-----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, r9cbOqf/+Q5TTUSizLD7eXrx0V9mK8k5YZ+6jExbSMAced5EH9oetr1uqsqStayk yt1fU4I8cKMNvK4hbSYVFA== 0000073960-95-000008.txt : 19950505 0000073960-95-000008.hdr.sgml : 19950505 ACCESSION NUMBER: 0000073960-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950504 SROS: MSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OHIO EDISON CO CENTRAL INDEX KEY: 0000073960 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 340437786 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02578 FILM NUMBER: 95534386 BUSINESS ADDRESS: STREET 1: 76 S MAIN ST CITY: AKRON STATE: OH ZIP: 44308 BUSINESS PHONE: 2163845100 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ----------- Commission File Number 1-2578 OHIO EDISON COMPANY (Exact name of Registrant as specified in its charter) Ohio 34-0437786 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 76 South Main Street, Akron, Ohio 44308 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 216-384-5100 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 ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 152,569,437 shares of common stock, $9 par value, outstanding as of May 4, 1995. OHIO EDISON COMPANY TABLE OF CONTENTS Pages ----- Part I. Financial Information Consolidated Statements of Income 1 Consolidated Balance Sheets 2-3 Consolidated Statements of Cash Flows 4 Notes to Consolidated Financial Statements 5-6 Report of Independent Public Accountants 7 Management's Discussion and Analysis of Results of Operations and Financial Condition 8-9 Part II. Other Information PART I. FINANCIAL INFORMATION - ------------------------------ OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31, -------------------------- 1995 1994 ---------- --------- (In thousands, except per share amounts) OPERATING REVENUES $587,734 $601,248 -------- -------- OPERATING EXPENSES AND TAXES: Fuel and purchased power 110,041 124,559 Nuclear operating costs 73,886 81,141 Other operating costs 106,843 107,230 -------- -------- Total operation and maintenance expenses 290,770 312,930 Provision for depreciation 56,866 54,025 Amortization of net regulatory assets 3,289 (1,807) General taxes 59,557 61,179 Income taxes 43,439 42,523 -------- -------- Total operating expenses and taxes 453,921 468,850 -------- -------- OPERATING INCOME 133,813 132,398 OTHER INCOME 2,997 2,255 -------- -------- TOTAL INCOME 136,810 134,653 -------- -------- NET INTEREST AND OTHER CHARGES: Interest on long-term debt 61,931 64,771 Deferred nuclear unit interest (2,125) (2,130) Allowance for borrowed funds used during construction and capitalized interest (1,314) (1,190) Other interest expense 5,562 3,916 Subsidiary's preferred stock dividend requirements 1,160 1,356 -------- -------- Net interest and other charges 65,214 66,723 -------- -------- NET INCOME 71,596 67,930 PREFERRED STOCK DIVIDEND REQUIREMENTS 5,359 5,601 -------- -------- EARNINGS ON COMMON STOCK $ 66,237 $ 62,329 ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 143,521 143,032 ======== ======== EARNINGS PER SHARE OF COMMON STOCK $ .46 $ .44 ====== ===== DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $.375 $.375 ===== ===== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -1-
OHIO EDISON COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 1995 1994 ----------- ------------ (In thousands) ASSETS UTILITY PLANT: In service, at original cost $8,512,391 $8,518,050 Less--Accumulated provision for depreciation 2,928,642 2,910,587 ---------- ---------- 5,583,749 5,607,463 ---------- ---------- Construction work in progress- Electric plant 194,751 174,970 Nuclear fuel 36,395 52,470 ---------- ---------- 231,146 227,440 ---------- ---------- 5,814,895 5,834,903 ---------- ---------- OTHER PROPERTY AND INVESTMENTS: Letter of credit collateralization 277,763 277,763 Other 205,730 197,546 ---------- ---------- 483,493 475,309 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 24,023 23,291 Receivables- Customers (less accumulated provisions of $2,590,000 and $2,517,000, respectively, for uncollectible accounts) 240,385 254,515 Other 42,339 54,713 Materials and supplies, at average cost- Fuel 41,690 40,528 Other 80,141 81,809 Prepayments 84,039 71,836 ---------- ---------- 512,617 526,692 ---------- ---------- DEFERRED CHARGES: Regulatory assets 2,001,157 2,005,333 Unamortized sale and leaseback costs 105,651 106,883 Other 45,701 44,844 ---------- ---------- 2,152,509 2,157,060 ---------- ---------- $8,963,514 $8,993,964 ========== ========== -2-
