<Page>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2001
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 1-2385
------
THE DAYTON POWER AND LIGHT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 31-0258470
- ---------------------------------- -----------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
COURTHOUSE PLAZA SOUTHWEST
DAYTON, OHIO 45402
---------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(937) 224-6000
---------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------ ------
Indicate the number of shares of the issuer's classes of common stock, as of the
latest practicable date.
Common Stock, $.01 par value 41,172,173 Shares
- ------------------------------------- ----------------------------------
(Title of each class) (Outstanding at June 30, 2001)
<Page>
THE DAYTON POWER AND LIGHT COMPANY
INDEX
<Table>
<Caption>
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Results of Operations 3
Consolidated Statement of Cash Flows 4
Consolidated Balance Sheet 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Operating Statistics 13
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</Table>
2
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PART I. FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------------------------------
2001 2000 2001 2000
---- ---- ---- ----
REVENUES
Utility Service Revenues --
Electric..................................................... $287.2 $262.8 $581.9 $522.3
Gas.......................................................... - 31.1 - 132.6
------ ------ ------ ------
Total utility service revenues........................... 287.2 293.9 581.9 654.9
------ ------ ------ ------
EXPENSES
Fuel and purchased power....................................... 89.9 66.3 172.0 125.4
Gas purchased for resale....................................... - 17.6 - 85.2
Operation and maintenance...................................... 48.5 49.8 81.6 96.3
Depreciation and amortization.................................. 28.5 34.4 57.2 67.9
Amortization of regulatory assets, net......................... 11.3 7.1 23.4 12.7
General taxes.................................................. 22.2 31.2 48.0 65.7
------ ------ ------ ------
Total expenses............................................ 200.4 206.4 382.2 453.2
------ ------ ------ ------
OPERATING INCOME............................................... 86.8 87.5 199.7 201.7
Other income (deductions)...................................... 1.5 1.8 (1.0) (5.8)
Interest expense............................................... (16.0) (15.8) (31.9) (34.3)
------ ------ ------ ------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE......................................... 72.3 73.5 166.8 161.6
Income taxes................................................... 26.8 26.4 64.8 58.4
------ ------ ------ ------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE....................................................... 45.5 47.1 102.0 103.2
Cumulative effect of accounting change, net of tax............. - - 1.0 -
------ ------ ------ ------
NET INCOME..................................................... 45.5 47.1 103.0 103.2
Preferred dividends............................................ 0.2 0.2 0.4 0.4
------ ------ ------ ------
EARNINGS ON COMMON STOCK....................................... $ 45.3 $ 46.9 $102.6 $102.8
====== ====== ====== ======
</Table>
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
3
<Page>
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN MILLIONS)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
----------------------------------
2001 2000
---- ----
OPERATING ACTIVITIES
Cash received from utility customers................................................. $ 566.7 $ 681.4
Other operating cash receipts........................................................ 47.6 10.8
Cash paid for:
Fuel and purchased power........................................................ (183.8) (116.5)
Purchased gas................................................................... - (74.2)
Operation and maintenance labor................................................. (36.5) (41.7)
Nonlabor operating expenditures................................................. (88.4) (108.9)
Interest........................................................................ (29.7) (32.1)
Income taxes.................................................................... (45.1) (63.7)
General taxes................................................................... (76.2) (83.0)
------- -------
Net cash provided by operating activities............................................ 154.6 172.1
------- -------
INVESTING ACTIVITIES
Capital expenditures................................................................. (85.1) (50.7)
Income taxes on gain from sale of natural gas retail distribution operations......... (90.9) -
------- -------
Net cash used for investing activities............................................... (176.0) (50.7)
------- -------
FINANCING ACTIVITIES
Dividends paid on common stock....................................................... (65.4) (102.5)
Dividends paid on preferred stock.................................................... (0.4) (0.4)
Retirement of long-term debt......................................................... (0.4) (0.4)
Issuance (retirement) of short-term debt, net........................................ 84.8 (111.1)
