of 1997
decreased 8.4%, as compared to the same period in 1996. Decreased residential
and commercial sales reflecting mild weather during the first quarter of 1997,
were slightly offset by an increase in the number of customers and higher gas
transportation volumes which reflect the continued trend of industrial
customers purchasing gas directly from suppliers, using transportation
services provided by Cinergy.
Operating Revenues
Electric Operating Revenues
Electric operating revenues for the quarter ended March 31, 1997, increased
$133 million (19%), as compared to the same period last year, primarily as a
result of the increased activity in Cinergy's power marketing and trading
operations previously discussed. Also contributing to the increase was the
effect of PSI's 7.6% ($76 million annually) retail rate increase approved in
the September 1996 Order. These increases were partially offset by declines
in kwh sales to residential and commercial customers as a result of mild
weather and the operation of CG&E's fuel adjustment clauses.
An analysis of electric operating revenues is shown below:
Quarter
Ended March 31
(in millions)
Electric operating revenues - March 31, 1996 $685
Increase (Decrease) due to change in:
Price per kwh
Retail 2
Sales for resale
Firm power obligations 1
Non-firm power transactions 19
Total change in price per kwh 22
Kwh sales
Retail (4)
Sales for resale
Non-firm power transactions 115
Total change in kwh sales 111
Electric operating revenues - March 31, 1997 $818
Gas Operating Revenues
The increasing trend of industrial customers purchasing gas directly from
producers and utilizing Cinergy facilities to transport the gas continues to
put downward pressure on gas operating revenues. When Cinergy sells gas, the
sales price reflects the cost of gas purchased by Cinergy to support the sale
plus the costs to deliver the gas. When gas is transported, Cinergy does not
incur any purchased gas costs but delivers gas the customer has purchased from
other sources. Since providing transportation services does not necessitate
recovery of gas purchased costs, the revenue per Mcf transported is less than
the revenue per Mcf sold. As a result, a higher relative volume of gas
transported to gas sold translates into lower gas operating revenues.
Gas operating revenues increased $13 million (7%) in the first quarter of
1997, when compared to the same period last year. Contributing to the
increase was CG&E's December 1996 Order approving an overall average increase
in gas revenues for CG&E of 2.5% ($9 million annually) and the operation of
fuel adjustment clauses reflecting a higher cost of gas purchased. These
increases were partially offset by the effect on residential and commercial
gas sales of the mild weather during the first quarter of 1997.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs, Cinergy's largest operating expense, decreased $16
million (8%), as compared to the same period last year.
An analysis of these fuel costs is shown below:
Quarter
Ended March 31
(in millions)
Fuel expense - March 31, 1996 $192
Decrease due to change in:
Price of fuel (15)
Kwh generation (1)
Fuel expense - March 31, 1997 $176
Gas Purchased
Gas purchased for the quarter ended March 31, 1997, increased $31 million
(33%), when compared to the same period last year, reflecting a higher average
cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power increased $133 million for the quarter ended
March 31, 1997, when compared to the same period last year, primarily
reflecting increased purchases of non-firm power for resale to others as a
result of increased activity in Cinergy's power marketing and trading
operations.
Other Operation
The $17 million (12%) increase in other operation expenses for the first
quarter of 1997, as compared to the same period of 1996, is primarily due to
increased production expenses associated with the Clean Coal Project and
increases related to the amortization of deferred DSM expenses, deferred
merger costs, and deferred postretirement benefit costs, all of which are
being recovered in revenues pursuant to either the September 1996 Order or the
December 1996 DSM Order.
Maintenance
For the three months ended March 31, 1997, maintenance expenses increased $2
million (5%), when compared to the three months ended March 31, 1996. This
increase is primarily due to scheduled outages at Beckjord and Miami Fort and
a forced outage at Zimmer.
Amortization of Post-in-service Deferred Operating Expenses - Net
Amortization of post-in-service deferred operating expenses - net reflects the
amortization and related recovery in rates of various deferrals of
depreciation, operation and maintenance expenses (exclusive of fuel costs),
and property taxes on certain generating units and other utility plant from
the in-service date until the related plant was reflected in retail rates.
Other Income and Expenses - Net
Other - net
The change in other - net of $5 million (66%) for the three months ended March
31, 1997, from the same period of 1996, is primarily due to an increase in
carrying costs related to the Coal Supply Agreement and PSI's deferred DSM
costs. A higher level of expenses associated with CG&E's and ULH&P's sales of
accounts receivables partially offset this increase.
Interest and Other Charges
Other Interest
Other interest increased $11 million for the first quarter of 1997, as
compared to the same period last year, primarily reflecting interest expense
on short-term borrowings used to fund Cinergy's investment in Avon Energy.
(See Note 5 of the "Notes to Financial Statements" in "Part I. Financial
Information.")
Preferred Dividend Requirements of Subsidiaries
Preferred dividend requirements of subsidiaries decreased $4 million (52%) for
the quarter ended March 31, 1997, as compared to the same period of 1996.
This decrease is primarily attributable to the reaquisition of approximately
90% of the outstanding preferred stock of CG&E, pursuant to Cinergy's tender
offer.
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED MARCH 31, 1997
Kwh Sales
Kwh sales increased 17.2% for the twelve months ended March 31, 1997, from the
comparable period of last year, primarily reflecting increased activity in
Cinergy's power marketing and trading operations which led to higher non-firm
power sales for resale. Also contributing to the higher kwh sales levels was
an increase in industrial sales primarily reflecting growth in the primary
metals sector. These increases were partially offset by declines in
residential and commercial sales attributable to a return to more normal
weather in the third quarter of 1996 as compared to 1995, and mild weather for
the first quarter of 1997, as compared to the same period last year, offset
slightly by increases in the average number of residential and commercial
customers.
Mcf Sales and Transportation
Mcf gas sales and transportation for the twelve months ended March 31, 1997,
remained relatively unchanged as compared to the same period in 1996. Colder
than normal weather during the first quarter of 1996 combined with mild
weather during the first quarter of 1997 caused a decrease in residential and
commercial sales. Higher gas transportation volumes which reflect the
continued trend of industrial customers purchasing gas directly from
suppliers, using transportation services provided by Cinergy and increases in
the number of customers substantially offset this decrease.
