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 Quarter Ended June 30, 1995
DUKE POWER COMPANY
422 South Church Street
Charlotte, North Carolina 28242-0001
704-594-0887
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 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
June 30, 1995.................................... 204,859,339 shares
DUKE POWER COMPANY
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income for the Three and Six Months
Ended June 30, 1995 and 1994 2
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1995 and 1994 3
Consolidated Balance Sheets - June 30, 1995 and December 31, 1994 4-5
Consolidated Statements of Capitalization - June 30, 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 Six Months Ended
June 30 June 30
1995 1994 1995 1994
Operating revenues $1,052,403 $1,083,310 $2,163,468 $2,182,312
Operating expenses
Fuel used in electric generation 167,408 183,030 336,776 352,076
Net interchange and purchased power 121,897 139,980 236,156 276,494
Other operation and maintenance 324,363 339,799 606,493 627,311
Depreciation and amortization 113,700 116,166 226,435 232,239
General taxes 61,159 61,916 124,318 125,189
Total operating expenses 788,527 840,891 1,530,178 1,613,309
Operating Income 263,876 242,419 633,290 569,003
Interest expense and other income
Interest expense (72,685) (66,166) (145,208) (130,636)
Allowance for funds used during construction and other deferred returns 32,711 25,819 64,308 50,971
Other, net 2,160 8,055 4,208 7,528
Total interest expense and other income (37,814) (32,292) (76,692) (72,137)
Income before income taxes 226,062 210,127 556,598 496,866
Income taxes 88,539 82,125 217,799 195,247
Net Income 137,523 128,002 338,799 301,619
Preferred and preference stock requirements 12,677 12,385 25,412 24,707
Earnings for common stock $ 124,846 $ 115,617 $ 313,387 $ 276,912
Common stock data
Average common shares outstanding (thousands) 204,859 204,859 204,859 204,859
Earnings per share $ 0.61 $ 0.56 $ 1.53 $ 1.35
Dividends per share $ 0.49 $ 0.47 $ 0.98 $ 0.94
See Notes to Consolidated Financial Statements
2
DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
Six Months Ended
June 30
1995 1994
Cash flows from operating activities
Net Income $ 338,799 $ 301,619
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash items
Depreciation and amortization 332,291 314,974
Deferred income taxes and investment tax credit amortization 12,165 59,114
Allowance for equity funds used during construction (12,228) (11,881)
Purchased capacity levelization (28,637) (124,366)
Other, net 42,387 4,284
(Increase) Decrease in
Accounts receivable 6,834 512
Inventory (31,294) (10,100)
Prepayments 179 3,291
Increase (Decrease) in
Accounts payable (81,323) (94,902)
Taxes accrued (4,233) (16,508)
Interest accrued and other liabilities (22,047) (10,858)
Total adjustments 214,094 113,560
Net cash provided by operating activities 552,893 415,179
Cash flows from investing activities
Construction expenditures and other property additions (375,915) (353,931)
External funding for decommissioning (28,235) (26,262)
Investment in nuclear fuel (17,416) (41,490)
Investment in joint ventures (35,280) 1,505
Net change in investment securities 15,463 21,342
Net cash used in investing activities (441,383) (398,836)
Cash flows from financing activities
Proceeds from the issuance of
First and refunding mortgage bonds 77,415 144,390
Short-term notes payable, net 138,000 54,400
Construction loans and other 18,250 6,192
Payments for the redemption of
First and refunding mortgage bonds (116,976) -
Preferred stock (2,926) (1,500)
Construction loans and other (5,990) (2,051)
Dividends paid (226,070) (217,692)
Other (751) (3,606)
Net cash used in financing activities (119,048) (19,867)
Net increase (decrease) in cash (7,538) (3,524)
Cash at beginning of period 37,430 33,812
Cash at end of period $ 29,892 $ 30,288
See Notes to Consolidated Financial Statements
3
DUKE POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
June 30 December 31
1995 1994
(Unaudited)
ASSETS
Current assets
Cash $ 29,892 $ 37,430
Short-term investments 82,941 132,692
Receivables (less allowance for losses: 1995 - $6,402; 1994 - $6,637) 546,031 552,865
Inventory - at average cost 354,633 319,385
Prepayments and other 15,543 15,722
Total current assets 1,029,040 1,058,094
Investments and other
