-----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, JF4/AAGUErNfYfn4BxvRHS4/0J0Z3b9TpmP+xuwa42aanAn8VhTvLNFeflLM04l7 A5T7tUabwhDjTfczLljK+w== 0000020290-98-000009.txt : 19980518 0000020290-98-000009.hdr.sgml : 19980518 ACCESSION NUMBER: 0000020290-98-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINCINNATI GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000020290 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 310240030 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01232 FILM NUMBER: 98622272 BUSINESS ADDRESS: STREET 1: 139 E FOURTH ST ROOM 362-ANNEX CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5133812000 10-Q 1 1ST QUARTER 10-Q CG&E UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address, and Telephone Number Identification No. 1-11377 CINERGY CORP. 31-1385023 (A Delaware Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 381-2000 1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030 (An Ohio Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 381-2000 1-3543 PSI ENERGY, INC. 35-0594457 (An Indiana Corporation) 1000 East Main Street Plainfield, Indiana 46168 (317) 839-9611 2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080 (A Kentucky Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 381-2000 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 This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants. The Union Light, Heat and Power Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its company specific information with the reduced disclosure format. As of April 30, 1998, shares of Common Stock outstanding for each registrant were as listed: Company Shares Cinergy Corp., par value $.01 per share 157,764,020 The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086 PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701 The Union Light, Heat and Power Company, par value $15.00 per share 585,333 TABLE OF CONTENTS Item Page Number Number Glossary of Terms . . . . . . . . . . . . . . . . . . . 3 PART I. FINANCIAL INFORMATION 1 Financial Statements Cinergy Corp. Consolidated Balance Sheets . . . . . . . . . . . . . 6 Consolidated Statements of Income . . . . . . . . . . 8 Consolidated Statements of Changes in Common Stock Equity. . . . . . . . . . . . . . . . . . . . 9 Consolidated Statements of Cash Flows . . . . . . . . 11 Results of Operations . . . . . . . . . . . . . . . . 12 The Cincinnati Gas & Electric Company Consolidated Balance Sheets . . . . . . . . . . . . . 20 Consolidated Statements of Income and Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . 22 Consolidated Statements of Cash Flows . . . . . . . . 23 Results of Operations . . . . . . . . . . . . . . . . 24 PSI Energy, Inc. Consolidated Balance Sheets . . . . . . . . . . . . . 28 Consolidated Statements of Income and Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . 30 Consolidated Statements of Cash Flows . . . . . . . . 31 Results of Operations . . . . . . . . . . . . . . . . 32 The Union Light, Heat and Power Company Balance Sheets. . . . . . . . . . . . . . . . . . . . 35 Statements of Income. . . . . . . . . . . . . . . . . 37 Statements of Cash Flows. . . . . . . . . . . . . . . 38 Results of Operations . . . . . . . . . . . . . . . . 39 Notes to Financial Statements . . . . . . . . . . . . . 41 2 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 46 3 Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . 49 PART II. OTHER INFORMATION 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . 49 4 Submission of Matters to a Vote of Security Holders . . 49 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 50 Signature . . . . . . . . . . . . . . . . . . . . . . . 52 GLOSSARY OF TERMS The following abbreviations or acronyms used in the text of this combined Form 10-Q are defined below: TERM DEFINITION 1997 Form Combined 1997 Annual Report on Form 10-K filed separately by 10-K Cinergy, CG&E, PSI, and ULH&P Avon Energy Avon Energy Partners Holdings, an Unlimited Liability Company and its wholly-owned subsidiary Avon Energy Partners PLC, a Limited Liability Company CERCLA Comprehensive Environmental Response, Compensation and Liability Act CFC National Rural Utilities Cooperative Finance Corporation CG&E The Cincinnati Gas & Electric Company (a subsidiary of Cinergy) Cinergy or Cinergy Corp. Company Cinergy UK Cinergy UK, Inc., formerly M.E. Holdings, Inc., (a subsidiary of Cinergy Investments, Inc.) which holds Cinergy's 50% investment in Avon Energy Committed Lines Unsecured lines of credit December 1996 A PUCO order issued in December 1996 on CG&E's gas rate Order proceeding December 1996 An Indiana Utility Regulatory Commission order issued in DSM Order December 1996 on PSI's DSM proceeding DSM Demand-side management Enertech Enertech Associates, Inc., formerly named Power International, Inc. (a subsidiary of Cinergy Investments, Inc.) EPA United States Environmental Protection Agency EPS Earnings per share February 1995 An Indiana Utility Regulatory Commission order issued in Order February 1995 HB 443 Customer choice bill introduced by the House Chairman of the Tourism, Development and Energy Committee in Kentucky HJR House Joint Resolution, which calls for an executive task force to study electricity restructuring in Kentucky kwh Kilowatt-hour GLOSSARY OF TERMS (Continued) TERM DEFINITION IDEM Indiana Department of Environmental Management IGC Indiana Gas Company, Inc., formerly Indiana Gas and Water Company, Inc. Investments Cinergy Investments, Inc. (a subsidiary of Cinergy) IRS Internal Revenue Service Mcf Thousand cubic feet MGP Manufactured gas plant Midlands Midlands Electricity plc NIPSCO Northern Indiana Public Service Company PSI PSI Energy, Inc. (a subsidiary of Cinergy) PUCO Public Utilities Commission of Ohio RUS Rural Utilities Service September 1996 An Indiana Utility Regulatory Commission order issued in Order September 1996 on PSI's retail rate proceeding Statement 130 Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ULH&P The Union Light, Heat and Power Company (a wholly-owned subsidiary of CG&E) Uncommitted Short-term borrowings with various banks arranged on an Lines "as offered" basis WVPA Wabash Valley Power Association, Inc. Zimmer CG&E's William H. Zimmer Generating Station CINERGY CORP. AND SUBSIDIARY COMPANIES CINERGY CORP. CONSOLIDATED BALANCE SHEETS ASSETS March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Utility Plant - Original Cost In service Electric $9,014,797 $8,981,182 Gas 753,311 746,903 Common 186,631 186,078 ---------- ---------- 9,954,739 9,914,163 Accumulated depreciation 3,860,682 3,800,322 ---------- ---------- 6,094,057 6,113,841 Construction work in progress 194,042 183,262 ---------- ---------- Total utility plant 6,288,099 6,297,103 Current Assets Cash and temporary cash investments 58,731 53,310 Restricted deposits 2,348 2,319 Accounts receivable less accumulated provision for doubtful accounts of $10,349 at March 31, 1998, and $10,382 at December 31, 1997 519,396 413,626 Materials, supplies, and fuel - at average cost Fuel for use in electric production 68,292 57,916 Gas stored for current use 12,232 29,174 Other materials and supplies 77,972 76,066 Prepayments and other 47,291 38,171 ---------- ---------- 786,262 670,582 Other Assets Regulatory assets Amounts due from customers - income taxes 383,314 374,456 Post-in-service carrying costs and deferred operating expenses 176,531 178,504 Coal contract buyout costs 117,964 122,485 Deferred demand-side management costs 101,958 109,596 Deferred merger costs 89,015 90,346 Phase-in deferred return and depreciation 85,960 89,689 Unamortized costs of reacquiring debt 65,941 66,242 Other 46,592 45,533 Investments in unconsolidated subsidiaries 580,269 537,720 Other 274,092 275,897 ---------- ---------- 1,921,636 1,890,468 $8,995,997 $8,858,153 The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements. CINERGY CORP. CAPITALIZATION AND LIABILITIES March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Common Stock Equity Common stock - $.01 par value; authorized shares - 600,000,000; outstanding shares - 157,764,020 at March 31, 1998, and 157,744,658 at December 31, 1997 $ 1,578 $ 1,577 Paid-in capital 1,574,080 1,573,064 Retained earnings 1,002,495 967,420 Accumulated other comprehensive income (3,279) (2,861) ---------- ---------- Total common stock equity 2,574,874 2,539,200 Cumulative Preferred Stock of Subsidiaries Not subject to mandatory redemption 92,752 177,989 Long-term Debt 2,032,156 2,150,902 ---------- ---------- Total capitalization 4,699,782 4,868,091 Current Liabilities Long-term debt due within one year 145,000 85,000 Notes payable and other short-term obligations 1,222,795 1,114,028 Accounts payable 558,021 488,716 Accrued taxes 218,251 187,033 Accrued interest 40,342 46,622 Other 98,740 79,193 ---------- ---------- 2,283,149 2,000,592 Other Liabilities Deferred income taxes 1,233,505 1,248,543 Unamortized investment tax credits 163,850 166,262 Accrued pension and other postretirement benefit costs 307,373 297,142 Other 308,338 277,523 ---------- ---------- 2,013,066 1,989,470 $8,995,997 $8,858,153
CINERGY CORP. CONSOLIDATED STATEMENTS OF INCOME (unaudited) Quarter Ended Twelve Months Ended March 31 March 31 1998 1997 1998 1997 (in thousands, except per share amounts) Operating Revenues Electric $1,158,724 $ 817,914 $4,202,508 $2,901,780 Gas 173,061 212,266 451,940 487,145 ---------- ---------- ---------- ---------- 1,331,785 1,030,180 4,654,448 3,388,925 Operating Expenses Fuel used in electric production 180,519 175,746 698,208 697,544 Gas purchased 96,611 123,968 238,801 279,859 Purchased and exchanged power 471,885 160,592 1,530,651 291,809 Other operation 163,028 163,412 637,561 615,712 Maintenance 39,066 45,854 169,683 196,120 Depreciation 73,305 71,556 290,826 284,124 Amortization of phase-in deferrals 5,539 3,371 15,651 13,569 Amortization of post-in-service deferred operating expenses - net 1,091 1,091 4,362 425 Income taxes 70,791 63,919 255,809 208,205 Taxes other than income taxes 69,649 68,372 266,301 260,450 ---------- ---------- ---------- ---------- 1,171,484 877,881 4,107,853 2,847,817 Operating Income 160,301 152,299 546,595 541,108 Other Income and Expenses - Net Allowance for equity funds used during construction 21 191 (72) 1,065 Post-in-service carrying costs - - - 880 Phase-in deferred return 1,811 2,002 7,817 8,281 Equity in earnings of unconsolidated subsidiaries 11,854 26,500 45,746 51,930 Income taxes 13,342 791 48,488 17,109 Other - net (19,031) (2,627) (47,906) (35,415) ---------- ---------- ---------- ---------- 7,997 26,857 54,073 43,850 Income Before Interest and Other Charges 168,298 179,156 600,668 584,958 Interest and Other Charges Interest on long-term debt 43,758 49,275 176,255 190,757 Other interest 17,994 13,867 64,074 42,165 Allowance for borrowed funds used during construction (1,947) (1,342) (6,005) (6,387) Preferred dividend requirements of subsidiaries 2,422 3,239 11,752 19,650 ---------- ---------- ---------- ---------- 62,227 65,039 246,076 246,185 Net Income Before Extraordinary Item $ 106,071 $ 114,117 $ 354,592 $ 338,773 Extraordinary Item - Equity Share of Windfall Profits Tax (Less Applicable Income Taxes of $0) - - (109,400) - ---------- ---------- ---------- ---------- Net Income $ 106,071 $ 114,117 $ 245,192 $ 338,773 Average Common Shares Outstanding 157,764 157,679 157,706 157,679 Earnings Per Common Share (Note 9) Net income before extraordinary item $.67 $.72 $2.24 $2.02 Net income $.67 $.72 $1.55 $2.02 Earnings Per Common Share - Assuming Dilution (Note 9) Net income before extraordinary item $.67 $.72 $2.23 $2.01 Net income $.67 $.72 $1.54 $2.01 Dividends Declared Per Common Share $.45 $.45 $1.80 $1.76 The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