Operating Revenues
Electric Operating Revenues
Compared to the same period last year, electric operating revenues for the
twelve months ended March 31, 1997, increased $237 million (9%), reflecting
increased kwh sales and PSI's 7.6% retail rate increase, as previously
discussed. This increase was partially offset by the operation of CG&E's fuel
adjustment clauses reflecting a lower average cost of fuel used in electric
production and a decrease in ULH&P's electric rates reflecting a reduction in
the cost of electricity purchased from CG&E.
An analysis of electric operating revenues is shown below:
Twelve Months
Ended March 31
(in millions)
Electric operating revenues - March 31, 1996 $2 665
Increase due to change in:
Price per kwh
Retail 7
Sales for resale
Firm power obligations 3
Non-firm power transactions 15
Total change in price per kwh 25
Kwh sales
Retail 10
Sales for resale
Firm power obligations 4
Non-firm power transactions 194
Total change in kwh sales 208
Other 4
Electric operating revenues - March 31, 1997 $2 902
Gas Operating Revenues
For a discussion of the continued trend of downward pressure on gas operating
revenues from increased transportation services, refer to the discussion under
the caption "Gas Operating Revenues" for Cinergy in "Results of Operations for
the Quarter Ended March 31, 1997."
Gas operating revenues increased $52 million (12%) for the twelve months ended
March 31, 1997, when compared to the same period last year. Contributing to
the increase was the December 1996 Order approving an overall average increase
in gas revenues for CG&E of 2.5% ($9 million annually) and the operation of
fuel adjustment clauses reflecting a higher cost of gas purchased. These
increases were partially offset by the effect of colder than normal weather
during the first quarter of 1996 and the mild weather during the first quarter
of 1997 on residential and commercial gas sales.
Operating Expenses
Gas Purchased
Gas purchased for the twelve months ended March 31, 1997, increased $75
million (37%) when compared to the same period last year. This increase
reflects a higher average cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power increased $222 million for the twelve months
ended March 31, 1997, when compared to the same period of last year,
primarily reflecting increased purchases of non-firm power for resale to
others as a result of increased activity in Cinergy's power marketing and
trading operations.
Other Operation
Other operation increased $66 million (12%) for the twelve months ended March
31, 1997, as compared to the same period last year, primarily due to charges
of $35 million for voluntary early retirement and severance programs and
charges totaling $6 million related to the December 1996 Order. In addition,
expenses associated with the Clean Coal Project, which are being recovered in
revenues pursuant to the September 1996 Order, contributed to the increase, as
well as, an increase related to amortization of DSM expenses, which are being
recovered in revenues pursuant to the December 1996 DSM Order.
Maintenance
Maintenance increased $15 million (8%) for the twelve months ended March 31,
1997, as compared to the twelve months ended March 31, 1996, primarily due to
increased production maintenance expenses associated with the Clean Coal
Project, which are being recovered in revenues pursuant to the September 1996
Order.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for
Zimmer.
Amortization of Post-in-service Deferred Operating Expenses - Net
Amortization of post-in-service deferred operating expenses - net reflects the
amortization and related recovery in rates of various deferrals of
depreciation, operation and maintenance expenses (exclusive of fuel costs),
and property taxes on certain generating units and other utility plant from
the in-service date until the related plant was reflected in retail rates.
Other Income and Expenses - Net
Other - net
The change in other - net of $26 million for the twelve months ended March 31,
1997, as compared to the same period last year is primarily due to charges of
$14 million associated with the December 1996 Order and expenses associated
with the sales of accounts receivable for CG&E and ULH&P.
Interest and Other Charges
Interest on Long-term Debt
Interest on long-term debt decreased $17 million (8%) for the twelve months
ended March 31, 1997, from the same period of 1996 primarily due to the
redemption of approximately $175 million of long-term debt by CG&E and ULH&P
during the period from December 1995 through May 1996.
Other Interest
Other interest increased $24 million for the twelve months ended March 31,
1997, as compared to the same period last year, primarily reflecting interest
expense on short-term borrowings used to fund Cinergy's investment in Avon
Energy. (See Note 5 of the "Notes to Financial Statements" in "Part I.
Financial Information.")
Preferred Dividend Requirements of Subsidiaries
The decrease in preferred dividend requirements of subsidiaries of $9 million
(32%) for the twelve months ended March 31, 1997, from the same period of 1996
is primarily attributable to the reacquisition of approximately 90% of the
outstanding preferred stock of CG&E, pursuant to Cinergy's tender offer.
Costs of Reacquisition of Preferred Stock of Subsidiary
Costs of reacquisition of preferred stock of subsidiary represents the
difference between the par value of preferred stock of CG&E tendered pursuant
to Cinergy's tender offer in September of 1996 and the purchase price paid
(including tender fees paid to dealer managers) by Cinergy for these shares.
THE CINCINNATI GAS &
ELECTRIC COMPANY
AND SUBSIDIARY COMPANIES
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
March 31 December 31
1997 1996
(dollars in thousands)
Utility Plant - Original Cost
In service
Electric $4,653,785 $4,631,605
Gas 720,227 713,829
Common 185,302 185,255
5,559,314 5,530,689
Accumulated depreciation 1,904,820 1,868,579
3,654,494 3,662,110
Construction work in progress 94,112 95,984
Total utility plant 3,748,606 3,758,094
Current Assets
Cash and temporary cash investments 2,364 5,120
Restricted deposits 1,172 1,171
Notes receivable from affiliated companies 99,975 31,740
Accounts receivable less accumulated provision
for doubtful accounts of $9,974 at March 31, 1997,
and $9,178 at December 31, 1996 93,485 117,912
Accounts receivable from affiliated companies 1,168 2,453
Materials, supplies, and fuel - at average cost
Fuel for use in electric production 28,927 29,865
Gas stored for current use 11,030 32,951
Other materials and supplies 46,995 52,023
Property taxes applicable to subsequent year 92,685 123,580
Prepayments and other 37,459 32,433
415,260 429,248
Other Assets
Regulatory assets
Amounts due from customers - income taxes 341,982 344,126
Post-in-service carrying costs and deferred
operating expenses 139,787 141,492
Deferred merger costs 17,475 17,709
Deferred demand-side management costs 34,302 33,534
Phase-in deferred return and depreciation 93,794 95,163
Unamortized costs of reacquiring debt 37,913 38,439
Other 13,384 19,545
Other 92,624 89,908
771,261 779,916
$4,935,127 $4,967,258
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated
financial statements.
