1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1997
COMMISSION REGISTRANTS; STATE OF INCORPORATION; I.R.S. EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
- ----------- ------------------------------------------ ------------------
1-11607 DTE Energy Company 38-3217752
(a Michigan corporation)
2000 2nd Avenue
Detroit, Michigan 48226-1279
313-235-4000
1-2198 The Detroit Edison Company 38-0478650
(a Michigan corporation)
2000 2nd Avenue
Detroit, Michigan 48226-1279
313-235-8000
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
---- ----
At June 30, 1997, 145,097,829 shares of DTE Energy's Common Stock,
substantially all held by non-affiliates, were outstanding.
2
DTE ENERGY COMPANY
AND
THE DETROIT EDISON COMPANY
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
This document contains the Quarterly Reports on Form 10-Q for the quarter ended
June 30, 1997 for each of DTE Energy Company and The Detroit Edison Company.
Information contained herein relating to an individual registrant is filed by
such registrant on its own behalf. Accordingly, except for its subsidiaries,
The Detroit Edison Company makes no representation as to information relating
to any other companies affiliated with DTE Energy Company.
TABLE OF CONTENTS
Page
----
Definitions.........................................................................3
Quarterly Report on Form 10-Q for DTE Energy Company:
Part I- Financial Information....................................................4
Item 1 - Condensed Financial Statements (Unaudited)....................4
Notes to Condensed Consolidated Financial
Statements (Unaudited).......................................14
Independent Accountants' Report..............................16
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................17
Part II - Other Information.....................................................24
Item 1 - Legal Proceedings............................................24
Item 4 - Submission of Matters to a Vote of Security Holders..........24
Item 5 - Other Information............................................25
Quarterly Report on Form 10-Q for The Detroit Edison Company:
Part I - Financial Information..................................................26
Item 1 - Condensed Financial Statements (Unaudited)...................26
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................26
Part II - Other Information.....................................................26
Item 1 - Legal Proceedings............................................26
Item 5 - Other Information............................................26
Quarterly Reports on Form 10-Q for DTE Energy Company and The Detroit
Edison Company:
Item 6 - Exhibits and Reports on Form 8-K.............................27
Signature Page to DTE Energy Company Quarterly Report on Form 10-Q.................33
Signature Page to The Detroit Edison Company Quarterly Report on Form 10-Q.........34
2
3
DEFINITIONS
Annual Report ........ 1996 Annual Report to the Securities and Exchange
Commission on Form 10-K for DTE Energy Company or The
Detroit Edison Company, as the case may be
Annual Report Notes .. Notes to Consolidated Financial Statements appearing on
pages 49 through 59 of the 1996 Annual Report to the
Securities and Exchange Commission on Form 10-K for DTE
Energy Company and The Detroit Edison Company
Company .............. DTE Energy Company and Subsidiary Companies
Detroit Edison ....... The Detroit Edison Company (a wholly owned subsidiary
of DTE Energy Company) and Subsidiary Companies
FERC ................. Federal Energy Regulatory Commission
kWh .................. Kilowatthour
MPSC ................. Michigan Public Service Commission
Note(s) .............. Note(s) to Condensed Consolidated Financial
Statements (Unaudited) appearing herein
PSCR .................... Power Supply Cost Recovery
Quarterly Report Notes .. Notes to Condensed Consolidated Financial Statements
(Unaudited) appearing in the Quarterly Report to the
Securities and Exchange Commission on Form 10-Q for
the quarter ended March 31, 1997 for DTE Energy
Company or The Detroit Edison Company, as the case
may be
Registrant .............. Company or Detroit Edison, as the case may be
3
4
QUARTERLY REPORT ON FORM 10-Q FOR DTE ENERGY COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - CONDENSED FINANCIAL STATEMENTS (UNAUDITED):
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Dollars in Thousands)
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------------------------------------------
1997 1996 1997 1996
----------------------------------------------------------------------
OPERATING REVENUES
Electric - System $857,072 $857,769 $1,699,048 $1,745,396
Electric - Interconnection and Steam 20,858 13,208 43,038 34,472
Non-Regulated 14,408 344 18,856 1,032
- ----------------------------------------------------------------------------------------------------------------------
Total Operating Revenues $892,338 $871,321 $1,760,942 $1,780,900
- ----------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Operation
Fuel $157,942 $166,687 $ 310,404 $ 342,354
Purchased power 38,966 37,629 85,001 61,125
Other operation 172,924 158,227 336,071 309,249
Maintenance 65,098 78,689 134,730 152,300
Depreciation and amortization 137,598 130,593 276,012 262,604
Deferred Fermi 2 amortization (746) (1,120) (1,493) (2,240)
Amortization of deferred Fermi 2 depreciation
and return 27,973 25,485 55,946 50,968
Taxes other than income 65,646 62,994 134,500 129,755
Income taxes 63,545 57,671 117,936 133,775
- --------------------------------------------------------------------------------------------------------------------
Total Operating Expenses $728,946 $716,855 $1,449,107 $1,439,890
- --------------------------------------------------------------------------------------------------------------------
OPERATING INCOME $163,392 $154,466 $ 311,835 $ 341,010
OTHER INCOME AND (DEDUCTIONS)
Allowance for other funds used
during construction $ 264 $ 586 $ 487 $ 974
Other income and (deductions) - net (4,737) (5,669) (9,519) (6,625)
Accretion income 1,395 2,150 2,986 4,477
Accretion expense (2,382) - (4,764) -
Income taxes 2,018 1,264 3,932 881
- ----------------------------------------------------------------------------------------------------------------------
Net Other Income and (Deductions) $ (3,442) $ (1,669) $ (6,878) $ (293)
- ----------------------------------------------------------------------------------------------------------------------
INTEREST CHARGES
Long-term debt $ 67,237 $ 69,261 $ 134,803 $ 137,621
Amortization of debt discount and expense 2,837 2,967 5,823 5,922
Other 2,422 469 3,261 2,043
Allowance for borrowed funds used during
construction (credit) (344) (1,060) (635) (1,762)
- ----------------------------------------------------------------------------------------------------------------------
Net Interest Charges $ 72,152 71,637 $ 143,252 $ 143,824
- ----------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK DIVIDENDS OF SUBSIDIARY 2,908 2,907 5,815 10,200
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 84,890 $ 78,253 $ 155,890 $ 186,693
======================================================================================================================
COMMON SHARES OUTSTANDING - AVERAGE 145,099,589 145,119,875 145,104,043 145,119,875
EARNINGS PER COMMON SHARE $ 0.59 $ 0.54 $ 1.07 $ 1.29
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.515 $ 0.515 $ 1.03 $ 1.03
See Accompanying Notes to the Condensed Consolidated Financial Statements
(Unaudited).
4
5
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------------------
1997 1996 1997 1996
----------------------------------------------
OPERATING ACTIVITIES
Net Income $ 84,890 $ 78,253 $ 155,890 $ 186,693
Adjustments to reconcile net income to net cash
from operating activities:
Accretion income (1,395) (2,150) (2,986) (4,477)
Accretion expense 2,382 - 4,764 -
Depreciation and amortization 137,598 130,593 276,012 262,604
Deferred Fermi 2 amortization and return - net 27,227 24,365 54,453 48,728
Deferred income taxes and investment tax credit - net (8,309) 11,549 (22,272) 28,612
Fermi 2 refueling outage - net 3,330 3,258 6,857 6,516
Other (38,822) 12,343 21,404 (9,457)
Changes in current assets and liabilities:
Customer accounts receivable and unbilled revenues (21,802) (19,268) 3,370 (17,726)
Other accounts receivable 14,276 769 (28,298) (4,739)
Inventories (29,167) (6,358) (25,393) 12,221
Accounts payable (21,252) (1,987) (32,091) (2,257)
Taxes payable (60,281) (62,759) (6,189) (11,404)
Interest payable 7,820 (10,086) (2,645) 4,619
Other 35,499 29,616 (36,026) (55,986)
- ----------------------------------------------------------------------------------------------------------
Net cash from operating activities $ 131,994 $ 188,138 $ 366,850 $ 443,947
- ----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures - regulated $ (123,037) $ (124,152) $ (208,605) $(225,377)
Plant and equipment expenditures - non-regulated (212,677) (12,069) (218,451) (26,603)
Nuclear decommissioning trust funds (27,496) (9,107) (36,758) (22,794)
Non-regulated investments (5,173) (701) (6,048) (6,285)
Other changes in current assets and liabilities (6,621) (1,768) (6,114) (847)
Other 13,088 (14,318) 12,858 (14,254)
- ----------------------------------------------------------------------------------------------------------
Net cash used for investing activities $ (361,916) $ (162,115) $ (463,118) $(296,160)
- ----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of long-term debt $ 243,000 $ - $ 249,600 $ 185,000
Increase in short-term borrowings 214,788 94,988 208,787 57,998
Redemption of long-term debt (139,500) (69,214) (184,714) (69,214)
Redemption of preferred stock - - - (185,000)
Dividends on common stock (74,728) (74,737) (149,465) (149,474)
Other - (167) (68) (9,975)
- ----------------------------------------------------------------------------------------------------------
Net cash from (used for) financing activities $ 243,560 $ (49,130) $ 124,140 $(170,665)
- ----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS $ 13,638 $ (23,107) $ 27,872 $ (22,878)
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF THE PERIOD 67,268 65,177 53,034 64,948
- ----------------------------------------------------------------------------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS AT END
OF THE PERIOD $ 80,906 $ 42,070 $ 80,906 $ 42,070
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 61,312 $ 78,617 $ 138,448 $ 133,174
Income taxes paid 127,475 113,328 128,043 113,946
New capital lease obligations 344 11,885 32,890 12,182
==========================================================================================================
See Accompanying Notes to the Condensed Consolidated Financial Statements
(Unaudited).
