-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WCcr4ZDZemASCdIpAmdQsfgLu4wC/y+rM049bUYc9fkmgGMIr+Xih8+kH4k7A+su e7JcLsX1wQoE2ACApYvLIw== 0000774197-95-000006.txt : 19950516 0000774197-95-000006.hdr.sgml : 19950516 ACCESSION NUMBER: 0000774197-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTERIOR ENERGY CORP CENTRAL INDEX KEY: 0000774197 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 341479083 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09130 FILM NUMBER: 95539045 BUSINESS ADDRESS: STREET 1: 6200 OAK TREE BLVD CITY: INDEPENDENCE STATE: OH ZIP: 44131 BUSINESS PHONE: 2164473100 MAIL ADDRESS: STREET 1: PO BOX 94661 CITY: CLEVELAND STATE: OH ZIP: 44101-4661 FORMER COMPANY: FORMER CONFORMED NAME: NORTH HOLDING CO /OH/ DATE OF NAME CHANGE: 19851002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEVELAND ELECTRIC ILLUMINATING CO CENTRAL INDEX KEY: 0000020947 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 340150020 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02323 FILM NUMBER: 95539046 BUSINESS ADDRESS: STREET 1: 55 PUBLIC SQ STREET 2: PO BOX 5000 CITY: CLEVELAND STATE: OH ZIP: 44101 BUSINESS PHONE: 2166229800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOLEDO EDISON CO CENTRAL INDEX KEY: 0000352049 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 344375005 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03583 FILM NUMBER: 95539047 BUSINESS ADDRESS: STREET 1: 300 MADISON AVE CITY: TOLEDO STATE: OH ZIP: 43652 BUSINESS PHONE: 4192495000 10-Q 1 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, 1995 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. 1-9130 CENTERIOR ENERGY CORPORATION 34-1479083 (An Ohio Corporation) 6200 Oak Tree Boulevard Independence, Ohio 44131 Telephone (216) 447-3100 1-2323 THE CLEVELAND ELECTRIC 34-0150020 ILLUMINATING COMPANY (An Ohio Corporation) 55 Public Square Cleveland, Ohio 44113 Telephone (216) 622-9800 1-3583 THE TOLEDO EDISON COMPANY 34-4375005 (An Ohio Corporation) 300 Madison Avenue Toledo, Ohio 43652 Telephone (419) 249-5000 Indicate by check mark whether each of the registrants (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No On May 8, 1995, there were 148,031,503 shares of Centerior Energy Corporation Common Stock outstanding. Centerior Energy Corporation is the sole holder of the 79,590,689 shares and 39,133,887 shares of common stock of The Cleveland Electric Illuminating Company and The Toledo Edison Company, respectively, outstanding on that date. This combined Form 10-Q is separately filed by Centerior Energy Corporation ("Centerior Energy"), The Cleveland Electric Illuminating Company ("Cleveland Electric") and The Toledo Edison Company ("Toledo Edison"). Centerior Energy, Cleveland Electric and Toledo Edison are sometimes referred to collectively as the "Companies". Cleveland Electric and Toledo Edison are sometimes collectively referred to as the "Operating Companies". Information contained herein relating to any individual registrant is filed by such registrant on its behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to either or both of the Operating Companies is also attributed to Centerior Energy. TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Centerior Energy Corporation and Subsidiaries The Cleveland Electric Illuminating Company The Toledo Edison Company Notes to the Financial Statements (Unaudited) 1 Centerior Energy Corporation and Subsidiaries Income Statement 4 Balance Sheet 5 Cash Flows 6 Management's Discussion and Analysis of Financial 7 Condition and Results of Operations The Cleveland Electric Illuminating Company Income Statement 10 Balance Sheet 11 Cash Flows 12 Management's Discussion and Analysis of Financial 13 Condition and Results of Operations The Toledo Edison Company Income Statement 16 Balance Sheet 17 Cash Flows 18 Management's Discussion and Analysis of Financial 19 Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders 22 Item 5. Other Information 24 Item 6. Exhibits and Reports on Form 8-K 24 Signatures 25 -i- CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES, THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND THE TOLEDO EDISON COMPANY NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) (1) Interim Financial Statements Centerior Energy Corporation (Centerior Energy) is the parent company of Centerior Service Company (Service Company); two electric utilities, The Cleveland Electric Illuminating Company (Cleveland Electric) and The Toledo Edison Company (Toledo Edison); and four other wholly owned subsidiaries. The two utilities are referred to collectively herein as the "Operating Companies". Centerior Energy, Cleveland Electric and Toledo Edison are referred to collectively herein as the "Companies". The comparative income statement and balance sheet and the related statement of cash flows of each of the Companies have been prepared from the records of each of the Companies without audit by independent public accountants. In the opinion of management, all adjustments necessary for a fair statement of financial position at March 31, 1995 and results of operations for the three months ended March 31, 1995 and 1994 have been included. All such adjustments were normal recurring adjustments. These financial statements and notes should be read in conjunction with the financial statements and notes included in the Companies' combined Annual Report on Form 10-K for the year ended December 31, 1994 (1994 Form 10-K). These interim period financial results are not necessarily indicative of results for a 12-month period. (2) Equity Distribution Restrictions The Operating Companies can make cash available for the funding of Centerior Energy's common stock dividends by paying dividends on their respective common stock, which is held solely by Centerior Energy. Federal law prohibits the Operating Companies from paying dividends out of capital accounts. However, the Operating Companies may pay preferred and common stock dividends out of appropriated retained earnings and current earnings. At March 31, 1995, Cleveland Electric and Toledo Edison had $177.6 million and $119.1 million, respectively, of appropriated retained earnings for the payment of dividends. However, Toledo Edison is prohibited from paying a common stock dividend by a provision in its mortgage that essentially requires such dividends to be paid out of the total balance of retained earnings, which currently is a deficit. (3) Common Stock Dividends Cash dividends per common share declared by Centerior Energy during the three months ended March 31, 1995 and 1994 were as follows: 1995 1994 Paid February 15 $.20 $.20 Paid May 15 .20 .20 Common stock cash dividends declared by Cleveland Electric during the three months ended March 31, 1995 and 1994 were as follows: 1995 1994 (millions) Paid in February $ - $18.6 Toledo Edison did not declare any common stock dividends during the three months ended March 