</FN>
THE CINCINNATI GAS & ELECTRIC COMPANY
CAPITALIZATION AND LIABILITIES
March 31 December 31
1997 1996
(dollars in thousands)
Common Stock Equity
Common stock - $8.50 par value;
authorized shares - 120,000,000;
outstanding shares - 89,663,086 at March 31, 1997,
and December 31, 1996 $ 762,136 $ 762,136
Paid-in capital 534,542 536,276
Retained earnings 271,302 247,403
Total common stock equity 1,567,980 1,545,815
Cumulative Preferred Stock
Not subject to mandatory redemption 21,110 21,146
Long-term Debt 1,405,536 1,565,108
Total capitalization 2,994,626 3,132,069
Current Liabilities
Long-term debt due within one year 274,000 130,000
Notes payable 49,600 30,488
Notes payable to affiliated companies 6,973 103
Accounts payable 127,260 166,064
Accounts payable to affiliated companies 32,608 12,726
Accrued taxes 227,150 267,841
Accrued interest 32,159 30,570
Other 28,041 32,191
777,791 669,983
Other Liabilities
Deferred income taxes 768,520 767,085
Unamortized investment tax credits 121,632 123,185
Accrued pension and other postretirement benefit costs 169,214 165,282
Other 103,344 109,654
1,162,710 1,165,206
$4,935,127 $4,967,258
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended
March 31
1997 1996
(in thousands)
Operating Revenues
Electric
Non-affiliated companies $ 395,625 $ 363,344
Affiliated companies 6,075 12,285
Gas
Non-affiliated companies 212,266 199,155
Affiliated companies 1 -___
613,967 574,784
Operating Expenses
Fuel used in electric production 70,239 97,107
Gas purchased 123,968 93,225
Purchased and exchanged power
Non-affiliated companies 70,862 6,433
Affiliated companies 1,572 6,736
Other operation 79,275 79,580
Maintenance 27,336 20,979
Depreciation 40,404 39,987
Amortization of phase-in deferrals 3,371 3,400
Amortization of post-in-service deferred
operating expenses 823 823
Income taxes 43,800 54,890
Taxes other than income taxes 53,514 51,569
515,164 454,729
Operating Income 98,803 120,055
Other Income and Expenses - Net
Allowance for equity funds used during
construction 119 351
Phase-in deferred return 2,002 2,093
Income taxes 3,006 1,681
Other - net (4,775) (686)
352 3,439
Income Before Interest 99,155 123,494
Interest
Interest on long-term debt 30,045 32,100
Other interest 1,696 462
Allowance for borrowed funds used during
construction (909) (823)
30,832 31,739
Net Income $ 68,323 $ 91,755
Preferred Dividend Requirement 219 3,474
Net Income Applicable to Common Stock $ 68,104 $ 88,281
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated
financial statements.
</FN>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
March 31
1997 1996
(in thousands)
Operating Activities
Net income $ 68,323 $ 91,755
Items providing (using) cash currently:
Depreciation 40,404 39,987
Deferred income taxes and investment tax
credits - net 2,929 19,368
Allowance for equity funds used during
construction (119) (351)
Regulatory assets - net 8,587 7,165
Changes in current assets and current
liabilities
Restricted deposits (1) (24)
Accounts and notes receivable, net of
reserves on receivables sold (44,863) 111,135
Materials, supplies, and fuel 27,887 20,965
Accounts payable (18,922) 6,797
Accrued taxes and interest (39,102) (25,133)
Other items - net 16,951 (6,590)
Net cash provided by operating activities 62,074 265,074
Financing Activities
Retirement of preferred stock (24) -
Redemption of long-term debt (16,180) (150,289)
Change in short-term debt 25,982 -
Dividends on preferred stock (219) (3,474)
Dividends on common stock (42,600) (41,995)
Net cash used in financing activities (33,041) (195,758)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (31,021) (23,693)
Deferred demand-side management costs - net (768) (4,268)
Net cash used in investing activities (31,789) (27,961)
Net increase (decrease) in cash and
temporary cash investments (2,756) 41,355
Cash and temporary cash investments at
beginning of period 5,120 6,612
Cash and temporary cash investments at
end of period $ 2,364 $ 47,967
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated
financial statements.
</FN>
THE CINCINNATI GAS & ELECTRIC COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1997
Kwh Sales
Kwh sales for the quarter ended March 31, 1997, increased 31.1%, as compared
to the first quarter of 1996, primarily due to higher non-firm power sales for
resale resulting from increased activity in Cinergy's power marketing and
trading operations. Mild weather during the first quarter of 1997 resulted in
decreased residential and commercial sales. These decreases were partially
offset by increased industrial sales reflecting growth in the primary metals
sector.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the first quarter of 1997
decreased 8.4%, as compared to the same period in 1996. Decreased residential
and commercial sales reflecting mild weather during the first quarter of 1997
were slightly offset by an increase in the number of customers and higher gas
transportation volumes which reflect the continued trend of industrial
customers purchasing gas directly from suppliers, using transportation
services provided by CG&E.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $26 million (7%) for the quarter ended
March 31, 1997, from the comparable period of 1996. This increase, primarily
due to higher non-firm power sales for resale, was offset, in part, by lower
residential and commercial sales, as previously discussed, and the operation
of fuel adjustment clauses reflecting a lower average cost per kwh.
An analysis of electric operating revenues is shown below:
Quarter
Ended March 31
(in millions)
Electric operating revenues - March 31, 1996 $376
Increase (Decrease) due to change in:
Price per kwh
Retail (20)
Sales for resale
Non-firm power transactions 8
Total change in price per kwh (12)
Kwh sales
Retail (9)
Sales for resale
Non-firm power transactions 47
Total change in kwh sales 38
Electric operating revenues - March 31, 1997 $402
Gas Operating Revenues
The increasing trend of industrial customers purchasing gas directly from
producers and utilizing CG&E facilities to transport the gas continues to put
downward pressure on gas operating revenues. When CG&E sells gas, the sales
price reflects the cost of gas purchased by CG&E to support the sale plus the
costs to deliver the gas. When gas is transported, CG&E does not incur any
purchased gas costs but delivers gas the customer has purchased from other
sources. Since providing transportation services does not necessitate
recovery of gas purchased costs, the revenue per Mcf transported is less than
the revenue per Mcf sold. As a result, a higher relative volume of gas
transported to gas sold translates into lower gas operating revenues.