CINERGY CORP. CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (dollars in thousands) (unaudited) Accumulated Other Total Total Common Paid-in Retained Comprehensive Comprehensive Common Stock Stock Capital Earnings Income Income Equity Quarter Ended March 31, 1998 Balance January 1, 1998 $1,577 $1,573,064 $ 967,420 $(2,861) $2,539,200 Comprehensive income Net income 106,071 $106,071 106,071 Other comprehensive income, net of tax Foreign currency translation adjustment (367) (367) Minimum pension liability adjustment (51) (51) -------- Other comprehensive income total (418) (418) -------- Comprehensive income total $105,653 Issuance of 19,362 shares of common stock - net 1 289 290 Treasury shares purchased (1) (1,430) (1,431) Treasury shares reissued 1 2,149 2,150 Dividends on common stock (see page 8 for per share amounts) (70,994) (70,994) Other 8 (2) 6 ------ ---------- ---------- ------- ---------- Balance March 31, 1998 $1,578 $1,574,080 $1,002,495 $(3,279) $2,574,874 Quarter Ended March 31, 1997 Balance at January 1, 1997 $1,577 $1,590,735 $ 993,526 $(1,384) $2,584,454 Comprehensive income Net income 114,117 $114,117 114,117 Other comprehensive income, net of tax Foreign currency translation adjustment (1,035) (1,035) -------- Other comprehensive income total (1,035) (1,035) -------- Comprehensive income total $113,082 ======== Treasury shares purchased (7) (31,947) (31,954) Treasury shares reissued 7 21,134 21,141 Dividends on common stock (see page 8 for per share amounts) (71,000) (71,000) Other 12 12 ------ ---------- ---------- ------- ---------- Balance March 31, 1997 $1,577 $1,579,934 $1,036,643 $(2,419) $2,615,735
CINERGY CORP. CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (CONTINUED) (dollars in thousands) (unaudited) Accumulated Other Total Total Common Paid-in Retained Comprehensive Comprehensive Common Stock Stock Capital Earnings Income Income Equity Twelve Months Ended March 31, 1998 Balance April 1, 1997 $1,577 $1,579,934 $1,036,643 $(2,419) $2,615,735 Comprehensive income Net income 245,192 $245,192 245,192 Other comprehensive income, net of tax Foreign currency translation adjustment 273 273 Minimum pension liability adjustment (1,133) (1,133) -------- Other comprehensive income total (860) (860) -------- Comprehensive income total $244,332 Issuance of 84,891 shares of common stock - net 1 2,355 2,356 Treasury shares purchased (5) (15,682) (15,687) Treasury shares reissued 5 7,744 7,749 Dividends on common stock (see page 8 for per share amounts) (283,860) (283,860) Other (271) 4,520 4,249 ------ ---------- ---------- ------- ---------- Balance March 31, 1998 $1,578 $1,574,080 $1,002,495 $(3,279) $2,574,874 Twelve Months Ended March 31, 1997 Balance at April 1, 1996 $1,577 $1,595,435 $ 993,632 $(1,074) $2,589,570 Comprehensive income Net income 338,773 $338,773 338,773 Other comprehensive income, net of tax Foreign currency translation adjustment (1,166) (1,166) Minimum pension liability adjustment (179) (179) -------- Other comprehensive income total (1,345) (1,345) -------- Comprehensive income total $337,428 ======== Treasury shares purchased (10) (40,717) (40,727) Treasury shares reissued 10 25,548 25,558 Costs of reacquisition of preferred stock of subsidiary (18,391) (18,391) Dividends on common stock (see page 8 for per share amounts) (277,559) (277,559) Other (332) 188 (144) ------ ---------- ---------- ------- ---------- Balance March 31, 1997 $1,577 $1,579,934 $1,036,643 $(2,419) $2,615,735 The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
CINERGY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Year to Date Twelve Months Ended March 31 March 31 1998 1997 1998 1997 (in thousands) Operating Activities Net income $106,071 $114,117 $245,192 $338,773 Items providing or (using) cash: Depreciation 73,305 71,556 290,826 284,124 Deferred income taxes and investment tax credits - net (12,955) (6,889) 61,572 24,045 Equity in earnings of unconsolidated subsidiaries (11,854) (26,500) (20,593) (51,930) Extraordinary item - equity share of windfall profits tax - - 109,400 - Allowance for equity funds used during construction (21) (191) 72 (1,065) Regulatory assets - net 20,915 21,599 70,626 41,922 Changes in current assets and current liabilities Restricted deposits (29) (2) (625) (336) Accounts receivable, net of reserves on receivables sold (106,525) (8,498) (315,184) (19,527) Materials, supplies, and fuel 4,660 30,699 (4,222) 45,535 Accounts payable 69,305 (60,734) 313,335 (36,128) Litigation settlement - - - (80,000) Accrued taxes and interest 24,938 52,412 (48,888) 29,121 Other items - net 25,596 (21,239) 79,010 68,573 -------- -------- -------- -------- Net cash provided by operating activities 193,406 166,330 780,521 643,107 Financing Activities Issuance of common stock 290 - 2,356 - Issuance of long-term debt 98,901 - 198,963 150,217 Retirement of preferred stock of subsidiaries (85,229) (25) (101,473) (212,507) Redemption of long-term debt (160,291) (61,880) (434,723) (148,774) Change in short-term debt 108,767 26,560 274,018 668,477 Dividends on common stock (70,802) (71,000) (283,668) (277,559) -------- -------- -------- -------- Net cash (used in) or provided by financing activities (108,364) (106,345) (344,527) 179,854 Investing Activities Construction expenditures (less allowance for equity funds used during construction) (66,348) (58,909) (335,494) (332,162) Deferred demand-side management costs (3,615) (5,109) (18,373) (39,718) Investments in unconsolidated subsidiaries (9,658) - (38,690) (503,349) -------- -------- -------- -------- Net cash used in investing activities (79,621) (64,018) (392,557) (875,229) Net increase (decrease) in cash and temporary cash investments 5,421 (4,033) 43,437 (52,268) Cash and temporary cash investments at beginning of period 53,310 19,327 15,294 67,562 -------- -------- -------- -------- Cash and temporary cash investments at end of period $ 58,731 $ 15,294 $ 58,731 $ 15,294 The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
CINERGY CORP. Below is information concerning the consolidated results of operations for Cinergy for the quarter and twelve months ended March 31, 1998. For information concerning the results of operations for each of the other registrants for the same quarter, see the discussion under the heading "Results of Operations" following the financial statements of each such registrant. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 Kwh Sales Increased activity in Cinergy's power marketing and trading operations, for the quarter ended March 31, 1998, led to higher non-firm power sales for resale and significantly contributed to the increase in total kwh sales of 72%, as compared to the same period of 1997. An increase in retail sales, which reflects higher industrial sales and an increased average number of residential and commercial customers, was partially offset by a decline in residential sales as a result of milder weather during the first quarter of 1998 as compared to the first quarter of 1997. Increased industrial sales primarily reflected growth in the primary metals sector. Mcf Sales and Transportation Mcf gas sales and transportation volumes for the first quarter of 1998 decreased 7.3%, as compared to the same period in 1997. Decreased residential and commercial sales, reflecting the milder weather during the first quarter of 1998, were slightly offset by an increase in the average number of customers. Higher gas transportation volumes reflect the continued trend of customers purchasing gas directly from suppliers, using transportation services provided by CG&E. Operating Revenues Electric Operating Revenues Electric operating revenues for the quarter ended March 31, 1998, increased $341 million (42%), as compared to the same period last year, primarily as a result of the increased kwh sales as previously discussed. The operation of CG&E's fuel adjustment clauses, reflecting a higher average cost of fuel used in electric production, also contributed to the increase. An analysis of electric operating revenues is shown below: Quarter Ended March 31 (in millions) Electric operating revenues - March 31, 1997 $818 Increase (Decrease) due to change in: Price per kwh Retail 15 Sales for resale Firm power obligations (1) Non-firm power transactions (26) Total change in price per kwh (12) Kwh sales Retail 7 Sales for resale Non-firm power transactions 343 Total change in kwh sales 350 Other 3 Electric operating revenues - March 31, 1998 $1 159 Gas Operating Revenues The increasing trend of industrial customers purchasing gas directly from producers and utilizing CG&E facilities to transport the gas continues to put downward pressure on gas operating revenues. (See the "Mcf Sales and Transportation" section.) Since providing transportation services does not necessitate recovery of the cost of gas purchased, the revenue per Mcf transported is less than the revenue per Mcf sold. As a result, a higher relative volume of gas transported to gas sold translates into lower gas operating revenues. Gas operating revenues decreased $39 million (18%) in the first quarter of 1998, when compared to the same period last year. The decrease in gas operating revenues is primarily attributable to lower residential and commercial sales due to the milder weather during the first quarter of 1998. An increase in the relative volume of gas transported to gas sold, as previously discussed, also contributed to the decrease. Operating Expenses Fuel Used in Electric Production Electric fuel costs increased $5 million (3%) for the quarter ended March 31, 1998, as compared to the same period last year. An analysis of these fuel costs is shown below: Quarter Ended March 31 (in millions) Fuel expense - March 31, 1997 $176 Increase (Decrease) due to change in: Price of fuel (6) Deferred fuel cost 9 Kwh generation 2 ---- Fuel expense - March 31, 1998 $181 Gas Purchased Gas purchased for the quarter ended March 31, 1998, decreased $27 million (22%), when compared to the same period last year, reflecting a lower average cost per Mcf purchased and a decline in the volumes of gas purchased primarily due to the milder weather during the first quarter of 1998. Purchased and Exchanged Power Purchased and exchanged power increased $311 million for the quarter ended March 31, 1998, when compared to the same period last year, primarily reflecting increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing and trading operations. Maintenance For the three months ended March 31, 1998, maintenance costs decreased $7 million (15%), when compared to the three months ended March 31, 1997. This decrease is partially due to a decline in maintenance activities associated with postponed outages at certain of CG&E's electric production facilities. Decreased maintenance costs, associated with CG&E's electric distribution facilities, also contributed