-----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, BrUr3kVEGpWTSTxrbhiEiKOqYqKmgWn77VE9tN2SMOzenoq4Ff5fdi99yCIiar0l UKcvgf3yvXWfmGmeSQ7m/w== 0000023632-96-000011.txt : 19960514 0000023632-96-000011.hdr.sgml : 19960514 ACCESSION NUMBER: 0000023632-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED EDISON CO OF NEW YORK INC CENTRAL INDEX KEY: 0000023632 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 135009340 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01217 FILM NUMBER: 96562163 BUSINESS ADDRESS: STREET 1: 4 IRVING PL CITY: NEW YORK STATE: NY ZIP: 10003 BUSINESS PHONE: 2124604600 10-Q 1 QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________ [x] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 _________________________ Commission File No. 1-1217 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. (Name of Registrant) NEW YORK 13-5009340 (State of Incorporation) (IRS Employer Identification No.) 4 IRVING PLACE, NEW YORK, NEW YORK 10003 - (212) 460-4600 (Address and Telephone Number) The Registrant 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 and has been subject to such filing requirements for the past 90 days. Yes ___X___ No _______ As of the close of business on April 30, 1996, the Registrant had outstanding 234,973,914 shares of Common Stock ($2.50 par value). - 2 - PART I. - FINANCIAL INFORMATION CONTENTS PAGE NO. ITEM 1. FINANCIAL STATEMENTS: Consolidated Balance Sheet 3-4 Consolidated Income Statements 5-6 Consolidated Statements of Cash Flows 7-8 Note to Financial Statements 9-11 ITEM 2. Management's Discussion and Analysis of 12-22 Financial Condition and Results of Operations _________________________ The following consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments (which include only normal recurring adjustments) necessary to a fair statement of the results for the interim periods presented. These condensed unaudited interim financial statements do not contain the detail, or footnote disclosure concerning accounting policies and other matters, which would be included in full-year financial statements and, accordingly, should be read in conjunction with the Company's audited financial statements (including the notes thereto) included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1-1217). - 3 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 1996, DECEMBER 31, 1995 AND MARCH 31, 1995 As At March 31, 1996 Dec. 31, 1995 March 31, 1995 (Thousands of Dollars) ASSETS Utility plant, at original cost Electric $ 11,344,951 $ 11,319,622 $ 11,047,944 Gas 1,560,433 1,537,296 1,453,102 Steam 513,345 462,975 436,679 General 1,108,114 1,085,795 1,037,752 Total 14,526,843 14,405,688 13,975,477 Less: Accumulated depreciation 4,125,708 4,036,954 3,826,672 Net 10,401,135 10,368,734 10,148,805 Construction work in progress 338,666 360,457 362,694 Nuclear fuel assemblies and components, less accumulated amortization 78,896 85,212 92,945 Net utility plant 10,818,697 10,814,403 10,604,444 Current assets Cash and temporary cash investments 103,232 342,292 111,385 Accounts receivable - customers, less allowance for uncollectible accounts of $22,128, $21,600 and $22,102 586,578 497,215 471,825 Other receivables 44,789 45,558 62,295 Regulatory accounts receivable (883) (6,481) 33,631 Fuel, at average cost 41,533 40,506 59,456 Gas in storage, at average cost 8,453 26,452 32,443 Materials and supplies, at average cost 219,421 221,026 229,681 Prepayments 171,808 66,148 173,265 Other current assets 14,619 15,126 13,922 Total current assets 1,189,550 1,247,842 1,187,903 Investments and nonutility property 157,422 145,646 118,206 Deferred charges Enlightened Energy program costs 134,261 144,282 170,748 Unamortized debt expense 131,244 133,812 136,071 Power contract termination costs 93,696 105,408 170,361 Other deferred charges 328,253 316,237 324,678 Total deferred charges 687,454 699,739 801,858 Regulatory asset-future federal income taxes 1,029,062 1,042,260 1,085,014 Total $ 13,882,185 $ 13,949,890 $ 13,797,425
The accompanying note is an integral part of these financial statements. - 4 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 1996, DECEMBER 31, 1995 AND MARCH 31, 1995 As At March 31, 1996 Dec. 31, 1995 March 31, 1995 (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization Common stock, authorized 340,000,000 shares; outstanding 234,968,376 shares, 234,956,299 shares and 234,914,842 shares $ 1,478,341 $ 1,464,305 $ 1,463,986 Capital stock expense (35,036) (38,606) (38,846) Retained earnings 4,144,779 4,097,035 3,960,340 Total common equity 5,588,084 5,522,734 5,385,480 Preferred stock Subject to mandatory redemption 7.20% Series I 47,500 50,000 50,000 6-1/8% Series J 37,050 50,000 50,000 Total subject to mandatory redemption 84,550 100,000 100,000 Other preferred stock $ 5 Cumulative Preferred 175,000 175,000 175,000 5-3/4% Series A 7,061 60,000 60,000 5-1/4% Series B 13,844 75,000 75,000 4.65% Series C 15,330 60,000 60,000 4.65% Series D 22,233 75,000 75,000 5-3/4% Series E - 50,000 50,000 6.20% Series F - 40,000 40,000 6% Convertible Series B 4,824 4,917 5,236 Total other preferred stock 238,292 539,917 540,236 Total preferred stock 322,842 639,917 640,236 Long-term debt 4,189,242 3,917,244 3,926,754 Total capitalization 10,100,168 10,079,895 9,952,470 Noncurrent liabilities Obligations under capital leases 44,610 45,250 47,167 Other noncurrent liabilities 78,941 75,907 72,322 Total noncurrent liabilities 123,551 121,157 119,489 Current liabilities Long-term debt due within one year 82,812 183,524 111,171 Accounts payable 384,561 420,852 328,061 Customer deposits 157,856 158,366 161,435 Accrued taxes 94,035 24,374 69,146 Accrued interest 71,544 89,374 71,370 Accrued wages 75,602 76,459 85,463 Other current liabilities 163,695 168,477 158,753 Total current liabilities 1,030,105 1,121,426 985,399 Provisions related to future federal income taxes and other deferred credits Accumulated deferred federal income tax 2,330,716 2,296,284 2,331,508 Accumulated deferred investment tax credits 179,140 181,420 189,184 Other deferred credits 118,505 149,708 219,375 Total deferred credits 2,628,361 2,627,412 2,740,067 Total $ 13,882,185 $ 13,949,890 $ 13,797,425