Gas operating revenues increased $13 million (7%) in the first quarter of
1997, when compared to the same period last year. Contributing to the
increase was the December 1996 Order approving an overall average increase in
gas revenues for CG&E of 2.5% ($9 million annually) and the operation of fuel
adjustment clauses reflecting a higher cost of gas purchased. These increases
were partially offset by the effect on residential and commercial gas sales of
the mild weather during the first quarter of 1997.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs decreased $27 million (28%) for the quarter ended March
31, 1997, as compared to the same period last year.
An analysis of these fuel costs is shown below:
Quarter
Ended March 31
(in millions)
Fuel expense - March 31, 1996 $97
Decrease due to change in:
Price of fuel (23)
Kwh generation (4)
Fuel expense - March 31, 1997 $70
Gas Purchased
Gas purchased for the quarter ended March 31, 1997, increased $31 million
(33%), when compared to the same period last year, reflecting a higher average
cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power for the quarter ended March 31, 1997, increased
$59 million over the comparable period of 1996, reflecting increased purchases
of non-firm power for resale to others as a result of increased activity in
Cinergy's power marketing and trading operations.
Maintenance
The $6 million (30%) increase in maintenance expenses for the first quarter of
1997, as compared to the same period of 1996, is primarily due to scheduled
outages at Beckjord and Miami Fort and a forced outage at Zimmer.
Other Income and Expenses - Net
Other - net
The change in other - net of $4 million in the first quarter of 1997, as
compared to the first quarter of 1996, is due, in part, to increased expenses
associated with CG&E's and ULH&P's sales of accounts receivables.
Interest
Interest on Long-term Debt
Interest on long-term debt decreased $2 million (6%) for the quarter ended
March 31, 1997, as compared to the same period of 1996, primarily due to the
redemption of $177.5 million of long-term debt during the period from January
1996 through March 1997.
Other Interest
The $1 million increase in other interest for the first quarter of 1997, as
compared to the first quarter of 1996, is primarily due to increased interest
expense on short-term borrowings used to fund the acquisition of approximately
90% of the outstanding preferred stock of CG&E and interest expense related to
a sale-leaseback agreement CG&E entered into in November 1996 for certain
equipment at Woodsdale.
Preferred Dividend Requirement
The preferred dividend requirement decreased $3 million for the first quarter
of 1997, as compared to the same period in 1996. This decrease is primarily
attributable to the reacquisition of approximately 90% of the outstanding
preferred stock of CG&E, pursuant to Cinergy's tender offer.
PSI ENERGY, INC.
AND SUBSIDIARY COMPANIES
PSI ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
March 31 December 31
1997 1996
(dollars in thousands)
Electric Utility Plant - Original Cost
In service $4,204,576 $4,178,181
Accumulated depreciation 1,745,575 1,723,279
2,459,001 2,454,902
Construction work in progress 66,575 76,630
Total electric utility plant 2,525,576 2,531,532
Current Assets
Cash and temporary cash investments 2,375 2,911
Restricted deposits 551 550
Notes receivable 236 299
Notes receivable from affiliated companies 14,507 3
Accounts receivable less accumulated provision
for doubtful accounts of $1,121 at March 31, 1997,
and $1,269 at December 31, 1996 107,672 73,990
Accounts receivable from affiliated companies 8,380 4,016
Materials, supplies, and fuel - at average cost
Fuel 37,739 41,865
Other materials and supplies 29,582 28,268
Prepayments and other 3,149 3,184
204,191 155,086
Other Assets
Regulatory assets
Amounts due from customers - income taxes 33,932 33,068
Post-in-service carrying costs and deferred
operating expenses 44,636 44,904
Coal contract buyout costs 134,378 138,171
Deferred merger costs 74,969 76,290
Deferred demand-side management costs 93,558 101,208
Unamortized costs of reacquiring debt 31,561 32,079
Other 49,931 52,938
Other 127,564 129,667
590,529 608,325
$3,320,296 $3,294,943
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
</FN>
PSI ENERGY, INC.
CAPITALIZATION AND LIABILITIES
March 31 December 31
1997 1996
(dollars in thousands)
Common Stock Equity
Common stock - without par value; $.01 stated value;
authorized shares - 60,000,000; outstanding shares
- 53,913,701 at March 31, 1997, and December 31, 1996 $ 539 $ 539
Paid-in capital 401,007 402,947
Retained earnings 627,966 626,089
Total common stock equity 1,029,512 1,029,575
Cumulative Preferred Stock
Not subject to mandatory redemption 173,085 173,086
Long-term Debt 970,158 969,870
Total capitalization 2,172,755 2,172,531
Current Liabilities
Long-term debt due within one year - 10,000
Notes payable 102,577 147,129
Notes payable to affiliated companies 87,943 13,186
Accounts payable 100,866 114,330
Accounts payable to affiliated companies 6,493 12,850
Accrued taxes 110,539 73,206
Accrued interest 25,909 24,045
Other 17,069 17,107
451,396 411,853
Other Liabilities
Deferred income taxes 364,905 372,997
Unamortized investment tax credits 51,885 52,750
Accrued pension and other postretirement benefit costs 102,668 98,037
Other 176,687 186,775
696,145 710,559
$3,320,296 $3,294,943
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended
March 31
1997 1996
(in thousands)
Operating Revenues
Non-affiliated companies $ 422,289 $ 321,496
Affiliated companies 1,566 6,799
423,855 328,295
Operating Expenses
Fuel 105,507 94,345
Purchased and exchanged power
Non-affiliated companies 89,730 21,188
Affiliated companies 6,069 12,348
Other operation 83,709 66,551
Maintenance 18,518 22,663
Depreciation 31,152 30,208
Amortization of post-in-service
deferred operating expenses - net 268 (1,666)
Income taxes 20,225 18,883
Taxes other than income taxes 14,857 14,168
370,035 278,688
Operating Income 53,820 49,607
Other Income and Expenses - Net
Allowance for equity funds used during
construction 72 -
Post-in-service carrying costs - 343
Income taxes (603) 760
Other - net 3,263 (3,658)
2,732 (2,555)
Income Before Interest 56,552 47,052
Interest
Interest on long-term debt 19,230 17,035
Other interest 4,457 3,468
Allowance for borrowed funds used during
construction (433) (315)
23,254 20,188
Net Income $ 33,298 $ 26,864
Preferred Dividend Requirement 3,020 3,295
Net Income Applicable to Common Stock $ 30,278 $ 23,569
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