to the lower level of expenses for the current quarter. Amortization of Phase-in Deferrals Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for Zimmer. Other Income and Expenses - Net Equity in Earnings of Unconsolidated Subsidiaries The $15 million decrease in equity in earnings of unconsolidated subsidiaries for the first three months of 1998, as compared to the same period of 1997, is primarily attributable to the decrease in earnings of Midlands, which is due to milder weather conditions and a penalty imposed on each electric distribution company due to the delay in opening up the electricity supply business to competition. Other - net The change in other - net of $16 million for the three months ended March 31, 1998, from the same period of 1997, is primarily due to a litigation settlement (see Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information"), an increase in expenses related to Cinergy Global Power, Inc., which was acquired in September 1997, and an adjustment recorded in the first quarter of 1997 related to a 1996 sale of a foreign subsidiary. Interest and Other Charges Interest on Long-term Debt Interest on long-term debt decreased $6 million (11%) for the quarter ended March 31, 1998, as compared to the same period last year, primarily due to the net redemption of approximately $250 million of long-term debt by CG&E and PSI during the period from February 1997 through March 1998. Other Interest Other interest increased $4 million (30%) for the first quarter of 1998, as compared to the same period last year, primarily due to higher levels of short-term borrowings, the recognition of a full quarter of interest on the currency swap program, which was initiated in mid-February 1997, and an increase in short-term interest rates during 1998 over 1997. The remainder of the increase is attributable to interest resulting from an IRS audit of the 1989 and 1990 tax years. RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED MARCH 31, 1998 Kwh Sales Increased activity in Cinergy's power marketing and trading operations led to higher non-firm power sales for resale and significantly contributed to the increase in total kwh sales of 86% for the twelve months ended March 31, 1998, as compared to the same period for 1997. An increase in retail sales, which reflects higher industrial sales and an increase in the average number of residential and commercial customers, was partially offset by a decline in residential sales as a result of the milder weather experienced for the twelve months ended March 31, 1998, as compared to the same period last year. Increased industrial sales primarily reflected growth in the primary metals sector. Mcf Sales and Transportation Mcf gas sales for the twelve months ended March 31, 1998, decreased 9.5% while transportation volumes increased 12.4%, as compared to the same period in 1997. The decrease in Mcf sales is due, in part, to the milder weather during the twelve month period ended March 31, 1998, and was partially offset by increases in the average number of customers. Higher gas transportation volumes reflect the continued trend of customers purchasing gas directly from suppliers, using transportation services provided by CG&E. Operating Revenues Electric Operating Revenues Increased kwh sales, as previously discussed, the effects of PSI's retail rate increases approved in the September 1996 Order, as amended in August 1997, and the December 1996 DSM Order significantly contributed to the $1.3 billion (45%) increase in electric operating revenues for the twelve months ended March 31, 1998, when compared to the same period of 1997. Also contributing to the increase was the return of approximately $5 million to customers in 1996 in accordance with an order issued by the IURC in February 1995. The February 1995 Order required all retail operating income above a certain rate of return to be refunded to customers. The operation of PSI's and CG&E's fuel adjustment clauses, reflecting a lower average cost of fuel used in electric production, partially offset these increases. An analysis of electric operating revenues is shown below: Twelve Months Ended March 31 (in millions) Electric operating revenues - March 31, 1997 $2 902 Increase (Decrease) due to change in: Price per kwh Retail 22 Sales for resale Firm power obligations (13) Non-firm power transactions 31 Total change in price per kwh 40 Kwh sales Retail 20 Sales for resale Firm power obligations 14 Non-firm power transactions 1 220 ------ Total change in kwh sales 1 254 Other 7 Electric operating revenues - March 31, 1998 $4 203 Gas Operating Revenues For a discussion of the continued trend of downward pressure on gas operating revenues from increased transportation services, refer to the discussion under the caption "Gas Operating Revenues" for Cinergy in "Results of Operations for the Quarter Ended March 31, 1998." Gas operating revenues decreased $35 million (7%) for the twelve months ended March 31, 1998, when compared to the same period last year. This decrease is primarily attributable to the decline in Mcf sales due to the milder weather. An increase in the relative volume of gas transported to gas sold, as previously discussed, also contributed to the decrease. Operating Expenses Fuel Used in Electric Production Electric fuel costs for the twelve months ended March 31, 1998, were relatively constant, as compared to the same period last year. An analysis of these fuel costs is shown below: Twelve Months Ended March 31 (in millions) Fuel expense - March 31, 1997 $698 Increase (Decrease) due to change in: Price of fuel 6 Deferred fuel cost (37) Kwh generation 31 ---- Fuel expense - March 31, 1998 $698 Gas Purchased Gas purchased for the twelve months ended March 31, 1998, decreased $41 million (15%) when compared to the same period last year. This decrease reflects a lower average cost per Mcf of gas purchased and a decline in the volumes purchased as previously discussed. Purchased and Exchanged Power Purchased and exchanged power increased $1.2 billion for the twelve months ended March 31, 1998, when compared to the same period of last year, primarily reflecting increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing and trading operations. Maintenance Maintenance costs decreased $26 million (13%) for the twelve months ended March 31, 1998, as compared to the same period last year, partially due to a decline in maintenance activities associated with postponed outages at certain of CG&E's and PSI's electric production facilities. Decreased maintenance costs, associated with electric distribution facilities, also contributed to the lower level of expenses for the current twelve month period. Amortization of Phase-in Deferrals Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for Zimmer. Amortization of Post-in-Service Deferred Operating Expenses - Net Amortization of post-in-service deferred operating expenses - net reflects the amortization and related recovery in rates of various deferrals of depreciation, operation and maintenance expenses (exclusive of fuel costs), and property taxes on certain generating units and other utility plant from the in-service date until the related plant was reflected in retail rates. Other Income and Expenses - Net Equity in Earnings of Unconsolidated Subsidiaries The $6 million (12%) decrease in equity in earnings of unconsolidated subsidiaries for the twelve months ended March 31, 1998, as compared to the same period of 1997, is primarily attributable to the decrease in earnings of Midlands, which is due to milder weather conditions and a penalty imposed on each electric distribution company due to the delay in opening up the electricity supply business to competition. Other - net The change in other - net of $12 million for the twelve months ended March 31, 1998, as compared to the same period last year is primarily due to a litigation settlement (see Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information"), a gain in 1996 related to the sale of certain CG&E assets, and expenses incurred relative to non-regulated entities. These amounts are partially offset by charges in 1996 associated with the December 1996 Order. Interest and Other Charges Interest on Long-term Debt Interest on long-term debt decreased $15 million (8%) for the twelve months ended March 31, 1998, from the same period of 1997 primarily due to the net redemption of approximately $170 million of long-term debt by CG&E, PSI, and ULH&P during the period from May 1996 through March 1998. Other Interest Other interest increased $22 million (52%) for the twelve months ended March 31, 1998, as compared to the same period last year, primarily reflecting the recognition of a full twelve months of interest on the currency swap program, which was initiated in mid-February 1997, an increase in short-term interest rates during 1998 over 1997, higher levels of short-term borrowing, a full twelve months of interest on the borrowings used to fund the purchase of Midlands, and increased borrowings to fund CG&E's and PSI's redemption of first mortgage bonds and PSI's redemption of preferred stock. Preferred Dividend Requirements of Subsidiaries The decrease in preferred dividend requirements of subsidiaries of $8 million (40%) for the twelve months ended March 31, 1998, from the same period of 1997 is primarily attributable to the September 1996 reacquisition and retirement of approximately 90% of the outstanding preferred stock of CG&E. Additionally, PSI redeemed all outstanding shares of its 7.15% Cumulative Preferred Stock and 7.44% Series Cumulative Preferred Stock on September 1, 1997, and March 1, 1998, respectively. THE CINCINNATI GAS & ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS ASSETS March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Utility Plant - Original Cost In service Electric $4,716,835 $4,700,631 Gas 753,311 746,903 Common 186,631 186,078 ---------- ---------- 5,656,777 5,633,612 Accumulated depreciation 2,047,211 2,008,005 ---------- ---------- 3,609,566 3,625,607 Construction work in progress 126,145 118,133 ---------- ---------- Total utility plant 3,735,711 3,743,740 Current Assets Cash and temporary cash investments 5,384 2,349 Restricted deposits 1,173 1,173 Notes receivable from affiliated companies 14,235 27,193 Accounts receivable less accumulated provision for doubtful accounts of $9,816 at March 31, 1998, and $9,199 at December 31, 1997 223,784 193,549 Accounts receivable from affiliated companies 17,523 35,507 Materials, supplies, and fuel - at average cost Fuel for use in electric production 31,647 29,682 Gas stored for current use 12,232 29,174 Other materials and supplies 50,015 49,111 Prepayments and other 39,982 31,827 ---------- ---------- 395,975 399,565 Other Assets Regulatory assets Amounts due from customers - income taxes 358,286 350,515 Post-in-service carrying costs and deferred operating expenses 132,967 134,672 Deferred merger costs 16,323 16,557 Deferred demand-side management costs 39,058 38,318 Phase-in deferred return and depreciation 85,960 89,689 Unamortized costs of reacquiring debt 36,912 36,575 Other 4,704 1,439 Other 92,642 103,368 ---------- ---------- 766,852 771,133 $4,898,538 $4,914,438 The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated financial statements.
