-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OfKo5U8pEGbTkeSdnlNC6KriO+hXWL/qkMVPSSMGyHkZ+flcIV5d4lj2CkTkJ0dN NHEp91Go1nd5m+PLRggR4A== 0000018672-96-000007.txt : 19961118 0000018672-96-000007.hdr.sgml : 19961118 ACCESSION NUMBER: 0000018672-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL LOUISIANA ELECTRIC CO INC CENTRAL INDEX KEY: 0000018672 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 720244480 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05663 FILM NUMBER: 96665253 BUSINESS ADDRESS: STREET 1: 2030 DONAHUE FERRY RD CITY: PINEVILLE STATE: LA ZIP: 71360 BUSINESS PHONE: 3184847400 MAIL ADDRESS: STREET 1: P O BOX 5000 CITY: PINEVILLE STATE: LA ZIP: 71361-5000 10-Q 1 CENTRAL LOUISIANA ELECTRIC CO. THIRD QUARTER 1996 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 Commission file number 1-5663 Or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Central Louisiana Electric Company, Inc. (Exact name of registrant as specified in its charter) Louisiana 72-0244480 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (318) 484-7400 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 As of October 31, 1996 there were 22,450,312 shares outstanding of the Registrant's Common Stock, par value $2.00 per share. TABLE OF CONTENTS Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . 1 Report of Independent Accountants. . . . . . . . . . . . 2 Consolidated Statements of Income. . . . . . . . . . . . 3 Consolidated Balance Sheets. . . . . . . . . . . . . . . 5 Consolidated Statements of Cash Flows. . . . . . . . . . 7 Note to Consolidated Financial Statements. . . . . . . . 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Disclosure Regarding Forward-Looking Statements. . . . . 10 Results of Operations. . . . . . . . . . . . . . . . . . 10 Financial Condition. . . . . . . . . . . . . . . . . . . 12 PART II. OTHER INFORMATION Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 14 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 14 SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS The consolidated financial statements for Central Louisiana Electric Company, Inc. (the Company) included herein are unaudited but reflect, in management's opinion, all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of the Company's financial position and the results of its operations for the interim periods presented. Because of the seasonal nature of the Company's business, the results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the results that may be expected for the full fiscal year. The financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. The consolidated financial statements included herein have been subjected to a limited review by Coopers & Lybrand L.L.P., independent accountants for the Company, whose report is included herein. 1 Coopers certified public accountants & Lybrand L.L.P. a professional services firm REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors Central Louisiana Electric Company, Inc.: We have made a review of the consolidated balance sheet of Central Louisiana Electric Company, Inc. as of September 30, 1996, and the related consolidated statements of income and cash flows for the three-month and nine-month periods ended September 30, 1996 and 1995, in accordance with standards established by the American Institute of Certified Public Accountants. These financial statements are the responsibility of the Company's management. A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical review procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit 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 review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above 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 sheet as of December 31, 1995 and the related consolidated statements of income, cash flows and changes in common shareholders' equity for the year then ended (not present herein); and in our report dated January 26, 1996, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of December 31, 1995, is fairly stated in all material respects in relation to the balance sheet from which it has been derived. COOPERS & LYBRAND, L.L.P. New Orleans, Louisiana November 1, 1996 2 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. CONSOLIDATED STATEMENTS OF INCOME For the three months ended September 30 (Unaudited)
(In thousands, except share and per share amounts) 1996 1995 ---------- ---------- OPERATING REVENUES $ 130,054 $ 123,383 ---------- ---------- OPERATING EXPENSES Fuel used for electric generation 40,310 38,547 Power purchased 12,443 4,755 Other operation 14,276 17,149 Maintenance 5,837 6,223 Depreciation 10,564 10,122 Taxes other than income taxes 8,117 7,751 Federal and state income taxes 11,317 11,392 ---------- ---------- 102,864 95,939 ---------- ---------- OPERATING INCOME 27,190 27,444 Allowance for other funds used during construction 637 278 Other income and expenses, net 206 (169) ---------- ---------- INCOME BEFORE INTEREST CHARGES 28,033 27,553 Interest charges, including amortization of debt expense, premium and discount 7,047 7,289 Allowance for borrowed funds used during construction 86 (807) ---------- ---------- NET INCOME 20,900 21,071 Preferred dividend requirements, net 521 515 ---------- ---------- NET INCOME APPLICABLE TO COMMON STOCK $ 20,379 $ 20,556 ========== ========== WEIGHTED AVERAGE COMMON SHARES Primary 22,452,482 22,433,451 Fully diluted 23,856,511 23,850,320 EARNINGS PER SHARE Primary $0.91 $0.92 Fully diluted $0.87 $0.88 CASH DIVIDENDS PAID PER SHARE $0.385 $0.375 The accompanying note is an integral part of the consolidated financial statements.