</FN>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
March 31
1997 1996
(in thousands)
Operating Activities
Net income $ 33,298 $ 26,864
Items providing (using) cash currently:
Depreciation 31,152 30,208
Deferred income taxes and investment tax
credits - net (9,820) (1,926)
Allowance for equity funds used during
construction (72) -
Regulatory assets - net 1,021 2,796
Changes in current assets and current
liabilities
Restricted deposits (1) -
Accounts and notes receivable, net of
reserves on receivables sold (51,892) (7,674)
Materials, supplies, and fuel 2,812 8,176
Accounts payable (19,821) (1,692)
Accrued taxes and interest 39,197 18,594
Other items - net (104) 239
Net cash provided by operating activities 25,770 75,585
Financing Activities
Issuance of long-term debt 35,000 -
Funds on deposit from issuance of long-term debt - 973
Retirement of preferred stock (1) (5)
Redemption of long-term debt (45,700) -
Change in short-term debt 30,205 (31,766)
Dividends on preferred stock (3,020) (3,294)
Dividends on common stock (28,400) (25,887)
Net cash used in financing activities (11,916) (59,979)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (22,040) (26,067)
Deferred demand-side management costs - net 7,650 3,531
Net cash used in investing activities (14,390) (22,536)
Net decrease in cash and temporary cash
investments (536) (6,930)
Cash and temporary cash investments at
beginning of period 2,911 15,522
Cash and temporary cash investments at
end of period $ 2,375 $ 8,592
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
</FN>
PSI ENERGY, INC.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1997
Kwh Sales
Kwh sales for the first quarter of 1997 increased 31.9%, as compared to the
same period last year, primarily due to higher non-firm power sales for resale
resulting from increased activity in Cinergy's power marketing and trading
operations. Partially offsetting this increase was the effects of mild
weather during the first quarter of 1997. An increase in industrial sales
primarily reflects growth in the transportation equipment, bituminous coal
mining, and primary metals sectors.
Operating Revenues
Operating revenues increased $96 million (29%) for the quarter ended March 31,
1997, when compared to the same period last year, reflecting, in part, the
increased activity in Cinergy's power marketing and trading operations
previously discussed. Also contributing to the increase was the effect of a
7.6% ($76 million annually) retail rate increase approved in the September
1996 Order. Partially offsetting these increases were the previously
mentioned effects of weather.
An analysis of operating revenues is shown below:
Quarter
Ended March 31
(in millions)
Operating revenues - March 31, 1996 $328
Increase due to change in:
Price per kwh
Retail 24
Sales for resale
Firm power obligations 2
Non-firm power transactions 8
Total change in price per kwh 34
Kwh sales
Retail 2
Sales for resale
Non-firm power transactions 59
Total change in kwh sales 61
Other 1
Operating revenues - March 31, 1997 $424
Operating Expenses
Fuel
Fuel costs, PSI's largest operating expense, increased $11 million (12%) for
the first quarter of 1997, as compared to the same period last year.
An analysis of fuel costs is shown below:
Quarter
Ended March 31
(in millions)
Fuel expense - March 31, 1996 $ 94
Increase due to change in:
Price of fuel 8
Kwh generation 3
Fuel expense - March 31, 1997 $105
Purchased and Exchanged Power
For the quarter ended March 31, 1997, purchased and exchanged power increased
$62 million, as compared to the same period last year, due primarily to
increased purchases of non-firm power for resale to others as a result of
increased activity in Cinergy's power marketing and trading operations.
Other Operation
Other operation expenses increased $17 million (26%) for the quarter ended
March 31, 1997, as compared to the same period last year. This increase is
primarily due to increased production expenses associated with the Clean Coal
Project and increases related to the amortization of deferred DSM expenses,
deferred merger costs, and deferred postretirement benefit costs, all of which
are being recovered in revenues pursuant to either the September 1996 Order or
the December 1996 DSM Order.
Maintenance
The $4 million (18%) decrease in maintenance expenses for the first quarter of
1997, as compared to the same period of 1996, is primarily associated with
production facilities.
Amortization of Post-in-service Deferred Operating Expenses - Net
Amortization of post-in-service deferred operating expenses - net reflects the
amortization and related recovery in rates of depreciation deferred on certain
major projects, primarily environmental in nature, from the in-service date
until the related projects are reflected in retail rates.
Other Income and Expenses - Net
Other - net
The change of $7 million for other - net for the quarter ended March 31, 1997,
as compared to the same period of 1996, is primarily attributable to an
increase in carrying costs related to the Coal Supply Agreement and deferred
DSM costs.
Interest
Interest on Long-term Debt
Interest on long-term debt increased $2 million (13%) for the first quarter of
1997, as compared to the first quarter of 1996, primarily due to the net
issuance of approximately $150 million of long-term debt during the fourth
quarter of 1996.
THE UNION LIGHT, HEAT AND POWER COMPANY
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEETS
(unaudited)
ASSETS
March 31 December 31
1997 1996
(dollars in thousands)
Utility Plant - Original Cost
In service
Electric $197,712 $195,053
Gas 149,560 148,203
Common 19,293 19,285
366,565 362,541
Accumulated depreciation 125,237 122,310
241,328 240,231
Construction work in progress 8,687 9,050
Total utility plant 250,015 249,281
Current Assets
Cash and temporary cash investments 2,067 1,197
Notes receivable from affiliated companies 100 100
Accounts receivable less accumulated
provision for doubtful accounts of
$1,222 at March 31, 1997, and $1,024 at
December 31, 1996 5,198 12,763
Accounts receivable from affiliated
companies 1,153 620
Materials, supplies, and fuel - at average
cost
Gas stored for current use 2,573 6,351
Other materials and supplies 767 716
Property taxes applicable to subsequent
year 1,950 2,600
Prepayments and other 228 370
Total current assets 14,036 24,717
Other Assets
Regulatory assets
Deferred merger costs 5,218 5,218
Unamortized costs of reacquiring debt 3,718 3,764
Other 2,366 2,357
Other 6,630 5,146
17,932 16,485
$281,983 $290,483
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial
statements.