THE CINCINNATI GAS & ELECTRIC COMPANY CAPITALIZATION AND LIABILITIES March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Common Stock Equity Common stock - $8.50 par value; authorized shares - 120,000,000; outstanding shares - 89,663,086 at March 31, 1998, and December 31, 1997 $ 762,136 $ 762,136 Paid-in capital 534,654 534,649 Retained earnings 342,929 314,553 Accumulated other comprehensive income (905) (750) ---------- ---------- Total common stock equity 1,638,814 1,610,588 Cumulative Preferred Stock Not subject to mandatory redemption 20,779 20,793 Long-term Debt 1,105,476 1,324,432 ---------- ---------- Total capitalization 2,765,069 2,955,813 Current Liabilities Long-term debt due within one year 60,000 - Notes payable and other short-term obligations 327,000 289,000 Notes payable to affiliated companies 23,410 12,253 Accounts payable 277,923 249,538 Accounts payable to affiliated companies 34,407 10,821 Accrued taxes 144,572 149,129 Accrued interest 25,548 25,430 Other 27,947 29,950 ---------- ---------- 920,807 766,121 Other Liabilities Deferred income taxes 814,080 794,396 Unamortized investment tax credits 115,420 116,966 Accrued pension and other postretirement benefit costs 154,208 180,566 Other 128,954 100,576 ---------- ---------- 1,212,662 1,192,504 $4,898,538 $4,914,438
THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited) Quarter Ended March 31 1998 1997 (in thousands) Operating Revenues Electric Non-affiliated companies $574,841 $395,625 Affiliated companies 18,464 6,075 Gas Non-affiliated companies 173,060 212,266 Affiliated companies 402 1 -------- -------- 766,767 613,967 Operating Expenses Fuel used in electric production 88,063 70,239 Gas purchased 96,588 123,968 Purchased and exchanged power Non-affiliated companies 229,494 70,862 Affiliated companies 7,614 1,572 Other operation 81,647 79,275 Maintenance 19,758 27,336 Depreciation 41,298 40,404 Amortization of phase-in deferrals 5,539 3,371 Amortization of post-in-service deferred operating expenses 823 823 Income taxes 44,613 43,800 Taxes other than income taxes 54,683 53,514 -------- -------- 670,120 515,164 Operating Income 96,647 98,803 Other Income and Expenses - Net Allowance for equity funds used during construction 10 119 Phase-in deferred return 1,811 2,002 Income taxes 3,828 3,006 Other - net (4,315) (4,775) -------- -------- 1,334 352 Income Before Interest 97,981 99,155 Interest Interest on long-term debt 26,052 30,045 Other interest 2,101 1,696 Allowance for borrowed funds used during construction (1,364) (909) -------- -------- 26,789 30,832 Net Income $ 71,192 $ 68,323 Preferred Dividend Requirement 215 219 -------- -------- Net Income Applicable to Common Stock $ 70,977 $ 68,104 Other Comprehensive Income, Net of Tax (155) - _ -------- -------- Comprehensive Income $ 70,822 $ 68,104 The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated financial statements.
THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1998 1997 (in thousands) Operating Activities Net income $ 71,192 $68,323 Items providing or (using) cash: Depreciation 41,298 40,404 Deferred income taxes and investment tax credits - net (27) 2,929 Allowance for equity funds used during construction (10) (119) Regulatory assets - net 11,214 9,787 Changes in current assets and current liabilities Accounts and notes receivable, net of reserves on receivables sold 391 (44,863) Materials, supplies, and fuel 14,073 27,887 Accounts payable 51,971 (18,922) Accrued taxes and interest (4,439) (8,207) Other items - net 9,753 (13,945) Net cash provided by operating activities 195,416 63,274 Financing Activities Retirement of preferred stock (9) (24) Redemption of long-term debt (160,291) (16,180) Change in short-term debt 49,157 25,982 Dividends on preferred stock (215) (219) Dividends on common stock (42,600) (42,600) -------- ------- Net cash used in financing activities (153,958) (33,041) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (36,483) (31,021) Deferred demand-side management costs (1,940) (1,968) -------- ------- Net cash used in investing activities (38,423) (32,989) Net increase (decrease) in cash and temporary cash investments 3,035 (2,756) Cash and temporary cash investments at beginning of period 2,349 5,120 -------- ------- Cash and temporary cash investments at end of period $ 5,384 $ 2,364 The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated financial statements. THE CINCINNATI GAS & ELECTRIC COMPANY RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 Kwh Sales Increased activity in Cinergy's power marketing and trading operations led to higher non-firm power sales for resale and significantly contributed to the increase in total kwh sales of 80% for the first quarter of 1998, as compared to the same period of 1997. Milder weather during the first quarter of 1998, as compared to the same period last year, resulted in decreased residential and commercial sales. These decreases were partially offset by increased industrial sales, reflecting, in part, growth in the primary metals sector. Nonsystem kwh sales (and related revenues and expenses) resulting from Cinergy's power marketing and trading operations are allocated 50%/50% between CG&E and PSI pursuant to the operating agreements filed with the companies' regulators. Mcf Sales and Transportation Mcf gas sales and transportation volumes for the first quarter of 1998 decreased 7.3%, as compared to the same period in 1997. Decreased residential and commercial sales, reflecting the milder weather during the first quarter of 1998, were slightly offset by an increase in the average number of customers. Higher gas transportation volumes reflect the continued trend of customers purchasing gas directly from suppliers, using transportation services provided by CG&E. Operating Revenues Electric Operating Revenues Electric operating revenues increased $191 million (48%) for the quarter ended March 31, 1998, from the comparable period of 1997. This increase primarily reflects the increased kwh sales as previously discussed. The operation of fuel adjustment clauses reflecting a higher average cost of fuel used in electric production also contributed to the increase. An analysis of electric operating revenues is shown below: Quarter Ended March 31 (in millions) Electric operating revenues - March 31, 1997 $402 Increase (Decrease) due to change in: Price per kwh Retail 21 Sales for resale Non-firm power transactions 5 Total change in price per kwh 26 Kwh sales Retail (2) Sales for resale Firm power obligations (1) Non-firm power transactions 167 Total change in kwh sales 164 Other 1 ---- Electric operating revenues - March 31, 1998 $593 Gas Operating Revenues The increasing trend of industrial customers purchasing gas directly from producers and utilizing CG&E facilities to transport the gas continues to put downward pressure on gas operating revenues. (See the "Mcf Sales and Transportation" section.) Since providing transportation services does not necessitate recovery of the cost of gas purchased, the revenue per Mcf transported is less than the revenue per Mcf sold. As a result, a higher relative volume of gas transported to gas sold translates into lower gas operating revenues. Gas operating revenues decreased $39 million (18%) in the first quarter of 1998, when compared to the same period last year. The decrease in gas operating revenues is primarily attributable to lower residential and commercial sales due to the milder weather during the first quarter of 1998. An increase in the relative volume of gas transported to gas sold, as previously discussed, also contributed to the decrease. Operating Expenses Fuel Used in Electric Production Electric fuel costs increased $18 million (25%) for the quarter ended March 31, 1998, as compared to the same period last year. An analysis of these fuel costs is shown below: Quarter Ended March 31 (in millions) Fuel expense - March 31, 1997 $70 Increase (Decrease) due to change in: Price of fuel (1) Deferred fuel cost 21 Kwh generation (2) --- Fuel expense - March 31, 1998 $88 Gas Purchased Gas purchased for the quarter ended March 31, 1998, decreased $27 million (22%), when compared to the same period last year, reflecting a lower average cost per Mcf purchased and a decline in the volumes of gas purchased primarily due to the milder weather during the first quarter of 1998. Purchased and Exchanged Power Purchased and exchanged power for the quarter ended March 31, 1998, increased $165 million over the comparable period of 1997, reflecting increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing and trading operations. Maintenance The $8 million (28%) decrease in maintenance costs for the first quarter of 1998, as compared to the same period of 1997, is partially due to a decline in maintenance activities associated with postponed outages at certain electric production facilities. Decreased maintenance costs, associated with electric distribution facilities, also contributed to the lower level of expenses for the current quarter. Amortization of Phase-in Deferrals Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for Zimmer. Interest Interest on Long-term Debt Interest on long-term debt decreased approximately $4 million (13%) for the quarter ended March 31, 1998, as compared to the same period of 1997, primarily due to the net redemption of $350 million of long-term debt during the period from March 1997 through March 1998. PSI ENERGY, INC. AND SUBSIDIARY COMPANIES
PSI ENERGY, INC. CONSOLIDATED BALANCE SHEETS ASSETS March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Electric Utility Plant - Original Cost In service $4,297,962 $4,280,551 Accumulated depreciation 1,813,471 1,792,317 ---------- ---------- 2,484,491 2,488,234 Construction work in progress 67,897 65,129 ---------- ---------- Total electric utility plant 2,552,388 2,553,363 Current Assets Cash and temporary cash investments 25,816 18,169 Restricted deposits 1,175 1,146 Notes receivable 92 110 Notes receivable from affiliated companies 37,461 21,998 Accounts receivable less accumulated provision for doubtful accounts of $527 at March 31, 1998, and $1,183 at December 31, 1997 257,843 197,898 Accounts receivable from affiliated companies 6,018 6,384 Materials, supplies, and fuel - at average cost Fuel 36,645 28,234 Other materials and supplies 27,957 26,955 Prepayments and other 5,177 4,438 ---------- ---------- 398,184 305,332 Other Assets Regulatory assets Amounts due from customers - income taxes 24,805 23,941 Post-in-service carrying costs and deferred operating expenses 43,564 43,832 Coal contract buyout costs 117,964 122,485 Deferred merger costs 72,692 73,789 Deferred demand-side management costs 62,900 71,278 Unamortized costs of reacquiring debt 29,029 29,667 Other 41,888 44,094 Other 145,058 138,650 ---------- ---------- 537,900 547,736 $3,488,472 $3,406,431 The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
PSI ENERGY, INC. CAPITALIZATION AND LIABILITIES March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Common Stock Equity Common stock - without par value; $.01 stated value; authorized shares - 60,000,000; outstanding shares - 53,913,701 at March 31, 1998, and December 31, 1997 $ 539 $ 539 Paid-in capital 400,895 400,893 Retained earnings 650,064 637,814 Accumulated other comprehensive income (642) (1,586) ---------- ---------- Total common stock equity 1,050,856 1,037,660 Cumulative Preferred Stock Not subject to mandatory redemption 71,973 157,196 Long-term Debt 926,680 826,470 ---------- ---------- Total capitalization 2,049,509 2,021,326 Current Liabilities Long-term debt due within one year 85,000 85,000 Notes payable and other short-term obligations 215,495 190,600 Notes payable to affiliated companies 21 16,435 Accounts payable 249,681 212,833 Accounts payable to affiliated companies 38,077 41,326 Accrued taxes 101,326 69,304 Accrued interest 15,414 21,369 Other 2,527 2,560 ---------- ---------- 707,541 639,427 Other Liabilities Deferred income taxes 411,992 403,535 Unamortized investment tax credits 48,430 49,296 Accrued pension and other postretirement benefit costs 106,374 116,576 Other 164,626 176,271 ---------- ---------- 731,422 745,678 $3,488,472 $3,406,431