3 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. CONSOLIDATED STATEMENTS OF INCOME For the nine months ended September 30 (Unaudited)
(In thousands, except share and per share amounts) 1996 1995 ---------- ---------- OPERATING REVENUES $ 341,527 $ 303,854 ---------- ---------- OPERATING EXPENSES Fuel used for electric generation 94,285 86,442 Power purchased 41,375 17,599 Other operation 45,378 45,990 Maintenance 16,264 16,160 Depreciation 31,893 30,614 Taxes other than income taxes 23,085 22,390 Federal and state income taxes 23,744 22,331 ---------- ---------- 276,024 241,526 ---------- ---------- OPERATING INCOME 65,503 62,328 Allowance for other funds used during construction 941 1,176 Other income and expenses, net 492 249 ---------- ---------- INCOME BEFORE INTEREST CHARGES 66,936 63,753 Interest charges, including amortization of debt expense, premium and discount 21,959 22,084 Allowance for borrowed funds used during construction (496) (1,494) ---------- ---------- NET INCOME 45,473 43,163 Preferred dividend requirements, net 1,552 1,535 ---------- ---------- NET INCOME APPLICABLE TO COMMON STOCK $ 43,921 $ 41,628 ========== ========== WEIGHTED AVERAGE COMMON SHARES Primary 22,450,781 22,431,216 Fully diluted 23,856,339 23,850,043 EARNINGS PER SHARE Primary $1.96 $1.86 Fully diluted $1.89 $1.79 CASH DIVIDENDS PAID PER SHARE $1.145 $1.115 The accompanying note is an integral part of the consolidated financial statements.
4 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands) September 30, 1996 December 31, 1995 ------------------ ----------------- ASSETS Utility plant Property, plant and equipment $ 1,350,455 $ 1,319,815 Accumulated depreciation (467,383) (441,686) ------------- ---------------- 883,072 878,129 Construction work-in-progress 61,917 51,390 ------------- ---------------- Total utility plant, net 944,989 929,519 ------------- ---------------- Investments and other assets 8,739 8,097 ------------- ---------------- Current assets Cash and cash equivalents 22,405 20,621 Accounts receivable, net 23,036 17,075 Unbilled revenues 4,714 3,098 Fuel inventory, at average cost 9,116 8,699 Materials and supplies, at average cost 16,876 15,819 Prepayments and other current assets 2,811 2,501 ------------- ---------------- Total current assets 78,958 67,813 ------------- ---------------- Accumulated deferred federal and state income taxes 70,369 66,458 Prepayments 8,503 8,213 Regulatory assets and other deferred charges 163,722 185,934 ------------- ---------------- TOTAL ASSETS $ 1,275,280 $ 1,266,034 ============= ================ The accompanying note is an integral part of the consolidated financial statements. (Continued on next page)
5 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. CONSOLIDATED BALANCE SHEETS (Continued) (Unaudited)
(In thousands, except share amounts) September 30, 1996 December 31, 1995 ------------------ ----------------- CAPITALIZATION AND LIABILITIES Common shareholders' equity Common stock, $2 par value, authorized 50,000,000 shares, issued 22,748,854 and 22,745,104 shares at September 30, 1996 and December 31, 1995, respectively $ 45,498 $ 45,490 Premium on capital stock 113,503 113,444 Retained earnings 242,914 224,688 Treasury stock at cost, 307,042 and 318,446 shares at September 30, 1996 and December 31, 1995, respectively (6,228) (6,459) ------------- ---------------- 395,687 377,163 ------------- ---------------- Preferred stock, cumulative, $100 par value Not subject to mandatory redemption 30,280 30,519 Deferred compensation related to preferred stock held by ESOP (21,033) (22,595) ------------- ---------------- 9,247 7,924 Subject to mandatory redemption 6,570 6,610 ------------- ---------------- 15,817 14,534 ------------- ---------------- Long-term debt, net 345,850 360,822 ------------- ---------------- Total capitalization 757,354 752,519 ------------- ---------------- Current liabilities Short-term debt 31,497 23,062 Long-term debt due within one year 15,000 Accounts payable 29,742 51,087 Customer deposits 19,823 19,725 Taxes accrued 27,838 2,503 Interest accrued 2,773 8,909 Accumulated deferred fuel 4,579 3,651 Other current liabilities 2,516 2,343 ------------- ---------------- Total current liabilities 133,768 111,280 ------------- ---------------- Deferred credits Accumulated deferred federal and state income taxes 270,418 266,873 Accumulated deferred investment tax credits 31,816 33,173 Regulatory liabilities and other deferred credits 81,924 102,189 ------------- ---------------- Total deferred credits 384,158 402,235 ------------- ---------------- TOTAL CAPITALIZATION AND LIABILITIES $ 1,275,280 $ 1,266,034 ============= ================ The accompanying note is an integral part of the consolidated financial statements.