</FN>
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEETS
(unaudited)
CAPITALIZATION AND LIABILITIES
March 31 December 31
1997 1996
(dollars in thousands)
Common Stock Equity
Common stock - $15.00 par value;
authorized shares - 1,000,000;
outstanding shares - 585,333 at March 31, 1997,
and December 31, 1996 $ 8,780 $ 8,780
Paid-in capital 18,683 18,839
Retained earnings 99,051 92,484
Total common stock equity 126,514 120,103
Long-term Debt 44,630 44,617
Total capitalization 171,144 164,720
Current Liabilities
Notes payable to affiliated companies 18,926 30,649
Accounts payable 6,498 12,018
Accounts payable to affiliated companies 12,152 16,771
Accrued taxes 7,267 1,014
Accrued interest 902 1,284
Other 4,259 5,248
50,004 66,984
Other Liabilities
Deferred income taxes 32,289 33,463
Unamortized investment tax credits 4,727 4,797
Accrued pension and other postretirement benefit costs 13,261 12,983
Income taxes refundable through rates 6,028 5,121
Other 4,530 2,415
60,835 58,779
$281,983 $290,483
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF INCOME
(unaudited)
Quarter Ended
March 31
1997 1996
(in thousands)
Operating Revenues
Electric
Non-affiliated companies $ 48,580 $ 52,333
Gas
Non-affiliated companies 33,963 34,006
Affiliated companies 121 52
82,664 86,391
Operating Expenses
Electricity purchased from parent company for resale 35,129 37,600
Gas purchased 20,449 18,998
Other operation 8,534 9,247
Maintenance 1,563 1,166
Depreciation 3,070 2,907
Income taxes 4,742 5,511
Taxes other than income taxes 1,099 1,071
74,586 76,500
Operating Income 8,078 9,891
Other Income and Expenses - Net
Allowance for equity funds used during
construction (4) (21)
Income taxes 92 (4)
Other - net (447) (219)
(359) (244)
Income Before Interest 7,719 9,647
Interest
Interest on long-term debt 881 1,294
Other interest 301 107
Allowance for borrowed funds used during
construction (30) (10)
1,152 1,391
Net Income $ 6,567 $ 8,256
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial
statements.
</FN>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
March 31
1997 1996
(in thousands)
Operating Activities
Net income $ 6,567 $ 8,256
Items providing (using) cash currently:
Depreciation 3,070 2,907
Deferred income taxes and investment tax (338) 2,682
credits - net
Allowance for equity funds used during 4 21
construction
Regulatory assets (9) (21)
Changes in current assets and current
liabilities
Accounts and notes receivable, net of
reserves on receivables sold 6,016 15,823
Materials, supplies, and fuel 3,727 2,159
Accounts payable (10,139) (7,375)
Accrued taxes and interest 5,871 3,099
Other items - net 1,810 (643)
Net cash provided by operating
activities 16,579 26,908
Financing Activities
Redemption of long-term debt - (16,032)
Change in short-term debt (11,723) - __
Net cash used in financing activities (11,723) (16,032)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (3,986) (3,637)
Net cash used in investing activities (3,986) (3,637)
Net increase in cash and temporary cash
investments 870 7,239
Cash and temporary cash investments at
beginning of period 1,197 1,750
Cash and temporary cash investments at
end of period $ 2,067 $ 8,989
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial
statements.
</FN>
THE UNION LIGHT, HEAT AND POWER COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1997
Kwh Sales
Kwh sales for the quarter ended March 31, 1997, decreased 6.1% from the
comparable period of 1996. The mild weather in the first quarter of 1997
resulted in a decline in residential and commercial sales. This decrease was
partially offset by an increase in industrial sales in the manufacturing
sector and an increase in the average number of customers in all customer
classes.
Mcf Sales and Transportation
For the first quarter of 1997, Mcf gas sales volumes decreased 15.7%, while
Mcf transportation volumes increased 24.8%, when compared to the same period
in 1996. Decreased residential and commercial sales reflecting mild weather
during the first quarter of 1997 were slightly offset by an increase in the
number of customers. The higher level of gas transportation volumes reflects
the continued trend of customers purchasing gas directly from suppliers, using
transportation services provided by ULH&P.
Operating Revenues
Electric Operating Revenues
Electric operating revenues decreased $3.8 million (7%) for the quarter ended
March 31, 1997, from the comparable period of 1996. This decrease primarily
reflects the previously discussed decline in kwh sales. Also, in July 1996,
the KPSC issued an order authorizing a decrease in electric rates of
approximately $1.8 million annually to reflect a reduction in the cost of
electricity purchased from CG&E.
Gas Operating Revenues
The increasing trend of industrial customers purchasing gas directly from
producers and utilizing ULH&P facilities to transport the gas continues to put
downward pressure on gas operating revenues. When ULH&P sells gas, the sales
price reflects the cost of gas purchased by ULH&P to support the sale plus the
costs to deliver the gas. When gas is transported, ULH&P does not incur any
purchased gas costs, but delivers gas the customer has purchased from other
sources. Since providing transportation services does not necessitate
recovery of gas purchased costs, the revenue per Mcf transported is less than
the revenue per Mcf sold. As a result, a higher relative volume of gas
transported to gas sold translates into lower gas operating revenues.
Gas operating revenues remained relatively constant in the first quarter of
1997, when compared to the same period of last year. Increases primarily
attributable to the operation of the fuel adjustment clause reflecting an
increase in the cost of gas purchased were offset by the weather-related
decrease in Mcf volumes.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased decreased $2.5 million (7%) for the quarter ended March
31, 1997, as compared to the same period last year. This decrease reflects
the aforementioned reduction in the cost of electricity and lower volumes
purchased from CG&E.
Gas Purchased
Gas purchased for the quarter increased $1.5 million (8%) from the first
quarter of last year, reflecting a 22.4% increase in the average cost per Mcf
purchased which was partially offset by a 14.8% decrease in volume.
Other Operation
The $.7 million (8%) decrease in other operation expenses for the first
quarter of 1997, as compared to the same period of 1996, is due to a number of
factors, including decreases in administrative and general and distribution
expenses.
Maintenance
The $.4 million (34%) increase in maintenance expenses for the first quarter
of 1997, as compared to the same period of 1996, is primarily due to increased
maintenance expenses associated with gas and electric distribution facilities.
