-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, POWfwBZrsQOB3WKatUWfS9ObhXA3U1l+nGAeKQ7hPmIDaRIHIOu4B4FquLXqVZ6a V2eg8QsEsQx0BvbGCQWkWA== 0000774197-97-000018.txt : 19970520 0000774197-97-000018.hdr.sgml : 19970520 ACCESSION NUMBER: 0000774197-97-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97608610 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: 97608611 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: 97608612 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, 1997 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) c/o Centerior Energy Corporation 6200 Oak Tree Boulevard Independence, Ohio 44131 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 9, 1997, there were 148,025,928 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. Centerior Energy has made forward-looking statements in this Form 10-Q which statements are subject to risks and uncertainties, including the impact on the Companies if: (1) competitive pressure in the electric utility industry increases significantly;(2) state and federal regulatory initiatives are implemented that increase competition, threaten costs and investment recovery and impact dividends or rate structures; or (3) general economic conditions, either nationally or in the area in which the combined company will be doing business are less favorable than expected. -i- TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Centerior Energy Corporation and Subsidiaries The Cleveland Electric Illuminating Company and Subsidiary 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 and Subsidiary Income Statement 9 Balance Sheet 10 Cash Flows 11 Management's Discussion and Analysis of Financial 12 Condition and Results of Operations The Toledo Edison Company Income Statement 14 Balance Sheet 15 Cash Flows 16 Management's Discussion and Analysis of Financial 17 Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders 19 Item 5. Other Information 20 Item 6. Exhibits and Reports on Form 8-K 22 Signatures 23 Exhibit Index 24 -ii- CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY, AND THE TOLEDO EDISON COMPANY (UNAUDITED) NOTES TO THE FINANCIAL STATEMENTS (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 three 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 presentation of financial position at March 31, 1997 and results of operations and cash flows for the three months ended March 31, 1997 and 1996 have been included. All such adjustments were normal recurring adjustments, except for the write-down of inactive production facilities in the first quarter of 1996 discussed in Note 6. A new Statement of Position issued by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants, Inc. effective January 1, 1997 provides guidance on the recognition and disclosure of environmental remediation liabilities. The Companies' adoption of this statement in 1997 did not materially affect their results of operations or financial positions. 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, 1996 (1996 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 to fund 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. Cleveland Electric has since 1993 declared and paid preferred and common stock dividends out of appropriated current net income included in retained earnings. At the times of such declarations and payments, Cleveland Electric had a deficit in its retained earnings. From 1993 through 1996, Toledo Edison declared and paid preferred stock dividends out of appropriated current net income included in retained earnings. At the times of such declarations and payments, Toledo Edison had a deficit in its retained earnings from 1993 through November 1996. Toledo Edison also has a provision in its mortgage applicable to approximately $94 million of outstanding first mortgage bonds ($31 million of which mature in August 1997) that requires common stock dividends to be paid out of its total balance of retained earnings. At March 31, 1997, Toledo Edison's total retained earnings were $10 million. At March 31, 1997, Cleveland Electric and Toledo Edison had $120.4 million and $227.7 million, respectively, of appropriated retained earnings for the payment of dividends. See "Management's Financial Analysis -- Capital Resources and Liquidity-Liquidity" contained in Item 7 of the 1996 Form 10-K for a discussion of a Federal Energy Regulatory Commission (FERC) audit issue regarding the declaration and payment of dividends. (3) Common Stock Dividends Cash dividends per common share declared by Centerior Energy during the three months ended March 31, 1997 and 1996 were as follows: 1997 1996 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, 1997 and 1996 were as follows: 1997 1996 (millions) Paid in February $29.6 $29.6 Toledo Edison did not declare any common stock dividends during the three months ended March 31, 1997 and 1996. (4) Financing Activity During the three months ended March 31, 1997, the Operating Companies redeemed preferred stock and debt securities as follows: Cleveland Electric Mandatory redemptions consisted of $15 million of Serial Preferred Stock, $9.125 Series N. Toledo Edison Mandatory redemptions consisted of $8 million of notes secured by subordinated mortgage collateral. (5) Short-Term Borrowing Arrangements In May 1997, Centerior Energy renewed a $125 million revolving credit facility until May 7, 1998 on the same terms as the existing agreement. Centerior Energy and the Service Company may borrow under the facility, with all borrowings jointly and severally guaranteed by the Operating Companies. Centerior Energy plans to transfer any of its borrowed funds to the Operating Companies. There have not been any borrowings under the facility. (6) Write-down of Inactive Production Facilities In the first quarter of 1996, Toledo Edison wrote down