6 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30 (Unaudited)
(In thousands) 1996 1995 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 45,473 $ 43,163 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 32,722 31,533 Allowance for funds used during construction (1,437) (2,670) Amortization of investment tax credits (1,357) (1,361) Deferred income taxes 1,500 1,613 Deferred fuel costs 928 (954) (Gain) loss on disposition of utility plant, net 1 (20) Changes in assets and liabilities Accounts receivable, net (5,961) (9,722) Unbilled revenues (1,616) (4,313) Fuel inventory, materials and supplies (1,474) (263) Accounts payable (21,345) (15,087) Customer deposits 98 177 Other deferred accounts (244) (3,833) Taxes accrued 25,335 18,822 Interest accrued (6,136) (5,683) Other, net (1,792) 515 ---------- ---------- Net cash provided by operating activities 64,695 51,917 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to utility plant (46,227) (40,807) Allowance for funds used during construction 1,437 2,670 Sale of utility plant 420 515 Purchase of investments (200) (2,413) Sale of investments 445 12,632 ---------- ---------- Net cash used in investing activities (44,125) (27,403) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock 67 333 Reacquisition of common stock (2) Issuance of long-term debt 25,000 25,000 Retirement of long-term debt (25,000) (15,481) Increase in short-term debt, net 8,435 3,273 Redemption of preferred stock (40) (40) Dividends paid on common and preferred stock, net (27,246) (26,527) ---------- ---------- Net cash used in financing activities (18,786) (13,442) ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS 1,784 11,072 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,621 7,440 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 22,405 $ 18,512 ========== ========== Supplementary cash flow information Interest paid (net of amount capitalized) $ 27,339 $ 26,387 ========== ========== Income taxes paid $ 7,817 $ 14,540 ========== ========== The accompanying note is an integral part of the consolidated financial statements.
7 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. NOTE TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note A. Contingencies Teche Electric Cooperative, Inc. On March 31, 1996, the board of directors of Teche Electric Cooperative, Inc. (Teche) voted to extend the Purchase and Sale Agreement (Agreement) with the Company for an additional twelve months to allow for the Teche wholesale power contract with Cajun Electric Power Cooperative, Inc. (Cajun) to be resolved through Cajun's bankruptcy process. The Agreement calls for the purchase of all the assets of Teche by the Company for a purchase price, including the Company's assumption or other discharge of Teche's liabilities, of approximately $22.4 million. Consummation of the acquisition is subject to a number of conditions, including approval by the Louisiana Public Service Commission (LPSC), the Rural Utilities Service and other governmental agencies, successful resolution of Teche's wholesale power supply contract with Cajun and certain other conditions. Each plan of reorganization filed with the bankruptcy court in the Cajun bankruptcy includes a provision for the assignment or substitution of Teche's supply contract to or with the Company. This provision is subject to a number of approvals, including confirmation by the bankruptcy court. See Item 5 in Part II of this Report for additional information on Cajun's bankruptcy proceeding. LPSC Earnings Review The LPSC elected in 1993 to review the earnings of all electric, gas, water and telecommunications utilities regulated by it to determine whether the returns on equity of these companies may be higher than returns that might be awarded in the current economic environment. During 1994, earnings reviews of two of the four major Louisiana electric utilities were completed and small rate decreases were ordered. The LPSC began its review of the Company in August 1995. In October 1996, the LPSC approved a settlement of the Company's earnings review, providing for lower electricity rates to the Company's customers. The first rate decrease was effective November 1, 1996, with a second decrease scheduled for January 1, 1998. On November 1, 1996, the Company's annual base rate tariff for electric service was reduced by $3 million. In January 1998, the Company's annual base rate tariff for electric service will be reduced an additional $2 million. The terms of this settlement will be effective for a five-year period. During the five-year period which began November 1, 1996, a rate stabilization plan will be in place. This plan will allow the Company to retain all earnings equating to a return on equity up to and including 12.25% on its regulated utility operations. Any earnings over 12.25%, up to and including 13%, will be shared equally between the Company and its customers, which effectively provides the Company with the opportunity to realize a rate of return of up 8 to 12.625%. Any earnings above this level would be refunded fully to customers. During the five-year period, the Company's revenues and return on equity will be reviewed each year by the LPSC, beginning in 1997 through the year 2001. If the Company is found to be achieving a return on equity in any given year which requires a refund to customers, the refund will be made in the form of