-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, IStuC15dDIeHjz7zjWF5XtxQ8XnbcrY9yJHUBVxWp8uGNe/wGRUkgOD8xwBMd0Zj Tkvt1N0eOnWN8QBO4a8VFA== 0000950123-94-000862.txt : 19940509 0000950123-94-000862.hdr.sgml : 19940509 ACCESSION NUMBER: 0000950123-94-000862 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LONG ISLAND LIGHTING CO CENTRAL INDEX KEY: 0000060251 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 111019782 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03571 FILM NUMBER: 94526521 BUSINESS ADDRESS: STREET 1: 175 E OLD COUNTRY RD CITY: HICKSVILLE STATE: NY ZIP: 11801 BUSINESS PHONE: 5169334590 10-Q 1 LONG ISLAND LIGHTING COMPANY FORM 10-Q 1 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, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-3571 LONG ISLAND LIGHTING COMPANY Incorporated pursuant to the Laws of New York State Internal Revenue Service - Employer Identification No. 11-1019782 175 East Old Country Road, Hicksville, New York 11801 (516) 755-6650 Indicate by check mark whether the registrant (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 registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No The total number of shares of the registrant's Common Stock, $5 par value, outstanding on March 31, 1994, was 112,550,193. 2 LONG ISLAND LIGHTING COMPANY
Page No. -------- Part I - FINANCIAL INFORMATION Item 1. Financial Statements Statement of Income 3 Balance Sheet 4 Statement of Cash Flows 6 Notes to Financial Statements 7 Item 2. Management's Discussion and 10 Analysis of Financial Condition and Results of Operations Part II - OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Changes in Securities 17 Item 3. Defaults Upon Senior Securities 17 Item 4. Submission of Matters to a Vote 17 of Security Holders Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 18 Signature 20
2 3 LONG ISLAND LIGHTING COMPANY STATEMENT OF INCOME (UNAUDITED) (Thousands of Dollars - except per share amounts)
THREE MONTHS ENDED MARCH 31 ---------------------- 1994 1993 ---------------------- REVENUES Electric $587,266 $536,342 Gas 284,877 224,109 -------- -------- Total Revenues 872,143 760,451 -------- -------- EXPENSES Operations - fuel and purchased power 298,920 253,158 Operations - other 114,053 114,421 Maintenance 27,858 30,645 Depreciation, depletion and amortization 31,681 30,012 Base financial component amortization 25,243 25,243 Regulatory liability component amortization (22,143) (22,143) Other regulatory amortizations 10,014 (18,331) Rate moderation component 48,627 16,152 Operating taxes 109,640 92,791 Federal income tax - current 2,341 1,066 Federal income tax - deferred and other 42,044 45,046 -------- -------- Total Expenses 688,278 568,060 -------- -------- OPERATING INCOME 183,865 192,391 -------- -------- OTHER INCOME AND (DEDUCTIONS) Rate moderation component carrying charges 8,979 10,878 Class Settlement (5,701) (5,814) Other income and (deductions) 9,496 6,800 Allowance for other funds used during construction 717 49 Federal income tax credit (charge) - deferred and other 915 (448) -------- -------- Total Other Income and (Deductions) 14,406 11,465 -------- -------- INCOME BEFORE INTEREST CHARGES 198,271 203,856 -------- -------- INTEREST CHARGES AND (CREDITS) Interest on long-term debt 112,779 118,643 Other interest 17,075 17,589 Allowance for borrowed funds used during construction (1,203) (237) -------- -------- Total Interest Charges and (Credits) 128,651 135,995 -------- -------- NET INCOME 69,620 67,861 Preferred stock dividend requirements 13,272 14,575 -------- -------- EARNINGS FOR COMMON STOCK $ 56,348 $ 53,286 ======== ======== AVERAGE COMMON SHARES OUTSTANDING (000) 112,536 111,779 EARNINGS PER COMMON SHARE $0.50 $0.48 DIVIDENDS DECLARED PER COMMON SHARE $ 0.445 $ 0.435 ======== ========
SEE NOTES TO FINANCIAL STATEMENTS. - 3 - 4 LONG ISLAND LIGHTING COMPANY BALANCE SHEET (Thousands of Dollars)
MARCH 31 DECEMBER 31 1994 1993 ASSETS (UNAUDITED) (AUDITED) -------------- ------------- UTILITY PLANT Electric $ 3,577,040 $ 3,544,569 Gas 905,941 860,899 Common 211,941 201,418 Construction work in progress 94,003 176,504 Nuclear fuel in process and in reactor 16,532 16,533 ----------- ----------- 4,805,457 4,799,923 ----------- ----------- Less - Accumulated depreciation and amortization 1,477,493 1,452,366 ----------- ----------- Total Net Utility Plant 3,327,964 3,347,557 ----------- ----------- REGULATORY ASSETS Base financial component (less accumulated amortization of $479,612 and $454,369) 3,559,218 3,584,461 Rate moderation component 571,189 609,827 Shoreham post settlement costs 817,351 777,103 Shoreham nuclear fuel 74,966 75,497 Postretirement benefits other than pensions 406,479 402,921 Regulatory tax asset 1,846,285 1,848,998 Other 311,459 311,832 ----------- ----------- Total Regulatory Assets 7,586,947 7,610,639 ----------- ----------- NONUTILITY PROPERTY & OTHER INVESTMENTS 23,722 23,029 ----------- ----------- CURRENT ASSETS Cash and cash equivalents 241,935 248,532 Special deposits 24,938 23,439 Customer accounts receivable (less allowance for doubtful accounts of $21,875 and $23,889) 324,309 249,074 Other accounts receivable 9,669 12,199 Accrued unbilled revenues 171,304 170,042 Materials and supplies at average cost 71,429 68,882 Fuel oil at average cost 46,860 35,857 Gas in storage at average cost 17,432 75,182 Prepayments and other current assets 41,147 41,652 ----------- ----------- Total Current Assets 949,023 924,859 ----------- ----------- DEFERRED CHARGES Unamortized cost of issuing securities 337,654 350,239 Accumulated deferred income taxes 1,118,865 1,157,009 Other 40,924 42,705 ----------- ----------- Total Deferred Charges 1,497,443 1,549,953 ----------- ----------- TOTAL ASSETS $13,385,099 $13,456,037 =========== ===========