the net book value of two inactive production facilities, $11.3 million, to "Other Income and Deductions, Net" resulting in nonoperating losses for Toledo Edison and Centerior Energy for that period. The net write-down was $7.2 million after taxes or, for Centerior Energy, $.05 per common share. The write-down resulted from a decision that the facilities were no longer expected to provide revenues. (7) 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 1996 Form 10-K and "Part II, Item 5. Other Information" in this Quarterly Report on Form 10-Q. In September 1996, Centerior Energy and Ohio Edison Company (Ohio Edison) entered into an agreement and plan of merger to form a new holding company, FirstEnergy Corp. (FirstEnergy). On March 27, 1997, Centerior Energy and Ohio Edison common stock share owners approved the merger. Various aspects of the merger are subject to the approval of the FERC and other regulatory authorities. FirstEnergy plans to account for the merger as a purchase in accordance with generally accepted accounting principles. If FirstEnergy elects to apply, or "push down", the effects of purchase accounting to the financial statements of the Operating Companies, Cleveland Electric would record adjustments to: (1) reduce the carrying value of its nuclear generating plant by $880 million to fair value; (2) recognize goodwill of $675 million; (3) reduce its common stock equity by $258 million; (4) reset its retained earnings to zero; and (5) reduce its related deferred federal income tax liability by $308 million; and Toledo Edison would record adjustments to: (1) reduce the carrying value of its nuclear generating plant by $370 million to fair value; (2) recognize goodwill of $307 million; (3) reduce its common stock equity by $124 million; (4) reset its retained earnings to zero; and (5) reduce its related deferred federal income tax liability by $130 million. These amounts reflect FirstEnergy's estimates of the pro forma adjustments for the Operating Companies as of December 31, 1996. The actual adjustments to be recorded could be materially different from the estimates. FirstEnergy has not decided whether to push down the effects of purchase accounting to the financial statements of the Operating Companies if the Ohio Edison-Centerior Energy merger is completed. CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES INCOME STATEMENT (Unaudited) (Thousands, Except Per Share Amounts) Three Months Ended March 31, --------------------- 1997 1996 -------- -------- OPERATING REVENUES $ 611,608 $ 605,255 OPERATING EXPENSES Fuel and Purchased Power 121,831 114,984 Other Operation and Maintenance 142,584 155,905 Generation Facilities Rental Expense, Net 39,853 39,853 Depreciation and Amortization 77,111 73,232 Taxes, Other Than Federal Income Taxes 79,614 83,952 Amortization of Deferred Operating Expenses, Net 10,858 10,543 Federal Income Taxes 27,366 17,993 -------- -------- Total Operating Expenses 499,217 496,462 -------- -------- OPERATING INCOME 112,391 108,793 NONOPERATING INCOME (LOSS) Allowance for Equity Funds Used During Construction 658 911 Other Income and Deductions, Net (5,827) (6,460) Federal Income Taxes - Credit (Expense) (30) 1,915 -------- -------- Total Nonoperating Income (Loss) (5,199) (3,634) -------- -------- INCOME BEFORE INTEREST CHARGES 107,192 105,159 INTEREST CHARGES Long-Term Debt 76,503 83,318 Short-Term Debt 1,648 1,876 Allowance for Borrowed Funds Used During Construction (563) (843) -------- -------- Net Interest Charges 77,588 84,351 -------- -------- INCOME AFTER INTEREST CHARGES 29,604 20,808 Preferred Dividend Requirements of Subsidiaries 13,507 14,235 -------- -------- NET INCOME $ 16,097 $ 6,573 ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 148,026 148,028 ======== ======== EARNINGS PER COMMON SHARE $ .11 $ .04 ======== ======== 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, 1997 1996 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 9,893,144 $ 9,867,193 Accumulated Depreciation and Amortization (3,352,310) (3,272,158) ----------- ----------- 6,540,834 6,595,035 Construction Work In Progress 90,505 78,669 ----------- ----------- 6,631,339 6,673,704 Nuclear Fuel, Net of Amortization 168,125 189,148 Other Property, Less Accumulated Depreciation 87,142 89,291 ----------- ----------- 6,886,606 6,952,143 CURRENT ASSETS Cash and Temporary Cash Investments 144,907 138,068 Amounts Due from Customers and Others, Net 165,367 212,680 Materials and Supplies, at Average Cost Owned 82,906 84,846 Under Consignment 34,492 34,039 Taxes Applicable to Succeeding Years 215,913 249,961 Other 21,339 24,283 ----------- ----------- 664,924 743,877 REGULATORY AND OTHER ASSETS Regulatory Assets 2,262,719 2,277,083 Nuclear Plant Decommissioning Trusts 152,885 139,667 Investment in Partnership 25,327 23,245 Other 82,336 74,187 ----------- ----------- 2,523,267 2,514,182 ----------- ----------- $ 10,074,797 $ 10,210,202 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 1,943,536 $ 1,986,855 Preferred Stock With Mandatory Redemption Provisions 189,473 189,473 Without Mandatory Redemption Provisions 448,325 448,325 Long-Term Debt 3,444,352 3,444,241 ----------- ----------- 6,025,686 6,068,894 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 173,239 196,033 Current Portion of Lease Obligations 84,371 87,836 Accounts Payable 100,518 138,005 Accrued Taxes 321,153 389,014 Accrued Interest 85,245 74,826 Dividends Declared 43,336 13,977 Other 64,934 72,653 ----------- ----------- 872,796 972,344 DEFERRED CREDITS AND OTHER LIABILITIES Unamortized Investment Tax Credits 248,592 251,547 Accumulated Deferred Federal Income Taxes 1,887,576 1,876,924 Unamortized Gain from Bruce Mansfield Plant Sale 468,753 474,757 Accumulated Deferred Rents for Bruce Mansfield Plant and Beaver Valley Unit 