PSI ENERGY, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited) Quarter Ended March 31 1998 1997 (in thousands) Operating Revenues Non-affiliated companies $583,884 $422,289 Affiliated companies 8,241 1,566 -------- -------- 592,125 423,855 Operating Expenses Fuel 92,456 105,507 Purchased and exchanged power Non-affiliated companies 242,390 89,730 Affiliated companies 17,900 6,069 Other operation 82,377 83,709 Maintenance 19,308 18,518 Depreciation 32,007 31,152 Amortization of post-in-service deferred operating expenses - net 268 268 Income taxes 26,261 20,225 Taxes other than income taxes 14,967 14,857 -------- -------- 527,934 370,035 Operating Income 64,191 53,820 Other Income and Expenses - Net Allowance for equity funds used during construction 11 72 Income taxes 282 (603) Other - net 1,799 3,263 -------- -------- 2,092 2,732 Income Before Interest 66,283 56,552 Interest Interest on long-term debt 17,706 19,230 Other interest 5,775 4,457 Allowance for borrowed funds used during construction (583) (433) -------- -------- 22,898 23,254 Net Income $ 43,385 $ 33,298 Preferred Dividend Requirement 2,208 3,020 -------- -------- Net Income Applicable to Common Stock $ 41,177 $ 30,278 Other Comprehensive Income, Net of Tax 944 - -------- ----- Comprehensive Income $ 42,121 $ 30,278 The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements. PSI ENERGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1998 1997 (in thousands) Operating Activities Net income $43,385 $33,298 Items providing or (using) cash: Depreciation 32,007 31,152 Deferred income taxes and investment tax credits - net (473) (9,820) Allowance for equity funds used during construction (11) (72) Regulatory assets - net 9,701 11,812 Changes in current assets and current liabilities Restricted deposits (29) (1) Accounts and notes receivable, net of reserves on receivables sold (75,463) (51,892) Materials, supplies, and fuel (9,413) 2,812 Accounts payable 33,599 (19,821) Accrued taxes and interest 26,067 39,197 Other items - net (14,271) (104) Net cash provided by operating activities 45,099 36,561 Financing Activities Issuance of long-term debt 98,901 - Retirement of preferred stock (85,220) (1) Redemption of long-term debt - (45,700) Change in short-term debt 8,481 65,205 Dividends on preferred stock (2,736) (3,020) Dividends on common stock (28,400) (28,400) ------- ------- Net cash used in financing activities (8,974) (11,916) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (26,803) (22,040) Deferred demand-side management costs (1,675) (3,141) Net cash used in investing activities (28,478) (25,181) Net increase (decrease) in cash and temporary cash investments 7,647 (536) Cash and temporary cash investments at beginning of period 18,169 2,911 ------- ------- Cash and temporary cash investments at end of period $25,816 $ 2,375 The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements. PSI ENERGY, INC. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 Kwh Sales Increased activity in Cinergy's power marketing and trading operations led to higher non-firm power sales for resale and significantly contributed to the increase in total kwh sales of 67% for the first quarter of 1998, as compared to the same period last year. An increase in retail sales reflects higher industrial sales and a higher average number of customers in all retail customer classes. These increases were partially offset by a decline in residential sales as a result of milder weather during the first quarter of 1998, as compared to the first quarter of 1997. The increased industrial sales primarily reflect growth in the primary metals sector. Nonsystem kwh sales (and related revenues and expenses) resulting from Cinergy's power marketing and trading operations are allocated 50%/50% between CG&E and PSI pursuant to the operating agreements filed with the companies' regulators. Operating Revenues Operating revenues increased $168 million (40%) for the quarter ended March 31, 1998, when compared to the same period last year, primarily reflecting, the increased kwh sales as previously discussed. This increase was partially offset by the operation of fuel adjustment clauses reflecting a lower average cost of fuel used in electric production. An analysis of operating revenues is shown below: Quarter Ended March 31 (in millions) Operating revenues - March 31, 1997 $424 Increase (Decrease) due to change in: Price per kwh Retail (5) Sales for resale Firm power obligations (1) Non-firm power transactions (15) Total change in price per kwh (21) Kwh sales Retail 8 Sales for resale Firm power obligations 1 Non-firm power transactions 177 Total change in kwh sales 186 Other 3 Operating revenues - March 31, 1998 $592 Operating Expenses Fuel Electric fuel costs decreased $13 million (12%) for the first quarter of 1998, as compared to the same period last year. An analysis of fuel costs is shown below: Quarter Ended March 31 (in millions) Fuel expense - March 31, 1997 $105 Increase (Decrease) due to change in: Price of fuel (5) Deferred fuel cost (12) Kwh generation 4 ---- Fuel expense - March 31, 1998 $ 92 Purchased and Exchanged Power For the quarter ended March 31, 1998, purchased and exchanged power increased $164 million, as compared to the same period last year, due primarily to increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing and trading operations. Interest Interest on Long-term Debt The decrease in interest on long-term debt of $2 million (8%) for the first quarter of 1998, as compared to the first quarter of 1997, is primarily due to the recognition of interest income on interest rate swap activity. This was partially offset by increased interest expense related to the net issuance of approximately $100 million of long-term debt from February 1997 through March 1998. Other Interest The increase of $1 million (30%) in other interest for the quarter ended March 31, 1998, as compared to the same period of 1997, is attributable to interest resulting from an IRS audit of the 1989 and 1990 tax years. THE UNION LIGHT, HEAT AND POWER COMPANY THE UNION LIGHT, HEAT AND POWER COMPANY BALANCE SHEETS ASSETS March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Utility Plant - Original Cost In service Electric $205,839 $204,111 Gas 157,517 155,167 Common 19,069 19,073 -------- -------- 382,425 378,351 Accumulated depreciation 136,032 133,213 -------- -------- 246,393 245,138 Construction work in progress 15,795 14,346 -------- -------- Total utility plant 262,188 259,484 Current Assets Cash and temporary cash investments 4 546 Accounts receivable less accumulated provision for doubtful accounts of $1,101 at March 31, 1998, and $996 at December 31, 1997 7,547 7,308 Accounts receivable from affiliated companies 276 446 Materials, supplies, and fuel - at average cost Gas stored for current use 2,181 5,401 Other materials and supplies 802 693 Prepayments and other 243 385 -------- -------- Total current assets 11,053 14,779 Other Assets Regulatory assets Deferred merger costs 5,213 5,213 Unamortized costs of reacquiring debt 3,544 3,590 Other 2,303 2,262 Other 5,830 6,262 -------- -------- 16,890 17,327 $290,131 $291,590 The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements. THE UNION LIGHT, HEAT AND POWER COMPANY CAPITALIZATION AND LIABILITIES March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Common Stock Equity Common stock - $15.00 par value; authorized shares - 1,000,000; outstanding shares - 585,333 at March 31, 1998, and December 31, 1997 $ 8,780 $ 8,780 Paid-in capital 18,683 18,683 Retained earnings 101,219 95,450 -------- -------- Total common stock equity 128,682 122,913 Long-term Debt 34,684 44,671 -------- -------- Total capitalization 163,366 167,584 Current Liabilities Long-term debt due within one year 10,000 - Notes payable to affiliated companies 21,457 23,487 Accounts payable 8,695 11,097 Accounts payable to affiliated companies 16,363 19,712 Accrued taxes 5,714 6,332 Accrued interest 904 1,286 Other 4,223 4,364 -------- -------- 67,356 66,278 Other Liabilities Deferred income taxes 27,096 26,211 Unamortized investment tax credits 4,447 4,516 Accrued pension and other postretirement benefit costs 12,213 14,044 Income taxes refundable through rates 6,964 6,566 Other 8,689 6,391 -------- -------- 59,409 57,728 $290,131 $291,590 THE UNION LIGHT, HEAT AND POWER COMPANY STATEMENTS OF INCOME (unaudited) Quarter Ended March 31 1998 1997 (in thousands) Operating Revenues Electric Non-affiliated companies $ 46,999 $ 48,580 Gas Non-affiliated companies 28,375 33,963 Affiliated companies 105 121 -------- -------- 75,479 82,664 Operating Expenses Electricity purchased from parent company for resale 34,090 35,129 Gas purchased 16,353 20,449 Other operation 8,135 8,534 Maintenance 1,295 1,563 Depreciation 3,232 3,070 Income taxes 4,217 4,742 Taxes other than income taxes 1,005 1,099 -------- -------- 68,327 74,586 Operating Income 7,152 8,078 Other Income and Expenses - Net Allowance for equity funds used during construction (14) (4) Income taxes 228 92 Other - net (482) (447) -------- -------- (268) (359) Income Before Interest 6,884 7,719 Interest Interest on long-term debt 883 881 Other interest 351 301 Allowance for borrowed funds used during construction (119) (30) -------- -------- 1,115 1,152 Net Income $ 5,769 $ 6,567 The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements. THE UNION LIGHT, HEAT AND POWER COMPANY STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1998 1997 (in thousands) Operating Activities Net income $ 5,769 $ 6,567 Items providing or (using) cash: Depreciation 3,232 3,070 Deferred income taxes and investment tax credits - net 462 (338) Allowance for equity funds used during construction 14 4 Regulatory assets (41) (9) Changes in current assets and current liabilities Accounts and notes receivable, net of reserves on receivables sold 240 6,016 Materials, supplies, and fuel 3,111 3,727 Accounts payable (5,751) (10,139) Accrued taxes and interest (1,000) 5,871 Other items - net 1,627 1,810 ------- ------- Net cash provided by operating activities 7,663 16,579 Financing Activities Change in short-term debt (2,030) (11,723) Net cash used in financing activities (2,030) (11,723) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (6,175) (3,986) Net cash used in investing activities (6,175) (3,986) Net increase (decrease) in cash and temporary cash investments (542) 870 Cash and temporary cash investments at beginning of period 546 1,197 ------- ------- Cash and temporary cash investments at end of period $ 4 $ 2,067 The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements. THE UNION LIGHT, HEAT AND POWER COMPANY RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 Kwh Sales Kwh sales for the quarter ended March 31, 1998, decreased 1.9% from the comparable period of 1997. The milder weather in the first quarter of 1998, as compared to the same period last year, resulted in a decline in residential sales. This decrease was partially offset by an increase in industrial sales, primarily reflecting growth in the primary metals sector, and an increase in the average number of customers in all major retail customer classes. Mcf Sales and Transportation For the first quarter of 1998, Mcf gas sales volumes decreased 12.3%, while Mcf transportation volumes increased 17.9%, when compared to the same period in 1997. Decreased residential and commercial sales reflecting the milder weather during the first quarter of 1998 were slightly offset by an increase in the average number of customers. The higher level of gas transportation volumes reflects the continued trend of customers purchasing gas directly from suppliers, using transportation services provided by ULH&P. Operating Revenues Electric Operating Revenues Electric operating revenues decreased $2 million (3%) for the quarter ended March 31, 1998, from the comparable period of 1997. This decrease primarily reflects the previously discussed decline in kwh sales and a reduction in the cost of electricity purchased from CG&E. Gas Operating Revenues The increasing trend of industrial customers purchasing