The accompanying note is an integral part of these financial statements. - 5 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 1996 1995 (Thousands of Dollars) Operating revenues Electric $ 1,286,268 $ 1,223,308 Gas 406,864 318,956 Steam 174,233 126,521 Total operating revenues 1,867,365 1,668,785 Operating expenses Fuel 183,888 113,846 Purchased power 303,999 247,684 Gas purchased for resale 180,840 111,038 Other operations 277,311 282,109 Maintenance 125,025 131,489 Depreciation and amortization (A) 132,565 109,157 Taxes, other than federal income tax 306,036 275,766 Federal income tax 105,040 117,640 Total operating expenses 1,614,704 1,388,729 Operating income 252,661 280,056 Other income (deductions) Investment income 1,438 1,355 Allowance for equity funds used during construction 513 1,513 Other income less miscellaneous deductions (677) (402) Federal income tax (420) (470) Total other income 854 1,996 Income before interest charges 253,515 282,052 Interest on long-term debt 74,369 74,556 Other interest 4,852 7,203 Allowance for borrowed funds used during construction (241) (736) Net interest charges 78,980 81,023 Net income 174,535 201,029 Preferred stock dividend requirements 6,035 8,893 Gain on refunding of preferred stock (A) 13,943 - Net income for common stock $ 182,443 $ 192,136 Common shares outstanding - average (000) 234,963 234,910 Earnings per share $ .78 $ .82 Dividends declared per share of common stock $ .52 $ .51 Sales Electric (Thousands of Kwhrs.) Con Edison Customers 9,173,421 8,838,301 Deliveries for NYPA and Other Customers 2,319,834 2,256,464 Service for Municipal Agencies 107,455 107,163 Total Sales in Service Territory 11,600,710 11,201,928 Off-System Sales 160,703 852,449(B) Gas (Dekatherms) Firm 44,842,439 38,820,824 Off-Peak Firm/Interruptible 6,854,310 5,329,281 Total Sales to Con Edison Customers 51,696,749 44,150,105 Transportation of Customer-Owned Gas 638,990 5,646,612 Off-System Sales 3,848,951 89,487 Total Sales and Transportation 56,184,690 49,886,204 Steam (Thousands of Pounds) 11,864,687 10,310,693 (A) The gain resulting from the preferred stock refunding in the first quarter of 1996 was applied to reduce net utility plant by an additional provision for depreciation. (B) Includes 423,376 thousands of Kwhrs. subsequently purchased by the Company for sale to its customers.
The accompanying note is an integral part of these financial statements. - 6 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED INCOME STATEMENT FOR THE TWELVE MONTHS ENDED MARCH 31, 1996 AND 1995 1996 1995 (Thousands of Dollars) Operating revenues Electric $ 5,452,368 $ 5,215,989 Gas 901,264 815,000 Steam 381,844 313,122 Total operating revenues 6,735,476 6,344,111 Operating expenses Fuel 574,146 527,547 Purchased power 1,163,538 847,092 Gas purchased for resale 329,591 273,695 Other operations 1,134,934 1,149,992 Maintenance 505,638 504,086 Depreciation and amortization (A) 479,182 427,747 Taxes, other than federal income tax 1,150,502 1,112,489 Federal income tax 383,960 450,350 Total operating expenses 5,721,491 5,292,998 Operating income 1,013,985 1,051,113 Other income (deductions) Investment income 17,049 11,548 Allowance for equity funds used during construction 2,763 7,795 Other income less miscellaneous deductions (8,424) (13,653) Federal income tax (1,010) (20) Total other income 10,378 5,670 Income before interest charges 1,024,363 1,056,783 Interest on long-term debt 301,729 293,143 Other interest 26,604 21,151 Allowance for borrowed funds used during construction (1,326) (3,500) Net interest charges 327,007 310,794 Net income 697,356 745,989 Preferred stock dividend requirements 32,706 35,581 Gain on refunding of preferred stock (A) 13,943 - Net income for common stock $ 678,593 $ 710,408 Common shares outstanding - average (000) 234,943 234,879 Earnings per share $ 2.89 $ 3.02 Dividends declared per share of common stock $ 2.05 $ 2.01 Sales Electric (Thousands of Kwhrs.) Con Edison Customers 37,293,488 36,618,521 Deliveries for NYPA and Other Customers 8,919,160 8,759,400 Service for Municipal Agencies 457,020 424,473 Total Sales in Service Territory 46,669,668 45,802,394 Off-System Sales (B) 4,343,726 2,313,886 Gas (Dekatherms) Firm 96,745,941 87,006,114 Off-Peak Firm/Interruptible 16,997,841 15,217,022 Total Sales to Con Edison Customers 113,743,782 102,223,136 Transportation of Customer-Owned Gas 25,353,567 23,490,160 Off-System Sales 7,135,839 89,487 Total Sales and Transportation 146,233,188 125,802,783 Steam (Thousands of Pounds) 30,979,774 27,881,815 (A) The gain resulting from the preferred stock refunding in the first quarter of 1996 was applied to reduce net utility plant by an additional provision for depreciation. (B) Includes 2,243,461 and 423,376 thousands of Kwhrs., respectively, subsequently purchased by the Company for sale to its customers.