2 138,026 137,956 Nuclear Fuel Lease Obligations 106,860 122,655 Retirement Benefits 184,704 183,571 Other 141,804 121,554 ----------- ----------- 3,176,315 3,168,964 COMMITMENTS AND CONTINGENCIES (Note 7) ----------- ----------- $ 10,074,797 $ 10,210,202 =========== =========== 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, -------------------- 1997 1996 -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $16,097 $6,573 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 77,111 73,232 Deferred Federal Income Taxes 10,467 18,601 Deferred Fuel 10,264 (2,016) Leased Nuclear Fuel Amortization 22,853 20,688 Amortization of Deferred Operating Expenses, Net 10,858 10,543 Allowance for Equity Funds Used During Construction (658) (911) Changes in Amounts Due from Customers and Others, Net 47,313 4,360 Changes in Materials and Supplies 1,487 7,524 Changes in Accounts Payable (37,487) 53,223 Changes in Working Capital Affecting Operations (28,169) (37,707) Other Noncash Items 6,876 (12,463) -------- -------- Total Adjustments 120,915 135,074 -------- -------- Net Cash from Operating Activities 137,012 141,647 CASH FLOWS FROM FINANCING ACTIVITIES Reacquired Common Stock -- (7) Maturities, Redemptions and Sinking Funds (23,000) (44,550) Nuclear Fuel Lease Obligations (21,067) (32,163) Common Stock Dividends Paid (29,605) (29,606) Premiums, Discounts and Expenses -- (50) -------- -------- Net Cash from Financing Activities (73,672) (106,376) CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (42,961) (39,700) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (563) (843) Contributions to Nuclear Plant Decommissioning Trusts (5,387) -- Investment in Partnership (2,082) -- Other Cash Received (Applied) (5,508) 5,348 -------- -------- Net Cash from Investing Activities (56,501) (35,195) -------- -------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS 6,839 76 CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 138,068 179,038 -------- -------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $144,907 $179,114 ======== ======== Other Payment Information: Interest (net of amounts capitalized) $64,000 $68,000 Federal Income Taxes 14,000 -- 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 1996 Form 10-K. The information under "Capital Resources and Liquidity" remains unchanged with the following exceptions: During the first quarter of 1997, the Operating Companies redeemed various securities as discussed in Note 4. In May 1997, Centerior Energy renewed a $125 million revolving credit facility until May 7, 1998 as discussed in Note 5. Results of Operations Factors contributing to the 1% increase in 1997 first quarter operating revenues are shown as follows: Changes from First Quarter 1996 Factors Operating Revenues (millions) Base Rates $ 22.1 Kilowatt-hour Sales Volume and Mix (12.6) Wholesale Revenues 5.9 Fuel Cost Recovery Revenues 0.8 Miscellaneous Revenues (9.8) Total $ 6.4 The increase in first quarter 1997 base rates revenues resulted primarily from the April 1996 rate order issued by The Public Utilities Commission of Ohio (PUCO) for the Operating Companies. Renegotiated contracts for certain large industrial customers of the Operating Companies resulted in a decrease in base rates which partially offset the effect of the general price increase. Percentage changes between 1997 and 1996 first quarter billed electric kilowatt-hour sales are summarized as follows: Customer Categories % Change Residential (0.6)% Commercial 1.6 Industrial 1.7 Other 41.5 Total 5.5 First quarter 1997 total kilowatt-hour sales increased because of increases in industrial and commercial sales along with a 56% increase in wholesale sales (included in the "Other" category). Industrial sales increased as more sales to large primary metals industry customers (including the new North Star BHP Steel facility) and the broad-based, smaller industrial customer group were partially offset by fewer sales to large automotive manufacturers. Commercial sales increased despite milder weather because of a 1.9% increase in the number of commercial customers and greater economic activity. Residential sales declined slightly because of the milder weather. However, weather-normalized residential and commercial sales increased 3.8% and 2.5%, respectively, for the 1997 period. The increase in first quarter 1997 fuel cost recovery revenues included in customer bills resulted from changes in the weighted average of the fuel cost recovery factors used by the Operating Companies to calculate these revenues. First quarter miscellaneous revenues in 1997 decreased from the 1996 amount primarily because of the reclassification of certain revenues as credits to operating expenses commencing in the second quarter of 1996 and a first quarter 1997 refund payment related to a canceled generating plant lease agreement. First quarter operating expenses in 1997 increased 0.6% from the 1996 amount. Higher fuel and purchased power expenses resulted from increased purchased power requirements in the 1997 period. Depreciation and amortization expenses increased primarily because of changes in depreciation rates approved in the April 1996 PUCO rate order. Federal income taxes increased as a result of higher pretax operating income. Other operation and maintenance expenses decreased as a result of ongoing cost cutting and work force reductions; a shift of certain payroll expenses to the nonoperating classification for work related to the Ohio Edison-Centerior Energy merger; and the aforementioned reclassification of certain expense reimbursements as credits to operating expenses. Taxes, other than federal income taxes, decreased primarily because of lower property and payroll tax accruals. The first quarter 1997 total nonoperating loss was larger than the first quarter 1996 total