gas directly from producers and utilizing ULH&P facilities to transport the gas continues to put downward pressure on gas operating revenues. (See the "Mcf Sales and Transportation" section.) Since providing transportation services does not necessitate recovery of the cost of gas purchased, the revenue per Mcf transported is less than the revenue per Mcf sold. As a result, a higher relative volume of gas transported to gas sold translates into lower gas operating revenues. Gas operating revenues decreased $6 million (16%) for the quarter ended March 31, 1998, as compared to the same period of last year. The decrease in gas operating revenues is primarily attributable to lower residential and commercial sales due to the milder weather during the first quarter of 1998. An increase in the relative volume of gas transported to gas sold, as previously discussed, also contributed to the decrease. Operating Expenses Electricity Purchased from Parent Company for Resale Electricity purchased decreased $1 million (3%) for the quarter ended March 31, 1998, as compared to the same period last year. This decrease reflects the aforementioned lower volumes purchased from CG&E and the reduction in the cost of electricity purchased from CG&E. Gas Purchased Gas purchased for the quarter decreased $4 million (20%) from the first quarter of last year, reflecting a lower average cost per Mcf purchased and a decline in the volumes of gas purchased. Maintenance The $.3 million (17%) decrease in maintenance costs for the first quarter of 1998, as compared to the same period of 1997, is primarily attributable to a decline in maintenance activities associated with electric distribution facilities due to the milder weather in the first quarter of 1998. Depreciation Depreciation expense increased $.2 million (5%) for the quarter ended March 31, 1998, over the comparable period of last year. This increase primarily reflects additions to gas and electric utility plant. Taxes Other Than Income Taxes The $.1 million (9%) decrease in taxes other than income taxes for the first quarter of 1998, as compared to the same period of 1997, is primarily due to a reduction in property taxes. Interest Other Interest Other interest charges increased $.1 million (17%) for the quarter ended March 31, 1998, as compared to the same period of 1997, primarily due to payments to the Kentucky State Treasurer resulting from a sales tax audit and underpayment of tax year 1996 income taxes. Allowance for Borrowed Funds Used During Construction The increase in allowance for borrowed funds used during construction of $.1 million is primarily due to an increase in construction expenditures subject to allowance during the quarter ended March 31, 1998, as compared to the same period of 1997. NOTES TO FINANCIAL STATEMENTS Cinergy, CG&E, PSI, and ULH&P 1. These Financial Statements reflect all adjustments (which include only normal, recurring adjustments) necessary in the opinion of the registrants for a fair presentation of the interim results. These statements should be read in conjunction with the Financial Statements and the notes thereto included in the combined 1997 Form 10-K of the registrants. Certain amounts in the 1997 Financial Statements have been reclassified to conform to the 1998 presentation. Cinergy and CG&E 2. On April 7, 1998, CG&E issued and sold $100 million principal amount of its 6.40% Debentures due April 1, 2008. Proceeds from the sale were used to repay short-term indebtedness incurred in connection with CG&E's March 1998 redemptions of $100 million principal amount of its First Mortgage Bonds, 8 1/2% Series due 2022 and $60 million principal of its First Mortgage Bonds, 7 3/8% Series due 2001. 3. On May 1, 1998, CG&E redeemed the entire $50 million principal amount of its 7 3/8% Series First Mortgage Bonds due 1999, at the regular redemption price of 100.00%. This redemption effectively eliminates the maintenance and replacement fund provisions of CG&E's First Mortgage Bond indenture, which provisions required CG&E to make cash payments, deposit bonds, or pledge unfunded property additions to the trustee each year based on an amount related to net revenues. Cinergy, CG&E, and ULH&P 4. On April 30, 1998, ULH&P issued and sold $20 million principal amount of its 6.50% Debentures due April 30, 2008. Proceeds from the sale were used by ULH&P to repay short-term indebtedness incurred in connection with the redemption, on April 24, 1998, of $10 million principal amount of its First Mortgage Bonds, 8% Series due 2003, and in connection with its construction program. The redemption of said First Mortgage Bonds effectively eliminates the maintenance and replacement fund provisions of ULH&P's First Mortgage Bond indenture, which provisions required ULH&P to make cash payments, deposit bonds, or pledge unfunded property additions to the trustee each year based on an amount related to net revenues. Cinergy, CG&E, and PSI 5. Cinergy'spower marketing and trading function actively markets and trades over-the-counter forward and option contracts for the purchase and sale of electricity. The majority of these contracts are settled via physical delivery of electricity or netted out in accordance with industry trading standards. Option premiums are deferred and included in the Consolidated Balance Sheets and amortized to "Operating Revenues - Electric" or "Purchased and exchanged power" in the Consolidated Statements of Income over the term of the option contract. Cinergy values its portfolio of over-the-counter forward and option contracts using the aggregate lower of cost or market method. To the extent there are net aggregate losses in the portfolio, Cinergy reserves for such losses. Net gains are recognized when realized. Due to the lack of liquidity and the volatility currently experienced in the power markets, significant assumptions must be made by the Company when estimating current market values for purposes of the aggregate lower of cost or market comparison. It is possible that the actual gains and losses from the Company's power marketing and trading activities could differ substantially from the gains and losses estimated currently. Cinergy and its subsidiaries use derivative financial instruments to hedge exposures to foreign currency exchange rates, lower funding costs, and manage exposures to fluctuations in interest rates. Instruments used as hedges must be designated as a hedge at the inception of the contract and must be effective at reducing the risk associated with the exposure being hedged. Accordingly, changes in market values of designated hedge instruments must be highly correlated with changes in market values of the underlying hedged items at inception of the hedge and over the life of the hedge contract. Cinergy utilizes a currency swap to hedge its pound sterling denominated net investment in Avon Energy. Accordingly, any translation gains or losses related to the principal exchange on the currency swap are recorded in accumulated other comprehensive income, which is a separate component of common stock equity. Aggregate translation losses related to the principal exchange of the currency swap are reflected in "Current Liabilities - Other" in the Consolidated Balance Sheets. Interest rate swaps are accounted for under the accrual method. Accordingly, gains and losses based on any interest differential between fixed-rate and floating-rate interest amounts, calculated on agreed upon notional principal amounts, are recognized in the Consolidated Statements of Income as a component of interest expense as realized over the life of the agreement. Cinergy, CG&E, and PSI 6. As discussed in the 1997 Form 10-K, in October 1995, a suit was filed in the Federal District Court for the Southern District of Ohio by three former employees of Enertech naming as defendants Enertech, Cinergy, Investments, CG&E, PSI, James E. Rogers, and William J. Grealis. (Mr. Rogers and/or Mr. Grealis are officers and/or directors of the foregoing companies.) The lawsuit, which stemmed from the termination of employment of the three former employees, alleged that they entered into employment contracts with Enertech based on the opportunity to participate in potential profits from future investments in energy projects in central and eastern Europe. The suit alleged causes of action based upon, among other theories, breach of contract related to the events surrounding the termination of their employment and fraud and misrepresentation related to the level of financial support for future projects. The suit alleged compensatory damages of $154 million based upon assumed future success of potential future investments and punitive damages of three times that amount. In April 1998, the parties reached a comprehensive settlement and all claims were dismissed by the Court. The obligations of the Company arising out of the settlement are not material to its financial condition or its results of operations. Cinergy and PSI 7. As discussed in the 1997 Form 10-K, PSI and IGC submitted a proposed agreed order to the IDEM in 1997 related to the Shelbyville MGP site. On April 15, 1998, the IDEM signed the proposed agreed order, which will result in a determination by the IDEM of whether the activities previously undertaken at the site are sufficient to adequately protect human health and the environment. Based upon environmental investigations and remediation completed to date, PSI believes that any further investigation and remediation required for the Shelbyville site will not have a material adverse effect on its financial condition or results of operations. In August 1997, NIPSCO filed suit against PSI in the United States District Court for the Northern District of Indiana, South Bend Division, claiming, pursuant to the CERCLA, recovery from PSI of NIPSCO's past and future costs of investigating and remediating MGP related contamination at the Goshen MGP site. Recently, NIPSCO increased its estimate of the cost of remediating the Goshen site from $2.7 million to about $3.0 million. As also discussed in the 1997 Form 10-K, PSI previously placed its insurance carriers on notice of IGC's, NIPSCO's and the IDEM's claims related to MGP sites. In April 1998, PSI filed suit in Hendricks County Circuit Court against its general liability insurance carriers, seeking, among other matters, a declaratory judgment that its insurance carriers are obligated to defend MGP claims against PSI or pay PSI's costs of defense and to indemnify PSI for its costs of investigating, preventing, mitigating and remediating damage to property and paying claims associated with MGP sites. PSI cannot predict the outcome of this litigation. Cinergy, CG&E, PSI, and ULH&P 8. Effective with the first quarter of 1998, Cinergy and its subsidiaries adopted Statement 130. Statement 130 establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. Cinergy 9. Presented below is a reconciliation of earnings per common share (basic EPS) and earnings per common share assuming dilution (diluted EPS).
Income Shares Earnings (Numerator) (Denominator) Per Share (In thousands, except per share amounts) Quarter ended March 31, 1998 Earnings per common share: Net income $106,071 157,764 $.67 Effect of dilutive securities: Common stock options 787 Contingently issuable common stock 123 EPS--assuming dilution: Net income item plus assumed conversions $106,071 158,674 $.67 Quarter ended March 31, 1997 Earnings per common share: Net income $114,117 157,679 $.72 Effect of dilutive securities: Common stock options 983 Contingently issuable common stock 204 EPS--assuming dilution: Net income plus assumed conversions $114,117 158,866 $.72
Options to purchase shares of common stock that were excluded from the calculation of EPS--assuming dilution because the exercise prices of these options were greater than the average market price of the common shares during the period are summarized below: Quarter Average Ended Exercise March 31 Shares Price 1998 914,800 $37.61 1997 10,400 34.50 Presented below is a reconciliation of earnings per common share (basic EPS) and earnings per common share assuming dilution (diluted EPS).