5
6
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
ASSETS
(Dollars in Thousands)
June 30 December 31
1997 1996
------------- -------------
UTILITY PROPERTIES
Electric plant in service $ 14,022,242 $ 13,776,535
Less: Accumulated depreciation and amortization (5,624,582) (5,367,110)
- ---------------------------------------------------------------------------------------------------
$ 8,397,660 $ 8,409,425
Construction work in progress 26,975 91,242
- ---------------------------------------------------------------------------------------------------
Net utility properties $ 8,424,635 $ 8,500,667
- ---------------------------------------------------------------------------------------------------
Property under capital leases (less accumulated amortization
of $105,528 and $102,346, respectively) $ 153,809 $ 126,137
Nuclear fuel under capital lease (less accumulated amortization
of $482,385 and $473,788, respectively) 126,109 134,104
- ---------------------------------------------------------------------------------------------------
Net property under capital leases $ 279,918 $ 260,241
- ---------------------------------------------------------------------------------------------------
Total owned and leased properties $ 8,704,553 $ 8,760,908
- ---------------------------------------------------------------------------------------------------
OTHER PROPERTY AND INVESTMENTS
Non-utility property $ 288,033 $ 72,152
Investments and special funds 54,865 47,543
Nuclear decommissioning trust funds 208,272 171,514
- ---------------------------------------------------------------------------------------------------
$ 551,170 $ 291,209
- ---------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and temporary cash investments $ 80,906 $ 53,034
Customer accounts receivable and unbilled revenues (less allowance
for uncollectible accounts of $20,000) 437,106 440,476
Other accounts receivable 72,303 44,005
Inventories (at average cost)
Fuel 130,805 119,631
Materials and supplies 159,772 144,316
Prepayments 41,712 8,913
- ---------------------------------------------------------------------------------------------------
$ 922,604 $ 810,375
- ---------------------------------------------------------------------------------------------------
DEFERRED DEBITS
Regulatory assets $ 897,248 $ 975,351
Prepaid pensions 86,670 91,579
Unamortized debt expense 54,558 45,357
Other 39,553 40,150
- ---------------------------------------------------------------------------------------------------
$ 1,078,029 $ 1,152,437
- ---------------------------------------------------------------------------------------------------
TOTAL $ 11,256,356 $ 11,014,929
===================================================================================================
See Accompanying Notes to the Condensed Consolidated Financial Statements
(Unaudited).
6
7
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
LIABILITIES
(Dollars in Thousands)
June 30 December 31
1997 1996
------------ ------------
CAPITALIZATION
Common stock - without par value, 400,000,000 shares
authorized; 145,097,829 and 145,119,875 shares
outstanding, respectively $ 1,951,140 $ 1,951,437
Retained earnings used in the business 1,498,472 1,492,417
- -------------------------------------------------------------------------------------------
Total common shareholders' equity $ 3,449,612 $ 3,443,854
Cumulative preferred stock of subsidiary 144,405 144,405
Long-term debt 3,969,248 3,779,334
- -------------------------------------------------------------------------------------------
Total Capitalization $ 7,563,265 $ 7,367,593
- -------------------------------------------------------------------------------------------
OTHER NON-CURRENT LIABILITIES
Obligations under capital leases $ 143,287 $ 115,742
Other postretirement benefits - 5,516
Other 79,364 67,078
- -------------------------------------------------------------------------------------------
$ 222,651 $ 188,336
- -------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Short-term borrowings $ 218,788 $ 10,001
Amounts due within one year
Long-term debt 19,214 144,214
Obligations under capital leases 136,631 144,499
Accounts payable 124,583 160,786
Property and general taxes 17,127 29,475
Income taxes 19,893 14,334
Accumulated deferred income taxes 46,601 44,418
Interest payable 57,760 60,405
Dividends payable 77,633 77,644
Payrolls 80,897 81,448
Fermi 2 refueling outage 8,206 1,349
Other 130,566 133,409
- -------------------------------------------------------------------------------------------
$ 937,899 $ 901,982
- -------------------------------------------------------------------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes $ 1,989,453 $ 2,023,691
Accumulated deferred investment tax credits 307,990 315,030
Other 235,098 218,297
- -------------------------------------------------------------------------------------------
$ 2,532,541 $ 2,557,018
- -------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
- -------------------------------------------------------------------------------------------
TOTAL $ 11,256,356 $ 11,014,929
===========================================================================================
See Accompanying Notes to the Condensed Consolidated Financial Statements
(Unaudited).
7
8
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF
COMMON SHAREHOLDERS' EQUITY (UNAUDITED)
(Dollars in Thousands)
Retained Total
Common Stock Earnings Common
------------------------ Used in the Shareholders'
Shares Amount Business Equity
- -------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 145,119,875 $ 1,951,437 $ 1,492,417 $ 3,443,854
Net income 155,890 155,890
Cash dividends declared on
Common stock - $1.03 per share (149,453) (149,453)
Repurchase and retirement of
common stock (22,046) (297) (382) (679)
- ----------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1997 145,097,829 $ 1,951,140 $ 1,498,472 $ 3,449,612
====================================================================================================
See Accompanying Notes to the Condensed Consolidated Financial Statements
(Unaudited).
8
9
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Dollars in Thousands)
Three Months Ended Six Months Ended
June 30 June 30
---------------------------------------------
1997 1996 1997 1996
---------------------------------------------
OPERATING REVENUES
Electric - System $857,072 $857,769 $1,699,048 $1,745,396
Electric - Interconnection and Steam 20,858 13,208 43,038 34,472
- --------------------------------------------------------------------------------------------
Total Operating Revenues $877,930 $870,977 $1,742,086 $1,779,868
- --------------------------------------------------------------------------------------------
OPERATING EXPENSES
Operation
Fuel $157,942 $166,687 $310,404 $342,354
Purchased power 38,966 37,629 85,001 61,125
Other operation 158,948 156,755 316,329 305,966
Maintenance 65,098 78,689 134,730 152,300
Depreciation and amortization 137,293 130,489 275,532 262,393
Deferred Fermi 2 amortization (746) (1,120) (1,493) (2,240)
Amortization of deferred Fermi 2 depreciation
and return 27,973 25,485 55,946 50,968
Taxes other than income 65,576 62,889 134,307 129,650
Income taxes 66,651 58,198 122,735 134,870
- --------------------------------------------------------------------------------------------
Total Operating Expenses $717,701 $715,701 $1,433,491 $1,437,386
- --------------------------------------------------------------------------------------------
OPERATING INCOME $160,229 $155,276 $308,595 $342,482
- --------------------------------------------------------------------------------------------
OTHER INCOME AND (DEDUCTIONS)
Allowance for other funds used
during construction $ 264 $586 $487 $974
Other income and (deductions) - net (5,283) (6,573) (10,572) (8,186)
Accretion income 1,395 2,150 2,986 4,477
Accretion expense (2,382) - (4,764) -
Income taxes 2,018 1,264 3,932 881
- --------------------------------------------------------------------------------------------
Net Other Income and (Deductions) $ (3,988) $(2,573) $(7,931) $(1,854)
- --------------------------------------------------------------------------------------------
INTEREST CHARGES
Long-term debt $ 65,530 $69,261 $132,838 $137,621
Amortization of debt discount and expense 2,825 2,956 5,798 5,908
Other 2,495 390 3,007 1,941
Allowance for borrowed funds used during
construction (credit) (344) (1,060) (635) (1,762)
- --------------------------------------------------------------------------------------------
Net Interest Charges $ 70,506 $71,547 $141,008 $143,708
- --------------------------------------------------------------------------------------------
NET INCOME $ 85,735 $81,156 $159,656 $196,920
PREFERRED STOCK DIVIDENDS 2,908 2,907 5,815 10,200
- --------------------------------------------------------------------------------------------
NET INCOME AVAILABLE FOR COMMON STOCK $ 82,827 $78,249 $153,841 $186,720
============================================================================================
Note: Detroit Edison's condensed financial statements are presented here for
ease of reference and are not considered to be part of Item 1 of the
Company's report.