billing credits during the months of July, August and September following the evaluation period. During the five-year period, the Company will have the right to apply for a rate increase if a significant event affecting its earnings would justify it, such as regulatory or economic changes, major hurricane damage or other unforeseen circumstances. During the period, the Company will also be able to propose for LPSC consideration any revenue-neutral rate design changes it feels appropriate, such as revenue redistribution among customer classes which may be warranted. Also, during the period, the commission may amend or modify any of the settlement's terms should it determine changes are warranted by the public interest. Based on the earnings review's test year, which was the twelve months ending March 31, 1995, the $3 million reduction on November 1, 1996, is equivalent to a decrease in annual base revenues of about 1.2%, and the $2 million reduction scheduled for January 1, 1998, will reduce annual base revenues by approximately 0.8%, for a total reduction in annual base revenues of approximately 2% over the 14-month period. 9 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this Report, including, without limitation, the statements under "- Results of Operations," "-Financial Condition - Liquidity and Capital Resources," "-Financial Condition - Regulatory Matters" and Note A to the Consolidated Financial Statements located elsewhere in this Report regarding the Company's proposed Teche acquisition, the LPSC settlement, the Company's shelf registration statement, the effect of certain recent Federal Energy Regulatory Commission (FERC) regulations and other matters, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, such forward-looking statements are based on numerous assumptions (some of which may prove to be incorrect) and are subject to risks and uncertainties which could cause the actual results to differ materially from the Company's expectations. Such risks and uncertainties include, without limitation, the effects of competition in the power industry, legislative and regulatory changes affecting electric utilities, fluctuations in the weather and changes in general economic and business conditions, as well as other factors discussed in this and the Company's other filings with the Securities and Exchange Commission (Cautionary Statements). All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. RESULTS OF OPERATIONS Net income applicable to common stock totaled $20.4 million and $43.9 million, respectively, for the three- and nine-month periods ended September 30, 1996, as compared to $20.6 million and $41.6 million, respectively, for the corresponding periods in 1995. Net income per primary average common share was $0.91 and $1.96, respectively, for the three- and nine-month periods ended September 30, 1996, as compared to $0.92 and $1.86, respectively, for the same periods in 1995. The following principal factors contributed to these results: Operating revenues for the three months ended September 30, 1996 increased $6.7 million over the same period in 1995, primarily due to an increase in fuel cost recovery revenues, partially offset by the effect on base revenues of decreased kilowatt-hour sales to residential customers resulting from cooler summer weather in 1996. For the nine months ended September 30, 1996, operating revenues increased $37.6 million over the corresponding period in 1995, primarily due to an increase in fuel cost recovery revenues and the effect of increased kilowatt-hour sales related to customer growth. Third quarter 1996 fuel cost recovery revenues were $9.3 million, or 21.8%, higher than the third quarter of 1995, while such revenues for the nine months ended September 30, 1996 were $31.6 million, or 30.9%, higher than the same period in 1995. These increases are primarily attributable to higher natural gas prices in effect 10 during 1996, as compared to 1995, which resulted in higher generation costs and increased purchased power. Changes in fuel cost have historically had no effect on net income, as fuel costs are generally recovered through a fuel cost adjustment clause that enables the Company to pass on to customers substantially all changes in the cost of generating fuel and purchased power. These adjustments are audited monthly and regulated by the LPSC (about 99% of the total fuel cost adjustment) while the remaining portion, regulated by the FERC, is audited periodically for several years at a time. Until approval is received, the adjustments are subject to refund. Base revenues decreased $2.6 million for the three months ended September 30, 1996, as compared to the corresponding period in 1995. The decrease in base revenues is attributtable to a decline in kilowatt-hour sales to residential customers resulting from cooler summer weather in 1996. For the nine months ended September 30, 1996 base revenues increased $6.0 million as compared to the same period in 1995. The increase in base revenues result from an increase in sales to commercial and industrial customers, primarily attributable to increased usage by the Company's largest industrial customer. For the three months ended September 30, 1996, kilowatt-hour sales to regular customers decreased 2.8% compared to the same period in 1995 due to cooler summer weather. For the nine months ended September 30, 1996, kilowatt-hour