0000774197-95-000015.txt : 19950815 0000774197-95-000015.hdr.sgml : 19950815 ACCESSION NUMBER: 0000774197-95-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 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: 95562686 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: 95562687 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: 95562688 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 June 30, 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 August 9, 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 11 Balance Sheet 12 Cash Flows 13 Management's Discussion and Analysis of Financial 14 Condition and Results of Operations The Toledo Edison Company Income Statement 18 Balance Sheet 19 Cash Flows 20 Management's Discussion and Analysis of Financial 21 Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders 24 Item 5. Other Information 24 Item 6. Exhibits and Reports on Form 8-K 26 Signatures 27 -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 five other wholly owned subsidiaries. The two utilities are referred to collectively herein as the "Operating Companies" and individually as an "Operating Company". 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 June 30, 1995 and results of operations for the three months and six months ended June 30, 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) and the Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 (First Quarter 1995 Form 10-Q). 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 June 30, 1995, Cleveland Electric and Toledo Edison had $189.4 million and $136.4 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 six months ended June 30, 1995 and 1994 were as follows: 1995 1994 Paid February 15 $.20 $.20 Paid May 15 .20 .20 Paid August 15 .20 .20 Common stock cash dividends declared by Cleveland Electric during the six months ended June 30, 1995 and 1994 were as follows: 1995 1994 (millions) Paid in February $ - $18.6 Paid in May 15.0 24.2 Toledo Edison did not declare any common stock dividends during the six months ended June 30, 1995 and 1994. (4) Financing Activity During the three months ended June 30, 1995, one of Centerior Energy's nonutility subsidiaries repaid its remaining balance of $8.1 million of long- term debt. In addition, the Operating Companies redeemed or retired debt and preferred stock as follows: Cleveland Electric Cleveland Electric issued $300 million principal amount of First Mortgage Bonds, 9-1/2% Series due 2005-B, at a price of 99.808% primarily for the purpose of redeeming Cleveland Electric securities. Cleveland Electric also issued $53.9 million principal amount of First Mortgage Bonds, 7-5/8% Series due 2025, 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 were used in refunding at 103% of face value an equal principal amount of the authority's tax-exempt bonds that were issued in 1984 with an 11.125% interest rate. Concurrently with the refunding of the authority's 1984 bonds, Cleveland Electric's first mortgage bonds securing the authority's 1984 bonds were redeemed. Mandatory redemptions consisted of $35 million principal amount of Secured Medium-Term Notes, 9.80% Series 23 due 1995; $72 million principal amount of Secured Medium-Term Notes, 9.55% Series 25 due 1995; $4.3 million principal amount of First Mortgage Bonds, 13-3/4% Series due 2005-A (13-3/4% Bonds); $3 million of Serial Preferred Stock, $88.00 Series E; $10.7 million of Serial Preferred Stock, $91.50 Series Q; and $41.1 million of bank loans and pollution control notes. Cleveland Electric also elected to redeem 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. Toledo Edison Toledo Edison issued $45 million principal amount of First Mortgage Bonds, 7-5/8% Series due 2020, 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 were used in refunding at 102% of face value an equal principal amount of the authority's tax-exempt bonds that were issued in 1984 with a 13.25% interest rate. Concurrently with the refunding of the authority's 1984 bonds, Toledo Edison's pollution control notes securing the authority's 1984 bonds were redeemed. Mandatory redemptions consisted of $46.2 million of bank loans, pollution control notes and other long-term debt, and $1.7 million of 9-3/8% Cumulative Preferred Stock, $100 par value. (5) Long-Term Debt and Other Borrowing Arrangements On June 29, 1995, the Operating Companies replaced certain letters of credit in connection with the sale and leaseback of Beaver Valley Power Station Unit 2 (Beaver Valley Unit 2) that were due to expire with new letters of credit expiring in June 1999. The replacement letters of credit are in an aggregate amount of approximately $225.3 million and are secured by first mortgage bonds of Cleveland Electric and Toledo Edison in the proportion of 40% and 60%, respectively. The subordinate mortgage interests that secured the prior letters of credit were released. The reimbursement agreement relating to the replacement letters of credit contains a Centerior Energy fixed charge ratio covenant, but does not contain the other financial covenants contained in the prior letters of credit. In addition, a $205 million revolving credit facility which runs through May 1996 was reduced to $125 million and secured with first mortgage bonds of Cleveland Electric and Toledo Edison in the same 40% and 60% proportion. The credit agreement was amended to eliminate covenants relating to capitalization ratios and certain fixed charge coverage ratios while retaining a Centerior Energy fixed charge coverage ratio covenant. (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 and in the First Quarter 1995 Form 10-Q. 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 Public Utilities Commission of Ohio (PUCO) approved the merger in July 1994 and December 1994, respectively. In May 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, including an open-access transmission tariff. 