------- -------
Net cash provided by/(used for) financing activities................................. 18.6 (214.4)
------- -------
CASH AND TEMPORARY CASH INVESTMENTS--
Net change........................................................................... (2.8) (93.0)
Balance at beginning of period....................................................... 8.6 95.5
------- -------
Balance at end of period............................................................. $ 5.8 $ 2.5
======= =======
</Table>
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
4
<Page>
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
<Table>
<Caption>
AT At
JUNE 30, December 31,
2001 2000
-------- ------------
ASSETS
PROPERTY
Property..................................................................... $ 3,592.2 $ 3,522.6
Less: Accumulated depreciation and amortization.............................. (1,611.8) (1,560.4)
--------- ---------
Net property............................................................ 1,980.4 1,962.2
--------- ---------
CURRENT ASSETS
Cash and temporary cash investments.......................................... 5.8 8.6
Accounts receivable, less provision for uncollectible accounts
of $9.8 and $6.8, respectively.......................................... 210.3 189.7
Inventories, at average cost................................................. 60.0 45.7
Prepaid taxes................................................................ 66.0 65.4
Other........................................................................ 11.9 35.5
--------- ---------
Total current assets.................................................... 354.0 344.9
--------- ---------
OTHER ASSETS
Deferred compensation plan................................................... 156.7 171.8
Income taxes recoverable through future revenues............................. 45.9 49.4
Other regulatory assets...................................................... 123.7 146.4
Other........................................................................ 73.4 76.4
--------- ---------
Total other assets...................................................... 399.7 444.0
--------- ---------
TOTAL ASSETS................................................................. $ 2,734.1 $ 2,751.1
========= =========
</Table>
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
5
<Page>
THE DAYTON POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
(CONTINUED)
<Table>
<Caption>
AT At
JUNE 30, December 31,
2001 2000
-------- ------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity--
Common stock............................................. $ 0.4 $ 0.4
Other paid-in capital.................................... 773.3 769.8
Accumulated other comprehensive income................... 22.8 37.3
Earnings reinvested in the business...................... 242.5 205.4
---------- -----------
Total common shareholders' equity.................... 1,039.0 1,012.9
Preferred stock............................................... 22.9 22.9
Long-term debt................................................ 666.3 666.5
---------- -----------
Total capitalization................................. 1,728.2 1,702.3
---------- -----------
CURRENT LIABILITIES
Accounts payable.............................................. 102.2 103.9
Accrued taxes................................................. 99.3 220.0
Accrued interest.............................................. 19.3 19.1
Short-term debt............................................... 84.8 -
Other......................................................... 25.5 14.3
---------- -----------
Total current liabilities............................ 331.1 357.3
---------- -----------
DEFERRED CREDITS AND OTHER
Deferred taxes................................................ 421.5 429.9
Unamortized investment tax credit............................. 59.1 60.2
Deferred compensation......................................... 106.9 113.6
Other......................................................... 87.3 87.8
---------- -----------
Total deferred credits and other..................... 674.8 691.5
---------- -----------
TOTAL CAPITALIZATION AND LIABILITIES.......................... $ 2,734.1 $ 2,751.1
========== ===========
</Table>
See Notes to Consolidated Financial Statements.
These interim statements are unaudited.
6
<Page>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Dayton Power and Light Company ("DP&L" or "the Company") is a wholly
owned subsidiary of DPL Inc ("DPL"). DP&L has prepared the consolidated
financial statements in this report without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. 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. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto in the Company's 2000 Annual Report on Form 10-K.
2. Reclassifications have been made in certain prior years' amounts to conform
to the current reporting presentation of the Company.
In the opinion of management, the information included in this Form 10-Q
reflects all adjustments that are necessary for a fair statement of the results
of operations for the periods presented. Any adjustments are of a normal
recurring nature.
3. The Company adopted the provisions of the Financial Accounting Standard
Board's ("FASB") Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended ("SFAS No. 133") as of January 1, 2001. SFAS No.