nonoperating loss. The first quarter 1997 nonoperating loss resulted primarily from both merger-related expenses and certain costs associated with an accounts receivable securitization. The first quarter 1996 nonoperating loss resulted primarily from Toledo Edison's write-down of two inactive production facilities as discussed in Note 6. First quarter 1997 interest charges and preferred dividend requirements decreased because of the redemption of securities in 1996. New Accounting Standards In February 1997, the Financial Accounting Standards Board (FASB) issued two new statements of financial accounting standards, one for the computation and presentation of earnings per share and one for the disclosure of information about capital structure. Both statements are effective for year-end December 31, 1997 reporting. Centerior Energy's adoption of the statement for reporting earnings per share in 1997 is not expected to have a material effect on its reporting of earnings per common share. Centerior Energy's adoption of the statement for reporting about capital structure in 1997 will not affect its financial condition. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY INCOME STATEMENT (Unaudited) (Thousands) Three Months Ended March 31, --------------------- 1997 1996 -------- -------- OPERATING REVENUES $ 431,627 $ 427,526 OPERATING EXPENSES Fuel and Purchased Power (1) 110,530 103,726 Other Operation and Maintenance 91,447 105,132 Generation Facilities Rental Expense, Net 13,892 13,892 Depreciation and Amortization 53,297 50,816 Taxes, Other Than Federal Income Taxes 56,686 60,010 Amortization of Deferred Operating Expenses, Net 6,567 6,368 Federal Income Taxes 19,203 11,805 -------- -------- Total Operating Expenses 351,622 351,749 -------- -------- OPERATING INCOME 80,005 75,777 NONOPERATING INCOME (LOSS) Allowance for Equity Funds Used During Construction 327 498 Other Income and Deductions, Net (4,649) 1,649 Federal Income Taxes - Credit (Expense) 658 (752) -------- -------- Total Nonoperating Income (Loss) (3,664) 1,395 -------- -------- INCOME BEFORE INTEREST CHARGES 76,341 77,172 INTEREST CHARGES Long-Term Debt 54,393 60,160 Short-Term Debt 2,177 692 Allowance for Borrowed Funds Used During Construction (459) (519) -------- -------- Net Interest Charges 56,111 60,333 -------- -------- NET INCOME 20,230 16,839 Preferred Dividend Requirements 9,315 10,032 -------- -------- EARNINGS AVAILABLE FOR COMMON STOCK $ 10,915 $ 6,807 ======== ======== (1) Includes purchased power expense for purchases from Toledo Edison. $ 28,920 $ 26,672 The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY BALANCE SHEET (Thousands) March 31, December 31, 1997 1996 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 6,960,941 $ 6,938,535 Accumulated Depreciation and Amortization (2,306,322) (2,252,321) ----------- ----------- 4,654,619 4,686,214 Construction Work In Progress 62,173 56,853 ----------- ----------- 4,716,792 4,743,067 Nuclear Fuel, Net of Amortization 100,764 113,030 Other Property, Less Accumulated Depreciation 51,553 53,547 ----------- ----------- 4,869,109 4,909,644 CURRENT ASSETS Cash and Temporary Cash Investments 26,698 30,273 Amounts Due from Customers and Others, Net 146,187 189,547 Amounts Due from Affiliates 347 5,634 Materials and Supplies, at Average Cost Owned 50,777 51,686 Under Consignment 23,497 23,655 Taxes Applicable to Succeeding Years 156,147 181,609 Other 11,416 15,237 ----------- ----------- 415,069 497,641 REGULATORY AND OTHER ASSETS Regulatory Assets 1,341,785 1,349,693 Nuclear Plant Decommissioning Trusts 83,067 75,573 Other 60,725 44,980 ----------- ----------- 1,485,577 1,470,246 ----------- ----------- $ 6,769,755 $ 6,877,531 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 1,034,701 $ 1,044,283 Preferred Stock With Mandatory Redemption Provisions 186,118 186,118 Without Mandatory Redemption Provisions 238,325 238,325 Long-Term Debt 2,441,297 2,441,215 ----------- ----------- 3,900,441 3,909,941 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 129,874 144,668 Current Portion of Lease Obligations 49,266 51,592 Accounts Payable 57,092 82,694 Accounts and Notes Payable to Affiliates 170,966 171,433 Accrued Taxes 253,143 315,998 Accrued Interest 60,247 52,487 Dividends Declared 5,692 15,228 Other 40,156 43,672 ----------- ----------- 766,436 877,772 DEFERRED CREDITS AND OTHER LIABILITIES Unamortized Investment Tax Credits 174,158 176,130 Accumulated Deferred Federal Income Taxes 1,316,529 1,305,601 Unamortized Gain from Bruce Mansfield Plant Sale 291,993 295,730 Accumulated Deferred Rents for Bruce Mansfield Plant 99,351 98,767 Nuclear Fuel Lease Obligations 64,968 73,947 Retirement Benefits 74,512 72,843 Other 81,367 66,800 ----------- ----------- 2,102,878 2,089,818 COMMITMENTS AND CONTINGENCIES (Note 7) ----------- ----------- $ 6,769,755 $ 6,877,531 =========== =========== The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY CASH FLOWS (Unaudited) (Thousands) Three Months Ended March 31, ---------------------- 1997 1996 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $20,230 $16,839 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 53,297 50,816 Deferred Federal Income Taxes 10,736 14,388 Deferred Fuel 7,696 (2,639) Leased Nuclear Fuel Amortization 13,411 11,339 Amortization of Deferred Operating Expenses, Net 6,567 6,368 Allowance for Equity Funds Used During Construction (327) (498) Changes in Amounts Due from Customers and Others, Net 43,360 1,678 Changes in Materials and Supplies 1,067 6,643 Changes in Accounts Payable (25,602) 27,758 Changes in Working Capital Affecting Operations (27,289) (31,665) Other Noncash Items 2,336 (9,791) -------- -------- Total Adjustments 85,252 74,397 -------- -------- Net Cash from Operating Activities 105,482 91,236 CASH FLOWS FROM FINANCING