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 approval has been obtained from the FERC. The Operating Companies obtained the approvals of their preferred stock share owners at meetings held on 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 Six Months Ended June 30, June 30, --------------------- ---------------------------- 1995 1994 1995 1994 -------- -------- ------------- ----------- OPERATING REVENUES $ 606,945 $ 596,437 $ 1,194,526 $ 1,184,004 OPERATING EXPENSES Fuel and Purchased Power 113,725 104,968 233,094 220,321 Other Operation and Maintenance 150,551 160,075 291,155 307,126 Generation Facilities Rental Expense, Net 39,851 39,767 79,703 79,534 Depreciation and Amortization 70,023 67,597 139,471 135,911 Taxes, Other Than Federal Income Taxes 82,424 82,577 164,380 165,585 Deferred Operating Expenses, Net (14,706) (15,863) (30,770) (30,714) Federal Income Taxes 28,264 23,392 50,942 43,674 -------- -------- ---------- ---------- Total Operating Expenses 470,132 462,513 927,975 921,437 -------- -------- ---------- ---------- OPERATING INCOME 136,813 133,924 266,551 262,567 NONOPERATING INCOME Allowance for Equity Funds Used During Construction 271 1,252 1,646 2,094 Other Income and Deductions, Net 968 2,134 3,270 4,689 Deferred Carrying Charges 11,623 9,785 23,195 19,702 Federal Income Taxes - Credit (Expense) (997) (1,481) (2,797) (2,744) -------- -------- ---------- ---------- Total Nonoperating Income 11,865 11,690 25,314 23,741 -------- -------- ---------- ---------- INCOME BEFORE INTEREST CHARGES 148,678 145,614 291,865 286,308 INTEREST CHARGES Long-Term Debt 87,657 87,084 174,735 175,431 Short-Term Debt 2,589 1,780 5,571 3,246 Allowance for Borrowed Funds Used During Construction (1,073) (1,352) (1,763) (2,134) -------- -------- ---------- ---------- Net Interest Charges 89,173 87,512 178,543 176,543 -------- -------- ---------- ---------- INCOME AFTER INTEREST CHARGES 59,505 58,102 113,322 109,765 Preferred Dividend Requirements of Subsidiaries 15,414 16,566 31,154 33,226 -------- -------- ---------- ---------- NET INCOME $ 44,091 $ 41,536 $ 82,168 $ 76,539 ======== ======== ========== ========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 148,032 147,948 148,032 147,674 ======== ======== ========== ========== EARNINGS PER COMMON SHARE $ .30 $ .28 $ .56 $ .52 ======== ======== ========== ========== The accompanying notes as they relate to Centerior Energy are an integral part of this statement.
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES BALANCE SHEET (Thousands) June 30, December 31, 1995 1994 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 9,698,233 $ 9,769,996 Accumulated Depreciation and Amortization (2,926,421) (2,906,106) ----------- ----------- 6,771,812 6,863,890 Construction Work In Progress 122,749 129,495 ----------- ----------- 6,894,561 6,993,385 Nuclear Fuel, Net of Amortization 244,947 293,222 Other Property, Less Accumulated Depreciation 102,614 50,018 ----------- ----------- 7,242,122 7,336,625 CURRENT ASSETS Cash and Temporary Cash Investments 169,631 186,399 Amounts Due from Customers and Others, Net 197,908 211,178 Unbilled Revenues 100,344 93,344 Materials and Supplies, at Average Cost 140,847 139,293 Fossil Fuel Inventory, at Average Cost 39,945 28,684 Taxes Applicable to Succeeding Years 181,019 251,877 Other 13,472 14,822 ----------- ----------- 843,166 925,597 DEFERRED CHARGES AND OTHER ASSETS Amounts Due from Customers for Future Federal Income Taxes 1,059,153 1,046,317 Unamortized Loss from Beaver Valley Unit 2 Sale 98,452 100,698 Unamortized Loss on Reacquired Debt 88,179 85,921 Carrying Charges and Operating Expenses 1,010,940 957,053 Nuclear Plant Decommissioning Trusts 95,983 81,967 Other 171,503 157,278 ----------- ----------- 2,524,210 2,429,234 ----------- ----------- $ 10,609,498 $ 10,691,456 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 1,875,126 $ 1,881,930 Preferred Stock With Mandatory Redemption Provisions 222,430 252,656 Without Mandatory Redemption Provisions 450,871 450,871 Long-Term Debt 3,902,386 3,697,082 ----------- ----------- 6,450,813 6,282,539 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 229,429 373,451 Current Portion of Lease Obligations 94,504 83,099 Accounts Payable 139,864 143,919 Accrued Taxes 239,801 384,114 Accrued Interest 86,783 89,556 Dividends Declared 44,624 15,376 Other 65,041 59,964 ----------- ----------- 900,046 1,149,479 DEFERRED CREDITS AND OTHER LIABILITIES Unamortized Investment Tax Credits 269,591 278,824 Accumulated Deferred Federal Income Taxes 1,825,552 1,778,429 Unamortized Gain from Bruce Mansfield Plant Sale 511,895 525,020 Accumulated Deferred Rents for Bruce Mansfield Plant and Beaver Valley Unit 2 148,856 138,619 Nuclear Fuel Lease Obligations 179,899 219,465 Retirement Benefits 176,891 176,221 Other 145,955 142,860 ----------- ----------- 3,258,639 3,259,438 COMMITMENTS AND CONTINGENCIES (Note 6) ----------- ----------- $ 10,609,498 $ 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) Six Months Ended June 30, ------------------------ 1995 1994 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $82,168 $76,539 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 139,471 135,911 Deferred Federal Income Taxes 34,345 29,158 Unbilled Revenues (7,000) 5,000 Deferred Fuel 15,687 (9,183) Deferred Carrying Charges (23,195) (19,702) Leased Nuclear Fuel Amortization 60,005 48,436 Deferred Operating Expenses, Net (30,770) (30,714) Allowance for Equity Funds Used During Construction (1,646) (2,094) Changes in Amounts Due from Customers and Others, Net 13,270 (21,217) Changes in Inventories (12,815) 531 Changes in Accounts Payable (4,055) 12,079 Changes in Working Capital Affecting Operations (69,801) (25,802) Other Noncash Items (7,397) 17,439 -------- -------- Total Adjustments 106,099 139,842 -------- -------- Net Cash from Operating Activities 188,267 216,381 CASH FLOWS FROM FINANCING ACTIVITIES First Mortgage Bond Issues 398,900 -- Common Stock Issues -- 11,732 Maturities, Redemptions and Sinking Funds (371,516) (84,581) Nuclear Fuel Lease Obligations (39,893) (49,077) Common Stock Dividends Paid (59,213) (59,018) Premiums, Discounts and Expenses (13,456) -- -------- -------- Net Cash from Financing Activities (85,178) (180,944) CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (82,767) (88,984) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (1,763) (2,134) Contributions to Nuclear Plant Decommissioning Trusts (11,794) (4,597) Other Cash Applied (23,533) (11,465) -------- -------- Net Cash from Investing Activities (119,857) (107,180) -------- -------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (16,768) (71,743) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 186,399 225,253 -------- -------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $169,631 $153,510 ======== ======== Other Payment Information: Interest (net of amounts capitalized) $152,000 $151,000 Federal Income Taxes 32,800 -- 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 and in the First Quarter 1995 Form 10-Q. The information under "Capital Resources and Liquidity" remains unchanged with the following exceptions: During the second quarter of 1995, the Companies completed financings as discussed in Notes 4 and 5. In July 1995, Toledo Edison repaid a $35 million bank loan originally due in July 1996 with an annual interest rate of 9.17%. In August 1995, Cleveland Electric issued $45.15 million principal amount of First Mortgage Bonds, 7-3/4% Series due 2025-A, and Toledo Edison issued $35 million principal amount of First Mortgage Bonds, 7-3/4% Series due 2020-A, and will issue $19 million principal amount of First Mortgage Bonds, 7-3/4% Series due 2020-B, 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 to refund in September and November 1995 equal principal amounts of the authority's tax-exempt bonds that were issued in 1985. Concurrently with the refunding of the authority's 1985 bonds, Cleveland Electric's first mortgage bonds and Toledo Edison's pollution control notes securing the authority's respective 1985 bonds will be redeemed. Also, in August 1995, Cleveland Electric plans to issue $40.9 million principal amount of First Mortgage Bonds, 7.70% Series due 2025-B, and $2.9 million principal amount of First Mortgage Bonds, 7.70% Series due 2025-C, as collateral security for the sale by two other public authorities of equal principal amounts of tax-exempt bonds. The proceeds from the sales of the public authorities' bonds will be used to refund in September 1995 equal principal amounts of the authorities' tax-exempt bonds that were issued in 1985. Concurrently with the refunding of the authorities' 1985 bonds, Cleveland Electric's first mortgage bonds securing those issues will be redeemed. 