See Accompanying Notes to the Condensed Consolidated Financial Statements
(Unaudited).
9
10
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
Three Months Ended Six Months Ended
June 30 June 30
-------------------------------------------------
1997 1996 1997 1996
-------------------------------------------------
OPERATING ACTIVITIES
Net Income $ 85,735 $ 81,156 $ 159,656 $ 196,920
Adjustments to reconcile net income to net cash
from operating activities:
Accretion income (1,395) (2,150) (2,986) (4,477)
Accretion expense 2,382 - 4,764 -
Depreciation and amortization 137,293 130,489 275,532 262,393
Deferred Fermi 2 amortization and return - net 27,227 24,365 54,453 48,728
Deferred income taxes and investment tax credit - net (9,431) 11,625 (23,674) 28,560
Fermi 2 refueling outage - net 3,330 3,258 6,857 6,516
Other (2,149) 12,843 60,410 (6,282)
Changes in current assets and liabilities:
Customer accounts receivable and unbilled revenues (21,802) (19,268) 3,370 (17,726)
Other accounts receivable 21,038 2,330 (19,374) (942)
Inventories (17,392) (6,358) (13,618) 12,221
Accounts payable (25,732) (5,146) (37,563) (12,439)
Taxes payable (62,494) (65,137) (8,246) (13,085)
Interest payable 7,727 (10,141) (2,737) 4,543
Other 36,502 28,668 (35,189) (69,727)
- -------------------------------------------------------------------------------------------------------------
Net cash from operating activities $ 180,839 $ 186,534 $ 421,655 $ 435,203
- -------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures $(123,037) $(124,152) $ (208,605) $ (225,377)
Nuclear decommissioning trust funds (27,496) (9,107) (36,758) (22,794)
Other changes in current assets and liabilities (6,088) (1,768) (5,581) (847)
Other 11,586 (13,714) 12,132 (2,345)
- -------------------------------------------------------------------------------------------------------------
Net cash used for investing activities $(145,035) $(148,741) $ (238,812) $ (251,363)
- -------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of long-term debt $ - $ - $ - $ 185,000
Increase in short-term borrowings 181,788 94,988 175,787 57,998
Redemption of long-term debt (139,500) (69,214) (184,714) (69,214)
Redemption of preferred stock - - - (185,000)
Premiums on reacquired long-term debt and
preferred stock - - - (1,850)
Dividends on common and preferred stock (82,724) (80,852) (165,447) (166,361)
Cash portion of restructuring dividend to parent - - - (56,510)
Other - (2,039) (68) (6,517)
- -------------------------------------------------------------------------------------------------------------
Net cash used for financing activities $ (40,436) $ (57,117) $ (174,442) $ (242,454)
- -------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS $ (4,632) $ (19,324) $ 8,401 $ (58,614)
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF THE PERIOD 15,498 25,658 2,465 64,948
- -------------------------------------------------------------------------------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS AT END
OF THE PERIOD $ 10,866 $ 6,334 $ 10,866 $ 6,334
- -------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 59,859 $ 78,595 $ 136,914 $ 133,152
Income taxes paid 131,069 114,548 131,637 115,166
New capital lease obligations 344 11,885 32,890 12,182
Non-cash portion of restructuring dividend to parent - - - 26,716
=============================================================================================================
See Accompanying Notes to the Condensed Consolidated Financial Statements
(Unaudited).
10
11
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
ASSETS
(Dollars in Thousands)
June 30 December 31
1997 1996
-------------------------------------
UTILITY PROPERTIES
Electric plant in service $ 14,022,242 $ 13,776,535
Less: Accumulated depreciation and amortization (5,624,582) (5,367,110)
- ----------------------------------------------------------------------------------------------------
$ 8,397,660 $ 8,409,425
Construction work in progress 26,975 91,242
- ----------------------------------------------------------------------------------------------------
Net utility properties $ 8,424,635 $ 8,500,667
- ----------------------------------------------------------------------------------------------------
Property under capital leases (less accumulated amortization
of $105,528 and $102,346, respectively) $ 153,809 $ 126,137
Nuclear fuel under capital lease (less accumulated amortization
of $482,385 and $473,788, respectively) 126,109 134,104
- ----------------------------------------------------------------------------------------------------
Net property under capital leases $ 279,918 $ 260,241
- ----------------------------------------------------------------------------------------------------
Total owned and leased properties $ 8,704,553 $ 8,760,908
- ----------------------------------------------------------------------------------------------------
OTHER PROPERTY AND INVESTMENTS
Non-utility property $ 7,423 $ 7,423
Investments and special funds 31,109 31,145
Nuclear decommissioning trust funds 208,272 171,514
- ----------------------------------------------------------------------------------------------------
$ 246,804 $ 210,082
- ----------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and temporary cash investments $ 10,866 $ 2,465
Customer accounts receivable and unbilled revenues (less allowance
for uncollectible accounts of $20,000) 437,106 440,476
Other accounts receivable 60,741 41,367
Inventories (at average cost)
Fuel 130,805 119,631
Materials and supplies 147,997 144,316
Prepayments 39,553 8,394
- ----------------------------------------------------------------------------------------------------
$ 827,068 $ 756,649
- ----------------------------------------------------------------------------------------------------
DEFERRED DEBITS
Regulatory assets $ 897,248 $ 975,351
Prepaid pensions 86,670 91,579
Unamortized debt expense 43,717 45,247
Other 7,822 34,661
- ----------------------------------------------------------------------------------------------------
$ 1,035,457 $ 1,146,838
- ----------------------------------------------------------------------------------------------------
TOTAL $ 10,813,882 $ 10,874,477
====================================================================================================
See Accompanying Notes to the Condensed Consolidated Financial Statements
(Unaudited).
11
12
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
LIABILITIES
(Dollars in Thousands)
June 30 December 31
1997 1996
----------------------------
CAPITALIZATION
Common stock - $10 par value, 400,000,000 shares authorized;
145,119,875 shares outstanding $ 1,451,199 $ 1,451,199
Premium on common stock 547,799 547,799
Common stock expense (47,561) (47,561)
Retained earnings used in the business 1,385,313 1,391,104
- ------------------------------------------------------------------------------------------------
Total common shareholders' equity $ 3,336,750 $ 3,342,541
Cumulative preferred stock 144,405 144,405
Long-term debt 3,680,748 3,740,434
- ------------------------------------------------------------------------------------------------
Total Capitalization $ 7,161,903 $ 7,227,380
- ------------------------------------------------------------------------------------------------
OTHER NON-CURRENT LIABILITIES
Obligations under capital leases $ 143,287 $ 115,742
Other postretirement benefits - 5,516
Other 79,020 67,078
- ------------------------------------------------------------------------------------------------
$ 222,307 $ 188,336
- ------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Short-term borrowings $ 185,788 $ 10,001
Amounts due within one year
Long-term debt 19,214 144,214
Obligations under capital leases 136,631 144,499
Accounts payable 116,919 158,594
Property and general taxes 16,663 29,455
Income taxes 20,438 15,959
Accumulated deferred income taxes 46,601 44,418
Interest payable 57,666 60,403
Dividends payable 82,723 82,723
Payrolls 80,296 81,181
Fermi 2 refueling outage 8,206 1,349
Other 128,529 131,840
- ------------------------------------------------------------------------------------------------
$ 899,674 $ 904,636
- ------------------------------------------------------------------------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes $ 1,986,911 $ 2,022,550
Accumulated deferred investment tax credits 307,990 315,030
Other 235,097 216,545
- ------------------------------------------------------------------------------------------------
$ 2,529,998 $ 2,554,125
- ------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
- ------------------------------------------------------------------------------------------------
TOTAL $ 10,813,882 $ 10,874,477
================================================================================================
See Accompanying Notes to the Condensed Consolidated Financial Statements
(Unaudited).