sales to regular customers increased 2.6% over the corresponding period in 1995 due to a colder winter in the first quarter of 1996, offset partially by milder temperatures in the third quarter of this year. Operating expenses increased $6.9 million, or 7.2%, and $34.5 million, or 14.3%, respectively, for the three- and nine-month periods ended September 30, 1996 compared to the same periods in 1995. The increase in operating expenses for the three and nine months ended September 30, 1996 is primarily due to increased fuel and purchased power costs, depreciation expense and taxes other than income taxes. For the three months ended September 30, 1996, these same expenses were offset by a decrease in other operation and maintenance expenses; but for the nine months ended September 30, 1996, an increase in federal and state income taxes also contributed to the overall increase in operation expenses. The increase in the cost of fuel used for electric generation is attributable primarily to the higher cost of natural gas in 1996, compared to the cost of natural gas in 1995. The Company purchases electric energy from neighboring utilities when the price of the energy purchased is less than the cost to the Company of generating such energy from its own facilities. For the quarter and nine months ended September 30, 1996, 25% and 30%, respectively, of the Company's energy requirements were met with purchased power, compared to 9% and 15%, respectively, for the corresponding periods in 1995. The increase in purchased power resulted from the colder weather experienced during the first quarter of 1996, from scheduled outages of certain of the Company's generating units and from economy energy purchases. For the three months ended September 30, 1996, other operation expenses decreased $2.9 million compared to the same period in 1995, primarily due to a decline in co-op acquisition costs incurred by the Company in 1996, and a lower employee incentive plan expense in the third quarter of 1996 as compared to the employee incentive plan expense in the third quarter of 1995. Although other operation expenses remained relatively constant for the nine months ended September 30, 1996 compared to the same period in 1995, other operation expenses decreased as a result of lower co-op acquistion costs partially offset by an increase in consulting services related to the future implication of FERC Orders Nos. 888 and 889 (See "Financial Conditions - Regulatory Matters"). The $0.4 million decrease in maintenance expenses for the three months ended September 30, 1996 11 compared to the same period in 1995 resulted from an increased effort by the Company in 1995 relating to right-of-way reclearing activities. The increase in taxes other than income taxes of $0.4 million and $0.7 million, respectively, for the three and nine months ended September 30, 1996 over the corresponding periods in 1995, was from higher municipal franchise fees associated with the increase in revenues and the result of higher ad valorem taxes associated with property additions. For the three and nine months ended September 30, 1996, depreciation expense increased over the corresponding periods in 1995 as a result of property additions. Federal and state income taxes increased $1.4 million for the nine months ended September 30, 1996 over the same period in 1995 as the result of higher taxable income in 1996. Settlement of LPSC Earnings Review In October 1996, the LPSC approved a settlement of the Company's earnings review. The settlement reduces the Company's annual base rate tariff for electric service by $3 million as of November 1, 1996 and by an additional $2 million on January 1, 1998. The terms of this settlement will be effective for a five-year period. See Note A to the consolidated financial statements in Part I of this Report for additional information on the settlement. FINANCIAL CONDITION Liquidity and Capital Resources At September 30, 1996 and 1995, the Company had $31.5 million and $32.3 million, respectively, of short-term debt outstanding in the form of commercial paper borrowings and bank loans. The Company has a $100 million revolving credit facility which provides support for the issuance of commercial paper and working capital needs. Uncommitted lines of credit with banks totaling $20 million are also available to meet short-term working capital needs. Additionally, at September 30, 1996, an unregulated subsidiary of the Company had $19.0 million of cash and temporary cash investments in securities with original maturities of 90 days or less. The Company participates in a program where up to $35 million of its receivables can be sold on an ongoing basis. The amount of receivables that may be sold at any time depends upon seasonal fluctuations in the amount of eligible receivables. As of September 30, 1996, the Company had sold $35 million of eligible receivables. The Financial Accounting Standards Board recently released Statement of Financial Accounting Standards No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS No. 125). The Company is currently evaluating the effects, if any, SFAS No. 125 may have on the Company's accounting for sales of its receivables and whether or not to discontinue participation in this program. On August 15, 1996, the Company redeemed $25 million aggregate principal amount of the $50 million aggregate principal amount outstanding of its Series Y, 9-5/8% First Mortgage Bonds, due July 15, 2021, at a redemption price of 107.22% of the principal amount redeemed, plus accrued interest to the redemption date. The Company issued short-term debt to fund the redemption of the bonds. 