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 June 30, 1995, Cleveland Electric and Toledo Edison would have been permitted to issue approximately $275 million and $345 million of additional first mortgage bonds, respectively, after giving effect to the corresponding first mortgage bond issuances and redemptions through September 1995 discussed above and, for Cleveland Electric, the additional mandatory redemptions of $70.75 million aggregate principal amount of first mortgage bonds and secured medium-term notes through September 1995. Under its articles of incorporation, Toledo Edison cannot issue preferred stock unless certain earnings coverage requirements are met. At June 30, 1995, Toledo Edison would have been permitted to issue approximately $110 million of additional preferred stock at an assumed dividend rate of 10.5%. Results of Operations Factors contributing to the 1.8% and 0.9% increases in 1995 operating revenues from 1994 for the second quarter and six months, respectively, are shown as follows: Changes for Period Ended June 30, 1995 Three Six Factors Months Months (millions) Fuel Cost Recovery Revenues $ 7.9 $14.5 Kilowatt-hour Sales Volume and Mix 7.0 1.4 Wholesale Revenues (0.2) 3.3 Miscellaneous Revenues (4.2) (8.7) Total $10.5 $10.5 The increases in 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 second quarter of 1995 increased about 16% for Cleveland Electric and decreased about 6% for Toledo Edison compared to the weighted average of the respective fuel cost recovery factors used for the second quarter of 1994. The weighted average of the respective fuel cost recovery factors used for the 1995 six-month period increased about 17% for Cleveland Electric and decreased about 9% for Toledo Edison compared to the weighted average of the respective fuel cost recovery factors used for the 1994 six-month period. Significant increases in unbilled revenues as a result of hot and humid weather in the second half of June 1995 are included in the "Kilowatt-hour Sales Volume and Mix" amounts in the above table. An accrual is made at the end of each month to record the estimated amount of unbilled revenues for kilowatt-hours sold in the current month but not billed by the end of that month. Percentage changes between 1995 and 1994 billed electric kilowatt-hour sales are summarized as follows: Changes for Period Ended June 30, 1995 Three Six Customer Categories Months Months Residential (1.7)% (5.0)% Commercial (0.2) (0.3) Industrial 0.2 0.9 Other 30.7 32.1 Total 2.4 1.9 Second quarter 1995 total kilowatt-hour sales increased because of a 63% increase in wholesale sales (included in the "Other" category). A slight increase in industrial sales was completely offset by lower residential and commercial sales. Industrial sales increased slightly as increased sales to the broad-based, smaller industrial customer group entirely offset lower sales to the largest industrial customers. Residential and commercial sales were negatively affected by the milder spring weather as compared with the 1994 period. Kilowatt-hour sales data does not reflect a significant portion of the effect of the hot and humid weather in the second half of June 1995 because those sales were not billed by the end of the month. Total kilowatt-hour sales increased for the six-month period in 1995 because of a 62% increase in wholesale sales. An increase in industrial sales was completely offset by lower residential and commercial sales. Industrial sales increased as increased sales to large automotive manufacturers and the broad-based, smaller industrial customer group entirely offset lower sales to large steel industry customers. Residential and commercial sales were negatively affected by the milder weather as compared with the 1994 period. Weather-normalized residential sales were 2% lower for the 1995 six-month period than for the 1994 period, while weather-normalized commercial sales increased 0.4%. The significant percentage increases in wholesale sales for the 1995 second quarter and six-month period were related to the low level of activity in the comparable 1994 periods. Wholesale sales and revenues in the first and second quarters of 1994 were suppressed by soft market conditions and limited power availability for bulk power transactions because of generating plant outages. Miscellaneous revenues decreased in 1995 from the 1994 amounts primarily because the 1994 amounts included the billings to other utility owners and lessees for overhead expenses related to the 1994 refueling and maintenance outage of the jointly owned Perry Nuclear Power Plant Unit 1. Second quarter operating expenses in 1995 increased 1.6% from the 1994 amount. Lower power production expenses and cost-control measures combined to reduce other operation and maintenance expenses. Generating unit maintenance outages in 1994 had increased the level of power production expenses significantly for the 1994 comparable period. The cost-control measures have also helped to mitigate the increases in several operating expense categories. 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 increased generation and more amortization of previously deferred fuel costs than the amount amortized in 1994. An increase in depreciation and amortization expenses included an increase in nuclear plant decommissioning expense accruals for the 1995 second quarter as a result of the revisions to the cost estimates implemented in September 1994, when the true-up adjustments for the first eight months of 1994 were recorded. A decrease in deferred operating expenses resulted primarily from lower deferrals for postretirement benefits other than pensions in the 1995 period pursuant to the Rate Stabilization Program, which was approved by the PUCO for the Operating Companies in 1992. Federal income taxes increased as a result of higher pretax operating income. Second 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. A decrease in investment and other income lowered "Other Income and Deductions, Net". Six-month operating expenses in 1995 increased 0.7% from the 1994 amount. Other operation and maintenance expenses decreased for the same reasons cited for the decrease in second quarter 1995 other operation and maintenance expenses. Fuel and purchased power expenses increased for the same reasons cited for the increase in second quarter 1995 fuel and purchased power expenses. More than half of the increase in depreciation and amortization expenses was attributable to an increase in nuclear plant decommissioning expense accruals. Federal income taxes increased as a result of higher pretax operating income. The six-month 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. A decrease in investment and other income which lowered "Other Income and Deductions, Net" partially offset the carrying charge increase.