Depreciation
Depreciation expense increased $.2 million (6%) for the quarter ended March
31, 1997, over the comparable period of last year. This increase primarily
reflects additions to gas and electric utility plant.
Other Income and Expenses - Net
Other - net
The change in other - net of $.2 million for the quarter ended March 31, 1997,
as compared to the same period of 1996, is primarily attributable to expenses
associated with the sales of accounts receivables.
Interest
Interest on Long-term Debt
Interest on long-term debt decreased $.4 million (32%) for the quarter ended
March 31, 1997, as compared to the same period of 1996, primarily due to the
redemption of $25 million of long-term debt during the period from February
1996 through May 1996.
Other Interest
Other interest charges increased $.2 million for the quarter ended March 31,
1997, as compared to the same period of 1996, primarily due to increased
short-term borrowings.
NOTES TO FINANCIAL STATEMENTS
Cinergy, CG&E, PSI, and ULH&P
1. These Financial Statements reflect all adjustments (which include
only normal, recurring adjustments) necessary in the opinion of the
registrants for a fair presentation of the interim results. These
statements should be read in conjunction with the Financial Statements
and the notes thereto included in the combined 1996 Form 10-K of the
registrants. Certain amounts in the 1996 Financial Statements have been
reclassified to conform to the 1997 presentation.
Cinergy and CG&E
2. In March 1997, CG&E retired $16 million principal amount of its
8.95% Series First Mortgage Bonds, due December 15, 2021. In April 1997,
CG&E redeemed the remaining $84 million principal amount of such bonds at
a price of 100% through the M&R Fund provisions of its first mortgage
bond indenture. CG&E also redeemed, in April 1997, the entire $60
million principal amount of its 8 1/8% Series First Mortgage Bonds, due
August 1, 2003, at a redemption price of 100.72% through the M&R Fund.
Cinergy and PSI
3. In February 1997, the City of Princeton, Indiana, loaned the
proceeds from the sale of its $35 million Pollution Control Revenue
Refunding Bonds, 1997 Series, to PSI. Proceeds from the issuance were
used to refund, in March 1997, the outstanding $35 million City of
Princeton, Indiana, 7.60% Pollution Control Revenue Refunding Bonds, 1987
Series, which previously refunded the City of Princeton, Indiana, 12.75%
Pollution Control Revenue Bonds 1982 Series B, which were issued to
finance PSI's portion of the costs of acquiring and constructing PSI's
undivided interest in certain pollution control and solid waste disposal
facilities at Gibson.
The 1997 Series bonds bear interest at a variable rate and will
mature April 1, 2022, subject to redemption prior to maturity. Pursuant
to the loan agreement between PSI and Princeton, PSI will make loan
payments sufficient to pay, when due, principal and interest on the 1997
Series bonds.
Cinergy, CG&E, PSI, and ULH&P
4. In February 1997, the FASB issued Statement 128, which is effective
December 31, 1997, for Cinergy. Statement 128 replaces the calculation
and disclosure of primary and fully diluted earnings per share under
Opinion 15 with basic and diluted earnings per share. Statement 128 also
requires certain disclosures regarding the determination of earnings per
share amounts presented in the accompanying income statements that were
not previously required under Opinion 15. Earnings per share presented
in the accompanying income statements has been computed in accordance
with the provisions of Opinion 15. Earnings per share for the quarter
and twelve months ended March 31, 1997, determined in accordance with the
provisions of Statement 128, would not have been significantly different
from amounts shown.
Cinergy
5. Cinergy accounts for its 50% investment in Avon Energy, which owns
100% of Midlands, using the equity method of accounting. Avon Energy
acquired Midlands during the second and third quarters of 1996, with
substantially all of the Midlands' common stock being acquired during the
second quarter. Accordingly, Midlands' results are fully reflected in
the quarter ended March 31, 1997, while the historical results for the
twelve months ended March 31, 1997, include equity income from Midlands
for approximately 10 months. Had Avon Energy acquired Midlands on April
1, 1996, Cinergy's pro forma results for the twelve months ended March
31, 1997, would not have been significantly different from its reported
results.
On May 1, 1997, general elections were held in Great Britain which
resulted in the Labour Party gaining control of the government. As
previously disclosed in Cinergy's 1996 Form 10-K, at the time of
Cinergy's acquisition, through Avon Energy, of a 50% interest in
Midlands, the Labour Party was calling for a windfall profits levy
against certain businesses which had previously been owned and operated
by the government, of which Midlands would most likely be included.
With the election of the Labour Party, the likelihood of the windfall
profits levy occurring is almost certain.
The manner in which the levy will be calculated and paid, as well as the
actual companies to which it will be applied, remains unclear. As a
result, no liability for the levy has been recorded by either Midlands
or Avon Energy as of March 31, 1997. With the Labour Party now
elected, sufficient information to determine the form of the levy,
quantify the amount, and determine the appropriate accounting treatment
should most likely be available during the second quarter of 1997.
Estimates of the total amount to be raised by the levy, made by members
of the British press and financial community, have ranged from 3 billion
to 5 billion pounds sterling (approximately $5 billion to $9 billion).
These same estimates have indicated Midlands' apportionment to be in the
range of 60 million to 210 million pounds sterling (approximately $100
million to $350 million), depending on the manner in which the levy is
calculated and which companies are included in the levy.
Cinergy and CG&E
6. As discussed in the 1996 Form 10-K, the PUCO issued its December
1996 Order approving an overall average increase in gas revenues for CG&E
of 2.5% ($9.3 million annually). The PUCO disallowed certain of CG&E's
requests, including the requested working capital allowance, recovery of
certain capitalized information systems development costs, and certain
merger-related costs. These disallowances resulted in a pretax charge to
earnings during the fourth quarter of $20 million ($15 million net of
taxes or 10 cents per share). CG&E's request for a rehearing on the
disallowed information systems costs and other aspects of the order was
denied.
