SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended March 31, 1995
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DUKE POWER COMPANY
422 South Church Street
Charlotte, North Carolina 28242-0001
704-594-0887
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission File Number 1-4928
DUKE POWER COMPANY
(Exact name of registrant as specified in its charter)
North Carolina 56-0205520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
422 South Church Street,
Charlotte, N.C. 28242-0001
(Address of principal executive office)
(Zip Code)
Registrant's telephone number, including area code 704-594-0887
No Change
(Former name, former address and former fiscal year, if changed since last
report)
-----------------------------
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 outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of Common Stock, without par value, outstanding at
March 31, 1995 204,859,339 shares
DUKE POWER COMPANY
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income for the Three Months Ended March 31, 1995 and 1994 2
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1995 and 1994 3
Consolidated Balance Sheets - March 31, 1995 and December 31, 1994 4-5
Consolidated Statements of Capitalization - March 31, 1995 and December 31, 1994 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands)
Three Months Ended
March 31
1995 1994
Operating revenues $1,111,065 $1,099,002
Operating expenses
Fuel used in electric generation 169,368 169,046
Net interchange and purchased power 114,259 136,514
Other operation and maintenance 282,130 287,512
Depreciation and amortization 112,735 116,073
General taxes 63,159 63,273
Total operating expenses 741,651 772,418
Operating Income 369,414 326,584
Interest expense and other income
Interest expense (72,523) (64,470)
Allowance for funds used during construction and other deferred returns 31,597 25,152
Other, net 2,048 (527)
Total interest expense and other income (38,878) (39,845)
Income before income taxes 330,536 286,739
Income taxes 129,260 113,122
Net Income 201,276 173,617
Preferred and preference stock requirements 12,735 12,322
Earnings for common stock $188,541 $161,295
Common stock data
Average common shares outstanding (thousands) 204,859 204,859
Earnings per share $ 0.92 $ 0.79
Dividends per share $ 0.49 $ 0.47
See Notes to Consolidated Financial Statements
2
DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
Three Months Ended
March 31
1995 1994
Cash flows from operating activities
Net Income $ 201,276 $ 173,617
Adjustments to reconcile net income to net cash provided by operating
activities:
Non-cash items
Depreciation and amortization 168,727 $ 159,592
Deferred income taxes and investment tax credit amortization 6,733 4,268
Allowance for equity funds used during construction (5,928) (6,254)
Purchased capacity levelization (25,894) (11,671)
Other, net 2,728 (12,519)
(Increase) Decrease in
Accounts receivable (16,518) 50,293
Inventory (23,167) (1,715)
Prepayments (4,969) (2,040)
Increase (Decrease) in
Accounts payable (56,484) (107,938)
Taxes accrued 96,673 54,354
Interest accrued and other liabilities (29,579) (29,287)
Total adjustments 112,322 97,083
Net cash provided by operating activities 313,598 270,700
Cash flows from investing activities
Construction expenditures and other property additions (215,142) (174,451)
External funding for decommissioning (14,118) (13,131)
Investment in nuclear fuel (3,719) (17,757)
Investment in joint ventures (2,326) 966
Net change in investment securities (1,128) 23,363
Net cash used in investing activities (236,433) (181,010)
Cash flows from financing activities
Proceeds from the issuance of
Short-term notes payable, net 67,100 24,100
Construction loans and other 8,429 494
Payments for the redemption of
First and refunding mortgage bonds (40,000) -
Preferred stock (2,926) (1,500)
Construction loans and other (512) (164)
Dividends paid (113,305) (109,038)
Other (371) (336)
Net cash used in financing activities (81,585) (86,444)
Net increase (decrease) in cash (4,420) 3,246
Cash at beginning of period 37,430 33,812
Cash at end of period $ 33,010 $ 37,058
See Notes to Consolidated Financial Statements
3
DUKE POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31 December 31
1995 1994
(Unaudited)
ASSETS
Current assets
Cash $ 33,010 $ 37,430
Short-term investments 123,754 132,692
Receivables (less allowance for losses: 1995 - $6,729; 1994 - $6,637) 569,383 552,865
Inventory - at average cost 344,529 319,385
Prepayments and other 20,691 15,722
Total current assets 1,091,367 1,058,094
Investments and other
Investments in joint ventures 110,656 108,330
Other investments, at cost or less 93,292 83,226
Nuclear decommissioning trust funds 197,565 172,390
Pre-funded pension cost 80,000 80,000
Total investments and other assets 481,513 443,946
Property, plant and equipment
Electric plant in service (at original cost)
Production 6,800,370 6,747,397
Transmission 1,451,596 1,439,435
Distribution 4,003,021 3,965,393
Other 1,029,280 1,020,192
Electric plant in service 13,284,267 13,172,417
Less accumulated depreciation and amortization 4,899,299 4,810,004
Electric plant in service, net 8,384,968 8,362,413
Nuclear fuel 725,242 757,983
Less accumulated amortization 418,934 415,560