12
13
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF
COMMON SHAREHOLDERS' EQUITY (UNAUDITED)
(Dollars in Thousands)
Common Stock Premium Retained Total
--------------------- on Common Earnings Common
$10 Par Common Stock Used in the Shareholders'
Shares Value Stock Expense Business Equity
- ----------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 145,119,875 $ 1,451,199 $ 547,799 $ (47,561) $1,391,104 $ 3,342,541
Net income 159,656 159,656
Cash dividends declared
Common stock - $1.10 per share (159,632) (159,632)
Cumulative preferred stock* (5,815) (5,815)
- ----------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1997 145,119,875 $ 1,451,199 $ 547,799 $ (47,561) $1,385,313 $ 3,336,750
================================================================================================================
*At established rate for each series
See Accompanying Notes to the Condensed Consolidated Financial Statements
(Unaudited).
13
14
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTE 1 - ANNUAL REPORT NOTES
These condensed consolidated financial statements should be read in
conjunction with the Quarterly Report Notes and the Annual Report Notes. The
Notes contained herein update and supplement matters discussed in the Quarterly
Report Notes and the Annual Report Notes.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The preceding condensed consolidated financial statements are unaudited,
but in the opinion of the Company and Detroit Edison, with respect to its own
financial statements, include all adjustments necessary for a fair statement of
the results for the interim periods. Financial results for this interim period
are not necessarily indicative of results that may be expected for any other
interim period or for the fiscal year.
NOTE 2 - REGULATORY MATTERS
As discussed in Part I, Item 2, herein, there are continuing proceedings
in the State of Michigan for electric industry restructuring. While the
Company and Detroit Edison believe that these proceedings will allow for
recovery of recorded regulatory assets, the actual amounts recovered may differ
from the recorded amounts.
NOTE 3 - FERMI 2
As discussed in Note 2 of the Annual Report Notes and the Quarterly Report
Notes, the Fermi 2 plant was shut down for inspection and required repairs and
testing. Repairs to the main generator were completed and the unit was
restarted on May 2, 1997. The unit has been operating at more than 90 percent
power since May 17, 1997.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
As discussed in Note 12 of the Annual Report Notes and Note 3 of the
Quarterly Report Notes, a class action is pending in the Circuit Court for
Wayne County, Michigan (Gilford, et al v Detroit Edison) in which plaintiffs
are alleging that Detroit Edison has engaged in age and racial discrimination.
The Court has set January 19, 1998 as the opening date for trial in this
matter. Detroit Edison is of the opinion that the allegations of
discrimination are without merit.
14
15
This Quarterly Report on Form 10-Q, including the report of Deloitte & Touche
LLP (on page 16) will automatically be incorporated by reference in the
Prospectuses constituting part of the Registration Statements on Form S-3
(Registration Nos. 33-53207 and 33-64296) of The Detroit Edison Company and
Form S-8 (Registration No. 333-00023) and Form S-3 (Registration No. 33-57545)
of DTE Energy Company, filed under the Securities Act of 1933. Such report of
Deloitte & Touche LLP, however, is not a "report" or "part of the Registration
Statement" within the meaning of Sections 7 and 11 of the Securities Act of
1933 and the liability provisions of Section 11(a) of such Act do not apply.
15
16
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of DTE Energy Company and
The Detroit Edison Company
We have reviewed the accompanying condensed consolidated balance sheets of
DTE Energy Company and subsidiary companies and of The Detroit Edison Company
and subsidiary companies as of June 30, 1997, and the related condensed
consolidated statements of income and of cash flows for the three-month and
six-month periods ended June 30, 1997 and 1996, and the condensed consolidated
statements of common shareholders' equity for the six-month period ended June
30, 1997. These financial statements are the responsibility of DTE Energy
Company's management and of The Detroit Edison Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of DTE Energy Company and subsidiary
companies and of The Detroit Edison Company and subsidiary companies as of
December 31, 1996, and the related consolidated statements of income, common
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated January 27, 1997 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheets
as of December 31, 1996 is fairly stated, in all material respects, in relation
to the consolidated balance sheets from which it has been derived.
DELOITTE & TOUCHE LLP
Detroit, Michigan
July 25, 1997
16
17
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY
COMPANIES
This analysis for the three and six months ended June 30, 1997, as
compared to the same periods in 1996, should be read in conjunction with the
condensed consolidated financial statements (unaudited), the accompanying
Notes, the Quarterly Report Notes and the Annual Report Notes.
Detroit Edison is the principal subsidiary of the Company and, as such,
unless otherwise identified, this discussion explains material changes in
results of operations of both the Company and Detroit Edison and identifies
recent trends and events affecting both the Company and Detroit Edison.
RESULTS OF OPERATIONS
For the three months ended June 30, 1997, the Company's net income was
$84.9 million, or $0.59 per common share, up 8.5 percent from the $78.3
million, or $0.54 per common share earned in the three months ended June 30,
1996. For the six months ended June 30, 1997, the Company's net income was
$155.9 million, or $1.07 per common share, down 16.5 percent from the $186.7
million, or $1.29 per common share earned in the six months ended June 30,
1996. The increase in net income for the second quarter was due primarily to
higher electric sales and lower maintenance expenses. The decrease in
year-to-date net income was due primarily to a repair and maintenance outage at
Fermi 2 which increased the Fermi 2 capacity factor performance standard
reserve $21 million, lower electricity sales and the cost of responding to the
March 1997 catastrophic ice storm.
At June 30, 1997, the book value of the Company's common stock was $23.74
per share, an increase of $0.05 per share since December 31, 1996. Return on
average total common shareholders' equity was 7.93% and 11.6% for the twelve
months ended June 30, 1997 and 1996, respectively.
The Company's ratio of earnings to fixed charges was 2.53 and 3.14 for the
twelve months ended June 30, 1997 and 1996, respectively. The Company's ratio
of earnings to fixed charges and preferred stock dividends for the 1997 and
1996 twelve-month periods was 2.35 and 2.82, respectively.
17
18
OPERATING REVENUES
Operating revenues increased for the three-month period due primarily to higher
non-regulated subsidiary revenues and higher sales. Operating revenues
decreased for the six-month period due to an increase in the Fermi 2 capacity
factor performance standard reserve and lower sales, partially offset by higher
non-regulated subsidiary revenues.
kWh sales increased (decreased) as compared to the prior year as follows:
Three Six
Months Months
------ ----------
Residential (0.3) % (1.1) %
Commercial 1.0 (0.1)
Industrial 1.7 1.8
Other (includes primarily sales for resale) 16.1 (1.7)
Total System 1.4 0.1
Interconnection 45.1 (7.2)
Total 2.8 (0.2)
The decreases in residential sales reflect less heating and cooling demand
which more than offset growth in the customer base. Commercial sales increased
for the three-month period reflecting a continuation of good economic
conditions which offset the decline in cooling demand. Increases in industrial
sales reflect strong demand in the automotive and construction sectors. Sales
to other customers increased in the three-month period reflecting increased
demand from wholesale for resale customers. Interconnection sales increased
for the three-month period due to greater demand for energy while six month
sales decreased due to the impact of the Fermi 2 outage.
OPERATING EXPENSES
FUEL AND PURCHASED POWER
Net system output and average fuel and purchased power unit costs were as
follows:
Three Months Six Months
------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(Thousands of Megawatthours, "MWh")
Power plant generation
Fossil 10,032 9,653 20,398 20,156
Nuclear 1,260 1,365 1,247 3,150
Purchased power 1,368 1,366 3,572 1,987
--------- --------- --------- ---------
Net system output 12,660 12,384 25,217 25,293
========= ========= ========= =========
Average unit cost ($/MWh) $ 14.26 $ 14.98 $ 14.59 $ 14.49
========= ========= ========= =========
18
19
Fuel expense decreased in the three-month period due to lower average unit
costs resulting from lower costs of coal and nuclear fuel and a more aggressive
fuel procurement strategy.