On April 14, 1997, CG&E filed a notice of appeal with the Supreme Court
of Ohio challenging the disallowance of information systems costs and
the exclusion of certain imputed revenues. Cinergy and CG&E cannot
predict what action the Supreme Court of Ohio may take with respect to
this appeal.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Recent Developments
Cinergy
Securities Ratings On May 5, 1997, S&P assigned a corporate credit rating to
Cinergy of BBB+. Concurrently, S&P assigned a BBB+ rating to Cinergy's $600
million credit facility. In assigning these ratings, S&P stated, "The credit
evaluation of Cinergy is based on the favorable business position of PSI and
CG&E, further potential merger cost savings and benefits, as well as healthy
cash flow measurements and modest capital spending requirements." Also, S&P
indicated the ratings are reflective of, among other things, Cinergy's
excellent operation of domestic coal-fired equipment, its relatively low
rates, and a well-positioned gas operation.
Regulatory Matters
Cinergy and CG&E
CG&E's Gas Rate Proceeding See Note 6 of the "Notes to Financial Statements"
in "Part I. Financial Information."
Accounting Issues
Cinergy, CG&E, PSI, and ULH&P
New Accounting Standards See Note 4 of the "Notes to Financial Statements" in
"Part I. Financial Information."
CAPITAL RESOURCES
Cinergy, CG&E, and PSI
Long-term Debt For information regarding recent securities issuances and
redemptions, see Notes 2 and 3 of the "Notes to Financial Statements" in "Part
I. Financial Information."
Cinergy, CG&E, PSI, and ULH&P
Short-term Debt The operating subsidiary companies of Cinergy have the
following short-term debt authorizations and lines of credit:
Committed Unused
Authorized Lines__ Lines
(in millions)
Cinergy & Subsidiaries $838 $281 $245
CG&E & Subsidiaries 438 80 65
PSI 400 200 179
ULH&P 35 - -
Additionally, Cinergy's $600 million credit facility, which expires in May
2001, has $66 million unused as of March 31, 1997.
In addition, Cinergy UK's $40 million non-recourse credit agreement has $19
million outstanding as of March 31, 1997.
RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
Reference is made to "ITEM 1. FINANCIAL STATEMENTS" in "PART I. FINANCIAL
INFORMATION."
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Cinergy, CG&E, and PSI
Merger Litigation In March 1997, the United States Court of Appeals for the
District of Columbia Circuit Court denied AEP's petition for review of the
FERC's Merger Order. AEP had objected to the Merger Order alleging that the
post-merger operations of Cinergy would require the use of AEP's transmission
facilities on a continuous basis without compensation. AEP argued that the
FERC, in issuing the Merger Order, did not adequately evaluate the impact on
AEP or whether the need to use AEP's transmission facilities would interfere
with Cinergy achieving merger benefits. In addition, AEP claimed that the
FERC failed to evaluate the extent to which the merged facilities' operations
would be consistent with the integrated public utility concept of the PUHCA.
Cinergy, CG&E, and PSI cannot predict whether AEP will appeal this decision to
the United States Supreme Court, and if appealed, the outcome of such appeal.
Additionally, see Note 6 of the "Notes to Financial Statements" in "Part I.
Financial Information."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Cinergy
(a) The annual meeting of shareholders of Cinergy was held April 17, 1997,
in Cincinnati, Ohio.
(c) At the meeting, six Class III directors were elected to the board of
Cinergy to serve three-year terms, expiring in 2000, as set forth
below:
Votes Votes
Class III For Withheld
Michael G. Browning 135,034,136 3,840,569
Phillip R. Cox 135,184,191 3,690,514
Kenneth M. Duberstein 135,091,109 3,783,596
James E. Rogers 134,709,947 4,164,758
John J. Schiff, Jr. 135,197,970 3,676,735
Oliver W. Waddell 135,138,778 3,735,927
Additionally, a shareholder proposal was defeated. Such proposal, if
adopted, would have abolished the Annual Incentive Plan and the Long-term
Incentive Compensation Plan for the respective eligible employees, and
replaced said plans with an incentive award that would have been tied
proportionately to the price of Cinergy's common stock at the end of the
year. There were 100,917,186 common shares voted against the proposal,
16,492,160 voted for the proposal, 6,756,956 abstentions, and 14,708,403
broker non-votes.
CG&E
(a) In lieu of the annual meeting of shareholders of CG&E,
resolutions were adopted via unanimous written consent of shareholders
effective April 16, 1997.
(b) The Board of Directors as previously reported was re-elected in
its entirety (see (c) below).
(c) The following members of the Board of Directors were unanimously
re-elected at the annual meeting:
Jackson H. Randolph
James E. Rogers
William J. Grealis
PSI
(a) The annual meeting of shareholders of PSI was held in Cincinnati, Ohio
on April 17, 1997.
(b) Proxies were not solicited for the annual meeting, at which the Board
of Directors was re-elected in its entirety.
(c) The following members of the Board of Directors were unanimously re-
elected at the annual meeting:
James K. Baker
Michael G. Browning
John A. Hillenbrand II
John M. Mutz
Jackson H. Randolph
James E. Rogers
Van P. Smith
ULH&P
Omitted pursuant to Instruction H(2)(b).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit
Designation Nature of Exhibit
PSI
3-a By-laws of PSI, as amended on December 17,
1996.
Cinergy, CG&E, PSI, and ULH&P
27 Financial Data Schedules (included in
electronic submission only).
Cinergy, CG&E, PSI, and ULH&P
(b) The following report on Form 8-K was filed during the quarter
or prior to the filing of this Form 10-Q for the quarter ended
March 31, 1997.
Date of Report Item Filed_____________________
January 10, 1997 Item 5. Cautionary statements
for purposes of the "Safe Harbor" provisions of the
Private Securities Litigation Reform Act of 1995.
(Exhibit to Cinergy's Form 8-K/A filed January 10, 1997,
in File No. 1-11377.)
SIGNATURES
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although Cinergy, CG&E, PSI, and ULH&P believe that the
disclosures are adequate to make the information presented not misleading. In
the opinion of Cinergy, CG&E, PSI, and ULH&P, these statements reflect all
adjustments (which include only normal, recurring adjustments) necessary to
reflect the results of operations for the respective periods. The unaudited
statements are subject to such adjustments as the annual audit by independent
public accountants may disclose to be necessary.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed by an
officer and the chief accounting officer on their behalf by the undersigned
thereunto duly authorized.
CINERGY CORP.
THE CINCINNATI GAS & ELECTRIC COMPANY
PSI ENERGY, INC.
THE UNION LIGHT, HEAT AND POWER COMPANY
Registrants
Date: May 14, 1997 Charles J. Winger __
Duly Authorized Officer
and
Chief Accounting Officer