Nuclear fuel, net 306,308 342,423
Construction work in progress (including nuclear fuel in process:
1995 - $40,883; 1994 - $52,273) 580,145 558,730
Total electric plant, net 9,271,421 9,263,566
Other property - at cost (less accumulated depreciation:
1995 - $25,044; 1994 - $24,137) 310,840 302,383
Total property, plant and equipment, net 9,582,261 9,565,949
Deferred debits
Purchased capacity costs 958,218 932,324
Debt expense, primarily refinancing costs, being amortized over the
terms of related debt 183,425 186,306
Regulatory asset related to income taxes 489,232 489,292
Regulatory asset related to DOE assessment fee 107,670 102,467
Other 88,018 83,850
Total deferred debits 1,826,563 1,794,239
Total assets $12,981,704 $12,862,228
See Notes to Consolidated Financial Statements
4
DUKE POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31 December 31
1995 1994
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 229,980 $ 343,688
Notes payable 174,200 107,100
Taxes accrued 126,672 29,999
Interest accrued 68,944 72,157
Current maturities of long-term debt and preferred stock 55,265 93,759
Other 95,026 121,539
Total current liabilities 750,087 768,242
Long-term debt (Note 4) 3,572,806 3,567,122
Accumulated deferred income taxes 2,361,672 2,348,631
Deferred credits and other liabilities
Investment tax credit 269,785 272,594
DOE assessment fee 107,670 102,467
Nuclear decommissioning costs externally funded 197,565 172,390
Other 323,158 318,453
Total deferred credits and other liabilities 898,178 865,904
Preferred and preference stock with sinking fund requirements (Note 4) 278,029 279,500
Preferred and preference stock without sinking fund requirements (Note 4) 500,000 500,000
Common stockholders' equity
Common stock, no par 1,926,909 1,926,909
Retained earnings 2,694,023 2,605,920
Total common stockholders' equity 4,620,932 4,532,829
Total liabilities and stockholders' equity $12,981,704 $12,862,228
See Notes to Consolidated Financial Statements
5
DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
March 31 December 31
1995 1994
(Unaudited)
Common Stock Equity
Common stock, no par, 300,000,000 shares authorized; 204,859,339
shares outstanding for 1995 and 1994 $1,926,909 $1,926,909
Retained earnings 2,694,023 2,605,920
Total common stock equity 4,620,932 4,532,829
Preferred and preference stock (At March 31, 1995 and December 31, 1994
12,500,000 shares of preferred stock, 10,000,000 shares of preferred
stock A, and 1,500,000 shares of preference stock were authorized with
or without sinking fund requirements)
Without sinking fund requirements 500,000 500,000
With sinking fund requirements 279,500 281,000
Less preferred shares reacquired for current sinking fund requirements
(15,000 shares at cost) (1,471) -
Less current sinking fund requirements - (1,500)
Subtotal preferred and preference stock with sinking fund
requirements 278,029 279,500
Total preferred and preference stock 778,029 779,500
Long-term debt
First and refunding mortgage bonds 3,400,505 3,440,505
Capitalized leases 25,668 26,039
Other long-term debt 130,000 130,000
Unamortized debt discount and premium, net (61,774) (62,918)
Current maturities of long-term debt (44,965) (81,926)
Subtotal long-term debt 3,449,434 3,451,700
Subsidiary long-term debt
Crescent Resources 100,075 92,102
Nantahala Power and Light Company 33,597 33,653
Current maturities of long-term debt (10,300) (10,333)
Subtotal subsidiary long-term debt 123,372 115,422
Total consolidated long-term debt 3,572,806 3,567,122
Total capitalization $8,971,767 $8,879,451
See Notes to Consolidated Financial Statements
6
DUKE POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Total income taxes paid for the quarter ended March 31 were
$12,587,000 and $52,805,000 for 1995 and 1994, respectively. Interest
paid, net of amounts capitalized, for the quarter ended March 31 was
$67,591,000 and $65,626,000 for 1995 and 1994, respectively.
2. The North Carolina statute allowing rate adjustments for
past over- or under- recovery of fuel costs was set to expire in 1997.
The North Carolina legislature repealed this expiration provision in
March 1995.
3. The Company is involved in legal, tax and regulatory proceedings
before various courts, regulatory commissions and governmental agencies
regarding matters arising in the ordinary course of business, some of
which involve substantial amounts. Where appropriate, the Company has
made accruals in accordance with Statement of Financial Accounting
Standards No. 5 "Accounting for Contingencies," in order to provide for
such matters. Management is of the opinion that the final disposition of
these proceedings will not have a material adverse effect on the results
of operations or the financial position of the Company.
4. The carrying amounts and estimated fair values of long-term
debt and preferred stock are listed below in thousands of dollars. The
majority of estimated fair value amounts were obtained from independent
parties. Judgment is required in interpreting market data to develop
the estimates of fair value. Accordingly, the estimates determined as
of March 31, 1995 and December 31, 1994, are not necessarily indicative
of the amounts the Company could have realized in current market
exchanges.