See Notes to Financial Statements. -4- 5 LONG ISLAND LIGHTING COMPANY BALANCE SHEET (Thousands of Dollars)
MARCH 31 DECEMBER 31 1994 1993 CAPITALIZATION AND LIABILITIES (UNAUDITED) (AUDITED) -------------- ------------- CAPITALIZATION Long-term debt $ 4,887,733 $ 4,887,733 Unamortized premium and (discount) on debt (17,091) (17,393) ----------- ----------- 4,870,642 4,870,340 ----------- ----------- Preferred stock - redemption required 649,150 649,150 Preferred stock - no redemption required 64,005 64,038 ----------- ----------- Total Preferred Stock 713,155 713,188 ----------- ----------- Common stock 562,751 561,662 Premium on capital stock 1,014,106 1,010,283 Capital stock expense (50,002) (50,427) Retained earnings 717,704 711,432 ----------- ----------- Total Common Shareowners' Equity 2,244,559 2,232,950 ----------- ----------- Total Capitalization 7,828,356 7,816,478 ----------- ----------- REGULATORY LIABILITIES Regulatory liability component 416,636 436,476 1989 Settlement credits 152,778 155,081 Regulatory tax liability 175,634 177,669 Other 148,260 138,612 ----------- ----------- Total Regulatory Liabilities 893,308 907,838 ----------- ----------- CURRENT LIABILITIES Current maturities of long-term debt 600,000 600,000 Current redemption requirements of preferred stock 4,800 4,800 Accounts payable and accrued expenses 206,863 277,519 Accrued taxes 38,521 52,656 Accrued interest 148,336 142,409 Dividends payable 54,768 54,542 Class Settlement 30,000 30,000 Customer deposits 27,259 27,046 ----------- ----------- Total Current Liabilities 1,110,547 1,188,972 ----------- ----------- DEFERRED CREDITS Class Settlement 163,511 164,942 Accumulated deferred income taxes 2,934,298 2,932,029 Other 11,919 12,622 ----------- ----------- Total Deferred Credits 3,109,728 3,109,593 ----------- ----------- RESERVES FOR CLAIMS AND DAMAGES 11,877 8,714 ----------- ----------- PENSIONS AND OTHER POSTRETIREMENT BENEFITS 431,283 424,442 ----------- ----------- COMMITMENTS AND CONTINGENCIES - - ----------- ----------- TOTAL CAPITALIZATION AND LIABILITIES $13,385,099 $13,456,037 =========== ===========
See Notes to Financial Statements. -5- 6 LONG ISLAND LIGHTING COMPANY STATEMENT OF CASH FLOWS (UNAUDITED) (Thousands of Dollars)
THREE MONTHS ENDED MARCH 31 ----------------------- 1994 1993 ----------------------- OPERATING ACTIVITIES Net Income $69,620 $67,861 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation and amortization 31,681 30,012 Provision for doubtful accounts 5,282 10,672 Base financial component amortization 25,243 25,243 Regulatory liability component amortization (22,143) (22,143) Rate moderation component 48,627 16,152 Rate moderation component carrying charges (8,979) (10,878) Other regulatory amortizations 10,014 (18,331) Class Settlement 5,701 5,814 Amortization of cost of issuing and redeeming securities 12,795 13,324 Federal income taxes - deferred and other 41,129 45,494 Allowance for other funds used during construction (717) (49) Other 799 1,224 CHANGES IN OPERATING ASSETS AND LIABILITIES Accounts receivable (77,987) (55,392) Accrued unbilled revenues (1,262) (15,157) Materials and supplies, fuel oil and gas in storage 44,200 56,675 Prepayments and other current assets 506 (2,878) Accounts payable and accrued expenses (80,356) (50,032) Accrued taxes (14,135) (42,332) Accrued interest 5,927 13,281 Other 14,439 (11,195) -------- --------- Net Cash Provided by Operating Activities 110,384 57,365 -------- --------- INVESTING ACTIVITIES Construction and nuclear fuel expenditures (12,434) (52,865) Shoreham post settlement costs (45,721) (50,666) Other (783) (356) -------- --------- Net Cash Used in Investing Activities (58,938) (103,887) -------- --------- FINANCING ACTIVITIES Proceeds from issuance of long-term debt - 650,241 Redemption of long-term debt - (645,000) Proceeds from sale of common stock 4,877 4,909 Proceeds from sale of preferred stock - 60,356 Redemption of preferred stock - (57,000) Preferred stock dividends paid (13,133) (14,945) Common stock dividends paid (49,988) (48,542) Cost of issuing and redeeming securities (10) (12,151) Other 211 677 -------- --------- Net Cash Used in Financing Activities (58,043) (61,455) -------- --------- Net Decrease in Cash and Cash Equivalents ($6,597) ($107,977) ======== ========= Cash and cash equivalents at beginning of period $248,532 $309,485 Net decrease in cash and cash equivalents (6,597) (107,977) -------- --------- Cash and Cash Equivalents at end of period $241,935 $201,508 ======== ========= SUPPLEMENTARY INFORMATION Interest Paid, before reduction for the allowance for borrowed funds used during constuction $111,133 $109,463 Federal income taxes - refunded - $1,000