31, 1995 and 1994. (4) Financing Activity During the three months ended March 31, 1995, one of Centerior Energy's nonutility subsidiaries repaid $0.7 million of long-term debt. In addition, the Operating Companies retired debt and preferred stock as follows: Cleveland Electric Mandatory redemptions consisted of $11.1 million of Serial Preferred Stock, $9.125 Series N, and $0.8 million of bank loans. Toledo Edison Mandatory redemptions consisted of $4 million of unsecured notes, bank loans and other long-term debt. (5) Regulatory Matters The Operating Companies are subject to the provisions of Statement of Financial Accounting Standards (SFAS) 71, which governs the accounting for the effects of certain types of regulation. Under SFAS 71, regulatory assets are recorded which represent probable future revenues associated with certain deferred costs to be recovered from customers through the ratemaking process. Total regulatory assets at March 31, 1995 approximated $2.2 billion, $1.3 billion and $0.9 billion for Centerior Energy, Cleveland Electric and Toledo Edison, respectively. In March 1995, the Financial Accounting Standards Board issued SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SFAS 121, which is effective for 1996, imposes stricter criteria for regulatory assets than SFAS 71 by requiring that such assets be probable of future recovery at each balance sheet date. Adoption of SFAS 121 is not expected to have an impact on the Companies' financial position or results of operations based on the Operating Companies' current and requested regulatory agreements. On April 17, 1995, the Operating Companies each filed a request with The Public Utilities Commission of Ohio (PUCO) for a rate increase to be effective in 1996. Cleveland Electric's requested increase is $82.8 million in annual revenues and Toledo Edison's requested increase is $34.8 million. The requested rates would result in an average increase of 4.9% in Cleveland Electric's existing rates and an average increase of 4.7% in Toledo Edison's existing rates. The Operating Companies plan to freeze rates until at least 2002 if their rate requests are approved, although they are not precluded from requesting additional rate increases. This plan is premised on the Operating Companies obtaining full recovery of all costs including an acceptable rate of return on equity in order to continue to apply SFAS 71 for financial reporting purposes. The Operating Companies plan to avoid the need for further rate increases through additional cost reductions, an enhanced marketing plan designed to increase retail revenues and other efforts. The Operating Companies will periodically assess their continued compliance with SFAS 71 criteria and the appropriateness of continuing to record additional deferrals pursuant to the Rate Stabilization Program which was approved by the PUCO for the Operating Companies in 1992. They will modify their intended course of action as necessary to maintain compliance. The rate increases are necessary to recover capital investment and increases in costs incurred since the Operating Companies' last rate cases, which were decided in January 1989, and to recover certain costs deferred since 1992. The amounts of the requested rate increases are lower than the authorized limits set forth in the Rate Stabilization Program. The additional cash resulting from the rate increases will strengthen the Companies' financial and competitive position. (6) Commitments and Contingencies Various legal actions, claims and regulatory proceedings covering several matters are pending against the Companies. See "Item 3. Legal Proceedings" in the 1994 Form 10-K and "Part II, Item 5. Other Information" in this Quarterly Report on Form 10-Q. Also, for Centerior Energy and Cleveland Electric, see "Outlook--Competition--Cleveland Public Power" in their respective "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q. At their annual meeting on April 25, 1995, Centerior Energy common stock share owners approved the Equity Compensation Plan adopted in 1994. As discussed in Centerior Energy's Note 11(a) in its Notes to the Financial Statements for 1994 in the 1994 Form 10-K, the option and common stock grants for 1994 were conditioned upon this approval. The Companies continue to seek the necessary approvals to complete the merger of Toledo Edison into Cleveland Electric. The Pennsylvania Public Utility Commission and the PUCO approved the merger in July 1994 and December 1994, respectively. On May 9, 1995, the Operating Companies filed the additional information which the Federal Energy Regulatory Commission (FERC) had requested in connection with the Operating Companies' joint application for approval of the merger, with the exception of an open-access transmission tariff which the Operating Companies intend to file later in May 1995. The Operating Companies do not expect the Nuclear Regulatory Commission (NRC) to take action on their request for authorization to transfer certain NRC licenses to the merged entity until approvals have been obtained from the FERC and the preferred stock share owners. The Operating Companies are seeking preferred stock share owner approval at meetings to be held June 14, 1995. The merger is expected to be effective in late 1995. CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES INCOME STATEMENT (Unaudited) (Thousands, Except Per Share Amounts)
Three Months Ended March 31, --------------------- 1995 1994 -------- -------- OPERATING REVENUES $ 587,581 $ 587,567 OPERATING EXPENSES Fuel and Purchased Power 119,369 115,353 Other Operation and Maintenance 140,604 147,051 Generation Facilities Rental Expense, Net 39,852 39,767 Depreciation and Amortization 69,448 68,314 Taxes, Other Than Federal Income Taxes 81,956 83,008 Deferred Operating Expenses, Net (16,064) (14,851) Federal Income Taxes 22,678 20,282 -------- -------- Total Operating Expenses 457,843 458,924 -------- -------- OPERATING INCOME 129,738 128,643 NONOPERATING INCOME Allowance for Equity Funds Used During Construction 1,375 842 Other Income and Deductions, Net 2,302 2,555 Deferred Carrying Charges 11,572 9,917 Federal Income Taxes - Credit (Expense) (1,800) (1,263) -------- -------- Total Nonoperating Income 13,449 12,051 -------- -------- INCOME BEFORE INTEREST CHARGES 143,187 140,694 INTEREST CHARGES Long-term Debt 87,078 88,347 Short-term Debt 2,982 1,466 Allowance for Borrowed Funds Used During Construction (690) (782) -------- -------- Net Interest Charges 89,370 89,031 -------- -------- INCOME AFTER INTEREST CHARGES 53,817 51,663 Preferred Dividend Requirements of Subsidiaries 15,740 16,660 -------- -------- NET INCOME $ 38,077 $ 35,003 ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 148,032 147,446 ======== ======== EARNINGS PER COMMON SHARE $ .26 $ .24 ======== ======== The accompanying notes as they relate to Centerior Energy are an integral part of this statement.