133 requires that all derivatives be recognized as either assets or liabilities
in the consolidated balance sheet and be measured at fair value, and changes in
the fair value be recorded in earnings, unless they are designated as a cash
flow hedge of a forecasted transaction. As a result of adopting this accounting
standard, the Company recorded a cumulative effect of accounting change of $1.0
million in income, net of tax. The implementation of this accounting standard
did not have a material impact on the Company's financial position or results of
operations.
The Company uses forward and option purchase contracts as a hedge against the
risk of changes in cash flows associated with expected electricity purchases.
These purchases are required to meet full requirements load during times of peak
demand or during planned and unplanned generation facility outages. The Company
also holds forward sales contracts that hedge against the risk of changes in
cash flows associated with power sales during periods of projected generation
facility availability. The Company records the fair value of all these contracts
as "Other Assets" or "Other Liabilities" on the Consolidated Balance Sheet with
an offset to "Accumulated Other Comprehensive Income," which is reclassified
into earnings in the month of physical receipt or delivery of power. In June
2001, the FASB concluded that electric utilities could apply the normal
purchases and sales exception for option-type contracts and forward contracts in
electricity subject to specific criteria for the power buyers and sellers. The
Company holds contracts currently classified as cash flow hedges that will meet
the requirements for the normal purchases and sales exception to be excluded
from the scope of SFAS No. 133. These contracts remain recorded as hedges as the
scope exception is not effective until the third quarter of 2001. Beginning on
July 1, 2001, the Company intends to apply the normal purchase and sales
exception as defined in SFAS No. 133 and accordingly will account for these
contracts upon settlement. Therefore, the fair value of these contracts as of
June 30, 2001 will become their net carrying amount beginning July 1, 2001 and,
prospectively, carrying amounts of the contracts will no longer be adjusted for
changes in their fair values. Similarly, the hedge accounting effects of these
contracts recorded in Accumulated Other Comprehensive Income on June 30, 2001
will be recorded in earnings in the month of physical receipt or delivery of the
power. This prospective
7
<Page>
change will not have a material impact on the Company's financial position or
results of operations.
The Company also holds purchased gas contracts through November 2001, as well as
emission allowance options through 2004, that are classified as derivatives not
subject to hedge accounting. The fair value of these contracts is reflected as
"Other Assets" or "Other Liabilities" on the Consolidated Balance Sheet and
changes in fair value are recorded as "Other Income/Deductions" on the
Consolidated Statement of Results of Operations. The impact on net income was
immaterial during the second quarter and the first six months of 2001.
4. In prior years, the Company had two reportable operating segments: Electric
and Natural Gas. In October 2000, the Company completed the sale of
substantially all of its natural gas retail distribution assets and certain
liabilities. Accordingly, the Electric segment is the remaining reportable
operating segment. The Electric segment generates, markets, distributes, and
transmits electricity to retail and wholesale customers. Prior year amounts
related to the Natural Gas segment are included in "Other."
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------- ------------------------------------
2001 2000 2001 2000
---- ---- ---- ----
NET REVENUES:
Electric................................. $197.3 $196.5 $409.9 $396.9
Other.................................... - 13.5 - 47.4
------ ------ ------ ------
Total................................. $197.3 $210.0 $409.9 $444.3
====== ====== ======
OPERATING INCOME:
Electric................................. $ 94.8 $ 90.9 $201.7 $189.3
Other (a)................................ (8.0) (3.4) (2.0) 12.4
------ ------ ------ ------
Total................................. $ 86.8 $ 87.5 $199.7 $201.7
====== ====== ======
RECONCILIATION:
Operating income......................... $ 86.8 $ 87.5 $199.7 $201.7
Other deductions......................... 4.9 12.7 2.4 (5.8)
Interest expense......................... (16.0) (26.7) (31.9) (34.3)
------ ------ ------ ------
Income before income taxes and
cumulative effect of accounting
change................................ $ 75.7 $ 73.5 $170.2 $161.6
====== ====== ====== ======
</Table>
(a) Includes unallocated corporate items. The second quarter and year-to-date
periods for 2000 also include operating income for the natural gas retail
distribution operations, the sale of which was completed in October 2000.