The accompanying note is an integral part of these financial statements. - 7 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 1996 1995 (Thousands of Dollars) Operating activities Net income $ 174,535 $ 201,029 Principal non-cash charges (credits) to income Depreciation and amortization 132,565 109,157 Federal income tax deferred 44,890 86,410 Common equity component of allowance for funds used during construction (485) (1,426) Other non-cash charges (18,173) (16,128) Changes in assets and liabilities Accounts receivable - customers, less allowance for uncollectibles (89,363) (31,329) Regulatory accounts receivable (5,598) (7,285) Materials and supplies, including fuel and gas in storage 18,577 9,745 Prepayments, other receivables and other current assets (104,384) (118,084) Enlightened Energy program costs 10,021 (547) Power contract termination costs (2,601) (5,178) Accounts payable (36,291) (46,408) Accrued income taxes 61,054 31,819 Other - net 9 (65,733) Net cash flows from operating activities 184,756 146,042 Investing activities including construction Construction expenditures (130,888) (144,057) Nuclear fuel expenditures (655) (2,573) Contributions to nuclear decommissioning trust (12,127) (2,917) Common equity component of allowance for funds used during construction 485 1,426 Net cash flows from investing activities including construction (143,185) (148,121) Financing activities including dividends Issuance of long-term debt 275,000 - Retirement of long-term debt (103,206) (2,924) Advance refunding of preferred stock (316,982) - Issuance and refunding costs (8,652) (135) Common stock dividends (122,182) (119,805) Preferred stock dividends (4,609) (8,893) Net cash flows from financing activities including dividends (280,631) (131,757) Net decrease in cash and temporary cash investments (239,060) (133,836) Cash and temporary cash investments at January 1 342,292 245,221 Cash and temporary cash investments at March 31 $ 103,232 $ 111,385 Supplemental disclosure of cash flow information Cash paid during the period for: Interest $ 93,854 $ 85,499 Income taxes - -
The accompanying note is an integral part of these financial statements. - 8 - CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE TWELVE MONTHS ENDED MARCH 31, 1996 AND 1995 1996 1995 (Thousands of Dollars) Operating activities Net income $ 697,356 $ 745,989 Principal non-cash charges (credits) to income Depreciation and amortization 479,182 427,747 Federal income tax deferred 27,500 162,890 Common equity component of allowance for funds used during construction (2,605) (7,348) Other non-cash charges (49,600) 23,621 Changes in assets and liabilities Accounts receivable - customers, less allowance for uncollectibles (114,753) 56,136 Regulatory accounts receivable 34,514 29,379 Materials and supplies, including fuel and gas in storage 52,173 (2,387) Prepayments, other receivables and other current assets 18,266 (4,692) Enlightened Energy program costs 36,487 (25,774) Power contract termination costs 57,964 (67,554) Federal income tax refund (52,937) (9,643) Accounts payable 56,500 5,093 Accrued income taxes 20,685 (87,843) Other - net 54,440 (120,921) Net cash flows from operating activities 1,315,172 1,124,693 Investing activities including construction Construction expenditures (679,634) (772,424) Nuclear fuel expenditures (10,922) (46,269) Contributions to nuclear decommissioning trust (28,103) (11,669) Common equity component of allowance for funds used during construction 2,605 7,348 Net cash flows from investing activities including construction (716,054) (823,014) Financing activities including dividends Issuance of long-term debt 503,285 250,000 Retirement of long-term debt and preferred stock (111,171) (133,896) Advance refunding of long-term debt (155,699) - Advance refunding of preferred stock (316,982) - Issuance and refunding costs (13,786) (3,781) Common stock dividends (481,639) (472,141) Preferred stock dividends (31,279) (35,581) Net cash flows from financing activities including dividends (607,271) (395,399) Net decrease in cash and temporary cash investments (8,153) (93,720) Cash and temporary cash investments at beginning of period 111,385 205,105 Cash and temporary cash investments at March 31 $ 103,232 $ 111,385 Supplemental disclosure of cash flow information Cash paid during the period for: Interest $ 318,308 $ 278,681 Income taxes 344,754 375,533
The accompanying note is an integral part of these financial statements. - 9 - - ---------------------------------------------------------------- Contingency Note - ---------------------------------------------------------------- Indian Point. Nuclear generating units similar in design to the Company's Indian Point 2 unit have experienced problems of varying severity in their steam generators, which in a number of instances have required steam generator replacement. Inspections of the Indian Point 2 steam generators since 1976 have revealed various problems, some of which appear to have been arrested, but the remaining service life of the steam generators is uncertain and may be shorter than the unit's life. The projected service life of the steam generators is reassessed periodically in the light of the inspections made during scheduled outages of the unit. Based on the latest available data, the Company estimates that steam generator replacement will not be required before 1999, and possibly not until some years later. To avoid procurement delays in the event replacement is necessary, the Company purchased replacement steam generators, which are stored at the site. If replacement of the steam generators is required, such replacement is presently estimated (in 1995 dollars) to require additional expenditures of approximately $107 million (exclusive of replacement power costs) and an outage of approximately six months. However, securing necessary permits and approvals or other factors could require a substantially longer outage if steam generator replacement is required on short notice. Nuclear Insurance. The insurance policies covering the Company's nuclear facilities for property damage, excess property damage, and outage costs permit assessments under certain conditions to cover insurers' losses. As of March 31, 1996 the highest amount which could be assessed for losses during the current policy year under all of