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES BALANCE SHEET (Thousands)
March 31, December 31, 1995 1994 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 9,628,257 $ 9,769,996 Accumulated Depreciation and Amortization (2,848,012) (2,906,106) ----------- ----------- 6,780,245 6,863,890 Construction Work In Progress 138,572 129,495 ----------- ----------- 6,918,817 6,993,385 Nuclear Fuel, Net of Amortization 272,085 293,222 Other Property, Less Accumulated Depreciation 104,788 50,018 ----------- ----------- 7,295,690 7,336,625 CURRENT ASSETS Cash and Temporary Cash Investments 147,035 186,399 Amounts Due from Customers and Others, Net 213,871 211,178 Unbilled Revenues 81,344 93,344 Materials and Supplies, at Average Cost 142,578 139,293 Fossil Fuel Inventory, at Average Cost 32,535 28,684 Taxes Applicable to Succeeding Years 216,093 251,877 Other 13,453 14,822 ----------- ----------- 846,909 925,597 DEFERRED CHARGES AND OTHER ASSETS Amounts Due from Customers for Future Federal Income Taxes 1,049,364 1,046,317 Unamortized Loss from Beaver Valley Unit 2 Sale 99,575 100,698 Unamortized Loss on Reacquired Debt 84,057 85,921 Carrying Charges and Operating Expenses 984,649 957,053 Nuclear Plant Decommissioning Trusts 86,386 81,967 Other 146,292 157,278 ----------- ----------- 2,450,323 2,429,234 ----------- ----------- $ 10,592,922 $ 10,691,456 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 1,860,642 $ 1,881,930 Preferred Stock With Mandatory Redemption Provisions 237,809 252,656 Without Mandatory Redemption Provisions 450,871 450,871 Long-Term Debt 3,667,559 3,697,082 ----------- ----------- 6,216,881 6,282,539 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 401,572 373,451 Current Portion of Lease Obligations 97,841 83,099 Accounts Payable 120,520 143,919 Accrued Taxes 286,793 384,114 Accrued Interest 100,796 89,556 Dividends Declared 43,005 15,376 Other 62,508 59,964 ----------- ----------- 1,113,035 1,149,479 DEFERRED CREDITS AND OTHER LIABILITIES Unamortized Investment Tax Credits 274,208 278,824 Accumulated Deferred Federal Income Taxes 1,796,862 1,778,429 Unamortized Gain from Bruce Mansfield Plant Sale 518,457 525,020 Accumulated Deferred Rents for Bruce Mansfield Plant and Beaver Valley Unit 2 143,131 138,619 Nuclear Fuel Lease Obligations 203,144 219,465 Retirement Benefits 177,492 176,221 Other 149,712 142,860 ----------- ----------- 3,263,006 3,259,438 COMMITMENTS AND CONTINGENCIES (Note 6) ----------- ----------- $ 10,592,922 $ 10,691,456 =========== =========== The accompanying notes as they relate to Centerior Energy are an integral part of this statement.
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES CASH FLOWS (Unaudited) (Thousands)
Three Months Ended March 31, -------------------- 1995 1994 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $38,077 $35,003 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 69,448 68,314 Deferred Federal Income Taxes 15,793 12,980 Unbilled Revenues 12,000 14,000 Deferred Fuel 10,913 (3,265) Deferred Carrying Charges (11,572) (9,917) Leased Nuclear Fuel Amortization 30,600 28,954 Deferred Operating Expenses, Net (16,064) (14,851) Allowance for Equity Funds Used During Construction (1,375) (842) Changes in Amounts Due from Customers and Others, Net (2,693) (24,086) Changes in Inventories (7,136) 1,810 Changes in Accounts Payable (23,399) (28,798) Changes in Working Capital Affecting Operations (46,384) (23,176) Other Noncash Items 10,270 6,348 -------- -------- Total Adjustments 40,401 27,471 -------- -------- Net Cash from Operating Activities 78,478 62,474 CASH FLOWS FROM FINANCING ACTIVITIES Common Stock Issues -- 9,988 Maturities, Redemptions and Sinking Funds (16,506) (19,322) Nuclear Fuel Lease Obligations (11,043) (20,122) Common Stock Dividends Paid (29,606) (29,432) -------- -------- Net Cash from Financing Activities (57,155) (58,888) CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (35,173) (37,843) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (690) (782) Contributions to Nuclear Plant Decommissioning Trusts (5,897) (2,298) Other Cash Applied (18,927) (4,458) -------- -------- Net Cash from Investing Activities (60,687) (45,381) -------- -------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (39,364) (41,795) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 186,399 225,253 -------- -------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $147,035 $183,458 ======== ======== Other Payment Information: Interest (net of amounts capitalized) $63,000 $64,000 Federal Income Taxes 27,600 -- The accompanying notes as they relate to Centerior Energy are an integral part of this statement.
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity Reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7 of the 1994 Form 10-K. The information under "Capital Resources and Liquidity" remains un- changed with the following exceptions: During the first quarter of 1995, the Operating Companies redeemed various securities as discussed in Note 4. In April 1995, Cleveland Electric redeemed $4.3 million principal amount of First Mortgage Bonds, 13-3/4% Series due 2005-A (13-3/4% Bonds), under mandatory redemption provisions. At the same time, Cleveland Electric also optionally redeemed an additional $4.3 million principal amount of the 13-3/4% Bonds at face value and the remaining $26 million principal amount of the 13-3/4% Bonds at 104.58% of face value. In May 1995, Cleveland Electric plans to issue $300 million principal amount of First Mortgage Bonds, 9-1/2% Series due 2005-B. Part of the proceeds will be used to reimburse Cleveland Electric for cash expended in the optional redemption of $26 million principal amount of the 13-3/4% Bonds discussed above. The remaining proceeds will help fund the payment of required sinking fund obligations and maturing securities in 1995 and will also be used for general corporate purposes. Also, in May 1995, Cleveland Electric and Toledo Edison plan to issue $53.9 million and $45 million, respectively, of first mortgage bonds with a 7-5/8% fixed interest rate as collateral security for the sale by a public authority of equal principal amounts of tax-exempt bonds. The proceeds from the sales of the public authority's bonds will be used on June 15, 1995 to refund equal principal amounts of the authority's tax-exempt bonds that were issued in 1984. Concurrently with the refunding of the authority's bonds, Cleveland Electric's first mortgage bonds and Toledo Edison's pollution control notes securing the authority's respective issues will be redeemed. Cleveland Electric's and Toledo Edison's new bonds will mature on May 1, 2025 and May 1, 2020, respectively. Additional first mortgage bonds may be issued by the Operating Companies under their respective mortgages on the basis of property additions, cash or refund- able first mortgage bonds. If the applicable interest coverage test is met, each Operating Company may issue first mortgage bonds on the basis of property additions and, under certain circumstances, refundable bonds. At March 31, 1995, Cleveland Electric and Toledo Edison would have been permitted to issue approximately $329 million and $527 million of additional first mortgage bonds, respectively, after giving effect to the corresponding first mortgage bond issuances and redemptions through June 15, 1995 discussed above and, for Cleveland Electric, the additional mandatory redemptions of $107 million aggregate principal amount of secured