12 The Company has filed a shelf registration statement with the Securities and Exchange Commission (SEC) registering for future issuance $200 million aggregate principal amount of medium-term notes. The LPSC has authorized the issuance of the medium-term notes. The issuance of the notes is subject to the SEC's declaring the registration statement effective, which the Company expects to request prior to December 31, 1996. Regulatory Matters On April 24, 1996, the FERC issued two related final rules and a Notice of Proposed Rulemaking (NOPR) to advance the transition to a fully-competitive wholesale electric power market. The two final rules address industry issues of open access transmission and recovery of stranded costs and the functional unbundling of transmission operations from wholesale electricity marketing. Portions of these new rules became effective on July 9, 1996. The NOPR proposes to establish a new method for utilities to reserve capacity on their own and others' transmission lines. Order No. 888, a final rule, requires open access transmission by all public utilities that own, operate or control transmission lines. Each such utility was required to have on file, by July 9, 1996, a non-discriminatory open access tariff that offers other utilities the same transmission services such utilities provide themselves, under comparable terms and conditions. The Company filed its open access tariff and proposed rate schedule with the FERC on July 8, 1996. The FERC accepted the Company's tariff and allowed its proposed rates to go into effect, subject to refund, on July 9, but has set all rates for hearing under its standard review procedures. Utilities must take transmission service for their own wholesale transactions under the terms and conditions of their open access tariffs as of July 9 for any new transactions, and as of January 1, 1997, for all short-term inter-utility transactions under bilateral contracts entered into prior to July 9, 1996. The second part of Order No. 888 provides for the full recovery from a utility's departing customers of wholesale stranded costs to the extent such costs were prudently incurred to serve wholesale customers and could go unrecovered if those customers use open access transmission service to move to another supplier. The Order also allows customers under existing wholesale contracts to seek FERC approval to modify their contracts on a case-by-case basis. The Company has three wholesale customers, which represented 1.0% of its sales to regular customers for the twelve months ended September 30, 1996. Management cannot predict what, if any, effects Order No. 888 may have on wholesale prices in the Company's service area. Order No. 889, a final rule, required public utilities to implement standards of conduct and an Open Access Same-time Information System (OASIS) by November 1, 1996. On September 20, 1996, the FERC amended this order to delay its implementation until January 3, 1997. The OASIS rule applies to any public utility that offers transmission services under an open access tariff. Under this Order, transmission providers are required to: (1) establish or participate in an OASIS that meets certain requirements and (2) comply with prescribed standards of conduct which will prevent employees of a public utility (or any of its affiliates) engaged in wholesale power marketing functions from obtaining preferential access to information regarding operation and use of the transmission system. 13 PART II OTHER INFORMATION Item 5. OTHER INFORMATION New Director During the third quarter, the board of directors of the Company elected William H. Walker, Jr. of New Orleans, Louisiana as a Class II director of the Company for a three-year term ending at the Company's 1999 annual meeting of shareholders. Mr. Walker is president of Howard, Weil, Labouisse, Friedrichs Inc., an investment banking firm headquartered in New Orleans, Louisiana. Mr. Walker joined Howard, Weil, Labouisse, Friedrichs Inc. in 1976 and was named president in 1990. Cajun Electric Power Cooperative, Inc. (Cajun) Cajun, which provides power to Louisiana's electric distribution cooperatives, including Teche, is in bankruptcy. On March 8, 1996, the Company, along with another company, submitted a joint bid for Cajun's nonnuclear generation assets and wholesale contracts. In early April, the Company learned that its joint bid was not selected by the bankruptcy trustee as the lead proposal in the process to develop a reorganization plan for Cajun. Subsequently, several plans of reorganization were filed with the bankruptcy court, including a plan sponsored by the trustee. Each of the alternative plans currently proposed for confirmation includes a provision for the assignment of Teche's wholesale power supply contract to the Company or the substitution of a new wholesale power contract between Cajun and the Company. This provision is subject to a number of approvals, including confirmation by the bankruptcy court. The Company will continue to work with the bankruptcy trustee for the successful resolution of Teche's wholesale power supply contract with Cajun prior to confirmation of a bankruptcy plan. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11 Computation of Net Income Per Common Share for the three and nine months ended September 30, 1996 and September 30, 1995 12 Computation of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends for the twelve months ended September 30, 1996 15 Awareness letter, dated November 13, 1996, from Coopers & Lybrand L.L.P. regarding review of the unaudited interim financial statements 27 Financial Data Schedule 14 (b) Reports on Form 8-K During the three-month period ended September 30, 1996, the Company filed no Current Reports on Form 8-K. 15 SIGNATURE 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. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. (Registrant) BY: /s/ John L. Baltes, Jr. ------------------------------------- John L. Baltes, Jr. Controller (Chief Accounting Officer) Date: November 14, 1996 16 EX-11 2 NET INCOME PER COMMON SHARE CENTRAL LOUISIANA ELECTRIC COMPANY, INC. COMPUTATION OF NET INCOME PER COMMON SHARE For the three months ended September 30, (Unaudited)
(In thousands, except share and per share amounts) 1996 1995 ---------- ---------- PRIMARY Net income applicable to common stock $ 20,379 $ 20,556 ========== ========== Weighted average number of shares of common stock outstanding during the period 22,441,812 22,421,208 Common stock under stock option grants 10,670 12,243 ---------- ---------- Average shares 22,452,482 22,433,451 ========== ========== Primary net income per common share $ 0.91 $ 0.92 ========== ========== FULLY DILUTED Net income applicable to common stock $ 20,379 $ 20,556 Adjustments to net income related to Employee Stock Ownership Plan (ESOP) under the "if-converted" method: Add loss of deduction from net income for actual dividends paid on convertible preferred stock, net of tax 365 369 Deduct additional cash contribution required which is equal to dividends on preferred stock less dividends paid at the common dividend rate, net of tax (33) (42) Add tax benefit associated with dividends paid on allocated common shares 60 48 ---------- ---------- Adjusted income applicable to common stock $ 20,771 $ 20,931 ========== ========== Weighted average number of shares of common stock outstanding during the period 22,441,812 22,421,208 Number of equivalent common shares attributable to ESOP 1,404,029 1,415,515 Common stock under stock option grants 10,670 13,597 ---------- ---------- Average shares 23,856,511 23,850,320 ========== ========== Fully diluted net income per common share $ 0.87 $ 0.88 ========== ==========
CENTRAL LOUISIANA ELECTRIC COMPANY, INC. COMPUTATION OF NET INCOME PER COMMON SHARE For the nine months ended September 30, (Unaudited)
(In thousands, except share and per share amounts) 1996 1995 ---------- ---------- PRIMARY Net income applicable to common stock $ 43,921 $ 41,628 ========== ========== Weighted average number of shares of common stock outstanding during the period 22,439,941 22,419,248 Common stock under stock option grants 10,840 11,968 ---------- ---------- Average shares 22,450,781 22,431,216 ========== ========== Primary net income per common share $ 1.96 $ 1.86 ========== ========== FULLY DILUTED Net income applicable to common stock $ 43,921 $ 41,628 Adjustments to net income related to Employee Stock Ownership Plan (ESOP) under the "if-converted" method: Add loss of deduction from net income for actual dividends paid on convertible preferred stock, net of tax 1,097 1,106 Deduct additional cash contribution required which is equal to dividends on preferred stock less dividends paid at the common dividend rate, net of tax (107) (134) Add tax benefit associated with dividends paid on allocated common shares 170 132 ---------- ---------- Adjusted income applicable to common stock $ 45,081 $ 42,732 ========== ========== Weighted average number of shares of common stock outstanding during the period 22,439,941 22,419,248 Number of equivalent common shares attributable to ESOP 1,405,558 1,416,614 Common stock under stock option grants 10,840 14,181 ---------- ---------- Average shares 23,856,339 23,850,043 ========== ========== Fully diluted net income per common share $ 1.89 $ 1.79 ========== ==========
EX-12 3 EARNINGS TO FIXED CHARGES CENTRAL LOUISIANA ELECTRIC COMPANY, INC. COMPUTATION OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS For the twelve months ended September 30, 1996 (Unaudited)
(In thousands, except ratios) ------------------ Earnings $ 51,013 Income taxes 26,642 ------------------ Earnings from continuing operations before income taxes $ 77,655 ------------------ Fixed charges Interest, long-term debt 25,376 Interest, other (including interest on short-term debt) 2,586 Amortization of debt expense, premium, net 1,144 Portion of rentals representative of an interest factor 664 ------------------ Total fixed charges $ 29,770 ------------------ Earnings from continuing operations before income taxes and fixed charges $ 107,425 ================== Ratio of earnings to fixed charges 3.61x ================== Fixed charges from above $ 29,770 Preferred stock dividends* 2,930 ------------------ Total fixed charges and preferred stock dividends $ 32,700 ================== Ratio of earnings to combined fixed charges and preferred stock dividends 3.29x ================== * Preferred stock dividends multiplied by the ratio of pretax income to net income.