the policies was $31.1 million. While assessments may also be made for losses in certain prior years, the Company is not aware of any losses in such years which it believes are likely to result in an assessment. Under certain circumstances, in the event of nuclear incidents at facilities covered by the federal government's third-party liability indemnification program, the Company could be assessed up to $79.3 million per incident of which not more than $10 million may be assessed in any one year. The per-incident limit is to be adjusted for inflation not later than 1998 and not less than once every five years thereafter. The Company participates in an insurance program covering liabilities for injuries to certain workers in the nuclear power industry. In the event of such injuries, the Company is subject to assessment up to an estimated maximum of approximately $3.1 million. - 10 - Environmental Matters. The normal course of the Company's operations necessarily involves activities and substances that expose the Company to potential liabilities under federal, state and local laws protecting the environment. Such liabilities can be material and in some instances may be imposed without regard to fault, or may be imposed for past acts, even though such past acts may have been lawful at the time they occurred. Sources of such potential liabilities include (but are not limited to) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund), a 1994 settlement with the New York State Department of Environmental Conservation (DEC), asbestos, and electric and magnetic fields (EMF). Superfund. By its terms, Superfund imposes joint and several strict liability, regardless of fault, upon generators of hazardous substances for resulting removal and remedial costs and environmental damages. The Company has received process or notice concerning possible claims under Superfund or similar state statutes relating to a number of sites at which it is alleged that hazardous substances generated by the Company (and, in most instances, a large number of other potentially responsible parties) were deposited. Estimates of the investigative, removal, remedial and environmental damage costs (if any) the Company will be obligated to pay with respect to each of these sites range from extremely preliminary to highly refined. Based on these estimates, the Company had accrued a liability at March 31, 1996 of approximately $14.1 million. There will be additional costs with respect to these and possibly other sites, the materiality of which is not presently determinable. DEC Settlement. In November 1994 the Company agreed to a consent order settling a civil administrative proceeding instituted by the DEC in 1992, alleging environmental violations by the Company. Pursuant to the consent order, the Company has conducted an environmental management systems evaluation and is conducting an environmental compliance audit. The Company also must implement "best management practices" plans for certain facilities and undertake a remediation program at certain sites. At March 31, 1996 the Company had an accrued liability of $18.7 million for these sites. Expenditures for environment-related projects in the five years 1996-2000, including expenditures to comply with the consent order, are currently estimated at $155 million. There will be additional costs, including costs arising out of the compliance audit, the materiality of which is not presently determinable. - 11 - Asbestos Claims. Suits have been brought in New York State and federal courts against the Company and many other defendants, wherein several thousand plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the Company. Many of these suits have been disposed of without any payment by the Company, or for immaterial amounts. The amounts specified in all the remaining suits total billions of dollars but the Company believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to the Company at this time, it is the opinion of the Company that these suits will not have a material adverse effect on the Company's financial position. EMF. Electric and magnetic fields are found wherever electricity is used. Several scientific studies have raised concerns that EMF surrounding electric equipment and wires, including power lines, may present health risks. The Company is the defendant in several suits claiming property damage or personal injury allegedly resulting from EMF. In the event that a causal relationship between EMF and adverse health effects is established, or independently of any such causal determination, in the event of adverse developments in related legal or public policy doctrines, there could be a material adverse effect on the electric utility industry, including the Company. - 12 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis relates to the interim financial statements appearing in this report and should be read in conjunction with Management's Discussion and Analysis appearing in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1-1217). Reference is made to the note to the financial statements in Item 1 of this report, which note is incorporated herein by reference. LIQUIDITY AND CAPITAL RESOURCES Cash and temporary cash investments were $103.2 million at March 31, 1996 compared with $342.3 million at December 31, 1995 and $111.4 million at March 31, 1995. The Company's cash balances reflect the timing and amounts of external financing. In January 1996 the Company commenced a tender offer for certain series of its preferred stock. Shareholders tendered approximately $227 million of such preferred stock pursuant to the offer, which expired on February 27, 1996. In addition, the Company called $90 million of its preferred stock for redemption on March 30, 1996. These retirements and related expenses were funded with proceeds from $275 million of 7-3/4 percent subordinated debentures issued on March 6, 1996 and due on March 31, 2031 and cash of $25 million. The present value revenue- equivalent savings of these transactions was approximately $42 million. The net gain on these transactions of $13.9 million (after write-off of capital stock expense on redeemed stock) did not affect earnings per share due to an equivalent amount of provision for depreciation of utility plant recorded in the first quarter of 1996. The increases in