OHIO EDISON COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 1995 1994 ----------- ------------ (In thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stockholders' equity- Common stock, $9 par value, authorized 175,000,000 shares-152,569,437 shares outstanding $1,373,125 $1,373,125 Other paid-in capital 724,965 724,848 Retained earnings 402,021 389,600 Unallocated employee stock ownership plan common stock-8,998,305 and 9,076,489 shares, respectively (168,939) (170,376) ---------- ---------- Total common stockholders' equity 2,331,172 2,317,197 Preferred stock- Not subject to mandatory redemption 277,335 277,335 Subject to mandatory redemption 25,000 25,000 Preferred stock of consolidated subsidiary- Not subject to mandatory redemption 50,905 50,905 Subject to mandatory redemption 15,000 15,000 Long-term debt 3,064,197 3,166,593 ---------- ---------- 5,763,609 5,852,030 ---------- ---------- CURRENT LIABILITIES: Currently payable long-term debt 261,463 227,496 Short-term borrowings 158,861 174,642 Accounts payable 100,047 100,884 Accrued taxes 145,303 140,629 Accrued interest 61,198 65,743 Other 178,326 152,856 ---------- ---------- 905,198 862,250 ---------- ---------- DEFERRED CREDITS: Accumulated deferred income taxes 1,799,932 1,799,324 Accumulated deferred investment tax credits 221,821 223,827 Property taxes 107,678 106,458 Other 165,276 150,075 ---------- ---------- 2,294,707 2,279,684 ---------- ---------- COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 2) ---------- ---------- $8,963,514 $8,993,964 ========== ========== The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. -3-
OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ----------------------- 1995 1994 -------- -------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 71,596 $ 67,930 Adjustments to reconcile net income to net cash from operating activities- Provision for depreciation 56,866 54,025 Nuclear fuel and lease amortization 14,260 20,327 Deferred income taxes, net 5,803 9,038 Investment tax credits, net (2,006) (2,009) Allowance for equity funds used during construction (666) (1,506) Deferred fuel costs, net 4,496 2,207 Other amortization, net 3,757 (106) -------- -------- Internal cash before dividends 154,106 149,906 Receivables 26,504 19,191 Materials and supplies 506 9,111 Accounts payable 4,649 (3,898) Other 18,339 47,620 -------- -------- Net cash provided from operating activities 204,104 221,930 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: New Financing- Long-term debt 74,577 40,086 Redemptions and Repayments- Long-term debt 143,037 96,435 Preferred stock - 50,362 Short-term borrowings, net 15,781 1,975 Dividend Payments- Common stock 54,805 52,412 Preferred stock 5,401 5,814 -------- -------- Net cash used for financing activities 144,447 166,912 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property additions 54,205 65,320 Other 4,720 3,627 -------- -------- Net cash used for investing activities 58,925 68,947 -------- -------- Net increase (decrease) in cash and cash equivalents 732 (13,929) Cash and cash equivalents at beginning of period 23,291 159,690 -------- -------- Cash and cash equivalents at end of period $ 24,023 $145,761 ======== ======== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -4-
OHIO EDISON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1 - FINANCIAL STATEMENTS: The condensed consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary to fairly present results of operations for the interim periods. These statements should be read in conjunction with the consolidated financial statements and notes included in Ohio Edison Company's (Company) 1994 Annual Report to Stockholders. The results of operations are not intended to be indicative of results of operations for any future period. 2 - COMMITMENTS, GUARANTEES AND CONTINGENCIES: Construction Program -- The Company and its wholly owned subsidiary, Pennsylvania Power Company (Companies), currently forecast expenditures of approximately $800,000,000 for property additions and improvements from 1995-1999, of which approximately $180,000,000 is applicable to 1995. The Companies' nuclear fuel investments are expected to be approximately $172,000,000 during the 1995-1999 period, of which approximately $30,000,000 is applicable to 1995. Guarantees -- The Companies, together with the other Central Area Power Coordination Group companies, have each severally guaranteed certain debt and lease obligations in connection with a coal supply contract for the Bruce Mansfield Plant. As of March 31, 1995, the Companies' share of the guarantees were $74,850,000. The price under the coal supply contract, which includes certain