Investments in joint ventures 143,610 108,330
Other investments, at cost or less 117,514 83,226
Nuclear decommissioning trust funds 223,980 172,390
Pre-funded pension cost 80,000 80,000
Total investments and other assets 565,104 443,946
Property, plant and equipment
Electric plant in service (at original cost)
Production 6,975,395 6,747,397
Transmission 1,453,222 1,439,435
Distribution 4,046,887 3,965,393
Other 1,037,701 1,020,192
Electric plant in service 13,513,205 13,172,417
Less accumulated depreciation and amortization 4,995,135 4,810,004
Electric plant in service, net 8,518,070 8,362,413
Nuclear fuel 750,395 757,983
Less accumulated amortization 463,579 415,560
Nuclear fuel, net 286,816 342,423
Construction work in progress (including nuclear fuel in process:
1995 - $32,361; 1994 - $52,273) 484,209 558,730
Total electric plant, net 9,289,095 9,263,566
Other property - at cost (less accumulated depreciation:
1995 - $26,566; 1994 - $24,137) 314,173 302,383
Total property, plant and equipment, net 9,603,268 9,565,949
Deferred debits
Purchased capacity costs 960,961 932,324
Debt expense, primarily refinancing costs, being amortized over the terms of related debt 186,543 186,306
Regulatory asset related to income taxes 490,417 489,292
Regulatory asset related to DOE assessment fee 107,670 102,467
Other 90,318 83,850
Total deferred debits 1,835,909 1,794,239
Total assets $13,033,321 $12,862,228
See Notes to Consolidated Financial Statements
4
DUKE POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
June 30 December 31
1995 1994
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 233,094 $ 343,688
Notes payable 245,100 107,100
Taxes accrued 25,765 29,999
Interest accrued 71,373 72,157
Current maturities of long-term debt and preferred stock 51,697 93,759
Other 100,422 121,539
Total current liabilities 727,451 768,242
Long-term debt (Note 4) 3,587,859 3,567,122
Accumulated deferred income taxes 2,369,673 2,348,631
Deferred credits and other liabilities
Investment tax credit 266,976 272,594
DOE assesssment fee 107,670 102,467
Nuclear decommissioning costs externally funded 223,980 172,390
Other 326,299 318,453
Total deferred credits and other liabilities 924,925 865,904
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 2,718,475 2,605,920
Total common stockholders' equity 4,645,384 4,532,829
Total liabilities and stockholders' equity $13,033,321 $12,862,228
See Notes to Consolidated Financial Statements
5
DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
June 30 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 2,718,475 2,605,920
Total common stock equity 4,645,384 4,532,829
Preferred and preference stock (At June 30, 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 3,406,669 3,440,505
Capitalized leases 25,289 26,039
Other long-term debt 130,000 130,000
Unamortized debt discount and premium, net (60,417) (62,918)
Current maturities of long-term debt (45,004) (81,926)
Subtotal long-term debt 3,456,537 3,451,700
Subsidiary long-term debt
Crescent Resources, Inc. 104,574 92,102
Nantahala Power and Light Company 33,440 33,653
Current maturities of long-term debt (6,692) (10,333)
Subtotal subsidiary long-term debt 131,322 115,422
Total consolidated long-term debt 3,587,859 3,567,122
Total capitalization $ 9,011,272 $ 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 June 30 were $207,499,000
and $116,598,000 for 1995 and 1994, respectively. For the six months ended
June 30, 1995 and 1994, income taxes paid were $220,085,000 and $169,403,000,
respectively. Interest paid, net of amounts capitalized, for the quarter ended
June 30 was $61,979,000 and $47,712,000 for 1995 and 1994, respectively. For
the six months ending June 30, 1995 and 1994, interest paid was $129,570,000
and $113,338,000, 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 June 30, 1995 and December
31, 1994, are not necessarily indicative of the amounts the Company could
have realized in current market exchanges.
June 30, 1995 December 31, 1994
Carrying Amount Fair Value Carrying Amount Fair Value
Long-term debt $ 3,674,683 $ 3,677,000 $ 3,696,260 $ 3,392,000
Preferred stock $ 778,029 $ 770,000 $ 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 June 30, 1995, additions to
property (including nuclear fuel) of $372 million and retirements of $99
million resulted in a net increase in gross plant of $273 million.