depreciation expense for the three and twelve-month periods ending March 31, 1996 compared with the corresponding 1995 periods reflect this additional depreciation expense. On May 1, 1996 the Company issued $100 million of 7-3/4 percent Debentures Series 1996 A, due June 1, 2026, at a price to the public of 98.002 percent and a yield of 7.924 percent. The proceeds will be used to redeem, on June 1, 1996, the $95.3 million outstanding balance of the Company's 9-3/8 percent Debentures, Series 1991 A, due June 1, 2026. The other $79.7 million of the original $175 million Series 1991 A Debentures had been retired through a tender offer in 1993. - 13 - The Company expects to finance the balance of its capital requirements for the remainder of 1996 and 1997, including $187 million for securities maturing during this period, from internally generated funds and external financings of about $150 million, most, if not all, of which will be debt issues. Customer accounts receivable, less allowance for uncollectible accounts, amounted to $586.6 million at March 31, 1996 compared with $497.2 million at December 31, 1995 and $471.8 million at March 31, 1995. In terms of equivalent days of revenue outstanding (ENDRO), these amounts represented 28.7, 27.6 and 27.2 days, respectively. The increase in amount and in ENDRO in 1996 reflects increases in sales revenues and timing differences in billing and collection schedules. The regulatory accounts receivable negative balances of $.9 million at March 31, 1996 and $6.5 million at December 31, 1995 represent amounts to be refunded to customers. The regulatory accounts receivable of $33.6 million at March 31, 1995 represented amounts to be recovered from customers. These balances include amounts accrued under the electric revenue adjustment mechanisms (ERAM), modified ERAM and incentive provisions of the Company's electric and gas rate agreements referred to below. The changes in regulatory accounts receivable during the first three months of 1996 were as follows: 1996 Balance Recoveries Balance Dec. 31, 1996 from March 31, (Millions of Dollars) 1995* Accruals*Customers** 1996* ERAM/Modified ERAM $(37.7) $ .4 $ - $(37.3) Electric Incentives Enlightened Energy program 19.7 6.2 - 25.9 Customer service 4.0 2.1 - 6.1 Fuel and purchased power 1.9 2.1 (3.3) .7 Gas Incentives System improvement 4.6 - (1.5) 3.1 Customer service 1.0 - (.4) .6 Total $ (6.5) $ 10.8 $ (5.2) $ (.9)
* Negative amounts are refundable; positive amounts are recoverable. **Negative amounts have been recovered. - 14 - Gas in storage decreased $18.0 million in the first quarter of 1996, reflecting high levels of gas sendout as a result of colder than normal winter weather. In January 1996 the Company made a $224 million semi- annual payment to New York City for property taxes. Prepayments and other current assets at March 31, 1996 include the unamortized portion ($111.8 million) of this payment. Enlightened Energy program costs are generally recoverable over a five-year period. Program costs have declined and are expected to continue to decline in future periods, resulting in lower deferred balances as recoveries exceed new expenditures. Interest coverage under the SEC formula for the twelve months ended March 31, 1996 was 4.11 times compared with 4.20 times for the year 1995 and 4.59 times for the twelve months ended March 31, 1995. The decline in interest coverage reflects a lower level of pre-tax earnings. 1995 Electric Rate Agreement In April 1995 the New York Public Service Commission (PSC) approved a three-year electric rate agreement effective April 1, 1995. The agreement provided for no increase in base electric revenues in the first rate year and possible, but limited, increases in years two and three. For details of the agreement, see the Management's Discussion and Analysis appearing in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995, under the heading "Liquidity and Capital Resources - 1995 Electric Rate Agreement." The agreement provides that the Company will retain 50 percent of earnings (excluding incentive earnings) in excess of 50 basis points above the allowed return on equity but not more than 150 basis points above the allowed return, and will defer the balance for customer benefit. For the first rate year of the electric rate agreement, the twelve months ended March 31, 1996, the Company's actual rate of return on electric common equity, excluding incentives, exceeded the sharing threshold of 11.6 percent, principally due to increased productivity, and a provision for excess earnings of $8.4 million was set aside for the future benefit of customers. - 15 - In March 1996 the PSC approved a $19 million reduction to base electric rates for the second year of the rate agreement, effective April 1, 1996. The decrease reflects a lower allowed rate of return on common equity (10.31 percent excluding incentives) and a refund to customers under the modified ERAM mechanism, offset in part by increases in pension and retiree health benefit expenses and IPP capacity costs. 1995 Gas and Steam Rate Increases Effective October 1, 1995 (the beginning of the second year of the October 1994 three-year gas and steam rate settlements) gas and steam rates were increased by $20.9 million (2.5 percent) and $4.6 million (1.3 percent), respectively. The primary reasons for the gas rate increase were escalation in certain operation and maintenance expenses, return and depreciation on higher plant balances, and recovery of earnings under the incentive provisions of the settlement. The steam rate increase was primarily to cover escalation in operation and maintenance expenses, and return and depreciation on higher plant balances. For details of the October 1994 three-year gas and steam rate agreements, see Management's Discussion and Analysis appearing in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 under the heading "Liquidity and Capital Resources - Gas and Steam Rate Agreements." Credit Ratings The Company's senior debt (first mortgage bonds) is rated Aa3, A+ and AA- by Moody's Investors Service (Moody's), Standard & Poor's (S&P) and Duff and Phelps, Inc., respectively. The Company has not issued first mortgage bonds since 1974. As of March 31, 1996, one $75 million issue of first mortgage bonds remains outstanding, which will mature in December 