8
<Page>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Dayton Power and Light Company ("DP&L" or "the Company") reported earnings
on common stock for the second quarter of 2001 of $45.3 million, which was 3%
lower than earnings on common stock of $46.9 million for the same quarter last
year. Earnings on common stock for the current year-to-date period were $102.6
million compared to earnings on common stock of $102.8 million for same period
last year.
FINANCIAL CONDITION
At June 30, 2001, the Company's cash and temporary cash investment balance was
$5.8 million.
During the first quarter of 2001, investing cash flows included a cash payment
of $90.9 million for income taxes associated the gain on the sale of the natural
gas retail distribution assets and certain liabilities that was reported in
October 2000.
DPL and its subsidiaries have $265 million available through Revolving Credit
Agreements ("Credit Agreements"). The primary purpose of the revolving credit
facilities is to provide back-up liquidity for the commercial paper program. The
Company had no borrowings outstanding under these Credit Agreements at June 30,
2001. The Company also has $75 million available in short-term informal lines of
credit. The Company had no borrowings outstanding under these informal lines and
$85 million in commercial paper outstanding at June 30, 2001.
The Company currently has sufficient capacity to issue First Mortgage Bonds to
satisfy its requirements in connection with the financing of its construction
and refinancing programs during the five-year period 2001-2005.
Construction plans are subject to continuing review and are expected to be
revised in light of changes in financial and economic conditions, load
forecasts, electricity and fuel price forecasts, legislative and regulatory
developments and changing environmental standards, among other factors.
As a result of DPL's December 2000 press release regarding its exploration of
strategic alternatives in January 2001, Standard & Poor's placed DPL and DP&L on
credit watch with developing implications. Also in January, Moody's placed the
ratings of DPL and its affiliates under review. On May 2, 2001, Standard &
Poor's affirmed its ratings on DPL and DP&L with a stable outlook, and removed
the credit watch with developing implications. On July 27, 2001, Moody's also
affirmed the ratings of DPL and DP&L with a stable outlook. The current credit
ratings for DPL and DP&L are investment grade.
9
<Page>
RESULTS OF OPERATIONS
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ---------------------------------
2001 2000 2001 2000
---- ---- ---- ----
Electric revenues........................ $287.2 $262.8 $581.9 $522.3
Fuel and purchased power................. 89.9 66.3 172.0 125.4
------ ------ ----- -----
Net electric revenues............... 197.3 196.5 409.9 396.9
Gas revenues............................. $ - $ 31.1 $ - $132.6
Gas purchased for resale................. - 17.6 - 85.2
------ ------ ----- -----
Net gas revenues.................... $ - $ 13.5 $ - $ 47.4
Operating income......................... $ 86.8 $ 87.5 $ 199.7 $201.7
</Table>
Net electric revenues increased by $0.8 million and by $13.0 million or 3%
compared to last year's second quarter and year-to-date periods, respectively.
Wholesale revenues increased by 83% for the quarter and more than doubled for
the six-month period as a result of increased sales volume, higher wholesale
market prices, and revenue from additional generating facilities. Retail
revenues were 2% and 3% higher for the quarter and year-to-date periods,
respectively, primarily as a result of a higher average rate based on tax law
changes. Retail sales were down 1% for the quarter on account of lower
industrial sales resulting from sluggish economic conditions in DP&L's service
territory, which offset sales increases in residential (1%) and commercial (4%)
markets. Year-to-date retail sales were 1% higher than last year. Growth in
residential and commercial markets was partially offset by declines in
industrial sales, again reflecting economic conditions in DP&L's service
territory. Fuel costs increased for both comparison periods as a result of
higher spot-market prices for coal, higher prices on the wholesale market for
purchased power, and a greater volume of fuel usage and power purchases
resulting from increased wholesale sales.