ACTIVITIES Notes Payable to Affiliates 2,781 (5,000) Maturities, Redemptions and Sinking Funds (15,000) (15,800) Nuclear Fuel Lease Obligations (12,450) (18,194) Dividends Paid (39,141) (39,865) -------- -------- Net Cash from Financing Activities (63,810) (78,859) CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (32,812) (25,105) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (459) (519) Contributions to Nuclear Plant Decommissioning Trusts (2,928) -- Other Cash Received (Applied) (9,048) 3,486 -------- -------- Net Cash from Investing Activities (45,247) (22,138) -------- -------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (3,575) (9,761) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 30,273 69,770 -------- -------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $26,698 $60,009 ======== ======== Other Payment Information: Interest (net of amounts capitalized) $47,000 $47,000 Federal Income Taxes 8,300 -- The accompanying notes as they relate to Cleveland Electric are an integral part of this statement.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY 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 1996 Form 10-K. The information under "Capital Resources and Liquidity" remains unchanged with the following exceptions: During the first quarter of 1997, Cleveland Electric redeemed preferred stock as discussed in Note 4. Cleveland Electric is a party to a $125 million revolving credit facility which Centerior Energy renewed in May 1997 until May 7, 1998 as discussed in Note 5. Centerior Energy plans to transfer any of its borrowed funds under the facility to the Operating Companies. Results of Operations Factors contributing to the 1% increase in 1997 first quarter operating revenues are shown as follows: Changes from First Quarter 1996 Factors Operating Revenues (millions) Base Rates $ 18.7 Kilowatt-hour Sales Volume and Mix (15.0) Wholesale Revenues 7.5 Fuel Cost Recovery Revenues 2.3 Miscellaneous Revenues (9.4) Total $ 4.1 The increase in first quarter 1997 base rates revenues resulted primarily from the April 1996 rate order issued by the PUCO. Renegotiated contracts for certain large industrial customers resulted in a decrease in base rates which partially offset the effect of the general price increase. Percentage changes between 1997 and 1996 first quarter billed electric kilowatt-hour sales are summarized as follows: Customer Categories % Change Residential 0.5% Commercial 1.2 Industrial (1.7) Other 78.5 Total 8.0 Despite milder weather, first quarter 1997 total kilowatt-hour sales rose as increases in residential and commercial sales along with a 99% increase in wholesale sales (included in the "Other" category) were partially offset by a decline in industrial sales. Weather-normalized residential and commercial sales increased 5.4% and 2.2%, respectively, for the 1997 period. The number of commercial customers at March 31, 1997 was 1.3% above the March 31, 1996 number. Industrial sales decreased primarily because of fewer sales to large automotive manufacturers and steel industry customers. The increase in fuel cost recovery revenues included in customer bills resulted from a 3% increase in the weighted average of the fuel cost recovery factors used in the first quarter of 1997 to calculate these revenues compared to the 1996 first quarter average. First quarter miscellaneous revenues in 1997 decreased from the 1996 amount primarily because of the reclassification of certain revenues as credits to operating expenses commencing in the second quarter of 1996 and a first quarter 1997 refund payment related to a canceled generating plant lease agreement. First quarter operating expenses in 1997 were virtually the same as in 1996. Higher fuel and purchased power expenses resulted from increased purchased power requirements in the 1997 period. Depreciation and amortization expenses increased primarily because of changes in depreciation rates approved in the April 1996 PUCO rate order. Federal income taxes increased as a result of higher pretax operating income. Other operation and maintenance expenses decreased as a result of ongoing cost cutting and work force reductions; a shift of certain payroll expenses to the nonoperating classification for work related to the Ohio Edison-Centerior Energy merger; and the aforementioned reclassification of certain expense reimbursements as credits to operating expenses. Taxes, other than federal income taxes, decreased primarily because of lower property and payroll tax accruals. A first quarter 1997 nonoperating loss resulted primarily from both Cleveland Electric's share of merger-related expenses and certain costs associated with an accounts receivable securitization. First quarter 1997 interest charges and preferred dividend requirements decreased because of the redemption of securities in 1996. New Accounting Standard In February 1997, the FASB issued a new statement of financial accounting standards for the disclosure of information about capital structure effective for year-end December 31, 1997 reporting. Cleveland Electric's adoption of the statement in 1997 will not affect its financial condition. THE TOLEDO EDISON COMPANY INCOME STATEMENT (Unaudited) (Thousands) Three Months Ended March 31, --------------------- 1997 1996 -------- -------- OPERATING REVENUES (1) $ 217,060 $ 210,793 OPERATING EXPENSES Fuel and Purchased Power 43,314 38,768 Other Operation and Maintenance 56,317 56,519 Generation Facilities Rental Expense, Net 25,961 25,961 Depreciation and Amortization 23,814 22,416 Taxes, Other Than Federal Income Taxes 22,794 23,853 Amortization of Deferred Operating Expenses, Net 4,291 4,175 Federal Income Taxes 8,212 6,227 -------- -------- Total Operating Expenses 184,703 177,919 -------- -------- OPERATING INCOME 32,357 32,874 