medium-term notes during this same period. Under its articles of incorporation, Toledo Edison cannot issue preferred stock unless certain earnings coverage requirements are met. At March 31, 1995, Toledo Edison would have been permitted to issue approximately $60 million of additional preferred stock at an assumed dividend rate of 10.5%. In mid-1995, certain letters of credit now in effect in connection with the sale and leaseback of Beaver Valley Power Station Unit 2 will expire. The Operating Companies are required to procure replacement letters of credit in an aggregate amount of approximately $226 million. The letters of credit now in effect are secured by the Operating Companies' subordinate mortgages. The Operating Companies are planning to secure the replacement letters of credit by a combination of first mortagage bonds of Cleveland Electric and Toledo Edison, with the subordinate mortgage interests being released. The Companies also plan to secure an existing $205 million revolving credit facility with a combination of first mortgage bonds of Cleveland Electric and Toledo Edison. Results of Operations First quarter 1995 operating revenues were virtually the same as for the 1994 first quarter because of the following factors: Changes from First Quarter 1994 Factors Operating Revenues (millions) Fuel Cost Recovery Revenues $ 6.6 Wholesale Revenues 3.5 Kilowatt-hour Sales Volume and Mix (5.5) Miscellaneous Revenues (4.6) Total $ - The increase in first quarter 1995 fuel cost recovery revenues included in customer bills resulted from changes in the fuel cost recovery factors used by the Operating Companies to calculate these revenues. The weighted average of the respective fuel cost recovery factors used for the first quarter of 1995 increased about 17% for Cleveland Electric and decreased about 12% for Toledo Edison compared to the weighted average of the respective fuel cost recovery factors used for the first quarter of 1994. Percentage changes between 1995 and 1994 first quarter billed electric kilowatt-hour sales are summarized as follows: Customer Categories % Change Residential (7.4)% Commercial (0.3) Industrial 1.6 Other 33.7 Total 1.5 First quarter 1995 total kilowatt-hour sales increased because of a 60% increase in wholesale sales (included in the "Other" category). An increase in industrial sales was completely offset by lower residential and commercial sales. Industrial sales increased on the strength of increased sales to large automotive manufacturers and the broad-based, smaller industrial customer group. Residential and commercial sales were negatively affected by the milder winter weather as compared with the 1994 period. First quarter 1995 miscellaneous revenues decreased primarily because the first quarter 1994 amount included the billings to the other utility owners and lessees for overhead expenses related to the refueling and maintenance outage of the jointly owned Perry Nuclear Power Plant Unit 1 during that period. First quarter operating expenses in 1995 decreased 0.2% from the 1994 amount. Fuel and purchased power expenses increased as higher fuel expense was partially offset by lower purchased power expense. The higher fuel expense was attributable to more amortization of previously deferred fuel costs than the amount amortized in 1994. Cost control measures resulted in lower other operation and maintenance expenses. An increase in deferred operating expenses resulted primarily from increased deferrals for depreciation and postretirement benefits other than pensions in the 1995 period pursuant to the Rate Stabilization Program. Federal income taxes increased as a result of higher pretax operating income. First quarter 1995 credits for carrying charges relating to the Rate Stabilization Program increased from the 1994 amount primarily because of the larger base (which is related to net property additions since 1989) subject to the carrying charge calculation. The federal income tax provision for nonoperating income increased accordingly. Lower first quarter 1995 interest charges for long-term debt partially offset higher interest charges for short-term debt. Outlook--Competition--Cleveland Public Power In March 1995, one of Cleveland Electric's large commercial customers, comprising medical and educational institutions, signed a five-year contract for electric service with Cleveland Public Power (CPP) beginning in September 1996 when that customer's contract with Cleveland Electric terminates. The loss of this customer would reduce Centerior Energy's annual net income by about $5 million based on 1994 sales. On May 3, 1995, Cleveland Electric filed a complaint with the PUCO against this customer and American Electric Power Company (AEP) alleging, among other things, that the purchase of power from CPP by this customer is in reality a direct purchase from AEP and, thus, a sham transaction in violation of Ohio's certified territory statute. Some member institutions of this customer have indicated a desire to continue to be served by Cleveland Electric. Cleveland Electric is hopeful that other members will come to the same conclusion. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY INCOME STATEMENT (Unaudited) (Thousands)
Three Months Ended March 31, --------------------- 1995 1994 -------- -------- OPERATING REVENUES $ 410,383 $ 407,855 OPERATING EXPENSES Fuel and Purchased Power (1) 106,062 99,939 Other Operation and Maintenance 94,654 98,160 Generation Facilities Rental Expense, Net 13,892 13,892 Depreciation and Amortization 48,604 47,992 Taxes, Other Than Federal Income Taxes 57,688 59,085 Deferred Operating Expenses, Net (10,893) (9,719) Federal Income Taxes 15,075 12,994 -------- -------- Total Operating Expenses 325,082 322,343 -------- -------- OPERATING INCOME 85,301 85,512 NONOPERATING INCOME Allowance for Equity Funds Used During Construction 1,088 630 Other Income and Deductions, Net 292 1,899 Deferred Carrying Charges 7,648 6,237 Federal Income Taxes - Credit (Expense) (495) (1,056) -------- -------- Total Nonoperating Income 8,533 7,710 -------- -------- INCOME BEFORE INTEREST CHARGES 93,834 93,222 INTEREST CHARGES Long-term Debt 59,968 60,433 Short-term Debt 651 626 Allowance for Borrowed Funds Used During Construction (413) (744) -------- -------- Net Interest Charges 60,206 60,315 -------- -------- NET INCOME 33,628 32,907 Preferred Dividend Requirements 10,957 11,502 -------- -------- EARNINGS AVAILABLE FOR COMMON STOCK $ 22,671 $ 21,405 ======== ======== (1) Includes purchased power expense for purchases from Toledo Edison. $ 23,396 $ 29,669 The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY BALANCE SHEET (Thousands)