For the six-month period, fuel expense decreased due to lower average unit
costs resulting from lower costs of coal and nuclear fuel and a reduction in
nuclear power generation as a result of the Fermi 2 outage. Purchased power
expense was higher resulting from increased purchases of power while Fermi 2
was shut down.
OTHER OPERATION
Three Months
Other operation expense increased due primarily to higher expenses related
to non-regulated subsidiaries of the Company ($12.5 million).
Six Months
Other operation expense increased due primarily to higher expenses related
to non-regulated subsidiaries of the Company ($16.5 million) and operating and
development expense related to new computer systems ($5 million).
MAINTENANCE
Three Months
Maintenance expense decreased due to lower fossil plant ($4.8 million) and
overhead and underground lines support ($4.3 million) expenses.
19
20
Six Months
Maintenance expense decreased due to lower overhead and underground lines
support ($6.4 million), general property ($6.3 million), transmission and
distribution ($5.8 million) and fossil plant ($4.1 million) expenses. These
decreases were partially offset by higher major storm expenses ($9 million).
LIQUIDITY AND CAPITAL RESOURCES
PRIVATE SECURITIES LITIGATION REFORM ACT -
FORWARD-LOOKING STATEMENTS
Certain information presented in this Quarterly Report on Form 10-Q is
based upon the expectations of the Company and Detroit Edison and, as such, is
forward-looking. The Private Securities Litigation Reform Act of 1995
encourages reporting companies to provide analyses and estimates of future
prospects and also permits reporting companies to point out that actual results
may differ from those anticipated.
Actual results for the Company and Detroit Edison may differ from those
expected due to a number of variables including, but not limited to, the impact
of newly-required FERC tariffs, actual sales and expenses, the effects of
competition, the implementation of utility restructuring in Michigan (which
involves pending regulatory proceedings, pending and proposed statutory changes
and the recovery of stranded costs), environmental and nuclear requirements and
the success of non-utility projects. While the Company and Detroit Edison
believe that estimates given accurately measure the expected outcome, actual
results could vary materially due to the variables mentioned as well as others.
COMPETITION
THE DETROIT EDISON COMPANY
MPSC. As discussed in the Company's Current Report on Form 8-K, dated
June 11, 1997, the MPSC issued an Opinion and Order, dated June 5, 1997,
recommending certain modifications to the December 19, 1996 MPSC Staff Report
on Electric Industry Restructuring. The following summarizes key points
relating to Detroit Edison's participation in the proposed industry
restructuring:
- Direct customer access would be subject to a phase-in of 2.5%
annually of load (225 megawatts) during the period 1997 through 2001,
with all customers becoming eligible for direct access by 2002.
20
21
- Detroit Edison will be allowed to recover through transition charges
stranded costs, subject to a prudence standard, resulting from nuclear
capital costs, regulatory assets and capacity costs in excess of market
for qualifying facilities and resource recovery facilities (independent
power producers whom Detroit Edison is required to purchase power from).
The MPSC will also consider the recovery of costs of employee
retraining as well as costs for implementing the direct access system.
- The MPSC stated it would establish an annual true-up mechanism that
provides for annual adjustments to the stranded cost surcharge to
reflect changes in the actual market price of power.
- The MPSC indicated that securitization of stranded assets is "a
potential tool for reducing electric rates," but "legislation is
required before securitization can be implemented."
- Reciprocity from all utilities that wish to supply power directly
or through an affiliate in the State of Michigan would be required
during the phase-in period to competition. There would not be such a
requirement for unaffiliated marketers or brokers during phase-in. All
electric suppliers will be subject to full reciprocity when full direct
access is implemented.
- The MPSC Staff was directed to conduct public meetings to determine
the proper direction to take with respect to market power issues and
the development of an independent system operator, with a final report
to be filed with the commission within one year.
On July 7, 1997, Detroit Edison filed a Claim of Appeal with the Michigan
Court of Appeals. In it's filing, Detroit Edison stated that the MPSC's June
5, 1997 Opinion and Order "fixes regulations, practices or services."
On June 19, 1997, Detroit Edison filed with the MPSC for approval of a
direct retail access program, including proposed customer delivery contracts.
Several parties have filed comments and objections to Detroit Edison's
proposal.
On July 9, 1997, Detroit Edison filed its proposal for a stranded cost
recovery true-up mechanism as ordered by the MPSC in its June 5, 1997 Order
regarding industry restructuring.
On July 9, 1997, Detroit Edison filed an application with the MPSC
requesting that the Commission suspend Detroit Edison's PSCR clause for the
period 1998 through 2001, and determine that the Fermi 2 capacity factor
performance standard adjustment be zero for this period. If approved, the
suspension will be reflected in a reduction in base energy rates for customers
subject to the PSCR clause of 1.92 mills/kWh, and a PSCR factor of zero.
21
22
CASH GENERATION AND CASH REQUIREMENTS
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Net cash from operating activities decreased in both the three- and
six-month periods due primarily to increases in inventory and accounts payable.
Net cash used for investing activities was higher due to the acquisition
of the coke oven battery described in Non-Regulated Investments herein.
Net cash from financing activities was higher due to non-recourse debt
issued in connection with the acquisition of the coke oven battery described in
Non-Regulated Investments herein and an increase in short-term borrowings,
partially offset by higher redemptions of long-term debt.
ADDITIONAL INFORMATION
Detroit Edison's 1997 cash requirements for its capital expenditure
program are estimated at $448 million, of which $209 million had been expended
as of June 30, 1997. Internal cash generation is expected to be sufficient to
meet its cash requirements for capital expenditures as well as scheduled
long-term debt redemptions.
Detroit Edison had short-term credit arrangements of approximately $464
million at June 30, 1997, under which $186 million of borrowings were
outstanding.
On July 2, 1997, the Detroit Edison service territory experienced a severe
storm. Tornadoes and high winds destroyed or severely damaged parts of its
distribution system. Costs of restoration are estimated at $36 million of
which approximately $24 million will be a potential charge to earnings in 1997.
As a result of the March 1997 storm, Detroit Edison exceeded its maximum
policy coverage limit for major storms.
NON-REGULATED INVESTMENTS
Cash requirements for non-regulated investments are estimated to range
from $300 to $350 million in 1997, of which $218 million had been expended as
of June 30, 1997. Non-regulated investments are expected to be substantially
externally financed.
DTE Capital Corporation has a $200 million Revolving Credit Agreement,
backed by a Support Agreement from the Company, under which $33 million was
outstanding at June 30, 1997.
The Company and MCN Energy Group, Inc., formed a joint venture,
DTE-CoEnergy LLC, to provide electricity, natural gas and related services to
medium and large retail customers in non-regulated markets. The venture will
pursue industrial, commercial and institutional customers in Midwestern and
Mid-Atlantic states as well as the District of Columbia and the province of
Ontario, Canada as these markets open to competition.
22
23
The Company, through its non-regulated subsidiary, DTE Energy Services,
Inc., acquired a coke oven battery and related assets in River Rouge, Michigan,
from National Steel Corporation ("NSC"). The acquisition and debt service
reserves were financed through $50 million of equity from the Company and $243
million in non-recourse debt collateralized by the acquired assets.
DTE Coal Services Company, Inc., a non-regulated subsidiary of the
Company, acquired inventory related to the coke oven battery from NSC for
approximately $10 million. The seasonal value of this inventory is expected to
range from $9 million to $40 million with the minimum levels being held in the
spring and maximum levels being held in the late fall.
23
24
DTE ENERGY COMPANY
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.
As discussed in Part I, Item 3 - Legal Proceedings of the Annual Report,
three Detroit Edison employees have filed a lawsuit in the Circuit Court for
Wayne County, Michigan (Sanchez, et al v Detroit Edison) alleging age and
national origin discrimination. In July 1997, the plaintiffs in this matter
filed a motion with the Court seeking to have the matter certified as a class
action. Detroit Edison believes that class certification is inappropriate and
is opposing the motion. Detroit Edison expects that the motion will be heard
by the Court in Fall 1997. Detroit Edison is of the opinion that the
allegations of discrimination are without merit.