1996. The Company's unsecured debentures and tax-exempt debt are rated A1, A+ and A+ by Moody's, S&P and Duff and Phelps, respectively. The Company's subordinated debentures are rated A2, A and A+ by Moody's, S&P and Duff and Phelps, respectively. Competition - New York State and Federal Initiatives The PSC is expected to issue an order in the second quarter of 1996 in its generic "competitive opportunities" proceeding to investigate whether and how to introduce increased competition in the electric utility industry in the State. The order is not expected to conclude the PSC's review of competition and related issues. - 16 - It is not possible to predict the outcome of the proceeding or its impact upon the Company. The outcome could adversely affect the Company's eligibility to apply Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," which, pursuant to SFAS No. 101, "Accounting for Discontinuation of Application of FASB Statement No. 71," and SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," could then require a material write-down of assets, the amount of which is not yet determinable. On April 24, 1996 the Federal Energy Regulatory Commission (FERC) issued its final order requiring electric utilities to file non-discriminatory open access transmission tariffs that would be available to wholesale sellers and buyers of electric energy and to allow utilities to recover related legitimate and verifiable stranded costs. The Company is currently analyzing the final order to determine its impact. The Company participates in the wholesale electric market primarily as a buyer, and in this regard should benefit if the rules adopted result in lower wholesale prices for its purchases of electricity for its retail customers. For details of the New York State and FERC initiatives towards competition, see the Management's Discussion and Analysis appearing in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 under the heading "Liquidity and Capital Resources - Competition." Environmental Claims and Other Contingencies Reference is made to the note to the financial statements included in this report for information concerning potential liabilities of the Company arising from the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund), from claims relating to alleged exposure to asbestos, and from certain other contingencies to which the Company is subject. - 17 - RESULTS OF OPERATIONS Net income for common stock for the first quarter and twelve months ended March 31, 1996 was lower than in the corresponding 1995 periods by $9.7 million ($.04 a share) and $31.8 million ($.13 a share), respectively. These results reflect the three-year electric rate agreement effective April 1, 1995, which provides for generally more limited opportunities for earning incentives. In reviewing period-to-period comparisons, it should be noted that not all changes in sales volume affected operating revenues. Under the ERAM and the modified ERAM, discussed below, except for the variation attributed to a change in number of customers under the modified ERAM, most increases (or decreases) in electric sales revenues compared with revenues forecast pursuant to the electric rate agreement are deferred for subsequent credit (or billing) to customers. Under the weather normalization clause in the Company's gas tariff, most weather- related variations in gas sales do not affect gas revenues. Increases (Decreases) Three Months Ended Twelve Months Ended March 31, 1996 March 31, 1996 Compared With Compared With Three Months Ended Twelve Months Ended March 31, 1995 March 31, 1995 Amount Percent Amount Percent (Amounts in Millions) Operating revenues $ 198.6 11.9% $ 391.4 6.2% Fuel - electric and steam 70.1 61.5 46.6 8.8 Purchased power - electric 56.3 22.7 316.5 37.4 Gas purchased for resale 69.8 62.9 55.9 20.4 Operating revenues less fuel and purchased power and gas purchased for resale (Net revenues) 2.4 0.2 (27.6) (0.6) Other operations and maintenance (11.3) (2.7) (13.5) (0.8) Depreciation and amortization (A) 23.4 21.4 51.4 12.0 Taxes, other than federal income tax 30.3 11.0 38.0 3.4 Federal income tax (12.6) (10.7) (66.4) (14.7) Operating income (27.4) (9.8) (37.1) (3.5) Other income less deductions and related federal income tax (1.1) 57.2 4.7 83.0 Interest charges (2.0) (2.5) 16.2 5.2 Net income (26.5) (13.2) (48.6) (6.5) Preferred stock dividend requirement (2.9) (32.1) (2.9) (8.1) Gain on refunding of preferred stock (A) 13.9 - 13.9 - Net income for common stock $ (9.7) (5.0)% $ (31.8) (4.5)%
(A) See discussion above under Liquidity and Capital Resources. - 18 - First Quarter 1996 Compared with First Quarter 1995 Net revenues (operating revenues less fuel, purchased power and gas purchased for resale) increased $2.4 million in the first quarter of 1996 compared with the 1995 period. Electric net revenues decreased $35.2 million and gas and steam net revenues increased $18.1 million and $19.5 million, respectively. Total electric revenues in the 1996 period were higher than in the corresponding 1995 period, largely reflecting recovery of higher fuel and purchased power costs. Net electric revenues for the first quarter of 1996 reflect an accrual of $.4 million under the modified ERAM, reflecting net revenues below the forecast level, compared with an accrual of $7.1 million in the 1995 period. The 1995 electric rate agreement added to the ERAM a revenue per customer (RPC) mechanism (modified ERAM) which excludes from adjustment those variances in the Company's electric revenues which result from changes in the number of customers in each electric service classification. Net electric revenues for the first quarter of 1996 include $6.8 million earned under the RPC mechanism. Electric net revenues for the first quarter of 1996 include $10.4 million, compared with $21.2 million for the 1995 period, for incentives earned under the provisions of the 1995 and 1992 electric rate agreements, respectively. The accounting provisions of the 1992 and 1995 electric rate agreements for Indian Point Unit 2 refueling and maintenance outages decreased electric net revenues for the first quarter of 1996 compared with the 1995 period by $19.9 million; related expenses decreased in like amount. - 19 - Electric sales, excluding off-system sales, in the first quarter of 1996 compared with the 1995 period were: Millions of Kwhrs. 1st Quarter 1st Quarter Percent Description 1996 1995 Variation Variation Residential/Religious 2,710 2,570 140 5.4% Commercial/Industrial 6,311 6,119 192 3.1% Other 153 149 4 2.7% Total Con Edison Customers 9,174 8,838 336 3.8% NYPA, Municipal Agency and Other Sales 2,427 2,364 63 2.7% Total Service Area 11,601 11,202 399 3.6%