SEE NOTES TO FINANCIAL STATEMENTS. -6- 7 Notes to Financial Statements For the Quarter Ended March 31, 1994 (Unaudited) These Notes to Financial Statements reflect events subsequent to February 4, 1994, the date of the most recent Report of Independent Auditors, through the date of this Quarterly Report on Form 10-Q for the quarter ended March 31, 1994. These Notes to Financial Statements should be read in conjunction with both Part I - Financial Information and Part II - Other Information required to be furnished as part of this Quarterly Report, in particular, (1) Management's Discussion and Analysis of Financial Condition and Results of Operations for the three months ended March 31, 1994, respecting the Company's capital requirements and liquidity, and (2) Part II, Item 6, Reports on Form 8-K. These Notes to Financial Statements should also be read in conjunction with Notes to Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1993, incorporated herein by reference. The financial statements furnished are unaudited. However, in the opinion of management, the financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the interim periods presented. Operating results for these interim periods are not necessarily indicative of results to be expected for the entire year, due to seasonal, operating and other factors. Certain amounts from prior year financial statements have been reclassified to conform to the current year presentation. 7 8 Note 1. EXCESS EARNINGS - GAS In December 1993, the Public Service Commission of the State of New York (PSC) approved a three-year gas rate settlement between the Company and the Staff of the PSC, effective December 1, 1993. This gas rate settlement provides, among other matters, that earnings in excess of a 10.6% rate of return on common equity in any of the three years covered by the settlement be shared equally between the Company's firm gas customers and its shareowners. For a further discussion of the gas rate settlement, see Note 3 of Notes to Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1993. In March 1994, to reflect the firm gas customer's portion of estimated gas earnings in excess of the 10.6% return on common equity for the rate year ending November 30, 1994, the Company recorded a $4.8 million, net of tax effects, reduction to earnings. The Company computed this amount based upon the aggregate of actual operating gas income for the four month period ended March 31, 1994 and forecasted gas operating income for the eight month period ending November 30, 1994. Based upon this computation, the Company estimates that it will earn approximately $9.6 million, net of tax effects, in excess of the 10.6% rate of return on common equity for the rate year ending November 30, 1994. However, since the actual amount of earnings in excess of its allowed rate of return on common equity will not be determined until the completion of the rate year, amounts charged to earnings during the year will be subject to adjustments as actual financial data replaces forecasted data in the Company's excess earnings calculation. Note 2. ENVIRONMENT The Company is the owner of six pieces of property on which the Company or certain of its predecessor companies produced manufactured gas. The Company has investigated two of these sites for possible environmental contamination caused by these prior operations and plans to submit the findings to the appropriate regulatory agencies in 1994. Although the Company's clean-up costs, if any, cannot be determined until the remediation alternatives have been reviewed by the regulatory agencies and negotiations with such agencies have been completed, based on the findings of the aforementioned investigations, clean-up costs for the sites located in Hempstead and Bay Shore, Long Island are estimated to be $4 million and $6 million, respectively. Accordingly, the Company has recorded a $10 million liability for the estimated clean-up of these sites. The Company has also recorded a $10 million regulatory asset to reflect its belief that the PSC will provide for the future recovery of these costs through rates as it has for other New York State utilities. 8 9 The Company will conduct similar investigations of the remaining four sites over the next several years, the total cost of which cannot be determined at this time. However, the cost of investigating the site located in Far Rockaway, one of the four remaining sites, is approximately $750,000. The Company cannot determine the costs of remediation for these four sites until the investigations have been completed and the results reviewed by the appropriate regulatory agencies. The Company believes that the costs for the remediation of these sites will not be material and will be recoverable through rates. 