For further information on legal proceedings, see Note 4 and Part I, Item
2, herein.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The annual meeting of the holders of Common Stock of the Company was held
on April 28, 1997. Proxies for the meeting were solicited pursuant to
Regulation 14(a).
(b) The following five directors were elected to serve until the annual
meeting in the year 2000 with the votes shown:
Total Vote
Total Vote For Withheld From
Each Director Each Director
--------------- -------------
William C. Brooke 113,045,920 3,368,205
John E. Lobbia 113,325,662 3,088,463
Patricia S. Longe 112,761,884 3,652,240
Eugene A. Miller 113,352,181 3,061,943
Dean E. Richardson 113,283,648 3,130,476
The terms of the previously elected nine directors listed below continue until the
annual meeting dates shown after each name:
Terence E. Adderley April 27, 1998
Anthony F. Earley, Jr. April 27, 1998
Allan D. Gilmour April 27, 1998
Theodore S. Leipprandt April 27, 1998
Lillian Bauder April 26, 1999
David Bing April 26, 1999
Larry G. Garberding April 26, 1999
Alan E. Schwartz April 26, 1999
William Wegner April 26, 1999
24
25
(c) (i) Shareholders ratified the appointment of Deloitte & Touche LLP as
the Company's independent auditors for the year 1997 with the
votes shown:
For Against Abstain
----------- ------------ ------------
114,693,439 588,576 1,132,110
(ii) Shareholders also voted on the two items below:
(1) A shareholder proposal regarding criterion for closing the
nuclear power plant.
For Against Abstain
--------- ---------- ---------
6,363,487 89,135,377 5,849,737
(2) A shareholder proposal regarding the impact of deregulation,
including its impact on the operation of Fermi 2.
For Against Abstain
--------- ---------- ---------
6,697,007 86,878,445 7,773,149
(d) Not applicable.
ITEM 5 - OTHER INFORMATION.
As discussed in Part I, Items 1 and 2 - Business and Properties,
"Regulation and Rates - Environmental Matters - Wastes and Toxic Substances" of
the Annual Report, Detroit Edison has extensive land holdings and, from time to
time, must investigate claims of improperly disposed of contaminants. Detroit
Edison may have had some indirect involvement with waste that reached the
Ramona Park Landfill site in Utica, Michigan. Detroit Edison is participating
with other potentially responsible parties to further investigate the site and
evaluate appropriate remedies. It is unknown at this time what impact, if any,
this situation will have on Detroit Edison.
25
26
QUARTERLY REPORT ON FORM 10-Q FOR
THE DETROIT EDISON COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - CONDENSED FINANCIAL STATEMENTS (UNAUDITED).
See pages 9 through 15.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
See the Company's and Detroit Edison's "Item 2 - Management's Discussion
and Analysis of Financial Condition and Results of Operations," which is
incorporated herein by this reference.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.
See the Company's "Item 1 - Legal Proceedings," which is incorporated
herein by this reference.
ITEM 5 - OTHER INFORMATION.
See the Company's "Item 5 - Other Information" which is incorporated
herein by this reference.
On May 9, 1997, Frank E. Agosti, Senior Vice-President of Detroit Edison
retired.
26
27
QUARTERLY REPORTS ON FORM 10-Q FOR
DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(i) Exhibits filed herewith.
Exhibit
Number
11-8 - DTE Energy Company and Subsidiary Companies Primary
and Fully Diluted Earnings Per Share of Common Stock.
15-5 - Awareness Letter of Deloitte & Touche LLP regarding
their report dated July 25, 1997.
27-13 - Financial Data Schedule for the period ended June 30, 1997
for DTE Energy Company and Subsidiary Companies.
27-14 - Financial Data Schedule for the period ended June 30, 1997
for The Detroit Edison Company and Subsidiary Companies.
(ii) Exhibits incorporated herein by reference.
3(a) - Restated Articles of Incorporation of Detroit Edison,
as filed December 10, 1991 with the State of Michigan,
Department of Commerce - Corporation and Securities Bureau
(Exhibit 4-117 to Form 10-Q for quarter ended March 31, 1993).
3(b) - Certificate containing resolution of the Detroit Edison
Board of Directors establishing the Cumulative Preferred
Stock, 7.75% Series as filed February 22, 1993 with the State
of Michigan, Department of Commerce - Corporation and
Securities Bureau (Exhibit 4-134 to Form 10-Q for quarter
ended March 31, 1993).
3(c) - Certificate containing resolution of the Detroit Edison
Board of Directors establishing the Cumulative Preferred
Stock, 7.74% Series, as filed April 21, 1993 with the State of
Michigan, Department of Commerce - Corporation and Securities
Bureau (Exhibit 4-140 to Form 10-Q for quarter ended March 31,
1993).
3(d) - Amended and Restated Articles of Incorporation of DTE
Energy Company, dated December 13, 1995 (Exhibit 3A (3.1) to
DTE Energy Form 8-B filed January 2, 1996, File No. 1-11607).
27
28
Exhibit
Number
----------
3(e) - Agreement and Plan of Exchange (Exhibit 1(2) to DTE
Energy Form 8-B filed January 2, 1996, File No. 1-11607).
3(f) - Amended and Restated By-Laws, dated as of February 26, 1996,
of the Company (Exhibit 3-3 to Form 10-K for year ended
December 31, 1996).
3(g) - Amended and Restated By-Laws, dated as of February 26, 1996,
of Detroit Edison (Exhibit 3-4 to Form 10-K for year ended
December 31, 1996).
4(a) - Mortgage and Deed of Trust, dated as of October 1, 1924,
between Detroit Edison (File No. 1-2198) and Bankers Trust
Company as Trustee (Exhibit B-1 to Registration No. 2-1630) and
indentures supplemental thereto, dated as of dates indicated
below, and filed as exhibits to the filings as set forth below:
September 1, 1947 Exhibit B-20 to Registration No. 2-7136
October 1, 1968 Exhibit 2-B-33 to Registration No. 2-30096
November 15, 1971 Exhibit 2-B-38 to Registration No. 2-42160
January 15, 1973 Exhibit 2-B-39 to Registration No. 2-46595
June 1, 1978 Exhibit 2-B-51 to Registration No. 2-61643
June 30, 1982 Exhibit 4-30 to Registration No. 2-78941
August 15, 1982 Exhibit 4-32 to Registration No. 2-79674
October 15, 1985 Exhibit 4-170 to Form 10-K for year ended
December 31, 1994
November 30, 1987 Exhibit 4-139 to Form 10-K for year ended
December 31, 1992
July 15, 1989 Exhibit 4-171 to Form 10-K for year ended
December 31, 1994
December 1, 1989 Exhibit 4-172 to Form 10-K for year ended
December 31, 1994
February 15, 1990 Exhibit 4-173 to Form 10-K for year ended
December 31, 1994
April 1, 1991 Exhibit 4-15 to Form 10-K for year ended
December 31, 1996
May 1, 1991 Exhibit 4-178 to Form 10-K for year ended
December 31, 1996
May 15, 1991 Exhibit 4-179 to Form 10-K for year ended
December 31, 1996
September 1, 1991 Exhibit 4-180 to Form 10-K for year ended
December 31, 1996
November 1, 1991 Exhibit 4-181 to Form 10-K for year ended
December 31, 1996
28
29
Exhibit
Number
----------
January 15, 1992 Exhibit 4-182 to Form 10-K for year ended
December 31, 1996
February 29, 1992 Exhibit 4-121 to Form 10-Q for quarter
ended March 31, 1992
April 15, 1992 Exhibit 4-122 to Form 10-Q for quarter
ended June 30, 1992
July 15, 1992 Exhibit 4-123 to Form 10-Q for quarter
ended September 30, 1992
July 31, 1992 Exhibit 4-124 to Form 10-Q for quarter
ended September 30, 1992
November 30, 1992 Exhibit 4-130 to Registration
No. 33-56496
January 1, 1993 Exhibit 4-131 to Registration No. 33-56496
March 1, 1993 Exhibit 4-141 to Form 10-Q for quarter
ended March 31, 1993
March 15, 1993 Exhibit 4-142 to Form 10-Q for quarter
ended March 31, 1993
April 1, 1993 Exhibit 4-143 to Form 10-Q for quarter
ended March 31, 1993
April 26, 1993 Exhibit 4-144 to Form 10-Q for quarter
ended March 31, 1993
May 31, 1993 Exhibit 4-148 to Registration No. 33-64296
June 30, 1993 Exhibit 4-149 to Form 10-Q for quarter
ended June 30, 1993 (1993 Series AP)
June 30, 1993 Exhibit 4-150 to Form 10-Q for quarter
ended June 30, 1993 (1993 Series H)
September 15, 1993 Exhibit 4-158 to Form 10-Q for quarter
ended September 30, 1993
March 1, 1994 Exhibit 4-163 to Registration No. 33-53207
June 15, 1994 Exhibit 4-166 to Form 10-Q for quarter
ended June 30, 1994
August 15, 1994 Exhibit 4-168 to Form 10-Q for quarter
ended September 30, 1994
December 1, 1994 Exhibit 4-169 to Form 10-K for year ended
December 31, 1994
August 1, 1995 Exhibit 4-174 to Form 10-Q for quarter
ended September 30, 1995
4(b) - Collateral Trust Indenture (notes), dated as of June 30, 1993
(Exhibit 4-152 to Registration No. 33-50325).