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY INCOME STATEMENT (Unaudited) (Thousands) Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- 1995 1994 1995 1994 -------- -------- -------- -------- OPERATING REVENUES $ 424,362 $ 414,804 $ 834,745 $ 822,659 OPERATING EXPENSES Fuel and Purchased Power (1) 101,831 92,032 207,893 191,971 Other Operation and Maintenance 100,315 105,624 194,969 203,784 Generation Facilities Rental Expense, Net 13,891 13,891 27,783 27,783 Depreciation and Amortization 48,883 47,637 97,487 95,629 Taxes, Other Than Federal Income Taxes 58,559 58,959 116,247 118,044 Deferred Operating Expenses, Net (9,564) (10,307) (20,457) (20,026) Federal Income Taxes 19,377 15,916 34,452 28,910 -------- -------- -------- -------- Total Operating Expenses 333,292 323,752 658,374 646,095 -------- -------- -------- -------- OPERATING INCOME 91,070 91,052 176,371 176,564 NONOPERATING INCOME Allowance for Equity Funds Used During Construction (122) 947 966 1,577 Other Income and Deductions, Net 845 1,213 1,137 3,112 Deferred Carrying Charges 7,715 6,226 15,363 12,463 Federal Income Taxes - Credit (Expense) (408) (906) (903) (1,962) -------- -------- -------- -------- Total Nonoperating Income 8,030 7,480 16,563 15,190 -------- -------- -------- -------- INCOME BEFORE INTEREST CHARGES 99,100 98,532 192,934 191,754 INTEREST CHARGES Long-Term Debt 61,337 60,080 121,305 120,513 Short-Term Debt 1,143 1,307 1,794 1,933 Allowance for Borrowed Funds Used During Construction (965) (1,161) (1,378) (1,905) -------- -------- -------- -------- Net Interest Charges 61,515 60,226 121,721 120,541 -------- -------- -------- -------- NET INCOME 37,585 38,306 71,213 71,213 Preferred Dividend Requirements 10,718 11,366 21,675 22,868 -------- -------- -------- -------- EARNINGS AVAILABLE FOR COMMON STOCK $ 26,867 $ 26,940 $ 49,538 $ 48,345 ======== ======== ======== ======== (1) Includes purchased power expense for purchases from Toledo Edison. $ 26,161 $ 27,945 $ 49,557 $ 57,613 The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY BALANCE SHEET (Thousands) June 30, December 31, 1995 1994 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 6,816,896 $ 6,870,651 Accumulated Depreciation and Amortization (2,023,648) (2,013,775) ----------- ----------- 4,793,248 4,856,876 Construction Work In Progress 99,827 99,376 ----------- ----------- 4,893,075 4,956,252 Nuclear Fuel, Net of Amortization 146,567 173,745 Other Property, Less Accumulated Depreciation 59,765 20,575 ----------- ----------- 5,099,407 5,150,572 CURRENT ASSETS Cash and Temporary Cash Investments 61,935 65,643 Amounts Due from Customers and Others, Net 136,292 146,412 Amounts Due from Affiliates 4,463 5,002 Unbilled Revenues 76,500 71,500 Materials and Supplies, at Average Cost 97,425 94,563 Fossil Fuel Inventory, at Average Cost 24,431 16,186 Taxes Applicable to Succeeding Years 127,544 179,716 Other 5,195 4,343 ----------- ----------- 533,785 583,365 DEFERRED CHARGES AND OTHER ASSETS Amounts Due from Customers for Future Federal Income Taxes 650,782 641,249 Unamortized Loss on Reacquired Debt 60,481 57,827 Carrying Charges and Operating Expenses 614,082 578,302 Nuclear Plant Decommissioning Trusts 51,843 44,211 Other 110,468 95,114 ----------- ----------- 1,487,656 1,416,703 ----------- ----------- $ 7,120,848 $ 7,150,640 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 1,103,435 $ 1,058,190 Preferred Stock With Mandatory Redemption Provisions 217,410 245,971 Without Mandatory Redemption Provisions 240,871 240,871 Long-Term Debt 2,790,558 2,543,036 ----------- ----------- 4,352,274 4,088,068 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 154,374 281,785 Current Portion of Lease Obligations 53,508 47,403 Accounts Payable 89,651 87,954 Accounts and Notes Payable to Affiliates 58,308 117,635 Accrued Taxes 193,122 309,724 Accrued Interest 60,522 62,210 Dividends Declared 6,924 18,075 Other 36,191 33,028 ----------- ----------- 652,600 957,814 DEFERRED CREDITS AND OTHER LIABILITIES Unamortized Investment Tax Credits 186,580 192,151 Accumulated Deferred Federal Income Taxes 1,267,429 1,233,830 Unamortized Gain from Bruce Mansfield Plant Sale 318,804 326,930 Accumulated Deferred Rents for Bruce Mansfield Plant 88,029 84,454 Nuclear Fuel Lease Obligations 109,794 132,180 Retirement Benefits 62,072 59,471 Other 83,266 75,742 ----------- ----------- 2,115,974 2,104,758 COMMITMENTS AND CONTINGENCIES (Note 6) ----------- ----------- $ 7,120,848 $ 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) Six Months Ended June 30, ------------------------ 1995 1994 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $71,213 $71,213 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 97,487 95,629 Deferred Federal Income Taxes 24,004 14,492 Unbilled Revenues (5,000) 3,000 Deferred Fuel 15,393 (10,899) Deferred Carrying Charges (15,363) (12,463) Leased Nuclear Fuel Amortization 33,987 26,425 Deferred Operating Expenses, Net (20,457) (20,026) Allowance for Equity Funds Used During Construction (966) (1,577) Changes in Amounts Due from Customers and Others, Net 10,120 (11,105) Changes in Inventories (11,107) 610 Changes in Accounts Payable 1,697 9,806 Changes in Working Capital Affecting Operations (64,495) (20,191) Other Noncash Items (13,165) 5,622 -------- -------- Total Adjustments 52,135 79,323 -------- -------- Net Cash from Operating Activities 123,348 150,536 CASH FLOWS FROM FINANCING ACTIVITIES Notes Payable to Affiliates (58,100) 47,600 First Mortgage Bond Issues 353,900 -- Maturities, Redemptions and Sinking Funds (265,063) (53,105) Nuclear Fuel Lease Obligations (23,092) (27,193) Dividends Paid (36,967) (65,902) Premiums, Discounts and Expenses (8,644) -- -------- -------- Net Cash from Financing Activities (37,966) (98,600) CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (65,316) (73,071) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (1,378) (1,905) Contributions to Nuclear Plant Decommissioning Trusts (6,408) (2,435) Other Cash Applied (15,988) (5,969) -------- -------- Net Cash from Investing Activities (89,090) (83,380) -------- -------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (3,708) (31,444) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 65,643 77,374 -------- -------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $61,935 $45,930 ======== ======== Other Payment Information: Interest (net of amounts capitalized) $105,000 $105,000 Federal Income Taxes 20,900 -- 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 and in the First Quarter 1995 Form 10-Q. The information under "Capital Resources and Liquidity" remains unchanged with the following exceptions: During the second quarter of 1995, Cleveland Electric completed financings as discussed in Notes 4 and 5. In August 1995, Cleveland Electric issued $45.15 million principal amount of First Mortgage Bonds, 7-3/4% Series due 2025-A, 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 to refund in September 1995 $45.15 million of the authority's tax-exempt bonds that were issued in 1985. Concurrently with the refunding of the authority's 1985 bonds, Cleveland Electric's first mortgage bonds securing that issue will be redeemed. Also, in August 1995, Cleveland Electric plans to issue $40.9 million principal amount of First Mortgage Bonds, 7.70% Series due 2025-B, and $2.9 million principal amount of First Mortgage Bonds, 7.70% Series due 2025-C, as collateral security for the sale by two other public authorities of equal principal amounts of tax-exempt bonds. The proceeds from the sales of the public authorities' bonds will be used to refund in September 1995 equal principal amounts of the authorities' tax-exempt bonds that were issued in 1985. Concurrently with the refunding of the authorities' 1985 bonds, Cleveland Electric's first mortgage bonds securing those issues will be redeemed. 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 June 30, 1995, Cleveland Electric would have been permitted to issue approximately $275 million of additional first mortgage bonds after giving effect to the first mortgage bond issuances and redemptions through September 1995 discussed above and the additional mandatory redemptions of $70.75 million aggregate principal amount of first mortgage bonds and secured medium-term notes through September 1995. Results of Operations Factors contributing to the 2.3% and 1.5% increases in 1995 operating revenues from 1994 for the second quarter and six months, respectively, are shown as follows: Changes for Period Ended June 30, 1995 Three Six Factors Months Months (millions) Fuel Cost Recovery Revenues $ 9.5 $ 19.9 Kilowatt-hour Sales Volume and Mix 5.0 (0.8) Wholesale Revenues (0.3) 3.5 Miscellaneous Revenues (4.6) (10.5) Total $ 9.6 $ 12.1 The increases in 1995 fuel cost recovery revenues included in customer bills resulted from increases in the fuel cost recovery factors used in 1995 to calculate these revenues compared to those used in 1994. The increases in the weighted averages of the fuel cost recovery factors for 1995 were about 16% and 17% for the second quarter and six months, respectively. Significant increases in unbilled revenues as a result of hot and humid weather in the second half of June 1995 are included in the "Kilowatt-hour Sales Volume and Mix" amounts in the above table. An accrual is made at the end of each month to record the estimated amount of unbilled revenues for kilowatt-hours sold in the current month but not billed by the end of that month. Percentage changes between 1995 and 1994 billed electric kilowatt-hour sales are summarized as follows: Changes for Period Ended June 30, 1995 Three Six Customer Categories Months Months Residential (2.2)% (5.7)% Commercial 0.1 0.1 Industrial 0.3 - Other 70.5 65.8 Total 3.4 2.5 Second quarter 1995 total kilowatt-hour sales increased because a 234% increase in wholesale sales (included in the "Other" category) completely offset the decrease in residential sales. Residential sales were negatively affected by the milder spring weather as compared with the 1994 period; however, commercial sales increased slightly. Industrial sales increased slightly as increased sales to the broad-based, smaller industrial customer group entirely offset lower sales to large steel industry customers. Kilowatt-hour sales data does not reflect a significant portion of the effect of the hot and humid weather in the second half of June 1995 because those sales were not billed by the end of the month. Total kilowatt-hour sales increased for the six-month period in 1995 because a 149% increase in wholesale sales completely offset the decrease in residential sales. Residential sales were negatively affected by the milder weather as compared with the 1994 period. Weather-normalized residential sales were 3% lower for the 1995 six-month period than for the 1994 period. Commercial sales increased slightly. Industrial sales were virtually the same as for the 1994 period as lower sales to large steel industry customers entirely offset increased sales to the broad-based, smaller industrial customer group. The significant percentage increases in wholesale sales for the 1995 second quarter and six-month period were related to the low level of activity in the comparable 1994 periods. Wholesale sales and revenues in the first and second quarters of 1994 were suppressed by soft market conditions and limited power availability for bulk power transactions because of generating plant outages. Miscellaneous revenues decreased in 1995 from the 1994 amounts primarily because the 1994 amounts included the billings to other utility owners and lessees for overhead expenses related to the 1994 refueling and maintenance outage of the jointly owned Perry Nuclear Power Plant Unit 1. Second quarter operating expenses in 1995 increased 2.9% from the 1994 amount. Lower power production expenses and cost-control measures combined to reduce other operation and maintenance expenses. Generating unit maintenance outages in 1994 had increased the level of power production expenses significantly for the 1994 comparable period. The cost-control measures have also helped to mitigate the increases in several operating expense categories. 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 increased generation and more amortization of previously deferred fuel costs than the amount amortized in 1994. An increase in depreciation and amortization expenses included an increase in nuclear plant decommissioning expense accruals for the 1995 second quarter as a result of the revisions to the cost estimates implemented in September 1994, when the true-up adjustments for the first eight months of 1994 were recorded. Federal income taxes increased as a result of higher pretax operating income. Second 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 Rate Stabilization Program was approved by the PUCO for Cleveland Electric in 1992. Six-month operating expenses in 1995 increased 1.9% from the 1994 amount. Other operation and maintenance expenses decreased for the same reasons cited for the decrease in second quarter 1995 other operation and maintenance expenses. Fuel and purchased power expenses increased for the same reasons cited for the increase in second quarter 1995 fuel and purchased power expenses. More than half of the increase in depreciation and amortization expenses was attributable to an increase in nuclear plant decommissioning expense accruals. Federal income taxes increased as a result of higher pretax operating income. The six-month 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. A decrease in investment and other income which lowered "Other Income and Deductions, Net" partially offset the carrying charge increase. A decrease in the six-month federal income tax provision for nonoperating income in 1995 also contributed to the increase in nonoperating income.