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1994 RESULTS OF OPERATIONS EARNINGS Earnings for common stock for the quarter ended March 31, 1994 were $56.3 million or 50 cents per common share, compared to $53.3 million or 48 cents per common share for the same period last year. Quarterly earnings are not necessarily indicative of earnings in other quarters. The Company experienced an increase in earnings for the electric business, partially offset by lower earnings for the gas business for the three months ended March 31, 1994 compared to the same period in 1993. The increase in electric earnings reflects lower operations and maintenance expenses resulting from the Company's continuing efforts to control costs. Gas revenues continued to increase as a result of the Company's aggressive gas expansion program. However, gas earnings declined primarily due to the recognition of previously deferred storm costs affecting gas operations and a lower allowed rate of return on common equity as determined by the PSC. Although earnings cannot be predicted with certainty, the Company currently anticipates that its earnings for the first six months of 1994 will be significantly less than earnings for the same period in 1993. While the Company can give no assurances, it is expecting that the items described below, affecting the comparability of earnings between the six-month period ended June 30, 1994 and June 30, 1993 should be offset during the balance of the year by certain positive factors. These factors include a continuation of reductions in operations and maintenance expenses and the impact of improved cash flow from operations. Comparative earnings for the six-month period are expected to be affected by certain factors including: (1) the recognition in 1993 of the benefits associated with certain tax credits that the Company does not anticipate in 1994; (2) the recognition of previously deferred storm costs, mentioned above; (3) a provision in the Company's gas rate structure that was not in effect prior to December 1, 1993 that requires earnings in excess of a 10.6% rate of return on common equity to be shared equally between the Company's firm gas customers and its shareowners; (4) a lower allowed rate of return on common equity for the Company's gas business; and (5) lower gas revenues for the three months ended June 30, 1994, resulting from a refinement in the Company's procedures used to estimate revenues not yet billed, which will in turn increase gas revenues in the second six-month period of 1994. 10 11 REVENUES Total revenues for the quarter ended March 31, 1994, were $872.1 million, representing an increase of $111.7 million, or 14.7% over total revenues for the quarter ended March 31, 1993. Electric revenues increased by $50.9 million, or 9.5%, while gas revenues were up $60.8 million, or 27.1%, when compared to the same period of the prior year. The increase in electric revenues for the quarter ended March 31, 1994 when compared to the same period in 1993, is primarily the result of an electric rate increase of 4.0% effective December 1, 1993 and the current recovery of $2.8 million per month of certain deferrals relating to the rate year that ended November 30, 1992. The Public Service Commission of the State of New York (PSC) has authorized the Company to recover these net deferrals through the Company's fuel cost adjustment clause over a twelve-month period which began in August 1993. For a further discussion of the Company's rate matters, see Note 3 of Notes to Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 1993. The Company's current electric rate structure provides for a revenue reconciliation mechanism which mitigates the impact on earnings of experiencing electric sales that are above or below levels reflected in rates. For the quarters ended March 31, 1994 and 1993, the Company recorded non-cash income, which is included in "Other Regulatory Amortizations" on the Company's Statement of Income, of $10.6 million and $20.7 million, respectively, as a result of electric sales that were lower than those that were adjudicated by the PSC. The increase in gas revenues for the quarter ended March 31, 1994 when compared to the same period in 1993, is attributable to a 4.7% gas rate increase effective December 31, 1993, the addition of approximately 7,700 new gas space heating customers, and the recovery of higher fuel costs, resulting from an increase in the average price per decatherm. The Company's current gas rate structure provides for a weather normalization adjustment, which minimizes the impact on revenues of experiencing weather that is warmer or colder than normal. As a result of the operation of this mechanism, the increase in gas revenues attributable to weather for the quarter ended March 31, 1994, was less than $2 million, despite experiencing an increase in consumption associated with an abnormally cold heating season. 11 12 FUELS AND PURCHASED POWER Expenses for fuels and purchased power for electric operations and for gas used in gas operations amounted to $298.9 million for the quarter ended March 31, 1994, representing an increase of $45.8 million when compared to the comparable period in 1993. Fuels and purchased power expenses for the quarter ended March 31, 1994 and 1993 were as follows:
Three Months Ended 3/31/94 3/31/93 ------- ------- (In Millions) Fuels for Electric Operations Oil $ 57 $ 50 Gas 11 16 Nuclear 3 4 Purchased Power 76 75 ---- ---- Total 147 145 Gas Fuels 152 108 ---- ---- Total $299 $253 ==== ====
For the quarter ended March 31, 1994 the increase in gas fuel expenses was primarily due to higher sales volumes and higher gas prices. The mix of fuels and purchases of power for providing the Company's electric system energy requirements during the three months ended March 31, 1994 and 1993 were as follows:
Three Months Ended 3/31/94 3/31/93 ------- ------- Oil 40% 37% Purchases 44 41 Nuclear 8 9 Gas 8 13 ---- ---- Total 100% 100% ==== ====
OPERATIONS AND MAINTENANCE EXPENSES Total operations and maintenance expenses, exclusive of fuels and purchased power, amounted to $141.9 million for the quarter ended March 31, 1994, representing a decrease of $3.2 million, or 2.2%, from the comparable quarter of 1993. 12 13 RATE MODERATION COMPONENT For the quarters ended March 31, 1994 and 1993, the Company recorded non-cash charges to income of approximately $48.6 million and $16.2 million, respectively, reflecting the amortization of the Rate Moderation Component (RMC). The RMC reflects the difference between the Company's revenue requirements under conventional ratemaking and revenues resulting from the implementation of the rate moderation plan provided for in the Rate Moderation Agreement (RMA). At March 31, 1994 and 1993, the unamortized RMC balance was $571 million and $646 million, respectively. OPERATING TAXES Operating taxes for the quarter ended March 31, 1994 amounted to $109.6 million, representing an increase of $16.8 million, or 18.2%, from the comparable quarter of 1993. This increase in operating taxes is attributable to increases in property and payroll taxes and increases in gross receipts taxes attributable to higher electric and gas revenues. In addition, 1993 operating taxes reflect a $4.8 million adjustment related to an over-amortization in 1992 of the New York State Corporate Tax Surcharge. INTEREST EXPENSE For the quarter ended March 31, 1994, interest expense amounted to $129.9 million, representing a decrease of $6.4 million when compared to the same period of 1993. The decrease in interest expense is principally due to lower interest rates on the Company's outstanding debt, primarily resulting from the Company's aggressive refinancing efforts in 1993. 13 14 FINANCIAL CONDITION LIQUIDITY At March 31, 1994, the Company's cash and cash equivalents amounted to approximately $242 million, compared to $249 million at December 31, 1993. The Company also has a $300 million revolving line of credit through October 1, 1995, provided by its 1989 Revolving Credit Agreement (RCA). At March 31, 1994, no amounts were outstanding under the RCA. This line of credit is secured by a first lien upon the Company's accounts receivable and fuel oil inventories. FINANCING PROGRAMS The Company has a total of approximately $1.1 billion of debt securities maturing during the three-year period beginning January 1, 1994. Subject to market conditions, the Company currently intends to fund this requirement with the proceeds from the sale of equity and debt securities in addition to the use of cash. The Company's maturing debt in the years 1994, 1995, and 1996 is as follows:
1994 1995 1996 (In Millions of Dollars) - ------------------------------------------------------------------------------------ First Mortgage Bonds $ 25 $ 25 $ 40 General and Refunding - - 415 Debentures 575 - - - ------------------------------------------------------------------------------------ $ 600 $ 25 $ 455 ====================================================================================
The $600 million of debt maturing in 1994 consists of (i) $25 million First Mortgage Bonds, 4 5/8% Series N Due June 1, 1994, (ii) $400 million Debentures 10.25% Series Due June 15, 1994 and (iii) $175 million Debentures 11.75% Series Due November 15, 1994. The Company plans, subject to market conditions, to issue $100 million of common stock and up to $350 million of long-term debt during the second quarter of 1994 to satisfy the securities maturing in June 1994. The Company is currently planning to issue long-term debt or equity during the latter part of 1994 to satisfy all or a portion of the $175 million of debentures maturing in November 1994. The issuance of common stock will represent the first time in approximately ten years that the Company has issued common equity, other than through its Automatic Dividend Reinvestment Plan and Employee Stock Purchase Plan. The Company is committed to improving its debt-to-equity ratio through the issuance of common equity, growth in retained earnings and debt reduction from the use of internally generated funds. In this respect, subject to market conditions, the Company currently plans to issue an additional $225 million of common stock during the next four years. 14 15 CAPITAL REQUIREMENTS AND CAPITAL PROVIDED Capital requirements and capital provided for the three months ended March 31, 1994 were as follows:
- -------------------------------------------------------------------- Capital Requirements Three Months Ended March 31, 1994 - -------------------------------------------------------------------- (In Millions of Dollars) Total Construction $ 12 - -------------------------------------------------------------------- Dividends Preferred stock 13 Common stock 50 - -------------------------------------------------------------------- Total Dividends 63 - -------------------------------------------------------------------- Shoreham post settlement costs 46 - -------------------------------------------------------------------- Total Capital Requirements $121 ====================================================================
- -------------------------------------------------------------------- Capital Provided Three Months Ended March 31, 1994 - -------------------------------------------------------------------- (In Millions of Dollars) Decrease in cash $ 7 Common stock issued 5 Other financing activities (1) Internal cash generation from operations 110 - -------------------------------------------------------------------- Total Capital Provided $121 ====================================================================
For further information, see the Statement of Cash Flows. 15 16 RATE MATTERS ELECTRIC In December 1993, the Company filed a three-year electric rate plan with the PSC for the period beginning December 1, 1994 that minimizes future electric rate increases while retaining consistency with the RMA's objective of continuing the restoration of the Company's financial health. The filing provides for zero percentage base rate increases in years one and two of the plan and a rate increase of 4.3% in the third year. Although base electric rates would be frozen during the first two years of the plan, annual rate increases of approximately 1% to 2% are expected to result in these years from the operation of the Company's fuel cost adjustment clause. The electric rate plan requests an allowed rate of return on common equity of 11.0%. The Company's rate filing reflects four underlying objectives: (i) to limit the balance of the RMC during the three-year period to no more than its 1992 peak balance of $652 million; (ii) to recover the RMC within no more than thirteen years of its 1989 inception; (iii) to minimize the final three rate increases that will follow the two-year base rate freeze period; and (iv) to continue the Company's gradual return to financial health. The Company's electric rate plan is subject to approval by the PSC. For a further discussion see Note 3 of Notes to Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1993. GAS In December 1993, the PSC approved a three-year gas rate settlement between the Company and the staff of the PSC. The gas rate settlement provides that the Company receive, for the rate years beginning December 1, 1993, 1994 and 1995, annual gas rate increases of 4.7%, 3.8% and 2.8%, respectively. In the determination of the revenue requirements for the first year of the gas rate settlement, an allowed rate of return on common equity of 10.1% was used. The gas rate decision also provides that earnings in excess of a 10.6% return on common equity in any of the three rate years covered by the settlement be shared equally between the Company's firm gas customers and its shareowners. In March 1994, the Company recorded a reduction to earnings of $4.8 million, net of tax effects, representing the estimate of the firm gas customers' portion of earnings in excess of the 10.6% allowed rate of return on common equity for the rate year ending November 30, 1994. See Note 1 of Notes to Financial Statements for a further discussion of the treatment of gas excess earnings. 16 17 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On April 28, 1994, the New York State Court of Appeals denied Mayflower Energy Partners, L.P.'s (Mayflower) motion for leave to appeal a lower court decision which annulled a PSC order requiring the Company to enter into an agreement with Mayflower to purchase, on an energy-only basis, power for 15 years from a 300 MW facility (Long Island Lighting Company v. Public Service Commission of the State of New York and Mayflower Energy Partners, L.P.). In addition, on May 4, 1994, the Company notified Mayflower that it was exercising its right to terminate the agreement as a result of Mayflower's failure to meet the construction commencement milestone date. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Shareowners was held on April 12, 1994. The persons named below were elected as Directors by holders of the Company's Common Stock, voting cumulatively, casting votes in favor or withholding votes as indicated:
IN FAVOR WITHHELD -------- -------- William J. Catacosinos 96,074,868 1,018,578 Phyllis S. Vineyard 96,016,245 1,077,201 John H. Talmage 96,137,527 955,919 Basil A. Paterson 96,064,463 1,028,983 George Bugliarello 96,124,807 968,639 George J. Sideris 96,162,464 930,982 A. James Barnes 96,151,494 941,952 Richard L. Schmalensee 96,077,232 1,016,214 Renso L. Caporali 96,114,113 979,333 Peter O. Crisp 96,181,393 912,053 Katherine D. Ortega 96,094,768 998,678 Vicki L. Fuller 95,876,369 1,217,077
17 18 The shareowners also ratified the appointment of Ernst & Young as independent auditors with 95,814,042 votes cast for ratification, 520,297 votes against and 759,107 votes abstaining. Of the shares held by brokers and nominees, 211,386 and 5,050,474, respectively, were not voted. Item 5. OTHER INFORMATION In March 1989, the Company was notified that it is a potentially responsible party for the investigation and remediation of the Port Washington Landfill in Hempstead, New York, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act. The Company does not believe that it has contributed to the contamination of the site and has declined the Environmental Protection Agency's requests to participate in the investigation and remediation activities at the site. The Company has not received further communications regarding this site. Item 6. Exhibits and Reports on Form 8-K a. EXHIBITS Computation of Ratio of Earnings to Fixed Charges filed as Exhibit 11.1 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends filed as Exhibit 11.2 b. REPORTS ON FORM 8-K In its Report on Form 8-K dated January 21, 1994, the Company stated that: 1. The Company has announced the resignation of its President and Chief Operating Officer, Anthony F. Earley, Jr., effective March 1, 1994. 2. On December 31, 1993, the Company filed a three-year electric rate plan with the PSC for the period beginning December 1, 1994 that proposes no base electric rate increases in years one and two of the plan and an overall increase of 4.3% in the third year. 3. On January 12, 1994, the Company filed comments in response to the November 2, 1993 Petition filed by the New York State Consumer Protection Board and the Long Island Power Authority (LIPA) with the PSC asking the PSC to hold a proceeding on freezing or possibly reducing the Company's electric rates for the period December 1994 to November 1997. 18 19 4. In December 1993, the PSC approved, with an effective date of December 31, 1993, the Company's negotiated three-year gas rate settlement with the Staff of the PSC which provided for a first year increase of $26.6 million and two subsequent increases of $23 million and $20 million to be effective on December 1, 1995 and 1996, respectively. 5. On December 30, 1993, the Appellate Division, Third Judicial Department, affirmed the Supreme Court of the State of New York Special Term's decision in Long Island Lighting Company v. Public Service Commission of the State of New York and Mayflower Energy Partners, L.P., which held that the PSC had violated the federal Public Utility Regulatory Policies Act and the New York Public Service Law and had acted arbitrarily when it ordered the Company to sign a power purchase contract with Mayflower Energy Partners, L.P. incorporating the PSC's 1989 Long Run Avoided Cost estimates. 6. On December 13, 1993, the United States District Court for the Eastern District of New York issued an opinion in LILCO v. Stone & Webster Engineering Corp. granting a motion by Stone & Webster Engineering Corp. (SWEC) to dismiss the Company's complaint in this action which had sought to recover damages against SWEC for breach of contract, negligence, professional malpractice and gross negligence in connection with SWEC's work as architect-engineer and construction manager for Shoreham. 7. Pursuant to the LIPA Act, LIPA is required to make payments in-lieu-of-taxes (PILOTS) to the municipalities that impose real property taxes on Shoreham. On January 10, 1994, the Appellate Division, Second Department, affirmed Nassau County Supreme Court's March 29, 1993 decision in LIPA, et al, v. Shoreham-Wading River Central School District, et al. holding, in major part, that the Company is not obligated for any real property taxes that accrued after February 28, 1992, attributable to property that it conveyed to LIPA, that PILOTS commence on March 1, 1992, that PILOTS are subject to refunds and that the LIPA Act does not provide for the termination of PILOTS. In its Report on Form 8-K dated February 7, 1994, the Company reported earnings of $2.15 per common share on revenues of $2,880,995,000 for the year ended December 31, 1993. No other reports on Form 8-K were filed in the first quarter of 1994. 19 20 SIGNATURE 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. LONG ISLAND LIGHTING COMPANY (Registrant) By /s/ Anthony Nozzolillo --------------------------- ANTHONY NOZZOLILLO Senior Vice President and Principal Financial Officer Dated: May 6, 1994 20 21 EXHIBIT INDEX ------------- Exhibit Page No. Description No. - ------- ----------- ----- 11.1 Computation of Ratio of Earnings to Fixed Charges filed as Exhibit a. 11.2 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends filed as Exhibit b. EX-11.1 2 COMP. OF RATIO OF EARNINGS (FIXED CHARGES) 1 EXHIBIT 11.1 LONG ISLAND LIGHTING COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In Thousands of Dollars)