4(c) - First Supplemental Note Indenture, dated as of June 30, 1993
(Exhibit 4-153 to Registration No. 33-50325).
29
30
Exhibit
Number
----------
4(d) - Second Supplemental Note Indenture, dated as of
September 15, 1993 (Exhibit 4-159 to Form 10-Q for quarter ended
September 30, 1993).
4(e) - First Amendment, dated as of August 15, 1996, to Second
Second Supplemental Note Indenture (Exhibit 4-17 to Form 10-Q
for quarter ended September 30, 1996).
4(f) - Third Supplemental Note Indenture, dated as of August 15, 1994
(Exhibit 4-169 to Form 10-Q for quarter ended September
30, 1994).
4(g) - First Amendment, dated as of December 12, 1995, to Third
Supplemental Note Indenture, dated as of August 15, 1994
(Exhibit 4-12 to Registration No. 333-00023).
4(h) - Fourth Supplemental Note Indenture, dated as of August 15, 1995
(Exhibit 4-175 to Detroit Edison Form 10-Q for quarter ended
September 30, 1995).
4(i) - Fifth Supplemental Note Indenture, dated as of February 1, 1996
(Exhibit 4-14 to Form 10-K for year ended December 31, 1996).
4(j) - Standby Note Purchase Credit Facility, dated as of
August 17, 1994, among The Detroit Edison Company, Barclays Bank
PLC, as Bank and Administrative Agent, Bank of America, The Bank
of New York, The Fuji Bank Limited, The Long-Term Credit Bank of
Japan, LTD, Union Bank and Citicorp Securities, Inc. and First
Chicago Capital Markets, Inc. as Remarketing Agents (Exhibit
99-18 to Form 10-Q for quarter ended September 30, 1994).
4(k) - Support Agreement, dated as of March 8, 1996, between the
Company and Detroit Edison (Exhibit 4-176 to Form 10-Q for
quarter ended March 31, 1996).
99(a) - Belle River Participation Agreement between Detroit Edison
and Michigan Public Power Agency, dated as of December 1, 1982
(Exhibit 28-5 to Registration No. 2-81501).
99(b) - Belle River Transmission Ownership and Operating Agreement
between Detroit Edison and Michigan Public Power Agency,
dated as of December 1, 1982 (Exhibit 28-6 to
Registration No. 2-81501.)
99(c) - 1988 Amended and Restated Loan Agreement, dated as of
October 4, 1988, between Renaissance Energy Company (an
unaffiliated
30
31
Exhibit
Number
----------
company) ("Renaissance") and Detroit Edison (Exhibit 99-6 to
Registration No. 33-50325).
99(d) - First Amendment to 1988 Amended and Restated Loan
Agreement, dated as of February 1, 1990, between Detroit Edison
and Renaissance (Exhibit 99-7 to Registration No. 33-50325).
99(e) - Second Amendment to 1988 Amended and Restated Loan Agreement,
dated as of September 1, 1993, between Detroit Edison and
Renaissance (Exhibit 99-8 to Registration No. 33-50325).
99(f) - $200,000,000 364-Day Credit Agreement, dated as of
September 1, 1993, among Detroit Edison, Renaissance and
Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-12 to
Registration No. 33-50325).
99(g) - First Amendment, dated as of August 31, 1994, to $200,000,000
364-Day Credit Agreement, dated September 1, 1993, among
The Detroit Edison Company, Renaissance Energy Company, the
Banks party thereto and Barclays Bank, PLC, New York Branch, as
Agent (Exhibit 99-19 to Form 10-Q for quarter ended
September 30, 1994).
99(h) - Third Amendment, dated as of March 8, 1996, to $200,000,000
364-Day Credit Agreement, dated September 1, 1993, as
amended, among Detroit Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New York Branch, as Agent
(Exhibit 99-11 to Form 10-Q for quarter ended March 31, 1996).
99(i) - Fourth Amendment, dated as of August 29, 1996, to $200,000,000
364-Day Credit Agreement as of September 1, 1990, as amended,
among Detroit Edison, Renaissance, the Banks party thereto
and Barclays Bank, PLC, New York Branch, as Agent
(Exhibit 99-13 to Form 10-Q for quarter ended September 30,
1996).
99(j) - $200,000,000 Three-Year Credit Agreement, dated
September 1, 1993, among Detroit Edison, Renaissance and
Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-13 to
Registration No. 33-50325).
99(k) - First Amendment, dated as of September 1, 1994, to $200,000,000
Three-Year Credit Agreement, dated as of September 1, 1993,
among The Detroit Edison Company, Renaissance Energy
Company, the Banks party thereto and Barclays Bank, PLC, New
York Branch, as Agent (Exhibit 99-20 to Form 10-Q for quarter
ended September 30, 1994).
31
32
Exhibit
Number
----------
99(l) - Third Amendment, dated as of March 8, 1996, to
$200,000,000 Three-Year Credit Agreement, dated September 1,
1993, as amended among Detroit Edison, Renaissance, the Banks
party thereto and Barclays Bank, PLC, New York Branch, as Agent
(Exhibit 99-12 to Form 10-Q for quarter ended March 31, 1996).
99(m) - Fourth Amendment, dated as of September 1, 1996, to
$200,000,000 Multi-Year (formerly Three-Year) Credit Agreement,
dated as of September 1, 1993, as amended among Detroit Edison,
Renaissance, the Banks party thereto and Barclays Bank, PLC,
New ork Branch, as Agent (Exhibit 99-14 to Form 10-Q for
quarter ended September 30, 1996).
99(n) - 1988 Amended and Restated Nuclear Fuel Heat Purchase
Contract, dated October 4, 1988, between Detroit Edison and
Renaissance (Exhibit 99-9 to Registration No. 33-50325).
99(o) - First Amendment to 1988 Amended and Restated Nuclear
Fuel Heat Purchase Contract, dated as of February 1, 1990,
between Detroit Edison and Renaissance (Exhibit 99-10 to
Registration No. 33-50325).
99(p) - Second Amendment, dated as of September 1, 1993, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract
between Detroit Edison and Renaissance (Exhibit 99-11 to
Registration No. 33-50325).
99(q) - Third Amendment, dated as of August 31, 1994, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract,
dated October 4, 1988, between The Detroit Edison Company and
Renaissance Energy Company (Exhibit 99-21 to Form 10-Q for
quarter ended September 30, 1994).
99(r) - Fourth Amendment, dated as of March 8, 1996, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract
Agreement, dated as of October 4, 1988, between Detroit Edison
and Renaissance (Exhibit 99-10 to Form 10-Q for quarter ended
March 31, 1996).
99(s) - Credit Agreement, dated as of March 1, 1996 among DTE
Capital Corporation, the Initial Lenders named therein, and
Citibank, N.A., as Agent (Exhibit 99-9 to Form 10-Q for quarter
ended March 31, 1996).
(b) Registrants filed a report on Form 8-K dated June 11, 1997, discussing
the MPSC Opinion and Order, dated June 5, 1997 on electric industry
restructuring.
32
33
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.