The decline in net gas revenues for the quarter and year-to-date periods
resulted from the sale of the natural gas retail distribution assets and certain
liabilities, which was completed in October 2000.
Operation and maintenance expense decreased by $1.3 or 3% for the quarter and by
$14.7 million or 15% for the six-month period. The decreases for both comparison
periods were primarily attributable to the sale of the natural gas retail
distribution operations, lower insurance and claims expense, lower pension
expense, and general cost containment efforts. These favorable variances were
partially offset by voluntary early retirement costs.
Depreciation and amortization expense decreased by $5.9 million or 17% for the
quarter and by $10.7 million or 16% for the six-month period. The decreases for
both comparison periods resulted from depreciation rate changes for certain
generation units and the sale of the natural gas retail distribution assets.
10
<Page>
Beginning January 1, 2001, regulatory transition cost assets of $144.8 million
are being amortized over a three-year period based on transition revenues. As a
result, amortization expense increased by $4.2 million or 59% for the quarter
and by $10.7 million or 84% for the year-to-date period based on transition
revenues recognized in the respective periods.
General taxes decreased by $9.0 million or 29% for the quarter and by $17.7
million or 27% for the six-month period. The decreases for both comparison
periods primarily resulted from changes in tax laws associated with the Ohio
deregulation order and the sale of the natural gas retail distribution assets.
Other income (deductions) increased by $4.8 million for the six-month period.
This increase was primarily attributable to the elimination of certain
compensation programs in the prior year, partially offset by strategic
consulting expenses, net derivative losses, and deferred compensation expense
all reported in the current year.
Interest expense was essentially flat for the quarter and decreased by $2.4
million or 7% for the six-month period. The decrease in the year-to-date period
was primarily attributable to higher capitalized interest, partially offset by
higher long-term debt and higher long-term debt interest rates.
The effective income tax rates for the second quarter of 2001 and 2000 were
37.1% and 35.9%, respectively, and the effective income tax rates for the first
six months of 2001 and 2000 were 38.8% and 36.1%, respectively. The increases
were primarily attributable to higher state income-based taxes resulting from
the implementation of the Ohio deregulation order.
The cumulative effect of an accounting change reflects the Company's adoption of
the provisions of the Financial Accounting Standard Board's ("FASB") Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended ("SFAS No. 133"). SFAS No. 133 requires that all derivatives be
recognized as either assets or liabilities in the consolidated balance sheet and
be measured at fair value, and changes in the fair value be recorded in
earnings, unless they are designated as hedges of an underlying transaction.
OTHER MATTERS
A wholly-owned captive subsidiary of DPL provides, among other coverages,
business interruption and specific risk coverage for DP&L with respect to the
impact of environmental law and electric deregulation. "Insurance Claims and
Costs" on DPL's Consolidated Balance Sheet includes insurance reserves of the
captive subsidiary of approximately $87 million for this coverage, as well as
other coverages based on actuarial methods and loss experience data. As the
policy impact of electric deregulation becomes known during the three-year
regulatory transition period ending December 31, 2003, either policy payments
from the captive subsidiary to DP&L or release of the appropriate reserves will
occur and be reflected in income.
11
<Page>
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements regarding plans and
expectations for the future. Investors are cautioned that actual outcomes and
results may vary materially from those projected due to various factors beyond
the Company's control, including abnormal weather, unusual maintenance or repair
requirements, changes in fuel costs, increased competition, regulatory changes
and decisions, changes in accounting rules and adverse economic conditions.