NONOPERATING INCOME (LOSS) Allowance for Equity Funds Used During Construction 332 413 Other Income and Deductions, Net (427) (9,153) Federal Income Taxes - Credit (Expense) (225) 3,195 -------- -------- Total Nonoperating Income (Loss) (320) (5,545) -------- -------- INCOME BEFORE INTEREST CHARGES 32,037 27,329 INTEREST CHARGES Long-Term Debt 22,111 23,159 Short-Term Debt 1,190 1,218 Allowance for Borrowed Funds Used During Construction (104) (325) -------- -------- Net Interest Charges 23,197 24,052 -------- -------- NET INCOME 8,840 3,277 Preferred Dividend Requirements 4,194 4,204 -------- -------- EARNINGS (LOSS) AVAILABLE FOR COMMON STOCK $ 4,646 $ (927) ======== ======== (1) Includes revenues from bulk power sales to Cleveland Electric. $ 28,920 $ 26,672 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, 1997 1996 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 2,932,203 $ 2,928,657 Accumulated Depreciation and Amortization (1,045,988) (1,019,836) ----------- ----------- 1,886,215 1,908,821 Construction Work In Progress 26,443 21,479 ----------- ----------- 1,912,658 1,930,300 Nuclear Fuel, Net of Amortization 67,361 76,118 Other Property, Less Accumulated Depreciation 8,456 8,460 ----------- ----------- 1,988,475 2,014,878 CURRENT ASSETS Cash and Temporary Cash Investments 63,416 81,454 Amounts Due from Customers and Others, Net 15,948 16,308 Amounts Due from Affiliates 130,574 95,336 Materials and Supplies, at Average Cost Owned 32,127 33,160 Under Consignment 10,994 10,383 Taxes Applicable to Succeeding Years 59,766 68,352 Other 3,628 3,479 ----------- ----------- 316,453 308,472 REGULATORY AND OTHER ASSETS Regulatory Assets 921,175 927,629 Nuclear Plant Decommissioning Trusts 69,818 64,093 Other 39,483 42,408 ----------- ----------- 1,030,476 1,034,130 ----------- ----------- $ 3,335,404 $ 3,357,480 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 807,883 $ 803,237 Preferred Stock With Mandatory Redemption Provisions 3,355 3,355 Without Mandatory Redemption Provisions 210,000 210,000 Long-Term Debt 1,003,055 1,003,026 ----------- ----------- 2,024,293 2,019,618 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 43,365 51,365 Current Portion of Lease Obligations 35,105 36,244 Accounts Payable 52,987 46,496 Accounts Payable to Affiliates 25,454 30,016 Accrued Taxes 56,203 72,829 Accrued Interest 24,998 22,348 Other 16,437 18,722 ----------- ----------- 254,549 278,020 DEFERRED CREDITS AND OTHER LIABILITIES Unamortized Investment Tax Credits 74,434 75,417 Accumulated Deferred Federal Income Taxes 565,331 565,600 Unamortized Gain from Bruce Mansfield Plant Sale 176,760 179,027 Accumulated Deferred Rents for Bruce Mansfield Plant and Beaver Valley Unit 2 38,675 39,188 Nuclear Fuel Lease Obligations 41,699 48,491 Retirement Benefits 104,210 102,214 Other 55,453 49,905 ----------- ----------- 1,056,562 1,059,842 COMMITMENTS AND CONTINGENCIES (Note 7) ----------- ----------- $ 3,335,404 $ 3,357,480 =========== =========== 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, ---------------------- 1997 1996 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $8,840 $3,277 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 23,814 22,416 Deferred Federal Income Taxes (269) 4,403 Deferred Fuel 2,567 623 Leased Nuclear Fuel Amortization 9,442 9,349 Amortization of Deferred Operating Expenses, Net 4,291 4,175 Allowance for Equity Funds Used During Construction (332) (413) Changes in Amounts Due from Customers and Others, Net 360 3,784 Changes in Materials and Supplies 422 881 Changes in Accounts Payable 6,491 32,445 Changes in Working Capital Affecting Operations (15,042) (12,698) Other Noncash Items 4,540 (2,672) -------- -------- Total Adjustments 36,284 62,293 -------- -------- Net Cash from Operating Activities 45,124 65,570 CASH FLOWS FROM FINANCING ACTIVITIES Notes Payable to Affiliates -- (20,950) Maturities, Redemptions and Sinking Funds (8,000) (28,750) Nuclear Fuel Lease Obligations (8,617) (13,969) Dividends Paid (4,193) (4,226) Premiums, Discounts and Expenses -- (50) -------- -------- Net Cash from Financing Activities (20,810) (67,945) CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (10,149) (14,595) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (104) (325) Loans to Affiliates (32,582) -- Contributions to Nuclear Plant Decommissioning Trusts (2,459) -- Other Cash Received 2,942 3,451 -------- -------- Net Cash from Investing Activities (42,352) (11,469) -------- -------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (18,038) (13,844) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 81,454 93,669 -------- -------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $63,416 $79,825 ======== ======== Other Payment Information: Interest (net of amounts capitalized) $19,000 $21,000 Federal Income Taxes 4,300 -- 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 1996 Form 10-K. The information under "Capital Resources and Liquidity" remains unchanged with the following exceptions: During the first quarter of 1997, Toledo Edison redeemed notes as discussed in Note 4. Toledo Edison is a party to a $125 million revolving credit facility which Centerior Energy renewed in May 1997 until May 7, 1998 as discussed in Note 5. Centerior Energy plans to transfer any of its borrowed funds under the facility to the Operating Companies. Results of Operations Factors contributing to the 3% increase in 1997 first quarter operating revenues are shown as follows: Changes from First Quarter 1996 Factors Operating Revenues (millions) Base Rates $ 3.4 Kilowatt-hour Sales Volume and Mix 2.4 Wholesale Revenues 2.9 Fuel Cost Recovery Revenues (1.5) Miscellaneous Revenues (0.9) Total $ 6.3 The increase in first quarter 1997 base rates revenues resulted primarily from the April 1996 rate order issued by