DTE ENERGY COMPANY
---------------------------------------
(Registrant)
Date July 25, 1997 /s/ SUSAN M. BEALE
---------------------------------------
Susan M. Beale
Vice President and Corporate Secretary
Date July 25, 1997 /s/ DAVID E. MEADOR
---------------------------------------
David E. Meador
Vice President and Controller
33
34
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 DETROIT EDISON COMPANY
---------------------------------------
(Registrant)
Date July 25, 1997 /s/ SUSAN M. BEALE
---------------------------------------
Susan M. Beale
Vice President and Corporate Secretary
Date July 25, 1997 /s/ DAVID E. MEADOR
---------------------------------------
David E. Meador
Vice President and Controller
34
35
QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED JUNE 30, 1997
DTE ENERGY COMPANY FILE NO. 1-11607
THE DETROIT EDISON COMPANY FILE NO. 1-2198
EXHIBIT INDEX
(i) Exhibits filed herewith.
Exhibit
Number
11-8 - DTE Energy Company and Subsidiary Companies Primary
and Fully Diluted Earnings Per Share of Common Stock.
15-5 - Awareness Letter of Deloitte & Touche LLP regarding
their report dated July 25, 1997.
27-13 - Financial Data Schedule for the period ended June
30, 1997 for DTE Energy Company and Subsidiary Companies.
27-14 - Financial Data Schedule for the period ended June
30, 1997 for The Detroit Edison Company and
Subsidiary Companies.
See Page Nos. ____
through ___ for location
of Exhibits Incorporated
By Reference
(ii) Exhibits incorporated herein by reference.
3(a) - Restated Articles of Incorporation of Detroit Edison,
as filed December 10, 1991 with the State of Michigan,
Department of Commerce - Corporation and Securities Bureau.
3(b) - Certificate containing resolution of the Detroit Edison Board of
Directors establishing the Cumulative Preferred Stock, 7.75%
Series as filed February 22, 1993 with the State of Michigan,
Department of Commerce - Corporation and Securities Bureau.
36
Exhibit
Number
----------
3(c) - Certificate containing resolution of the Detroit
Edison Board of Directors establishing the Cumulative Preferred
Stock, 7.74% Series, as filed April 21, 1993 with the State of
Michigan, Department of Commerce - Corporation and Securities
Bureau (Exhibit 4-140 to Form 10-Q for quarter ended March 31,
1993).
3(d) - Amended and Restated Articles of Incorporation of DTE
Energy Company, dated December 13, 1995.
3(e) - Agreement and Plan of Exchange.
3(f) - Amended and Restated By-Laws, dated as of February
26, 1996, of the Company.
3(g) - Amended and Restated By-Laws, dated as of February 26,
1996, of Detroit Edison.
4(a) - Mortgage and Deed of Trust, dated as of October 1,
1924, between Detroit Edison and Bankers Trust Company as
Trustee and indentures supplemental thereto, dated as of dates
indicated below:
September 1, 1947
October 1, 1968
November 15, 1971
January 15, 1973
June 1, 1978
June 30, 1982
August 15, 1982
October 15, 1985
November 30, 1987
July 15, 1989
December 1, 1989
February 15, 1990
April 1, 1991
May 1, 1991
May 15, 1991
September 1, 1991
November 1, 1991
January 15, 1992
February 29, 1992
April 15, 1992
July 15, 1992
July 31, 1992
November 30, 1992
January 1, 1993
March 1, 1993
March 15, 1993
April 1, 1993
April 26, 1993
37
Exhibit
Number
----------
May 31, 1993
June 30, 1993
June 30, 1993
September 15, 1993
March 1, 1994
June 15, 1994
August 15, 1994
December 1, 1994
August 1, 1995
4(b) - Collateral Trust Indenture (notes), dated as of June
30, 1993.
4(c) - First Supplemental Note Indenture, dated as of June
30, 1993.
4(d) - Second Supplemental Note Indenture, dated as of
September 15, 1993.
4(e) - First Amendment, dated as of August 15, 1996, to
Second Supplemental Note Indenture.
4(f) - Third Supplemental Note Indenture, dated as of August
15, 1994.
4(g) - First Amendment, dated as of December 12, 1995, to
Third Supplemental Note Indenture, dated as of August 15, 1994.
4(h) - Fourth Supplemental Note Indenture, dated as of
August 15, 1995.
4(i) - Fifth Supplemental Note Indenture, dated as of
February 1, 1996.
4(j) - Standby Note Purchase Credit Facility, dated as of
August 17, 1994, among The Detroit Edison Company, Barclays Ban
PLC, as Bank and Administrative Agent, Bank of America, The Ban
of New York, The Fuji Bank Limited, The Long-Term Credit Bank o
Japan, LTD, Union Bank and Citicorp Securities, Inc. and First
Chicago Capital Markets, Inc. as Remarketing Agents.
4(k) - Support Agreement, dated as of March 8, 1996, between
the Company and Detroit Edison.
99(a) - Belle River Participation Agreement between Detroit
Edison and Michigan Public Power Agency, dated as of
December 1, 1982.
99(b) - Belle River Transmission Ownership and Operating
Agreement between Detroit Edison and Michigan Public Power
Agency, dated as of December 1, 1982.
38
Exhibit
Number
----------
99(c) - 1988 Amended and Restated Loan Agreement, dated as
of October 4, 1988, between Renaissance Energy Company (an
unaffiliated company) ("Renaissance") and Detroit Edison.
99(d) - First Amendment to 1988 Amended and Restated Loan
Agreement, dated as of February 1, 1990, between Detroit Edison
and Renaissance.
99(e) - Second Amendment to 1988 Amended and Restated Loan
Agreement, dated as of September 1, 1993, between Detroit
Edison and Renaissance.
99(f) - $200,000,000 364-Day Credit Agreement, dated as of
September 1, 1993, among Detroit Edison, Renaissance and
Barclays Bank PLC, New York Branch, as Agent.
99(g) - First Amendment, dated as of August 31, 1994, to
$200,000,000 364-Day Credit Agreement, dated September 1, 1993,
among The Detroit Edison Company, Renaissance Energy Company,
the Banks party thereto and Barclays Bank, PLC, New York
Branch, as Agent.
99(h) - Third Amendment, dated as of March 8, 1996, to
$200,000,000 364-Day Credit Agreement, dated September 1, 1993,
as amended, among Detroit Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New York Branch, as Agent.
99(i) - Fourth Amendment, dated as of August 29, 1996, to
$200,000,000 364-Day Credit Agreement as of September 1, 1990,
as amended, among Detroit Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New York Branch, as Agent.
99(j) - $200,000,000 Three-Year Credit Agreement, dated
September 1, 1993, among Detroit Edison, Renaissance and
Barclays Bank PLC, New York Branch, as Agent.
99(k) - First Amendment, dated as of September 1, 1994, to
$200,000,000 Three-Year Credit Agreement, dated as of September
1, 1993, among The Detroit Edison Company, Renaissance Energy
Company, the Banks party thereto and Barclays Bank, PLC, New
York Branch, as Agent.
39
Exhibit
Number
----------
99(l) - Third Amendment, dated as of March 8, 1996, to
$200,000,000 Three-Year Credit Agreement, dated September 1,
1993, as amended among Detroit Edison, Renaissance, the Banks
party thereto and Barclays Bank, PLC, New York Branch, as Agent.
99(m)- Fourth Amendment, dated as of September 1, 1996, to
$200,000,000 Multi-Year (formerly Three-Year) Credit Agreement,
dated as of September 1, 1993, as amended among Detroit Edison,
Renaissance, the Banks party thereto and Barclays Bank, PLC, New
York Branch, as Agent.
99(n)- 1988 Amended and Restated Nuclear Fuel Heat Purchase
Contract, dated October 4, 1988, between Detroit Edison and
Renaissance.
99(o)- First Amendment to 1988 Amended and Restated Nuclear
Fuel Heat Purchase Contract, dated as of February 1, 1990,
between Detroit Edison and Renaissance.
99(p)- Second Amendment, dated as of September 1, 1993, to
1988 Amended and Restated Nuclear Fuel Heat Purchase Contract
between Detroit Edison and Renaissance.
99(q)- Third Amendment, dated as of August 31, 1994, to
1988 Amended and Restated Nuclear Fuel Heat Purchase Contract,
dated October 4, 1988, between The Detroit Edison Company and
Renaissance Energy Company.
99(r)- Fourth Amendment, dated as of March 8, 1996, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract
Agreement, dated as of October 4, 1988, between Detroit Edison
and Renaissance.
99(s)- Credit Agreement, dated as of March 1, 1996 among
DTE Capital Corporation, the Initial Lenders named therein, and
Citibank, N.A., as Agent