12
<Page>
THE DAYTON POWER AND LIGHT COMPANY
OPERATING STATISTICS
<Table>
<Caption>
2001 2000 2001 2000
---- ---- ---- ----
ELECTRIC
Sales (millions of kWh)--
Residential.................................................. 1,017 1,008 2,497 2,348
Commercial................................................... 916 881 1,795 1,706
Industrial................................................... 1,148 1,265 2,242 2,423
Other retail................................................. 357 336 671 658
--------- -------- -------- --------
Total retail 3,438 3,490 7,205 7,135
Wholesale.................................................... 844 751 1,790 1,301
--------- -------- -------- --------
Total.................................................... 4,282 4,241 8,995 8,436
Revenues (thousands of dollars)--
Residential.................................................. $ 93,240 $ 92,406 $213,600 $203,274
Commercial................................................... 66,768 60,902 127,324 117,929
Industrial................................................... 57,921 61,537 112,679 117,024
Other retail................................................. 24,044 23,168 45,758 45,000
--------- -------- -------- --------
Total retail............................................. 241,973 238,013 499,361 483,227
Wholesale.................................................... 45,275 24,793 82,582 39,082
--------- -------- -------- --------
Total.................................................... $ 287,248 $262,806 $581,943 $522,309
Electric customers at end of period............................... 500,800 496,608 500,800 496,608
GAS (a)
Sales (millions of MCF)--
Residential.................................................. - 3,035 - 14,669
Commercial................................................... - 859 - 4,413
Industrial................................................... - 534 - 1,600
Other........................................................ - 141 - 611
Transportation gas delivered................................. - 4,141 - 11,034
--------- -------- -------- --------
Total.................................................... - 8,710 - 32,327
Revenues (thousands of dollars)--
Residential.................................................. $ - $19,379 $ - $ 86,608
Commercial................................................... - 5,100 - 24,757
Industrial................................................... - 2,503 - 8,158
Other........................................................ - 4,161 - 13,101
--------- -------- -------- --------
Total.................................................... $ - $31,143 $ - $132,623
Gas customers at end of period.................................... - 309,486 - 309,486
</Table>
(a) DP&L completed the sale of its natural gas retail distribution assets and
certain liabilities in October 2000.
13
<Page>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The carrying value of the Company's debt was $667.3 million at December 31,
2000, consisting of the Company's first mortgage bonds, guaranteed air quality
development obligations, and notes. The fair value of this debt was $666.7
million, based on current market prices or discounted cash flows using current
rates for similar issues with similar terms and remaining maturities. The
following table presents the principal cash repayments and related weighted
average interest rates by maturity date for long-term, fixed-rate debt at
December 31, 2000:
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------
Expected Maturity Date
- ---------------------------------------------------------------------------------------------------------------------------
2001 2002 2003 2004 2005 Thereafter Total Fair Value
- ------------------------------ --------- ---------- ---------- ---------- ---------- ------------- ----------- ------------
Long-term Debt
- ------------------------------ --------- ---------- ---------- ---------- ---------- ------------- ----------- ------------
Amount ($ in millions) $1 $1 $1 $1 $1 $662.3 $667.3 $666.7
- ------------------------------ --------- ---------- ---------- ---------- ---------- ------------- ----------- ------------
Average rate 6.4% 6.4% 6.4% 6.4% 6.4% 7.4% 7.4%
- ------------------------------ --------- ---------- ---------- ---------- ---------- ------------- ----------- ------------
</Table>
Because the long-term debt is at a fixed rate, the primary market risk to the
Company is short-term interest rate risk. The carrying value and fair value of
short-term debt was $85 million with a weighted-average interest rate of 4.0% at
June 30, 2001. The interest expense risk resulting from a hypothetical 10%
increase/decrease in the quarterly average cost of this debt is negligible.
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits required by Item 601 of Regulation S-K
for the quarter ended June 30, 2001.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 2001.
14
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DAYTON POWER AND LIGHT COMPANY
-----------------------------------------------
(Registrant)
Date: August 14, 2001 /s/ Elizabeth M. McCarthy
--------------- ------------------------------------------------
Elizabeth M. McCarthy
Group Vice President and Chief Financial Officer
Date: August 14, 2001 /s/ Stephen F. Koziar, Jr.
--------------- ------------------------------------------------
Stephen F. Koziar, Jr.
Group Vice President and Secretary
15