the PUCO. Renegotiated contracts for certain large industrial customers also resulted in a decrease in base rates which partially offset the effect of the general price increase. Percentage changes between 1997 and 1996 first quarter billed electric kilowatt-hour sales are summarized as follows: Customer Categories % Change Residential (3.1)% Commercial 2.9 Industrial 8.2 Other 21.0 Total 8.1 First quarter 1997 total kilowatt-hour sales increased because of increases in industrial and commercial sales along with a 26% increase in wholesale sales (included in the "Other" category). Industrial sales growth reflected increased sales to large primary metals, automotive and glass manufacturers and the broad-based, smaller industrial customer group. Industrial sales for the 1997 period included sales to the new North Star BHP Steel facility. Commercial sales increased despite milder weather because of a 3.3% increase in the number of commercial customers and greater economic activity. Residential sales declined because of the milder weather. However, weather-normalized commercial and residential sales increased 3.6% and 0.3%, respectively, for the 1997 period. The decrease in fuel cost recovery revenues included in customer bills resulted from a 5% decrease in the weighted average of the fuel cost recovery factors used in the first quarter of 1997 to calculate these revenues compared to the 1996 first quarter average. First quarter operating expenses in 1997 increased 3.8% from the 1996 amount. Higher fuel and purchased power expenses resulted from increased purchased power requirements in the 1997 period. Depreciation and amortization expenses increased primarily because of changes in depreciation rates approved in the April 1996 PUCO rate order. Federal income taxes increased as a result of higher pretax operating income. Taxes, other than federal income taxes, decreased primarily because of lower property and payroll tax accruals. The first quarter 1997 total nonoperating loss was smaller than the first quarter 1996 total nonoperating loss. The first quarter 1997 nonoperating loss resulted primarily from both Toledo Edison's share of expenses related to the Ohio Edison-Centerior Energy merger and certain costs associated with an accounts receivable securitization. The first quarter 1996 nonoperating loss resulted primarily from the write-down of two inactive production facilities as discussed in Note 6. First quarter 1997 interest charges and preferred dividend requirements decreased slightly because of the redemption of securities in 1996. New Accounting Standard In February 1997, the FASB issued a new statement of financial accounting standards for the disclosure of information about capital structure effective for year-end December 31, 1997 reporting. Toledo Edison's adoption of the statement in 1997 will not affect its financial condition. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders 1. Centerior Energy a. A Special Meeting of Centerior Energy's common stock share owners was held on March 27, 1997. b. The only matter submitted to share owners at the Special Meeting was for the approval and adoption of an Agreement and Plan of Merger between Ohio Edison and Centerior Energy. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 112,633,407 2,219,786 935,047 Not Applicable 2. Centerior Energy a. Centerior Energy's Annual Meeting of share owners was held on May 8, 1997. 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 April 3, 1997, and all such nominees were elected. c. Three matters were submitted to share owners for a vote at the Annual Meeting. Issue 1 was the election of 11 directors of Centerior Energy. The vote on this issue was as follows: Broker Nominee For Withheld Non-Vote R. P. Anderson 116,211,692 4,643,968 7,108,921 A. C. Bersticker 116,326,706 4,528,954 7,108,921 T. A. Commes 116,397,916 4,457,744 7,108,921 W. F. Conway 116,246,440 4,609,220 7,108,921 W. R. Embry 116,141,102 4,714,558 7,108,921 R. J. Farling 116,097,124 4,758,536 7,108,921 R. A. Miller 113,866,343 6,989,317 7,108,921 F. E. Mosier 116,226,823 4,628,837 7,108,921 Sr. M. M. Reinhard 116,098,360 4,757,301 7,108,921 R. C. Savage 116,274,966 4,580,694 7,108,921 W. J. Williams 116,236,011 4,619,649 7,108,921 Issue 2 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 1997. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 118,514,019 1,254,749 1,086,892 7,108,921 - 19 - Issue 3 was a share owner proposal to eliminate all discretionary voting when the individual share owner has not actually voted by marking the proxy card. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 15,700,936 79,222,813 4,893,382 28,147,450 3. 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 May 8, 1997. 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. 4. 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 May 8, 1997. 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. Item 5. Other Information 1. 1996 Rate Order For background relating to this topic see "Item 1. Business- Electric Rates-1996 Rate Order" in the Companies Annual Report on Form 10-K for the year ended December 31, 1996 ("1996 Form 10-K"). The City of Cleveland, the Office of the Ohio Consumer's Counsel ("OCC"), the Ohio Council of Retail Merchants, the Empowerment Center of Greater Cleveland, the City of Toledo, the Lucas County Board of Commissioners and Congresswoman Marcy Kaptur filed appeals with the Ohio Supreme Court from the PUCO's April 11, 1996 rate order for the Operating Companies. The Ohio Supreme Court granted the Operating Companies' motions to dismiss the appeals of the Lucas County Board of Commissioners and Congresswoman Marcy Kaptur on November 20, 1996. On April 4, 1997, the OCC filed a motion to - 20 - stay the appeal because of the Rate Stipulation agreed to by the OCC regarding the FirstEnergy merger, and the Operating Companies filed a memorandum in support of the stay on April 14, 1997. The Ohio Supreme Court granted OCC's motion to stay on April 21, 1997. 