Income Shares Earnings (Numerator) (Denominator) Per Share (In thousands, except per share amounts) Twelve months ended March 31, 1998 Earnings per common share: Net income before extraordinary item $354,592 157,706 $2.24 Effect of dilutive securities: Common stock options 886 Contingently issuable common stock 184 EPS--assuming dilution: Net income before extraordinary item plus assumed conversions $354,592 158,776 $2.23 Twelve months ended March 31, 1997 Net income $338,773 Less: costs of reacquisition of preferred stock of subsidiary 18,391 Earnings per common share: Net income applicable to common stock 320,382 157,679 $2.02 Effect of dilutive securities: Common stock options 913 Contingently issuable common stock 287 EPS--assuming dilution: Net income applicable to common stock plus assumed conversions $320,382 158,879 $2.01
Options to purchase shares of common stock that were excluded from the calculation of EPS--assuming dilution because the exercise prices of these options were greater than the average market price of the common shares during the period are summarized below: Twelve Months Average Ended Exercise March 31 Shares Price 1998 925,200 $37.58 1997 375,700 33.53 The after-tax impact of the extraordinary item - equity share of windfall profits tax in the twelve months ended March 31, 1998, was $.69 for both basic and diluted earnings per share. Cinergy and PSI 10. In February 1989, PSI and WVPA entered into a settlement agreement to resolve all claims related to Marble Hill, a nuclear project canceled in 1984. Implementation of the settlement was contingent upon a number of events, including the conclusion of WVPA's bankruptcy proceeding, negotiation of certain terms and conditions with WVPA, the RUS, and the CFC, and certain regulatory approvals. In December 1996, following the resolution of issues associated with WVPA's bankruptcy proceeding, PSI, on behalf of itself and its officers, paid $80 million on behalf of WVPA to the RUS and the CFC. The $80 million obligation, net of insurance proceeds, other credits, and applicable income tax effects, was charged to income in 1988. In January 1997, an order dismissing the WVPA litigation against PSI and its officers with prejudice was entered by the United States District Court for the Southern District of Indiana. Negotiations among PSI, WVPA, the RUS, and the CFC continue regarding certain additional terms and conditions of the settlement agreement. Based on the current status of negotiations, the Company believes it has adequately reserved for any loss that would be material to its financial condition or results of operations. However, the Company cannot currently predict the outcome of these negotiations. Depending on the form of the final negotiated terms and conditions and the form of any regulatory approvals, the Company could be required to recognize additional losses of up to $90 million for accounting purposes. The recognition of this loss is not expected to have an immediate impact on Cinergy's cash flow. The Company believes that negotiations could be concluded and the final terms and conditions determined during 1998. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Recent Developments Cinergy, CG&E, and PSI Air Toxics As discussed in the 1997 Form 10-K, the EPA was to announce, by April 15, 1998, its conclusions regarding the need for additional air toxics regulations. In April 1998, the EPA announced that it would make its regulatory determination on the need for additional air toxics regulation by November 15, 1998. If more air toxics regulations are issued, the compliance cost could be significant. Cinergy cannot predict the outcome or effects of the EPA's determination. Cinergy, CG&E and ULH&P Competitive Pressures - State Developments As discussed in the 1997 Form 10-K, competition legislation was to be introduced into the Ohio legislature during 1998. This legislation was introduced into the Ohio legislature during 1998 and it is uncertain whether this legislation will be passed in Ohio in 1998. As also discussed in the 1997 Form 10-K, HB 443 was introduced into the Kentucky General Assembly in January 1998. HB 443 was not brought to a vote during the 1998 legislative session, rather, HJR 95, which calls for the formation of an executive task force comprised of members from the governor's office and the General Assembly to further study electricity restructuring, was passed by the General Assembly. HJR 95 was signed by the governor during April 1998. Kentucky's General Assembly does not reconvene until the year 2000. Market Risk Sensitive Instruments and Positions Cinergy, CG&E, and PSI Energy Commodities Sensitivity The Company markets and trades over-the-counter forward and option contracts for the purchase and sale of electricity. See Note 5 of the "Notes to Financial Statements" in "Part I. Financial Information" for the Company's accounting policies for certain derivative instruments. The Company's market risks have not changed materially from the market risks reported in the 1997 Form 10-K. Cinergy Exchange Rate Sensitivity Cinergy utilizes a currency swap to hedge the exchange rate exposure related to its pound sterling denominated net investment in Avon Energy. See Note 5 of the "Notes to Financial Statements" in "Part I. Financial Information" for Cinergy's accounting policies for certain derivative instruments. Cinergy's market risks have not changed materially from the market risks reported in the 1997 Form 10-K. Cinergy, CG&E, PSI, and ULH&P Interest Rate Sensitivity The Company's net exposure to changes in interest rates primarily consists of short-term debt instruments with floating interest rates that are benchmarked to U.S. short-term money market indices. To manage the Company's exposure to fluctuations in interest rates and to lower funding costs, the Company constantly evaluates the use of, and has entered into, interest rate swaps. See Note 5 of the "Notes to Financial Statements" in "Part I. Financial Information" for the Company's accounting policies for certain derivative instruments. The Company's market risks have not changed materially from the market risks reported in the 1997 Form 10-K. Accounting Issues Cinergy, CG&E, PSI, and ULH&P New Accounting Standards See Note 8 of the "Notes to Financial Statements" in "Part I. Financial Information." Other Commitments Cinergy, CG&E, and PSI Enertech See Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information." Cinergy, CG&E, and PSI MGP Sites See Note 7 of the "Notes to Financial Statements" in "Part I. Financial Information." Cinergy and PSI WVPA See Note 10 of the "Notes to Financial Statements" in "Part I. Financial Information." CAPITAL RESOURCES AND REQUIREMENTS Cinergy, CG&E, and ULH&P Long-term Debt For information regarding recent issuances and redemptions of long-term debt securities, see Notes 2, 3, and 4 of the "Notes to Financial Statements" in "Part I. Financial Information." Cinergy, CG&E, PSI, and ULH&P Short-term Debt Obligations representing notes payable and other short-term obligations (excluding notes payable to affiliated companies) at March 31, 1998, were as follows: Cinergy Established Lines Outstanding (in millions) Cinergy Committed lines Acquisition line $ 350 $ 350 Revolving line 400 91 Commercial paper - 183 Utility subsidiaries Committed lines 300 88 Uncommitted lines 360 211 Pollution control notes 244 244 Cinergy UK, Inc. 115 56 ------ ------ Total $1 769 $1 223 CG&E Established Lines Outstanding (in millions) Committed lines $100 $ 30 Uncommitted lines 190 113 Pollution control notes 184 184 ---- ---- Total $474 $327 PSI Established Lines Outstanding (in millions) Committed lines $200 $ 58 Uncommitted lines 170 98 Pollution control notes 60 60 ---- ---- Total $430 $216 Cinergy, CG&E, and PSI Cinergy's committed lines are comprised of an acquisition line and a revolving line. The established revolving line (as shown in the above table) also provides credit support for Cinergy's commercial paper program. Such program is limited to a maximum outstanding principal amount of $200 million. The majority of the proceeds from the commercial paper sales were used to reduce the acquisition line to the year-end level of $350 million. CG&E and PSI also have the capacity to issue commercial paper that must be supported by committed lines (unsecured lines of credit) of the respective company. Neither CG&E nor PSI issued commercial paper in first quarter of 1998. Cinergy, CG&E, PSI, and ULH&P Cinergy's utility subsidiaries had regulatory authority to borrow up to $853 million ($453 million for CG&E and its subsidiaries, including $50 million for ULH&P, and $400 million for PSI) as of March 31, 1998. In connection with this authority, committed lines, as well as, uncommitted lines (short-term borrowings with various banks on an "as offered" basis) have been arranged. The established committed lines (as shown in the above table) include $100 million designated as backup for certain of the uncommitted lines at March 31, 1998. Further, the committed lines are maintained by commitment fees. RESULTS OF OPERATIONS Cinergy, CG&E, PSI, and ULH&P Reference is made to "Item 1. Financial Statements" in "Part I. Financial Information." ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Cinergy, CG&E, PSI, and ULH&P Reference is made to the "Market Risk Sensitive Instruments and Positions" section in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations." PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Cinergy, CG&E, and PSI See Notes 6, 7, and 10 of the "Notes to Financial Statements" in "Part I. Financial Information." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Cinergy (a) The annual meeting of shareholders of Cinergy was held April 22, 1998, in Cincinnati, Ohio. (c) At the meeting, five Class I directors were elected to the board of Cinergy to serve three-year terms, expiring in 2001, as set forth below: Votes Votes Class I For Withheld Neil A. Armstrong 132,494,599 2,094,057 James K. Baker 132,545,127 2,043,529 Cheryl M. Foley 132,482,049 2,106,607 John A. Hillenbrand II 132,546,546 2,042,110 George C. Juilfs 132,649,550 1,939,106 CG&E (a) In lieu of the annual meeting of shareholders of CG&E, a resolution was duly adopted via unanimous written consent of CG&E's sole shareholder, effective April 21, 1998. (b)-(c) The following members of the Board of Directors were elected via unanimous written consent of the sole shareholder of CG&E, in lieu of its annual meeting, for one-year terms expiring in 1999: Jackson H. Randolph James E. Rogers E. Renae Conley PSI (a) The annual meeting of shareholders of PSI was held in Cincinnati, Ohio on April 22, 1998. (b) Proxies were not solicited for the annual meeting, at which the Board of Directors was re-elected in its entirety (see (c) below). (c) The following members of the Board of Directors were unanimously re-elected at the annual meeting for one-year terms expiring in 1999: James K. Baker Michael G. Browning John A. Hillenbrand II John M. Mutz Jackson H. Randolph James E. Rogers Van P. Smith ULH&P Omitted pursuant to Instruction H(2)(b). ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits identified with a pound sign (#) are being filed herewith by the registrant identified in the exhibit discussion below and are incorporated herein by reference with respect to any other designated registrant. Exhibits not so identified are filed herewith: Exhibit Designation Nature of Exhibit Cinergy 3-a By-laws of Cinergy, as amended on April 22, 1998. Cinergy and CG&E 4-a #Fourth Supplemental Indenture between CG&E and The Fifth Third Bank, dated as of April 1, 1998. (Exhibit to CG&E's March 31, 1998, Form 10-Q in File No. 1-1232.) Cinergy, CG&E, and ULH&P 4-b #Second Supplemental Indenture between ULH&P and The Fifth Third Bank, dated as of April 30, 1998. (Exhibit to ULH&P's March 31, 1998, Form 10-Q in File No. 2-7793.) Cinergy, CG&E, PSI, and ULH&P 27 Financial Data Schedules (included in electronic submission only). Cinergy, CG&E, PSI, and ULH&P (b) No reports on Form 8-K were filed during the quarter. SIGNATURES Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although Cinergy, CG&E, PSI, and ULH&P believe that the disclosures are adequate to make the information presented not misleading. In the opinion of Cinergy, CG&E, PSI, and ULH&P, these statements reflect all adjustments (which include only normal, recurring adjustments) necessary to reflect the results of operations for the respective periods. The unaudited statements are subject to such adjustments as the annual audit by independent public accountants may disclose to be necessary. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed by an officer and the chief accounting officer on their behalf by the undersigned thereunto duly authorized. CINERGY CORP. THE CINCINNATI GAS & ELECTRIC COMPANY PSI ENERGY, INC. THE UNION LIGHT, HEAT AND POWER COMPANY Registrants Date: May 15, 1998 /s/ John P. Steffen -------------------------------------- John P. Steffen Duly Authorized Officer and Chief Accounting Officer EX-4 2 4TH SUPPLEMENTAL INDENTURE - CG&E/FIFTH 3RD BANK THE CINCINNATI GAS & ELECTRIC COMPANY AND THE FIFTH THIRD BANK, Trustee ---------------- Fourth Supplemental Indenture Dated as of April 1, 1998 To Indenture Dated as of May 15, 1995 ---------------- 6.40% Debentures Due 2008 FOURTH SUPPLEMENTAL INDENTURE, dated as of April 1, 1998, between The Cincinnati Gas & Electric Company, a corporation duly organized and existing under the laws of the State of Ohio (herein called the "Company"), having its principal office at 139 East Fourth Street, Cincinnati, Ohio 45202, and The Fifth Third Bank, an Ohio banking corporation, as Trustee (herein called the "Trustee") under the Indenture dated as of May 15, 1995 between the Company and the Trustee (the "Indenture"). Recitals of the Company The Company has executed and delivered the Indenture to the Trustee to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (the "Securities"), to be issued in one or more series as in the Indenture provided. Pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of its Securities to be known as its 6.40% Debentures Due 2008 (herein called the "Debentures"), in this Fourth Supplemental Indenture. All things necessary to make this Fourth Supplemental Indenture a valid agreement of the Company have been done. Now, Therefore, This Fourth Supplemental Indenture Witnesseth: For and in consideration of the premises and the purchase of the Debentures by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Debentures, as follows: ARTICLE ONE Terms of the Debentures Section 101. There is hereby authorized a series of Securities designated the "6.40% Debentures Due 2008", limited in aggregate principal amount to $100,000,000 (except as provided in Section 301(2) of the Indenture). The Debentures shall mature and the principal shall be due and payable together with all accrued and unpaid interest thereon on April 1, 2008 and shall be issued in the form of a registered Global Security without coupons, registered in the name of Cede & Co., as nominee of The Depository Trust Company (the "Depositary"). Section 102. The provisions of Section 305 of the Indenture applicable to Global Securities shall apply to the Debentures. Section 103. Interest on each of the Debentures shall be payable semiannually on April 1 and October 1 in each year (each an "Interest Payment Date"), commencing on October 1, 1998, at the rate per annum specified in the designation of the Debentures from April 1, 1998, or from the most recent Interest Payment Date to which interest has been paid or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the Person in whose name such Debenture (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the Business Day immediately preceding such Interest Payment Date. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. As used herein, "Business Day" means any day, other than a Saturday or Sunday, or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to be closed. Section 104. Subject to agreements with or the rules of the Depositary or any successor book-entry security system or similar system with respect to Global Securities, payments of interest will be made by check mailed to the Holder of each Debenture at the address shown in the Security Register, and payments of the principal amount of each Debenture will be made at maturity by check against presentation of the Debenture at the office or agency of the Trustee. Section 105. The Debentures shall be issued in denominations of $1,000 or any integral multiple of $1,000. Section 106. Principal and interest on the Debentures shall be payable in the coin or currency of the United States of America, which, at the time of payment, is legal tender for public and private debts. Section 107. The Debentures shall be subject to defeasance and covenant defeasance, at the Company's option, as provided for in Sections 1302 and 1303 of the Indenture. Section 108. Subject to the terms of Article Eleven of the Indenture, the Company shall have the right to redeem the Debentures, in whole but not in part, from time to time and at any time (such redemption, an "Optional Redemption", and the date thereof, the "Optional Redemption Date") upon not less than 30 days' notice to the holders, at a redemption price equal to the sum of (A) the greater of (i) 100% of the principal amount of the Debentures to be redeemed or (ii) the sum of the present values of the Remaining Scheduled Payments thereon discounted to the Optional Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points, less the Applicable Accrued Interest Amount plus (B) the Applicable Accrued Interest Amount. "Applicable Accrued Interest Amount" means, at the Optional Redemption Date, the amount of interest accrued and unpaid from the prior interest payment date to the Optional Redemption Date on the Debentures subject to the Optional Redemption determined at the rate per annum shown in the title thereof, computed on the basis of a 360-day year of twelve 30-day months. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Debentures to be redeemed pursuant to the Optional Redemption. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. "Comparable Treasury Price" means, with respect to the Optional Redemption Date, the average of the Reference Treasury Dealer Quotations for such Optional Redemption Date. "Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation, and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer") the Company will substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. "Remaining Scheduled Payments" means, with respect to any Debenture, the remaining scheduled payments of the principal thereof to be redeemed and interest thereon that would be due after the Optional Redemption Date but for the Optional Redemption. "Treasury Rate" means, with respect to the Optional Redemption Date (if any), the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Optional Redemption Date. ARTICLE TWO Form of the Debentures Section 201. The Debentures are to be substantially in the following form and shall include substantially the legend shown so long as the Debentures are Global Securities: (FORM OF FACE OF DEBENTURE) No. R-1 $100,000,000 CUSIP No. 172070CE2 THE CINCINNATI GAS & ELECTRIC COMPANY 6.40% DEBENTURE DUE 2008 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE CINCINNATI GAS & ELECTRIC COMPANY, a corporation duly organized and existing under the laws of the State of Ohio (herein called the "Company", which term includes any successor Person under the Indenture hereafter referred to), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of One Hundred Million and No/100 Dollars ($100,000,000) on April 1, 2008, and to pay interest thereon from April 1, 1998 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually on April 1 and October 1 in each year, commencing October 1, 1998, at the rate of 6.40% per annum, until the principal hereof is paid or made available for payment. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the Business Day immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the corporate trust office of the Trustee maintained for that purpose in the City of Cincinnati, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Any payment on this Security due on any day which is not a Business Day in the City of New York need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if made on the due date and no interest shall accrue for the period from and after such date, unless such payment is a payment at maturity or upon redemption, in which case interest shall accrue thereon at the stated rate for such additional days. As used herein, "Business Day" means any day, other than a Saturday or Sunday, or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to be closed. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. In Witness Whereof, the Company has caused this instrument to be duly executed. THE CINCINNATI GAS & ELECTRIC COMPANY By.............................. CERTIFICATE OF AUTHENTICATION Dated: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE FIFTH THIRD BANK, as Trustee By............................. Authorized Signatory (FORM OF REVERSE OF DEBENTURE) This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of May 15, 1995 (herein called the "Indenture", which term shall have the meaning assigned to it in such instrument), between the Company and The Fifth Third Bank, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $100,000,000. The Securities of this series are subject to optional redemption, in whole but not in part, from time to time and at any time (such redemption, an "Optional Redemption", and the date thereof, the "Optional Redemption Date") upon not less than 30 days' notice to the holders, at a redemption price equal to the sum of (A) the greater of (i) 100% of the principal amount of the Securities of this series to be redeemed or (ii) the sum of the present values of the Remaining Scheduled Payments thereon discounted to the Optional Redemption Date on a semiannual basis (assuming a 360- day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points, less the Applicable Accrued Interest Amount plus (B) the Applicable Accrued Interest Amount. "Applicable Accrued Interest Amount" means, at the Optional Redemption Date, the amount of interest accrued and unpaid from the prior interest payment date to the Optional Redemption Date on the Securities of this series subject to the Optional Redemption determined at the rate per annum shown in the title thereof, computed on the basis of a 360-day year of twelve 30-day months. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities of this series to be redeemed pursuant to the Optional Redemption. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. "Comparable Treasury Price" means, with respect to the Optional Redemption Date, the average of the Reference Treasury Dealer Quotations for such Optional Redemption Date. "Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation, and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer") the Company will substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. "Remaining Scheduled Payments" means, with respect to any Securities of this series, the remaining scheduled payments of the principal thereof to be redeemed and interest thereon that would be due after the Optional Redemption Date but for the Optional Redemption. "Treasury Rate" means, with respect to the Optional Redemption Date (if any), the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Optional Redemption Date. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security or certain restrictive covenants and Events of Default with respect to this Security upon compliance with certain conditions set forth in the Indenture. If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 35% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonably satisfactory indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. ARTICLE THREE Original Issue of Debentures Section 301. Debentures in the aggregate principal amount of $100,000,000, may, upon execution of this Fourth Supplemental Indenture, or from time to time thereafter, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Debentures upon a Company Order without any further action by the Company. ARTICLE FOUR Paying Agent and Security Registrar Section 401. The Fifth Third Bank will be the Paying Agent and Security Registrar for the Debentures. ARTICLE FIVE Sundry Provisions Section 501. Except as otherwise expressly provided in this Fourth Supplemental Indenture or in the form of Debenture or otherwise clearly required by the context hereof or thereof, all terms used herein or in said form of Debenture that are defined in the Indenture shall have the several meanings respectively assigned to them thereby. Section 502. The Indenture, as supplemented by this Fourth Supplemental Indenture, is in all respects ratified and confirmed, and this Fourth Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. ------------------ This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. In Witness Whereof, the parties hereto have caused this Fourth Supplemental Indenture to be duly executed as of the date first above written. THE CINCINNATI GAS & ELECTRIC COMPANY By /s/ William L. Sheafer William L. Sheafer Vice President and Treasurer THE FIFTH THIRD BANK, as Trustee By /s/ Kerry Byrne Kerry Byrne Vice President EX-27 3 CG&E FDS
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1998 JAN-01-1998 MAR-31-1998 PER-BOOK 3,735,711 0 395,975 674,210 92,642 4,898,538 762,136 534,654 342,024 1,638,814 0 20,779 1,105,476 327,000 0 0 60,000 0 0 0 1,746,469 4,898,538 766,767 44,613 625,507 670,120 96,647 1,334 97,981 26,789 71,192 215 70,977 (42,600) 26,052 195,416 0.00 0.00
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