THE TOLEDO EDISON COMPANY INCOME STATEMENT (Unaudited) (Thousands) Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- 1995 1994 1995 1994 -------- -------- -------- -------- OPERATING REVENUES (1) $ 215,043 $ 216,452 $ 421,427 $ 433,024 OPERATING EXPENSES Fuel and Purchased Power 38,466 41,350 75,957 87,023 Other Operation and Maintenance 56,611 60,905 108,672 116,613 Generation Facilities Rental Expense, Net 25,960 25,876 51,920 51,751 Depreciation and Amortization 21,140 19,959 41,984 40,281 Taxes, Other Than Federal Income Taxes 23,748 23,443 47,897 47,191 Deferred Operating Expenses, Net (5,142) (5,555) (10,313) (10,688) Federal Income Taxes 9,019 7,623 16,674 14,994 -------- -------- -------- -------- Total Operating Expenses 169,802 173,601 332,791 347,165 -------- -------- -------- -------- OPERATING INCOME 45,241 42,851 88,636 85,859 NONOPERATING INCOME Allowance for Equity Funds Used During Construction 392 304 679 517 Other Income and Deductions, Net 1,110 1,154 3,128 1,622 Deferred Carrying Charges 3,908 3,559 7,832 7,239 Federal Income Taxes - Credit (Expense) (501) (352) (1,282) (378) -------- -------- -------- -------- Total Nonoperating Income 4,909 4,665 10,357 9,000 -------- -------- -------- -------- INCOME BEFORE INTEREST CHARGES 50,150 47,516 98,993 94,859 INTEREST CHARGES Long-Term Debt 26,321 27,004 53,431 54,917 Short-Term Debt 1,965 1,048 4,465 1,940 Allowance for Borrowed Funds Used During Construction (108) (190) (385) (228) -------- -------- -------- -------- Net Interest Charges 28,178 27,862 57,511 56,629 -------- -------- -------- -------- NET INCOME 21,972 19,654 41,482 38,230 Preferred Dividend Requirements 4,696 5,200 9,479 10,358 -------- -------- -------- -------- EARNINGS AVAILABLE FOR COMMON STOCK $ 17,276 $ 14,454 $ 32,003 $ 27,872 ======== ======== ======== ======== (1) Includes revenues from bulk power sales to Cleveland Electric. $ 26,161 $ 27,945 $ 49,557 $ 57,613 The accompanying notes as they relate to Toledo Edison are an integral part of this statement.
THE TOLEDO EDISON COMPANY BALANCE SHEET (Thousands) June 30, December 31, 1995 1994 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 2,881,337 $ 2,899,345 Accumulated Depreciation and Amortization (902,773) (892,331) ----------- ----------- 1,978,564 2,007,014 Construction Work In Progress 22,921 30,119 ----------- ----------- 2,001,485 2,037,133 Nuclear Fuel, Net of Amortization 98,380 119,477 Other Property, Less Accumulated Depreciation 19,197 5,994 ----------- ----------- 2,119,062 2,162,604 CURRENT ASSETS Cash and Temporary Cash Investments 69,340 87,800 Amounts Due from Customers and Others, Net 58,430 61,794 Amounts Due from Affiliates 20,606 18,929 Unbilled Revenues 23,844 21,844 Materials and Supplies, at Average Cost 43,421 44,730 Fossil Fuel Inventory, at Average Cost 15,514 12,498 Taxes Applicable to Succeeding Years 53,476 72,160 Other 1,774 2,369 ----------- ----------- 286,405 322,124 DEFERRED CHARGES AND OTHER ASSETS Amounts Due from Customers for Future Federal Income Taxes 408,611 405,308 Unamortized Loss from Beaver Valley Unit 2 Sale 98,452 100,698 Unamortized Loss on Reacquired Debt 27,698 28,094 Carrying Charges and Operating Expenses 396,858 378,751 Nuclear Plant Decommissioning Trusts 44,141 37,755 Other 67,315 66,798 ----------- ----------- 1,043,075 1,017,404 ----------- ----------- $ 3,448,542 $ 3,502,132 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 716,506 $ 684,568 Preferred Stock With Mandatory Redemption Provisions 5,020 6,685 Without Mandatory Redemption Provisions 210,000 210,000 Long-Term Debt 1,111,828 1,154,046 ----------- ----------- 2,043,354 2,055,299 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 75,055 82,891 Current Portion of Lease Obligations 40,996 35,696 Accounts Payable 47,820 48,190 Accounts Payable to Affiliates 27,372 30,701 Accrued Taxes 46,911 74,909 Accrued Interest 26,247 27,027 Other 17,912 16,566 ----------- ----------- 282,313 315,980 DEFERRED CREDITS AND OTHER LIABILITIES Unamortized Investment Tax Credits 83,012 86,673 Accumulated Deferred Federal Income Taxes 554,508 540,836 Unamortized Gain from Bruce Mansfield Plant Sale 193,091 198,089 Accumulated Deferred Rents for Bruce Mansfield Plant and Beaver Valley Unit 2 60,827 54,165 Nuclear Fuel Lease Obligations 70,105 87,285 Retirement Benefits 102,886 102,897 Other 58,446 60,908 ----------- ----------- 1,122,875 1,130,853 COMMITMENTS AND CONTINGENCIES (Note 6) ----------- ----------- $ 3,448,542 $ 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) Six Months Ended June 30, ------------------------ 1995 1994 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $41,482 $38,230 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 41,984 40,281 Deferred Federal Income Taxes 10,603 15,348 Unbilled Revenues (2,000) 2,000 Deferred Fuel 294 1,716 Deferred Carrying Charges (7,832) (7,239) Leased Nuclear Fuel Amortization 26,019 22,013 Deferred Operating Expenses, Net (10,313) (10,688) Allowance for Equity Funds Used During Construction (679) (517) Changes in Amounts Due from Customers and Others, Net 3,364 (7,954) Changes in Inventories (1,707) (78) Changes in Accounts Payable (370) (1,684) Changes in Working Capital Affecting Operations (13,159) (7,236) Other Noncash Items 5,768 11,817 -------- -------- Total Adjustments 51,972 57,779 -------- -------- Net Cash from Operating Activities 93,454 96,009 CASH FLOWS FROM FINANCING ACTIVITIES First Mortgage Bond Issue 45,000 -- Maturities, Redemptions and Sinking Funds (97,678) (31,476) Nuclear Fuel Lease Obligations (16,801) (21,884) Dividends Paid (9,544) (10,289) Premiums, Discounts and Expenses (4,812) -- -------- -------- Net Cash from Financing Activities (83,835) (63,649) CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (17,451) (15,913) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (385) (228) Loans to Affiliates -- (26,000) Contributions to Nuclear Plant Decommissioning Trusts (5,386) (2,162) Other Cash Applied (4,857) (1,422) -------- -------- Net