March 31, December 31, 1995 1994 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 6,768,851 $ 6,870,651 Accumulated Depreciation and Amortization (1,971,924) (2,013,775) ----------- ----------- 4,796,927 4,856,876 Construction Work In Progress 109,977 99,376 ----------- ----------- 4,906,904 4,956,252 Nuclear Fuel, Net of Amortization 161,861 173,745 Other Property, Less Accumulated Depreciation 60,418 20,575 ----------- ----------- 5,129,183 5,150,572 CURRENT ASSETS Cash and Temporary Cash Investments 5,082 65,643 Amounts Due from Customers and Others, Net 146,554 146,412 Amounts Due from Affiliates 3,861 5,002 Unbilled Revenues 62,500 71,500 Materials and Supplies, at Average Cost 97,551 94,563 Fossil Fuel Inventory, at Average Cost 19,641 16,186 Taxes Applicable to Succeeding Years 153,754 179,716 Other 3,998 4,343 ----------- ----------- 492,941 583,365 DEFERRED CHARGES AND OTHER ASSETS Amounts Due from Customers for Future Federal Income Taxes 643,792 641,249 Unamortized Loss on Reacquired Debt 57,069 57,827 Carrying Charges and Operating Expenses 596,821 578,302 Nuclear Plant Decommissioning Trusts 46,595 44,211 Other 89,367 95,114 ----------- ----------- 1,433,644 1,416,703 ----------- ----------- $ 7,055,768 $ 7,150,640 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 1,091,666 $ 1,058,190 Preferred Stock With Mandatory Redemption Provisions 231,124 245,971 Without Mandatory Redemption Provisions 240,871 240,871 Long-Term Debt 2,542,310 2,543,036 ----------- ----------- 4,105,971 4,088,068 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 285,708 281,785 Current Portion of Lease Obligations 55,080 47,403 Accounts Payable 69,113 87,954 Accounts and Notes Payable to Affiliates 85,986 117,635 Accrued Taxes 229,860 309,724 Accrued Interest 71,757 62,210 Dividends Declared 5,164 18,075 Other 35,371 33,028 ----------- ----------- 838,039 957,814 DEFERRED CREDITS AND OTHER LIABILITIES Unamortized Investment Tax Credits 189,365 192,151 Accumulated Deferred Federal Income Taxes 1,247,367 1,233,830 Unamortized Gain from Bruce Mansfield Plant Sale 322,867 326,930 Accumulated Deferred Rents for Bruce Mansfield Plant 85,052 84,454 Nuclear Fuel Lease Obligations 123,134 132,180 Retirement Benefits 61,647 59,471 Other 82,326 75,742 ----------- ----------- 2,111,758 2,104,758 COMMITMENTS AND CONTINGENCIES (Note 6) ----------- ----------- $ 7,055,768 $ 7,150,640 =========== =========== The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CASH FLOWS (Unaudited) (Thousands)
Three Months Ended March 31, -------------------- 1995 1994 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $33,628 $32,907 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 48,604 47,992 Deferred Federal Income Taxes 11,168 5,885 Unbilled Revenues 9,000 10,000 Deferred Fuel 11,305 (5,616) Deferred Carrying Charges (7,648) (6,237) Leased Nuclear Fuel Amortization 17,303 16,053 Deferred Operating Expenses, Net (10,893) (9,719) Allowance for Equity Funds Used During Construction (1,088) (630) Changes in Amounts Due from Customers and Others, Net (142) (16,484) Changes in Inventories (6,443) 4,718 Changes in Accounts Payable (18,841) (27,882) Changes in Working Capital Affecting Operations (47,375) (22,380) Other Noncash Items 2,668 968 -------- -------- Total Adjustments 7,618 (3,332) -------- -------- Net Cash from Operating Activities 41,246 29,575 CASH FLOWS FROM FINANCING ACTIVITIES Notes Payable to Affiliates (24,800) -- Maturities, Redemptions and Sinking Funds (11,877) (16,138) Nuclear Fuel Lease Obligations (6,789) (11,140) Dividends Paid (12,911) (30,328) -------- -------- Net Cash from Financing Activities (56,377) (57,606) CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (30,169) (30,366) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (413) (744) Contributions to Nuclear Plant Decommissioning Trusts (3,204) (1,217) Other Cash Applied (11,644) (2,412) -------- -------- Net Cash from Investing Activities (45,430) (34,739) -------- -------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (60,561) (62,770) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 65,643 77,374 -------- -------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $5,082 $14,604 ======== ======== Other Payment Information: Interest (net of amounts capitalized) $41,000 $43,000 Federal Income Taxes 27,600 -- The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity Reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7 of the 1994 Form 10-K. The information under "Capital Resources and Liquidity" remains unchanged with the following exceptions: During the first quarter of 1995, Cleveland Electric redeemed various securities as discussed in Note 4. In April 1995, Cleveland Electric redeemed $4.3 million principal amount of First Mortgage Bonds, 13-3/4% Series due 2005-A (13-3/4% Bonds), under mandatory redemption provisions. At the same time, Cleveland Electric also optionally redeemed an additional $4.3 million principal amount of the 13-3/4% Bonds at face value and the remaining $26 million principal amount of the 13-3/4% Bonds at 104.58% of face value. In May 1995, Cleveland Electric plans to issue $300 million principal amount of First Mortgage Bonds, 9-1/2% Series due 2005-B. Part of the proceeds will be used to reimburse Cleveland Electric for cash expended in the optional redemption of $26 million principal amount of the 13-3/4% Bonds discussed above. The remaining proceeds will help fund the payment of required sinking fund obligations and maturing securities in 1995 and will also be used for general corporate purposes. Also, in May 1995, Cleveland Electric plans to issue $53.9 million of first mortgage bonds with a 7-5/8% fixed interest rate as collateral security for the sale by a public authority of an equal principal amount of tax-exempt bonds. The proceeds from the sale of the public authority's bonds will be used on June 15, 1995 to refund $53.9 million of the authority's tax-exempt bonds that were issued in 1984. Concurrently with the refunding of the authority's bonds, Cleveland Electric's first mortgage bonds securing that issue will be redeemed. The new bonds will mature on May 1, 2025. Additional first mortgage bonds may be issued by Cleveland Electric under its mortgage on the basis of property additions, cash or refundable first mortgage bonds. If the applicable interest coverage test is met, Cleveland Electric may issue first mortgage bonds on the basis of property additions and, under certain circumstances, refundable bonds. At March 31, 1995, Cleveland Electric would have been permitted to issue approximately $329 million of additional first mortgage bonds after giving effect to the first mortgage bond issuances and redemptions through June 15, 1995 discussed above and the additional mandatory redemptions of $107 million aggregate principal amount of secured medium-term notes during this same period. In mid-1995, certain letters of credit now in effect in connection with the sale and leaseback of Beaver Valley Power Station Unit 2 will expire. The Operating Companies are required to procure replacement letters of credit in an aggregate amount of approximately $226 million. The letters of credit now in effect are secured by the Operating Companies' subordinate mortgages. The Operating Companies are planning to secure the replacement letters of credit by a combination of first mortagage bonds of Cleveland Electric and Toledo Edison, with the subordinate mortgage interests being released. The Companies also plan to secure an existing $205 million revolving credit facility with a combination of first mortgage bonds of Cleveland Electric and Toledo Edison. Results of Operations Factors contributing to the 0.6% increase in 1995 first quarter operating revenues are shown as follows: Changes from First Quarter 1994 Factors Operating Revenues (millions) Fuel Cost Recovery Revenues $10.4 Wholesale Revenues 3.7 Kilowatt-hour Sales Volume and Mix (5.6) Miscellaneous Revenues (6.0) Total $ 2.5 The increase in fuel cost recovery revenues included in customer bills resulted from a 17% increase in the weighted average of the fuel cost recovery factors used in the first quarter of 1995 to calculate these revenues compared to the 1994 first quarter average. Percentage changes between 1995 and 1994 first