Twelve Months For the Year Ended December 31, Ended --------------------------------------------------------------- March 31, 1994 1993 1992 1991 1990 1989 -------------- ---------- -------- ---------- ---------- --------- Net Income/(Loss) per Statement of Income $ 298,321 $ 296,563 $301,974 $ 305,538 $ 319,637 a ($95,803) Less: Equity in earnings/loss of less than 50% owned subsidiary companies (892) (731) (470) 87 86 80 Add: Distributed income of less than 50% owned subsidiary companies 58 58 87 58 58 58 ---------- ---------- -------- ---------- ---------- --------- 299,271 297,352 302,531 305,509 319,609 (95,825) Add: Federal income tax 169,187 172,276 160,962 181,653 183,281 (1,037,412) Appropriate portion of rentals 4,552 4,552 3,504 2,751 2,343 2,730 Interest on long-term debt 460,674 466,538 450,621 472,974 467,700 453,267 Amortization of debt discount, expense and premium 52,332 52,863 41,950 30,186 24,231 14,743 Other interest 14,729 14,719 20,215 20,695 16,379 17,040 ---------- ---------- -------- ---------- ---------- --------- NET INCOME/(LOSS) AS ADJUSTED $1,000,745 $1,008,300 $979,783 $1,013,768 $1,013,543 a ($645,457)b ========== ========== ======== ========== ========== ======== Fixed Charges: Appropriate portion of rentals $4,552 $4,552 $3,504 $2,751 $2,343 $2,730 Interest on long-term debt 460,674 466,538 450,621 472,974 467,700 453,267 Amortization of debt discount, expense and premium 52,332 52,863 41,950 30,186 24,231 14,743 Other interest 14,729 14,719 20,215 20,695 16,379 17,040 ---------- ---------- -------- ---------- ---------- -------- TOTAL $ 532,287 $ 538,672 $516,290 $ 526,606 $ 510,653 $487,780 ========== ========== ======== ========== ========== ======== Ratio of earnings to fixed charges 1.88 1.87 1.90 1.93 1.98 b
- -------------------------------------- a Before cumulative effect of accounting change for unbilled gas revenue. b For the year ended December 31, 1989, earnings were inadequate to cover fixed charges. To attain a one-to-one coverage, earnings were deficient by approximately $1.1 billion, primarily due to the discontinuance of accruing AFC and the loss in June 1989 resulting from the effectiveness of the 1989 settlement and the approval of the Class Settlement. EX-11.2 3 COMP. OF RATIO OF EARNINGS(COMBINED FIXED CHARGES) 1 EXHIBIT 11.2 LONG ISLAND LIGHTING COMPANY COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (In Thousands of Dollars)
Twelve Months For the Year Ended December 31, Ended -------------------------------------------------------------- March 31, 1994 1993 1992 1991 1990 1989 ---------- ---------- -------- ---------- ---------- --------- Net Income/(Loss) per Statement of Income $ 298,321 $ 296,563 $301,974 $ 305,538 $ 319,637 a ($95,803) Less: Equity in earnings/loss of less than 50% owned subsidiary companies (892) (731) (470) 87 86 80 Add: Distributed income of less than 50% owned subsidiary companies 58 58 87 58 58 58 ---------- ---------- -------- ---------- ---------- --------- 299,271 297,352 302,531 305,509 319,609 (95,825) Add: Federal income tax 169,187 172,276 160,962 181,653 183,281 (1,037,412) Appropriate portion of rentals 4,552 4,552 3,504 2,751 2,343 2,730 Interest on long-term debt 460,674 466,538 450,621 472,974 467,700 453,267 Amortization of debt discount, expense and premium 52,332 52,863 41,950 30,186 24,231 14,743 Other interest 14,729 14,719 20,215 20,695 16,379 17,040 ---------- ---------- -------- ---------- ---------- --------- NET INCOME/(LOSS) AS ADJUSTED $1,000,745 $1,008,300 $979,783 $1,013,768 $1,013,543 a ($645,457) ========== ========== ======== ========== ========== ========= Fixed Charges: Appropriate portion of rentals $4,552 $4,552 $3,504 $2,751 $2,343 $2,730 Interest on long-term debt 460,674 466,538 450,621 472,974 467,700 453,267 Amortization of debt discount, expense and premium 52,332 52,863 41,950 30,186 24,231 14,743 Other interest 14,729 14,719 20,215 20,695 16,379 17,040 Preferred stock dividend requirements 54,779 56,108 63,954 66,394 68,161 79,232 Tax effect for preferred stock dividend requirements 29,966 32,600 34,090 39,481 39,078 40,816 ---------- ---------- -------- ---------- ---------- --------- TOTAL $ 617,032 $ 627,380 $614,334 $ 632,481 $ 617,892 $ 607,828 ========== ========== ======== ========== ========== ========= Ratio of earnings to combined fixed charges and preferred stock dividends 1.62 1.61 1.59 1.60 1.64 b
- -------------------------------------- a Before cumulative effect of accounting change for unbilled gas revenue. b For the year ended December 31, 1989, earnings were inadequate to cover combined fixed charges and preferred stock dividends. To attain a one-to-one coverage, earnings were deficient by approximately $1.3 billion, primarily due to the discontinuence of accruing AFC and the loss recorded in June 1989 resulting from the effectiveness of the 1989 Settlement and the approval of the Class Settlement. -----END PRIVACY-ENHANCED MESSAGE-----