The Company is building a combustion turbine facility in Lincoln County,
North Carolina to provide capacity at periods of peak demand. During the first
six months of 1995, four units of the Lincoln Combustion Turbine Station began
commercial operation. An additional two units began commercial operation on
July 18, 1995. Current plans call for another 6 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.
The Company normally experiences seasonal peak loads in the summer and
winter which are relatively in balance. On July 25, 1995, the Company
experienced a new all-time peak load of 16,139. The Company's peak load
includes the load of the other joint owners of the Catawba Nuclear Station
(the Other Catawba Joint Owners) and excludes the load of Nantahala Power
and Light Company.
Fixed charges coverage for the twelve months ended June 30, 1995, using
the SEC method, was 474 times Internal cash generation for the twelve months
ended June 30, 1995 was 69 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 were 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 second quarter and year-to-date June 1995 were
$0.61 and $1.53, respectively, up 8.9% and 13.3% compared to the same periods in
1994.
Revenues for second quarter and year-to-date June 1995 decreased by $30.9
and $18.8 million, respectively, when compared to the same periods in 1994.
Total sales decreased 3.4% from the second quarter 1994 primarily due to lower
sales to the Company's wholesale and other customers. This decrease was
partially offset by increases in billed retail sales. For the second quarter,
billed retail sales were up 3.3%. Residential sales were up 2.3%
and general service sales were up 4.7%. Textile sales were up 1.2%, with
overall industrial sales up 3%. For year-to-date June 1995, total revenues
decreased primarily due to lower sales to the Company's wholesale and other
customers. This decrease was partially offset by contributions from the
Associated Enterprises Group business units.
Fuel expense for second quarter and year-to-date June 1995 decreased by
$15.6 and $15.3 million, respectively, compared to the same periods during
1994. These decreases were primarily due to higher levels of nuclear generation
as a percentage of total generation.
Net interchange and purchased power expense decreased $18.1 and $40.3
million for second quarter and year-to-date June 1995, respectively, compared
to the same periods in 1994. These decreases were primarily due to decreases
in purchased capacity from the Other Catawba Joint Owners.
Operating and maintenance expenses decreased $15.4 million for the second
quarter 1995 compared to the same period in 1994. This 4.5% decrease was
primarily due to costs booked in the second quarter of 1994 associated with
employees electing to terminate employment under the Company's Enhanced
Voluntary Separation (EVS) program. A write-off of capitalized system
development costs along with higher nuclear operating and maintenance
expenses partially offset this decrease. Year-to-date June 1995 operating
and maintenance expenses decreased $20.8 million compared to the same
period in 1994. The 1994 EVS costs along with reduced fossil maintenance
expenses contributed to this decrease. Costs incurred in connection with the
increased activity of the Associated Enterprises Group business units
partially offset this year-to-date decrease.
Interest expense for second quarter and year-to-date June 1995 increased
$6.5 and $14.6 million, respectively, compared to the same periods in 1994.
These increases were primarily due to the issuance of additional long-term
debt in 1994.
Allowance for funds used during construction (AFUDC) and other deferred
returns increased $6.9 and $13.3 million for the second quarter and
year-to-date June 1995, respectively, compared to the same periods during 1994.
These increases were largely due to the accrued return on the deferred purchased
capacity costs along with additional AFUDC associated with the increased
investment in the Lincoln Combustion Turbine project.
PART II OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders on April 27, 1995, the
shareholders of the Company elected Steve C. Griffith, Jr., Paul H. Henson,
W.W. Johnson, Buck Mickel and Russell M. Robinson, II as Class I directors
to serve until the Annual Meeting of Shareholders to be held in 1998, or until
their successors are elected and qualified. The shareholders also voted to
ratify the selection of Deloitte & Touche to act as independent auditors to
make an examination of the Company's accounts for the year 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
second 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: August 9, 1995
_________________________________________________
Richard J. Osborne
Senior Vice President and Chief Financial Officer
Date: August 9, 1995
_________________________________________________
Jeffrey L. Boyer
Controller
10