quarter billed electric kilowatt-hour sales are summarized as follows: Customer Categories % Change Residential (8.2)% Commercial 0.2 Industrial (0.3) Other 62.1 Total 1.7 First quarter 1995 total kilowatt-hour sales increased because a 113% increase in wholesale sales (included in the "Other" category) completely offset the decreases in residential and industrial sales. Residential sales were negatively affected by the milder winter weather as compared with the 1994 period. However, commercial sales increased slightly. Industrial sales decreased slightly as lower sales to one large steel industry customer were almost entirely offset by increased sales to the broad-based, smaller industrial customer group. Wholesale sales in the 1994 first quarter were suppressed by soft market conditions and limited power availability for bulk power transactions because of generating plant outages. First quarter 1995 miscellaneous revenues decreased primarily because the first quarter 1994 amount included the billings to the other utility owners and lessees for overhead expenses related to the refueling and maintenance outage of the jointly owned Perry Nuclear Power Plant Unit 1 during that period. First quarter operating expenses in 1995 increased 0.8% from the 1994 amount. Fuel and purchased power expenses increased as higher fuel expense was partially offset by lower purchased power expense. The higher fuel expense was attributable to more amortization of previously deferred fuel costs than the amount amortized in 1994. Cost control measures resulted in lower other operation and maintenance expenses. An increase in deferred operating expenses resulted primarily from increased deferrals for depreciation and postretirement benefits other than pensions in the 1995 period pursuant to the Rate Stabilization Program. Federal income taxes increased as a result of higher pretax operating income. First quarter 1995 credits for carrying charges relating to the Rate Stabilization Program increased from the 1994 amount primarily because of the larger base (which is related to net property additions since 1989) subject to the carrying charge calculation. This increase partially offset a decrease in investment and other income (included in "Other Income and Deductions, Net"). However, the first quarter federal income tax provision for nonoperating income in 1995 decreased from the 1994 amount. Outlook--Competition--Cleveland Public Power In March 1995, one of Cleveland Electric's large commercial customers, comprising medical and educational institutions, signed a five-year contract for electric service with Cleveland Public Power (CPP) beginning in September 1996 when that customer's contract with Cleveland Electric terminates. The loss of this customer would reduce Cleveland Electric's annual net income by about $5 million based on 1994 sales. On May 3, 1995, Cleveland Electric filed a complaint with the PUCO against this customer and American Electric Power Company (AEP) alleging, among other things, that the purchase of power from CPP by this customer is in reality a direct purchase from AEP and, thus, a sham transaction in violation of Ohio's certified territory statute. Some member institutions of this customer have indicated a desire to continue to be served by Cleveland Electric. Cleveland Electric is hopeful that other members will come to the same conclusion. THE TOLEDO EDISON COMPANY INCOME STATEMENT (Unaudited) (Thousands)
Three Months Ended March 31, --------------------- 1995 1994 -------- -------- OPERATING REVENUES (1) $ 206,384 $ 216,572 OPERATING EXPENSES Fuel and Purchased Power 37,491 45,673 Other Operation and Maintenance 52,061 55,708 Generation Facilities Rental Expense, Net 25,960 25,875 Depreciation and Amortization 20,844 20,322 Taxes, Other Than Federal Income Taxes 24,149 23,748 Deferred Operating Expenses, Net (5,171) (5,133) Federal Income Taxes 7,655 7,371 -------- -------- Total Operating Expenses 162,989 173,564 -------- -------- OPERATING INCOME 43,395 43,008 NONOPERATING INCOME Allowance for Equity Funds Used During Construction 287 213 Other Income and Deductions, Net 2,018 468 Deferred Carrying Charges 3,924 3,680 Federal Income Taxes - Credit (Expense) (781) (26) -------- -------- Total Nonoperating Income 5,448 4,335 -------- -------- INCOME BEFORE INTEREST CHARGES 48,843 47,343 INTEREST CHARGES Long-term Debt 27,110 27,913 Short-term Debt 2,500 892 Allowance for Borrowed Funds Used During Construction (277) (38) -------- -------- Net Interest Charges 29,333 28,767 -------- -------- NET INCOME 19,510 18,576 Preferred Dividend Requirements 4,783 5,158 -------- -------- EARNINGS AVAILABLE FOR COMMON STOCK $ 14,727 $ 13,418 ======== ======== (1) Includes revenues from bulk power sales to Cleveland Electric. $ 23,396 $ 29,669 The accompanying notes as they relate to Toledo Edison are an integral part of this statement.
THE TOLEDO EDISON COMPANY BALANCE SHEET (Thousands)
March 31, December 31, 1995 1994 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 2,859,406 $ 2,899,345 Accumulated Depreciation and Amortization (876,089) (892,331) ----------- ----------- 1,983,317 2,007,014 Construction Work In Progress 28,595 30,119 ----------- ----------- 2,011,912 2,037,133 Nuclear Fuel, Net of Amortization 110,224 119,477 Other Property, Less Accumulated Depreciation 20,549 5,994 ----------- ----------- 2,142,685 2,162,604 CURRENT ASSETS Cash and Temporary Cash Investments 81,613 87,800 Amounts Due from Customers and Others, Net 64,107 61,794 Amounts Due from Affiliates 47,829 18,929 Unbilled Revenues 18,844 21,844 Materials and Supplies, at Average Cost 45,027 44,730 Fossil Fuel Inventory, at Average Cost 12,894 12,498 Taxes Applicable to Succeeding Years 62,339 72,160 Other 2,155 2,369 ----------- ----------- 334,808 322,124 DEFERRED CHARGES AND OTHER ASSETS Amounts Due from Customers for Future Federal Income Taxes 405,812 405,308 Unamortized Loss from Beaver Valley Unit 2 Sale 99,575 100,698 Unamortized Loss on Reacquired Debt 26,987 28,094 Carrying Charges and Operating Expenses 387,827 378,751 Nuclear Plant Decommissioning Trusts 39,791 37,755 Other 62,277 66,798 ----------- ----------- 1,022,269 1,017,404 ----------- ----------- $ 3,499,762 $ 3,502,132 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 699,273 $ 684,568 Preferred Stock With Mandatory Redemption Provisions 6,685 6,685 Without Mandatory Redemption Provisions 210,000 210,000 Long-Term Debt 1,125,249 1,154,046 ----------- ----------- 2,041,207 2,055,299 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 107,764 82,891 Current Portion of Lease Obligations 42,761 35,696 Accounts Payable 48,533 48,190 Accounts Payable to Affiliates 29,143 30,701 Accrued Taxes 57,093 74,909 Accrued Interest 29,038 27,027 Other 16,367 16,566 ----------- ----------- 330,699 315,980 DEFERRED CREDITS AND OTHER LIABILITIES Unamortized Investment Tax Credits 84,842 86,673 Accumulated Deferred Federal Income Taxes 545,863 540,836 Unamortized Gain from Bruce Mansfield Plant Sale 195,590 198,089 Accumulated Deferred Rents for Bruce Mansfield Plant and Beaver Valley Unit 2 58,080 54,165 Nuclear Fuel Lease Obligations 80,010 87,285 Retirement Benefits 103,040 102,897 Other 60,431 60,908 ----------- ----------- 1,127,856 1,130,853 COMMITMENTS AND CONTINGENCIES (Note 6) ----------- ----------- $ 3,499,762 $ 3,502,132 =========== =========== The accompanying notes as they relate to Toledo Edison are an integral part of this statement.