EX-15 4 AWARENESS LETTER Coopers Coopers & Lybrand L.L.P. 639 Loyola Avenue telephone (504) 529-2700 a professional services firm Suite 1800 facsmile (504) 529-1439 & Lybrand New Orleans, LA 70113 November 13, 1996 Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Central Louisiana Electric Company, Inc. Registrations On Form S-8 (Nos. 2-79671, 33-10169, 33-38362 and 33-44663) and Form S-3 (Nos. 33-24895, 33-62950 and 333-02895) We are aware that our report dated November 1, 1996 on our review of the interim financial information of Central Louisiana Electric Company, Inc. as of September 30, 1996 and for the three-month and nine-month periods ended September 30, 1996, and 1995 included in this Form 10-Q is incorporated by reference in the above mentioned registration statements. Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the registration statements prepared or certified by us within the meaning of Sections 7 and 11 of that Act. Coopers & Lybrand L.L.P. Coopers & Lybrand L.L.P., a registered limited liability partnership, is member of Coopers & Lybrand international. EX-27 5 FINANCIAL DATA SCHEDULE UT WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
UT This schedule contains summary financial information extracted from the Company's financial statements and is qualified in its entirety by reference to such financial statements. 1,000 PERIOD-TYPE 9-MOS FISCAL-YEAR-END Dec-31-1996 PERIOD-START Jan-01-1996 PERIOD-END Sep-30-1996 BOOK-VALUE PER-BOOK TOTAL-NET-UTILTIY-PLANT $ 944,989 OTHER-PROPERTY-AND-INVEST $ 8,739 TOTAL-CURRENT-ASSETS $ 78,958 TOTAL-DEFERRED-CHARGES $ 234,091 OTHER-ASSETS $ 8,503 TOTAL-ASSETS $ 1,275,280 COMMON $ 45,498 CAPITAL-SURPLUS-PAID-IN $ 107,275 RETAINED-EARNINGS $ 242,914 TOTAL-COMMON-STOCKHOLDERS-EQ $ 395,687 PREFERRED-MANDATORY $ 6,570 PREFERRED $ 9,247 LONG-TERM-DEBT-NET $ 145,850 SHORT-TERM-NOTES $ 0 LONG-TERM-NOTES-PAYABLE $ 200,000 COMMERCIAL-PAPER-OBLIGATIONS $ 31,497 LONG-TERM-DEBT-CURRENT-PORT $ 15,000 PREFERRED-STOCK-CURRENT $ 0 CAPITAL-LEASE-OBLIGATIONS $ 0 LEASES-CURRENT $ 0 OTHER-ITEMS-CAPITAL-AND-LIAB $ 471,429 TOT-CAPITALIZATION-AND-LIAB $ 1,275,280 GROSS-OPERATING-REVENUE $ 341,527 INCOME-TAX-EXPENSE $ 23,744 OTHER-OPERATING-EXPENSES $ 252,280 TOTAL-OPERATING-EXPENSES $ 276,024 OPERATING-INCOME-LOSS $ 65,503 OTHER-INCOME-NET $ 1,433 INCOME-BEFORE-INTEREST-EXPEN $ 66,936 TOTAL-INTEREST-EXPENSE $ 21,463 NET-INCOME $ 45,473 PREFERRED-STOCK-DIVIDENDS $ 1,552 EARNINGS-AVAILABLE-FOR-COMM $ 43,921 COMMON-STOCK-DIVIDENDS $ 25,695 TOTAL-INTEREST-ON-BONDS $ 9,932 CASH-FLOW-OPERATIONS $ 64,695 EPS-PRIMARY $ 1.96 EPS-DILUTED $ 1.89
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