Cash from Investing Activities (28,079) (45,725) -------- -------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (18,460) (13,365) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 87,800 82,042 -------- -------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $69,340 $68,677 ======== ======== Other Payment Information: Interest (net of amounts capitalized) $47,000 $47,000 Federal Income Taxes 11,300 -- 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 and in the First Quarter 1995 Form 10-Q. The information under "Capital Resources and Liquidity" remains unchanged with the following exceptions: During the second quarter of 1995, Toledo Edison completed financings as discussed in Notes 4 and 5. In July 1995, Toledo Edison repaid a $35 million bank loan originally due in July 1996 with an annual interest rate of 9.17%. In August 1995, Toledo Edison issued $35 million principal amount of First Mortgage Bonds, 7-3/4% Series due 2020-A, and will issue $19 million principal amount of First Mortgage Bonds, 7-3/4% Series due 2020-B, 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 to refund in September and November 1995 equal principal amounts of the authority's tax-exempt bonds that were issued in 1985. Concurrently with the refunding of the authority's 1985 bonds, Toledo Edison's pollution control notes securing those issues will be redeemed. 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 June 30, 1995, Toledo Edison would have been permitted to issue approximately $345 million of additional first mortgage bonds after giving effect to the August 1995 first mortgage bond issuances discussed above. Under its articles of incorporation, Toledo Edison cannot issue preferred stock unless certain earnings coverage requirements are met. At June 30, 1995, Toledo Edison would have been permitted to issue approximately $110 million of additional preferred stock at an assumed dividend rate of 10.5%. Results of Operations Factors contributing to the 0.7% and 2.7% decreases in 1995 operating revenues from 1994 for the second quarter and six months, respectively, are shown as follows: Changes for Period Ended June 30, 1995 Three Six Factors Months Months (millions) Kilowatt-hour Sales Volume and Mix $ 2.0 $ 2.1 Wholesale Revenues (1.7) (8.0) Fuel Cost Recovery Revenues (1.6) (5.4) Miscellaneous Revenues (0.1) (0.3) Total $(1.4) $(11.6) Significant increases in unbilled revenues as a result of hot and humid weather in the second half of June 1995 are included in the "Kilowatt-hour Sales Volume and Mix" amounts in the above table. An accrual is made at the end of each month to record the estimated amount of unbilled revenues for kilowatt-hours sold in the current month but not billed by the end of that month. Percentage changes between 1995 and 1994 billed electric kilowatt-hour sales are summarized as follows: Changes for Period Ended June 30, 1995 Three Six Customer Categories Months Months Residential (0.4)% (3.4)% Commercial (1.3) (1.6) Industrial 0.1 2.8 Other (3.6) (5.2) Total (1.3) (1.4) Second 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 spring weather as compared with the 1994 period. Industrial sales increased slightly as increased sales to the broad-based, smaller industrial customer group entirely offset lower sales to the largest industrial customers. 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 in late March 1995 and ended in early May 1995. Kilowatt-hour sales data does not reflect a significant portion of the effect of the hot and humid weather in the second half of June 1995 because those sales were not billed by the end of the month. Total kilowatt-hour sales decreased for the six-month period in 1995 because of lower residential and commercial sales and lower wholesale sales. Residential and commercial sales were negatively affected by the milder weather as compared with the 1994 period. Weather-normalized residential sales for the 1995 six-month period increased 0.6% as compared with the 1994 amount, while weather-normalized commercial sales decreased 0.1%. Industrial sales increased on the strength of increased sales to large automotive and glass manufacturers 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 aforementioned 1995 refueling and maintenance outage of Beaver Valley Unit 2. The decreases in 1995 fuel cost recovery revenues included in customer bills resulted from decreases in the fuel cost recovery factors used in 1995 to calculate these revenues compared to those used in 1994. The decreases in the weighted averages of the fuel cost recovery factors for 1995 were about 6% and 9% for the second quarter and six months, respectively. Second quarter operating expenses in 1995 decreased 2.2% from the 1994 amount. Lower power production expenses and cost-control measures combined to reduce other operation and maintenance expenses. A generating plant outage in 1994 had increased the level of power production expenses significantly for the 1994 comparable period. The cost-control measures have also helped to mitigate the increases in several operating expense categories. Fuel and purchased power expenses decreased primarily because of lower purchased power requirements resulting from the increased generation from the nuclear generating units in the 1995 second quarter. An increase in depreciation and amortization expenses included an increase in nuclear plant decommissioning expense accruals for the 1995 second quarter as a result of the revisions to the cost estimates implemented in September 1994, when the true-up adjustments for the first eight months of 1994 were recorded. Federal income taxes increased as a result of higher pretax operating income. Six-month operating expenses in 1995 decreased 4.1% from the 1994 amount. Other operation and maintenance expenses decreased for the same reasons cited for the decrease in second quarter 1995 other operation and maintenance expenses. Fuel and purchased power expenses decreased because of less fuel expense and lower purchased power requirements, both factors resulting from the increased generation from the nuclear generating units in the 1995 period. About one-half of the increase in depreciation and amortization expenses was attributable to an increase in nuclear plant decommissioning expense accruals. Federal income taxes increased as a result of higher pretax operating income. Six-month 1995 nonoperating income increased from the 1994 amount primarily because of increased investment income (included in "Other Income and Deductions, Net") and increased credits for carrying charges relating to the Rate Stabilization Program, which was approved by the PUCO for Toledo Edison in 1992. The federal income tax provision for nonoperating income increased accordingly. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders 1. Cleveland Electric a. A Special Meeting of Cleveland Electric's preferred stock share owners was held on June 14, 1995. b. The only matter submitted to preferred stock share owners for a vote at the Special Meeting was for the approval of new Amended Articles of Incorporation to increase the number of authorized shares of Cleveland Electric preferred stock. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 1,447,627 32,041 43,718 854,758 2. Toledo Edison a. A Special Meeting of Toledo Edison's preferred stock share owners was held on June 14, 1995. b. The only matter submitted to preferred stock share owners at the Special Meeting was for the approval of the Agreement of Merger between Toledo Edison and Cleveland Electric. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 1,573,495 69,079 49,686 445,751 Item 5. Other Information 1. Garfield Heights For background relating to this topic, see "Item 1. Business--Operations --Competitive Conditions--Cleveland Electric" in the Companies' Annual Report on Form 10-K for the year ended December 31, 1994 ("1994 Form 10-K"). On June 29, 1995, The Public Utilities Commission of Ohio ("PUCO") ruled that a rate reduction in the City of Garfield Heights was not warranted. Garfield Heights had passed an ordinance in March 1994 calling for a 30% reduction in rates for Cleveland Electric's customers within that city. Cleveland Electric appealed the ordinance to the PUCO. Each party has subsequently filed an application for rehearing concerning certain provisions of the PUCO's ruling. 2. City of Clyde For background relating to this topic, see "Item 1. Business--Operations --Competitive Conditions--Toledo Edison" in the 1994 Form 10-K. - 24 - On June 23, 1995, the Court of Appeals for Sandusky County, Ohio denied Toledo Edison's challenge to an ordinance passed by the City of Clyde in January 1995 which prohibits new customers from using Toledo Edison service. Toledo Edison has appealed this decision to the Ohio Supreme Court. 3. Rate Freeze Ordinances For background relating to this topic, see "Item 5. Other Information 1. Rate Freeze Ordinances" in the Companies' Quarterly Report on Form 10-Q for the quarter ended March 31, 1995. In May 1995, the cities of Parma, Brook Park and Berea and the Village of Brooklyn Heights each rescinded ordinances passed in those communities in April 1995 which attempted to freeze Cleveland Electric rates through 1997. 4. Federal Energy Regulatory Commission Proposed Rules on Transmission Access On March 29, 1995, the Federal Energy Regulatory Commission ("FERC") issued proposed rules relating to open access transmission services by public utilities, recovery of stranded costs and other related matters. The open access proposed rules would require all utilities subject to FERC jurisdiction to offer non-discriminatory open access transmission service tariffs to wholesale buyers and sellers of electric power. The proposed rules would require transmission owners to offer wholesale transmission customers services which are comparable to the services the owners provide for the transmission of their own power. In the proposed rules on stranded costs, the FERC indicates that utilities are entitled to full recovery of legitimate, prudent and verifiable stranded costs at both the state and federal level. On May 25, 1995, the Operating Companies filed with the FERC non- discriminatory open access transmission tariffs which were drafted using the proposed rules as a guideline. On August 7, 1995, Centerior Energy filed comments with the FERC on the proposed rules. The long-range impact of the proposed rules on the Operating Companies is uncertain at this time. In the near term, the impact of the requirement to provide transmission services is not expected to be material because the Operating Companies have provided transmission services to wholesale customers within their respective service territories since the late 1970s. 5. Medical Center Company For background relating to this topic, see "Item 1. Business-Operations --Competitive Conditions--Cleveland Electric" in the 1994 Form 10-K and "Part I. Financial Information--Management's Discussion and Analysis of Financial Condition and Results of Operations--Outlook--Competition-- Cleveland Public Power" in the Centerior Energy and Cleveland Electric Quarterly Reports on Form 10-Q for the quarter ended March 31, 1995. - 25 - On August 10, 1995, the PUCO dismissed a complaint filed by Cleveland Electric against American Electric Power Company ("AEP") and Medical Center Company ("Medco") concerning a proposed power contract between Medco and Cleveland Public Power ("CPP"). An operating subsidiary of AEP has agreed to sell the necessary power to CPP. Cleveland Electric has contended, among other things, that this transaction is in reality a direct purchase from AEP in violation of Ohio's certified territory statute. The PUCO dismissed the case on jurisdictional grounds. Cleveland Electric plans to request a rehearing of the matter. Item 6. Exhibits and Reports on Form 8-K a. Exhibits None. b. Reports on Form 8-K During the quarter ended June 30, 1995, Centerior Energy, Cleveland Electric and Toledo Edison each filed the following Current Report on Form 8-K: A Form 8-K dated June 14, 1995 was filed on June 16, 1995 to report, under "Item 5. Other Events -- 1. 1995 Special Meetings", that, at Special Meetings of the preferred stock share owners of Cleveland Electric and Toledo Edison held on June 14, 1995, Cleveland Electric preferred share owners approved an increase in the number of authorized shares of Cleveland Electric preferred stock and Toledo Edison preferred share owners approved the Agreement of Merger between Toledo Edison and Cleveland Electric. -26- 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: August 11, 1995 - 27 - 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 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1 PER-BOOK 6,894,561 443,943 843,166 2,427,828 0 10,609,498 2,319,688 0 (444,562) 1,875,126 222,430 450,871 3,902,386 0 0 0 178,250 51,179 179,899 94,504 3,654,853 10,609,498 1,194,526 50,942 877,033 927,975 266,551 25,314 291,865 178,543 82,168 0 0 88,818 308,753 188,267 .56 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 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1 PER-BOOK 4,893,075 258,225 533,785 1,435,763 0 7,120,848 1,241,138 78,624 (216,327) 1,103,435 217,410 240,871 2,790,558 0 0 0 114,860 39,514 109,794 53,508 2,450,898 7,120,848 834,745 34,452 623,922 658,374 176,371 16,563 192,934 121,721 71,213 21,675 49,538 15,000 241,160 123,348 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 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1 PER-BOOK 2,001,485 162,067 286,405 998,585 0 3,448,542 195,687 602,116 (81,297) 716,506 5,020 210,000 1,111,828 0 0 0 63,390 11,665 70,105 40,996 1,219,032 3,448,542 421,427 16,674 316,117 332,791 88,636 10,357 98,993 57,511 41,482 9,479 32,003 0 67,593 93,454 0 0