2. Joint Select Committee Hearings Ohio's General Assembly has commissioned a Joint Committee to study electric utility deregulation. The Joint Committee is conducting hearings concerning various issues regarding electric utility deregulation and plans to have a report completed by October 1997 to present to the full General Assembly for its consideration. The Operating Companies and other interested parties will be providing testimony on the issues as the hearings continue throughout the summer. 3. Rachel Transmission Line On March 24, 1997, the Ohio Power Siting Board ("OPSB") granted Cleveland Electric a Certificate of Environmental Compatibility and Public Need ("Certificate") to construct its nine-mile "Rachel" 138,000-volt transmission line in Geauga County, Ohio. The transmission line is necessary to provide high-quality and reliable electric service to the general area, which has experienced above average load growth over the last several decades. On April 24, 1997, Citizens for a Better Way filed an Application for Rehearing of the OPSB's decision; however, because the Application for Rehearing was filed late, it is anticipated that the OPSB will not entertain substantive modifications to the Certificate. 4. Chase Brass For background relating to this topic, see "Item 1. Business- Operations-Competitive Conditions-Toledo Edison" in the 1996 Form 10-K. Chase Brass & Copper Co., Inc. ("Chase Brass"), a former Toledo Edison customer, and other surrounding businesses and residences in Jefferson Township, Ohio, have sought incorporation as a municipality to be named the Village of Holiday City. The Williams County (Ohio) Board of Commissioners and the Williams County Court of Common Pleas issued an order permitting the area to be incorporated. Toledo Edison previously appealed the Court's order to the Sixth District Court of Appeals, but the Court of Appeals ruled against Toledo Edison, finding a lack of standing. Toledo Edison then appealed to the Ohio Supreme Court. On April 23, 1997, the Ohio Supreme Court denied Toledo Edison's appeal. Toledo Edison does not plan to apply for reconsideration at the Court. The new municipality can negotiate with other utilities for electric power. The other businesses in the proposed municipality previously terminated their service with Toledo Edison and are receiving electric service from the Village of Montpelier, one of the consortium now supplying Chase Brass. 5. Davis-Besse Plant Outage The Davis-Besse Nuclear Power Station automatically shut down on Sunday, May 4, 1997, when a fire suppression system on the station's main transformer malfunctioned. Although there was no fire, protective circuitry disconnected the transformer from the electrical system. Safety systems automatically take the plant - 21 - offline under these conditions. Plant personnel are investigating the cause of the malfunction. It is anticipated that the plant will be back on line by the end of May, 1997. This is the first unplanned shut down at the plant in three years. Item 6. Exhibits and Reports on Form 8-K a. Exhibits See Exhibit Index following. b. Reports on Form 8-K During the quarter ended March 31, 1997, Centerior Energy, Cleveland Electric and Toledo Edison each filed two Current Reports on Form 8-K with the Securities and Exchange Commission. A Form 8-K dated January 28, 1997 and filed that date included one item under "Item 5. Other Events". That item, "Recent Financial Results (Unaudited)", reported Centerior Energy's operating revenues, net income and earnings per share for 1996. A Form 8-K dated January 30, 1997 and filed on February 6, 1997 included one item under "Item 5. Other Events". That item, "Rate Reduction and Economic Development Plan", discussed a rate reduction plan approved by the PUCO for the Operating Companies which would take effect upon the consummation of the merger of Centerior Energy with Ohio Edison. - 22 - 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 15, 1997 - 23 - EXHIBIT INDEX The following exhibits are submitted herewith: CENTERIOR ENERGY EXHIBIT Exhibit Number Description 27(a) Financial Data Schedule for the period ended March 31, 1997. CLEVELAND ELECTRIC EXHIBITS Exhibit Number Description 27(b) Financial Data Schedule for the period ended March 31, 1997. TOLEDO EDISON EXHIBITS Exhibit Number Description 27(c) Financial Data Schedule for the period ended March 31, 1997. - 24 - 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 US DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 PER-BOOK 6,631,339 434,380 664,924 2,344,154 0 10,074,797 2,320,651 0 (377,115) 1,943,536 189,473 448,325 3,444,352 0 0 0 156,860 16,379 106,860 84,371 3,684,641 10,074,797 611,608 27,366 471,851 499,217 112,391 (5,199) 107,192 77,588 16,097 0 0 59,210 278,849 137,012 .11 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 US DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 PER-BOOK 4,716,792 235,434 415,069 1,402,460 0 6,769,755 1,242,148 78,618 (286,065) 1,034,701 186,118 238,325 2,441,297 114,399 0 0 115,160 14,714 64,968 49,266 2,510,807 6,769,755 431,627 19,203 332,419 351,622 80,005 (3,664) 76,341 56,111 20,230 9,315 10,915 29,605 208,720 105,482 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 US DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 PER-BOOK 1,912,658 146,486 316,453 959,807 0 3,335,404 195,687 602,113 10,083 807,883 3,355 210,000 1,003,055 0 0 0 41,700 1,665 41,699 35,105 1,190,942 3,335,404 217,060 8,212 176,491 184,703 32,357 (320) 32,037 23,197 8,840 4,194 4,646 0 70,129 45,124 0 0
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