Gas and steam revenues in the 1996 period reflect rate increases effective October 1995. Gas net revenues for the first quarter of 1996 also reflect an increase in non-weather related firm sales compared with the 1995 period. For the first quarter of 1996 firm gas sales volume increased 15.5 percent and steam sales volume increased 15.1 percent compared with the 1995 period due to colder than normal 1996 winter weather compared with warmer than normal 1995 winter weather. Steam net revenues for the period reflect the effect of this weather variation because there is no weather normalization provision for steam revenues. After adjustment for comparability in both periods, primarily for variations in weather, electric sales volume in the Company's service territory increased 1.6 percent in the first quarter of 1996, firm gas sales volume increased 3.3 percent and steam sales volume increased 1.7 percent. Electric fuel costs increased $41.9 million in the 1996 period, largely because of increased sendout and higher unit cost of fuel. Purchased power costs increased in the first quarter of 1996 by $56.3 million over the 1995 period due to the relatively high cost that the Company is required to pay under its IPP contracts and the increased cost of short-term power purchases, partially offset by reduced unit purchases. The variations in fuel and purchased power costs also reflect the availability of the Company's Indian Point Unit 2 nuclear generating station, which was operating during most of the 1996 period but was out of service for refueling and maintenance for a large part of the 1995 period. Steam fuel costs increased $28.2 million due to increased sendout and higher unit cost of fuel. Gas purchased for resale increased $69.8 million, reflecting increased sendout and higher unit cost of purchased gas. - 20 - Other operations and maintenance expenses decreased $11.3 million for the first quarter of 1996 compared with the 1995 period, due primarily to lower production expenses, since there was a refueling and maintenance outage of Indian Point Unit 2 in the 1995 period but none in 1996, offset in part by increased distribution costs related to the inclement winter weather. Depreciation and amortization increased $23.4 million in the first quarter of 1996 due to higher plant balances and the provision for depreciation expense of $13.9 million corresponding to the amount of the gain on the refunding of preferred stock, discussed above. Taxes other than federal income tax increased $30.3 million in the first quarter of 1996 compared with the 1995 period due principally to increased property taxes ($10.5 million) and revenue taxes ($14.4 million). Federal income tax decreased $12.6 million for the quarter reflecting lower pre-tax income. Twelve Months Ended March 31, 1996 Compared with Twelve Months Ended March 31, 1995 Net revenues (operating revenues less fuel, purchased power and gas purchased for resale) decreased $27.6 million in the twelve months ended March 31, 1996 compared with the 1995 period. Electric net revenues decreased $92.0 million and gas and steam net revenues increased $30.3 million and $34.1 million, respectively. Total electric revenues in the 1996 period were higher than in the corresponding 1995 period, largely reflecting recovery of higher purchased power costs. However, under the 1995 electric rate agreement, recovery of increased IPP capacity costs in the 1996 period was offset by revenue reductions reflecting a generally lower level of operation and maintenance expenses. The 1996 period also includes rate agreement reconciliations that increased electric revenues by $26.3 million and purchased power costs by $31.7 million. Under the modified ERAM, net electric revenues for the twelve months ended March 31, 1996 have been reduced for a credit due customers of $42.1 million, net of $20.1 million earned under the RPC mechanism, reflecting higher sales revenues than forecast, compared with a credit due customers of $33.5 million in the 1995 period. - 21 - Net electric revenues for the twelve months ended March 31, 1996 include $46.8 million, compared with $95.3 million for the 1995 period, for incentives earned under the 1995 and 1992 electric rate agreements, respectively. Electric sales, excluding off-system sales, for the twelve months ended March 31, 1996 compared with the twelve months ended March 31, 1995 were: Millions of Kwhrs. Twelve Months Twelve Months Ended Ended Percent Description March 31, 1996 March 31, 1995 Variation Variation Residential/Religious 10,988 10,601 387 3.7% Commercial/Industrial 25,685 25,412 273 1.1% Other 621 605 16 2.6% Total Con Edison Customers 37,294 36,618 676 1.8% NYPA and Municipal Agency Sales 9,376 9,184 192 2.1% Total Service Area 46,670 45,802 868 1.9%
Off-system electricity sales increased to 4,344 millions of Kwhrs in the 1996 period compared with 2,314 millions of Kwhrs in the 1995 period. The increase in such sales was due largely to arrangements in which the Company produced electricity for others using gas they provided as fuel. The Company purchased a substantial portion of this electricity for sale to its own customers. Gas and steam revenues in the 1996 period reflect rate increases in October 1995 and higher fuel-related revenues due to increased sales volumes and higher steam unit cost of fuel. For the twelve months ended March 31, 1996, firm gas sales volume increased 11.2 percent and steam sales volume increased 11.1 percent due to colder than normal 1996 winter weather compared to warmer than normal 1995 winter weather. Under the weather normalization clause in the Company's gas tariff, most weather-related variations in gas sales do not affect gas revenues. After adjustment for comparability in both periods, primarily for variations in weather, electric sales volume in the Company's service territory in the twelve months ended March 31, 1996 increased 2.0 percent. Similarly adjusted, firm gas sales volume increased 2.4 percent and