THE TOLEDO EDISON COMPANY CASH FLOWS (Unaudited) (Thousands)
Three Months Ended March 31, -------------------- 1995 1994 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $19,510 $18,576 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 20,844 20,322 Deferred Federal Income Taxes 4,623 7,387 Unbilled Revenues 3,000 4,000 Deferred Fuel (391) 2,351 Deferred Carrying Charges (3,924) (3,680) Leased Nuclear Fuel Amortization 13,297 12,901 Deferred Operating Expenses, Net (5,171) (5,133) Allowance for Equity Funds Used During Construction (287) (213) Changes in Amounts Due from Customers and Others, Net (2,313) (5,507) Changes in Inventories (693) (2,908) Changes in Accounts Payable 343 (9,509) Changes in Working Capital Affecting Operations (3,127) 3,425 Other Noncash Items 7,602 5,380 -------- -------- Total Adjustments 33,803 28,816 -------- -------- Net Cash from Operating Activities 53,313 47,392 CASH FLOWS FROM FINANCING ACTIVITIES Maturities, Redemptions and Sinking Funds (3,954) (3,184) Nuclear Fuel Lease Obligations (4,254) (8,982) Dividends Paid (4,806) (152) -------- -------- Net Cash from Financing Activities (13,014) (12,318) CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (5,004) (7,477) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (277) (38) Loans to Affiliates (33,300) -- Contributions to Nuclear Plant Decommissioning Trusts (2,693) (1,081) Other Cash Applied (5,212) (5,774) -------- -------- Net Cash from Investing Activities (46,486) (14,370) -------- -------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (6,187) 20,704 CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 87,800 82,042 -------- -------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $81,613 $102,746 ======== ======== Other Payment Information: Interest (net of amounts capitalized) $22,000 $21,000 Federal Income Taxes -- -- The accompanying notes as they relate to Toledo Edison are an integral part of this statement.
THE TOLEDO EDISON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity Reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7 of the 1994 Form 10-K. The information under "Capital Resources and Liquidity" remains unchanged with the following exceptions: During the first quarter of 1995, Toledo Edison redeemed various securities as discussed in Note 4. In May 1995, Toledo Edison plans to issue $45 million of first mortgage bonds with a 7-5/8% fixed interest rate as collateral security for the sale by a public authority of an equal principal amount of tax-exempt bonds. The proceeds from the sale of the public authority's bonds will be used on June 15, 1995 to refund $45 million of the authority's tax-exempt bonds that were issued in 1984. Concurrently with the refunding of the authority's bonds, Toledo Edison's pollution control notes securing that issue will be redeemed. The new bonds will mature on May 1, 2020. Additional first mortgage bonds may be issued by Toledo Edison under its mortgage on the basis of property additions, cash or refundable first mortgage bonds. If the applicable interest coverage test is met, Toledo Edison may issue first mortgage bonds on the basis of property additions and, under certain circumstances, refundable bonds. At March 31, 1995, Toledo Edison would have been permitted to issue approximately $527 million of additional first mortgage bonds after giving effect to the May 1995 first mortgage bond issuance discussed above. Under its articles of incorporation, Toledo Edison cannot issue preferred stock unless certain earnings coverage requirements are met. At March 31, 1995, Toledo Edison would have been permitted to issue approximately $60 million of additional preferred stock at an assumed dividend rate of 10.5%. In mid-1995, certain letters of credit now in effect in connection with the sale and leaseback of Beaver Valley Power Station Unit 2 (Beaver Valley Unit 2) will expire. The Operating Companies are required to procure replacement letters of credit in an aggregate amount of approximately $226 million. The letters of credit now in effect are secured by the Operating Companies' subordinate mortgages. The Operating Companies are planning to secure the replacement letters of credit by a combination of first mortgage bonds of Toledo Edison and Cleveland Electric, with the subordinate mortgage interests being released. The Companies also plan to secure an existing $205 million revolving credit facility with a combination of first mortgage bonds of Toledo Edison and Cleveland Electric. Results of Operations Factors contributing to the 4.7% decrease in 1995 first quarter operating revenues are shown as follows: Changes from First Quarter 1994 Factors Operating Revenues (millions) Kilowatt-hour Sales Volume and Mix $ 0.1 Wholesale Revenues (6.3) Fuel Cost Recovery Revenues (3.8) Miscellaneous Revenues (0.2) Total $(10.2) Percentage changes between 1995 and 1994 first quarter billed electric kilowatt-hour sales are summarized as follows: Customer Categories % Change Residential (5.5)% Commercial (1.9) Industrial 5.6 Other (6.6) Total (1.4) First quarter 1995 total kilowatt-hour sales decreased because of lower residential and commercial sales and lower wholesale sales (included in the "Other" category). Residential and commercial sales were negatively affected by the milder winter weather as compared with the 1994 period. Industrial sales increased on the strength of increased sales to large automotive manufacturers and petroleum refineries and the broad-based, smaller industrial customer group. Other sales decreased primarily because of lower wholesale sales to Cleveland Electric as a result of the refueling and maintenance outage of Beaver Valley Unit 2 which began as scheduled in March 1995. The decrease in fuel cost recovery revenues included in customer bills resulted from a 12% decrease in the weighted average of the fuel cost recovery factors used in the first quarter of 1995 to calculate these revenues compared to the 1994 first quarter average. First quarter operating expenses in 1995 decreased 6.1% from the 1994 amount. Fuel and purchased power expenses decreased because of less fuel expense and lower purchased power requirements, both factors resulting from the increased availability of the nuclear generating units in the 1995 period. Cost control measures resulted in lower other operation and maintenance expenses. First quarter 1995 nonoperating income increased from the 1994 amount because of increased investment and other income (included in "Other Income and Deductions, Net") and increased credits for carrying charges relating to the Rate Stabilization Program. The federal income tax provision for nonoperating income increased accordingly. Lower first quarter 1995 interest charges for long-term debt partially offset higher interest charges for short-term debt. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders 1. Centerior Energy a. Centerior Energy's Annual Meeting of share owners was held on April 25, 1995. b. Proxies for the Annual Meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934. There was no solicitation in opposition to management's nominees for directors as listed in the proxy statement dated March 14, 1995, and all such nominees were elected. c. Six matters were submitted to share owners for a vote at the Annual Meeting. Issue 1 was the election of 13 directors of Centerior Energy. The vote on this issue was as follows: Broker Nominee For Withheld Non-Vote R. P. Anderson 108,044,051 7,340,418 9,044,865 A. C. Bersticker 108,371,029 7,013,440 9,044,865 L. Carter 108,088,707 7,295,762 9,044,865 T. A. Commes 108,528,764 6,855,705 9,044,865 W. F. Conway 108,296,010 7,088,460 9,044,865 W. R. Embry 107,999,397 7,385,072 9,044,865 R. J. Farling 108,372,751 7,011,718 9,044,865 G. H. Kaull 108,491,300 6,893,170 9,044,865 R. A. Miller 107,963,984 7,420,486 9,044,865 F. E. Mosier 108,318,821 7,065,648 9,044,865 Sr. M. M. Reinhard 107,746,941 7,637,528 9,044,865 R. C. Savage 108,271,473 7,112,996 9,044,865 W. J. Williams 108,222,374 7,162,095 9,044,865 Issue 2 was for the approval of a restricted stock plan for non- employee directors. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 85,039,495 14,186,889 3,015,865 22,187,085 Issue 3 was for the approval of an equity compensation plan for management. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 58,604,789 40,131,202 3,506,259 22,187,085 - 22 - Issue 4 was the ratification of the appointment by the Board of Directors of Arthur Andersen LLP as the independent accountants of Centerior Energy, Cleveland Electric and Toledo Edison for 1995. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 106,351,193 7,201,706 1,831,570 9,044,865 Issue 5 was a share owner proposal to prevent the named proxy holder from having discretionary power of voting on any issue in future proxies of the Company where no direction is given. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 28,560,617 69,550,803 4,130,828 22,187,085 Issue 6 was a share owner proposal to cap executive compensation at specified levels, to hold all executive pay raises in abeyance, to not allow stock options to be granted or exercised and to not award bonuses to executives and directors for any reason until the common stock annual dividend is returned to $1.60 per share and the common stock price is returned to $16.00 per share. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 27,213,280 71,739,734 3,289,235 22,187,085 2. Cleveland Electric a. In lieu of an Annual Meeting, Cleveland Electric's sole share owner, Centerior Energy (the sole share owner of all 79,590,689 outstanding shares of Cleveland Electric common stock), elected directors of Cleveland Electric through a Written Action of Sole Share Owner on April 25, 1995. b. The directors elected pursuant to the Written Action were: Robert J. Farling Murray R. Edelman Fred J. Lange, Jr. c. No other matters were addressed in the Written Action in lieu of an Annual Meeting. 3. Toledo Edison a. In lieu of an Annual Meeting, Toledo Edison's sole share owner, Centerior Energy (the sole share owner of all 39,133,887 outstanding shares of Toledo Edison common stock), elected directors of Toledo Edison through a Written Action of Sole Share Owner on April 25, 1995. b. The directors elected pursuant to the Written Action were: Robert J. Farling Murray R. Edelman Fred J. Lange, Jr. - 23 - c. No other matters were addressed in the Written Action in lieu of an Annual Meeting. Item 5. Other Information 1. Rate Freeze Ordinances For background and earlier developments relating to this topic, see "Item 1. Business--Electric Rates--General" in the Companies' Annual Report on Form 10-K for the year ended December 31, 1994. In April 1995, four of the more than 90 municipalities in Cleveland Electric's service area enacted ordinances freezing Cleveland Electric rates in those municipalities through December 1997. The municipalities taking such action are the cities of Parma, Brook Park and Berea and the Village of Brooklyn Heights. Under Ohio law, a municipality may regulate the rates of an electric utility subject to appeal to The Public Utilities Commission of Ohio ("PUCO") if not acceptable to the utility. On May 4, 1995, Cleveland Electric appealed the rate freeze ordinances passed by these four municipalities to the PUCO. Item 6. Exhibits and Reports on Form 8-K a. Exhibits None. b. Reports on Form 8-K During the quarter ended March 31, 1995, Centerior Energy, Cleveland Electric and Toledo Edison each filed the following Current Report on Form 8-K: A Form 8-K dated March 15, 1995 was filed on March 17, 1995 to report, under "Item 5. Other Events -- 1. 1995 Rate Requests", the announcement by Cleveland Electric and Toledo Edison of their intent to file a request with the PUCO for a rate increase to be effective in 1996. Cleveland Electric would ask for an average increase in rates of 4.9%, resulting in an $82.8 million increase in annual revenue, and Toledo Edison would ask for a 4.7% average increase in rates, resulting in a $34.8 million increase in annual revenue. - 24 - Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The person signing this report on behalf of each such registrant is also signing in his capacity as each registrant's Chief Accounting Officer. CENTERIOR ENERGY CORPORATION (Registrant) THE CLEVELAND ELECTRIC ILLUMINATING COMPANY (Registrant) THE TOLEDO EDISON COMPANY (Registrant) By: E. LYLE PEPIN E. Lyle Pepin, Controller and Chief Accounting Officer of each Registrant Date: May 12, 1995 - 25 - EX-27 2
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for Centerior Energy Corporation and is qualified in its entirety by reference to such financial statements. 0000774197 CENTERIOR ENERGY CORPORATION 1,000 U.S. DOLLARS 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 1 PER-BOOK 6,918,817 463,654 846,909 2,363,542 0 10,592,922 2,319,638 0 (458,996) 1,860,642 237,809 450,871 3,667,559 0 0 0 350,393 51,179 203,144 97,841 3,673,484 10,592,922 587,581 22,678 435,165 457,843 129,738 13,449 143,187 89,370 38,077 0 0 59,212 294,285 78,478 .26 0
EX-27 3
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for The Cleveland Electric Illuminating Company and is qualified in its entirety by reference to such financial statements. 0000020947 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 1 PER-BOOK 4,906,904 268,924 492,941 1,386,999 0 7,055,768 1,241,087 78,624 (228,045) 1,091,666 231,124 240,871 2,542,310 33,300 0 0 246,194 39,514 123,134 55,080 2,452,575 7,055,768 410,383 15,075 310,007 325,082 85,301 8,533 93,834 60,206 33,628 10,957 22,671 0 230,123 41,246 0 0
EX-27 4
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for The Toledo Edison Company and is qualified in its entirety by reference to such financial statements. 0000352049 THE TOLEDO EDISON COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 1 PER-BOOK 2,011,912 170,909 334,808 982,133 0 3,499,762 195,687 602,116 (98,530) 699,273 6,685 210,000 1,125,249 0 0 0 96,099 11,665 80,010 42,761 1,228,020 3,499,762 206,384 7,655 155,334 162,989 43,395 5,448 48,843 29,333 19,510 4,783 14,727 0 64,162 53,313 0 0
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