March 31, 1995 December 31, 1994
Carrying Amount Fair Value Carrying Amount Fair Value
Long-term debt $3,664,177 $3,485,000 $3,696,260 $3,392,000
Preferred stock $ 778,029 $ 732,000 $ 781,000 $ 697,000
5. In the Consolidated Statements of Income and Consolidated
Statements of Cash Flows, certain prior period information has been
reclassified to conform with current classifications.
6. These are quarterly financial statements and the amounts
reported in the Consolidated Statements of Income are not necessarily
indicative of amounts expected for the respective years. These amounts
may be affected by seasonal temperature variations, timing of scheduled
and unscheduled maintenance of certain electric generating units, and
the Company's policy of accruing estimates for certain other expenses
ratably over twelve months until final amounts are determined.
7. In the opinion of the Company, the accompanying financial
statements contain all adjustments necessary to present fairly the
financial position of Duke Power Company as of the respective dates
shown and the results of its operations for the respective periods then
ended.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During the period January 1, 1995 through March 31, 1995, additions
to property (including nuclear fuel) of $174.5 million and retirements
of $64.6 million resulted in a net increase in gross plant of $109.9
million.
The Company is building a combustion turbine facility in Lincoln
County, North Carolina to provide capacity at periods of peak demand.
Units 1 and 2 of the Lincoln Combustion Turbine Station
began commercial operation on May 5, 1995. Current plans call
for another 10 units to begin commercial operation during 1995, with the
remaining 4 units to come on line in 1996. The estimated total cost of
the project is approximately $500 million. All appeals relating to the
issuance of the final air permit for the facility have been dismissed.
The Company normally experiences seasonal peak loads in the summer
and winter which are relatively in balance. On June 22, 1994, the
Company experienced its summer peak load of 14,936 MW during hot
weather. A new all-time peak load of 16,070 MW occurred on January 19,
1994 during extremely cold weather. The Company's peak load includes
the load of the other joint owners of the Catawba Nuclear Station (the
Other Catawba Joint Owners).
Fixed charges coverage for the twelve months ended March 31, 1995,
using the SEC method, was 4.78 times. Internal cash generation for the
twelve months ended March 31, 1995 was 67 percent.
The Company is involved in legal, tax and regulatory proceedings
before various courts, regulatory commissions and governmental agencies
regarding matters arising in the ordinary course of business, some of
which involve substantial amounts. Where appropriate, the Company has
made accruals in accordance with Statement of Financial Accounting
Standards No. 5 "Accounting for Contingencies," in order to provide for
such matters. Management is of the opinion that the final disposition of
these proceedings will not have a material adverse effect on the results
of operations or the financial position of the Company.
As a result of favorable market conditions, in April 1995 the
Company issued $78 million in medium-term notes, the proceeds of which
will be used to refinance higher cost long-term debt. In addition, the
Company reacquired 30,000 shares of its 7.12% Series Q Preferred Stock
to satisfy sinking fund requirements, including 15,000 shares for
current sinking fund requirements.
RESULTS OF OPERATIONS
Earnings per share for the first quarter 1995 were 92 cents per
share compared to 79 cents per share for the same period in 1994. This
increase was primarily due to decreased operating and maintenance
expenses, lower purchased power costs, and better performance by the
Associated Enterprises Group business units.
Revenues for the first quarter of 1995 were slightly higher than
first quarter 1994 due to contributions from the Associated Enterprises
Group business units as well as higher kilowatt-hour sales. Total
retail kilowatt-hour sales for the quarter increased 2.7 percent.
Residential sales fell 3.9 percent. General service sales rose 2.5
percent. Textile sales rose 3.3 percent, with total industrial sales
increasing 3.8 percent. However, total kilowatt-hour sales did not
materially impact earnings due to offsetting reductions in sales to
non-retail customers.
Net interchange and purchased power expense decreased $22.3 million
for the first quarter 1995 compared to the same period 1994. This
decrease was primarily due to decreases in purchased capacity and energy
from the Other Catawba Joint Owners.
8
Operating and maintenance expenses decreased $5.4 million, or 1.9%,
for the first quarter 1995 from the same period in 1994. This decrease
was primarily due to reduced fossil maintenance expenses, which were
partially offset by increased expenses for the increased activity of the
Associated Enterprises Group business units.
Interest expense increased $8.1 million during the first quarter of
1995 compared to the same period in 1994. This increase is primarily
due to the issuance of additional long-term debt in 1994.
Allowance for funds used during construction (AFUDC) and other
deferred returns increased $6.4 million. The increase was largely due
to the return on the deferred purchased capacity balance.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security
holders of the Company during the first quarter of 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
(27) Financial Data Schedule (included in electronic
filing only)
(B) Reports on Form 8-K
The Company filed no Form 8-K reports during the first
quarter of 1995.
9
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.
DUKE POWER COMPANY
Date: May 10, 1995 _________________________________________________
Richard J. Osborne
Senior Vice President and Chief Financial
Officer
Date: May 10, 1995 _________________________________________________
Jeffrey L. Boyer
Controller