steam sales volume increased 0.7 percent. - 22 - Electric fuel costs increased $12.0 million in the 1996 period due to higher unit cost of fuel; steam fuel costs increased $34.6 million due to higher sendout and higher unit cost of fuel. During the 1996 period the Company purchased 58 percent of its electric energy requirements compared with 54 percent for the prior period. Reflecting this increase and the relatively high cost that the Company is required to pay under its IPP contracts, purchased power costs increased in the 1996 period by $316.4 million over the 1995 period. Gas purchased for resale increased $55.9 million, reflecting principally higher sendout. Other operations and maintenance expenses decreased $13.5 million in the twelve months ended March 31, 1996 compared with the 1995 period, due to decreased electric production and administrative and general expenses, offset in part by higher distribution and transmission expenses and amortization of previously deferred Enlightened Energy program costs. Depreciation and amortization increased $51.4 million in the 1996 period due principally to higher plant balances and the provision for depreciation expense of $13.9 million corresponding to the amount of the gain on the refunding of preferred stock. Taxes, other than federal income tax, increased $38.0 million in the twelve months ended March 31, 1996 compared with the 1995 period primarily due to increased revenue taxes ($21.6 million), property taxes ($6.5 million) and other taxes ($8.3 million). Federal income tax decreased $66.4 million for the twelve months ended March 31, 1996 compared with the 1995 period principally due to lower pre-tax income and adjustments associated with the 1995 electric rate agreement. Other income less miscellaneous deductions increased $4.7 million for the twelve-month period primarily due to increases in investment income. Interest on long-term debt for the twelve-month period increased $8.6 million principally as a result of the issuance of new debt. Other interest charges increased $5.4 million due to interest expense associated with certain tax settlements. - 23 - PART II. - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Exhibit 4.1 Form of the Company's 7 3/4% Quarterly Income Capital Securities (Series A Subordinated Deferrable Interest Debentures). (Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K, dated February 29, 1996, in Commission File No. 1-1217.) Exhibit 4.2 Form of the Company's 7 3/4% Debentures, Series 1996 A. (Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K, dated April 24, 1996, in Commission File No. 1-1217.) Exhibit 12 Statement of computation of ratio of earnings to fixed charges for the twelve-month periods ended March 31, 1996 and 1995. Exhibit 27 Financial Data Schedule for the three-month period ended March 31, 1996. (To the extent provided in Rule 402 of Regulation S-T, this exhibit shall not be deemed "filed", or otherwise subject to liabilities, or be deemed part of a registration statement.) (b) REPORTS ON FORM 8-K The Company filed a Current Report on Form 8-K, dated February 29, 1996, reporting (under Item 5) the sale of $275 million aggregate principal amount of its 7 3/4% Quarterly Income Capital Securities (Series A Subordinated Deferrable Interest Debentures), and the expected use of the net proceeds of the sale thereof to refund certain preferred stock of the Company. The Company filed no other Current Reports on Form 8-K during the quarter ended March 31, 1996. The Company filed a Current Report on Form 8-K, dated April 24, 1996, reporting (under Item 5) the sale of $100 million aggregate principal amount of its 7 3/4% Debentures, Series 1996 A, and the expected use of the net proceeds of the sale thereof to refund certain debentures of the Company. - 24 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. DATE: May 13, 1996 Raymond J. McCann Raymond J. McCann Executive Vice President, Chief Financial Officer and Duly Authorized Officer DATE: May 13, 1996 Joan S. Freilich Joan S. Freilich Vice President, Controller and Chief Accounting Officer INDEX TO EXHIBITS SEQUENTIAL PAGE EXHIBIT NUMBER AT WHICH NO. DESCRIPTION EXHIBIT BEGINS 4.1 Form of the Company's 7 3/4% Quarterly Income Capital Securities (Series A Subordinated Deferrable Interest Debentures). (Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K, dated February 29, 1996, in Commission File No. 1-1217.) 4.2 Form of the Company's 7 3/4% Debentures, Series 1996 A. (Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K, dated April 24, 1996, in Commission File No. 1-1217.) 12 Statement of computation of ratio of earnings to fixed charges for the twelve-month periods ended March 31, 1996 and 1995. 27 Financial Data Schedule for the three-month period ended March 31, 1996. (To the extent provided in Rule 402 of Regulation S-T, this exhibit shall not be deemed "filed", or otherwise subject to liabilities, or be deemed part of a registration statement.) EX-12 2 EXHIBIT 12 TO FORM 10-Q CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. RATIO OF EARNINGS TO FIXED CHARGES TWELVE MONTHS ENDED (Thousands of Dollars) MARCH 31 MARCH 31 1996 1995 Earnings Net Income $ 697,356 $ 745,989 Federal Income Tax 357,470 287,480 Federal Income Tax Deferred 36,750 172,450 Investment Tax Credits Deferred (9,250) (9,560) Total Earnings Before Federal Income Tax 1,082,326 1,196,359 Fixed Charges* 347,929 332,848 Total Earnings Before Federal Income Tax and Fixed Charges $1,430,255 $1,529,207 *Fixed Charges Interest on Long-Term Debt $ 287,567 $ 281,656 Amortization of Debt Discount, Premium and Expenses 14,162 11,487 Interest Component of Rentals 19,596 18,554 Other Interest 26,604 21,151 Total Fixed Charges $ 347,929 $ 332,848 Ratio of Earnings to Fixed Charges 4.11 4.59
EX-27 3 EXHIBIT 27 TO FORM 10-Q
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEET, INCOME STATEMENT AND STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO 1,000 DEC-31-1996 MAR-31-1996 3-MOS PER-BOOK 10,818,697 157,422 1,189,550 687,454 1,029,062 13,882,185 587,421 855,884 4,144,779 5,588,084 84,550 238,292 4,189,242 0 0 0 82,812 0 44,610 2,557 3,652,038 13,882,185 1,867,365 105,040 1,509,664 1,614,704 252,661 854 253,515 78,980 174,535 6,035 182,443 122,182 301,729 184,756 0.78 0.78
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