minimum payments, has been determined to be sufficient to satisfy the debt and lease obligations. Environmental Matters -- Various federal, state and local authorities regulate the Companies with regard to air and water quality and other environmental matters. The Companies have estimated additional capital expenditures for environmental compliance of approximately $70,000,000 for the period 1995 through 1999, which is included in the construction forecast under "Construction Program." The Clean Air Act Amendments of 1990 required significant reductions of sulfur dioxide (SO2) and nitrogen oxides (NOx) from the Companies' coal-fired generating units by 1995 and additional emission reductions by 2000. SO2 reductions for the years 1995 through 1999 are being achieved by burning lower-sulfur fuel, generating more electricity from lower-emitting plants, and/or -5- OHIO EDISON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Cont'd) purchasing emission allowances. Equipment already installed provides NOx reductions sufficient to meet the 1995 requirements. Plans for complying with reductions required for the year 2000 and thereafter have not been finalized. The Environmental Protection Agency (EPA) is conducting additional studies which could indicate the need for additional NOx reductions from the Companies' Pennsylvania facilities by the year 2003. The cost of such reductions, if required, may be substantial. The Company continues to evaluate its compliance plans and other compliance options. The Companies are required to meet federally approved SO2 regulations. Violations of such regulations can result in shutdown of the generating unit involved and/or civil or criminal penalties of up to $25,000 for each day the unit is in violation. The EPA has an interim enforcement policy for SO2 regulations in Ohio that allows for compliance based on a 30-day averaging period. The EPA has proposed regulations that could change the interim enforcement policy, including the method of determining compliance with emission limits. The Companies cannot predict what action the EPA may take in the future with respect to the proposed regulations or the interim enforcement policy. The Pennsylvania Department of Environmental Resources has issued regulations dealing with the storage, treatment, transportation and disposal of residual waste such as coal ash and scrubber sludge. These regulations impose additional requirements relating to permitting, ground water monitoring, leachate collection systems, closure, liability insurance and operating matters. The Companies are considering various compliance options but are presently unable to determine the ultimate increase in capital and operating costs at existing sites. Legislative, administrative and judicial actions will continue to change the way that the Companies must operate in order to comply with environmental laws and regulations. With respect to any such changes and to the environmental matters described above, the Companies expect that any resulting additional capital costs which may be required, as well as any required increase in operating costs, would ultimately be recovered from their customers. -6- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Ohio Edison Company: We have reviewed the accompanying consolidated balance sheet of Ohio Edison Company (an Ohio corporation) and subsidiaries as of March 31, 1995, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 1995 and 1994. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet and consolidated statement of capitalization of Ohio Edison Company and subsidiaries as of December 31, 1994, and the related consolidated statements of income, retained earnings, capital stock and other paid-in capital, cash flows and taxes for the year then ended (not presented separately herein). In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1994 is fairly stated in all material respects in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Cleveland, Ohio May 4, 1995 -7- OHIO EDISON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations Earnings on common stock increased to $.46 per share in the first quarter of 1995 compared to $.44 per share for the same period last year. The Companies' ongoing commitment to cost control produced the improved earnings, even though operating revenues decreased by about $13,500,000. During the first quarter of 1995, retail kilowatt-hour sales decreased 1.2% from last year's first quarter record. Due to unseasonably mild weather conditions in the first quarter of 1995, residential and commercial kilowatt-hour sales fell 4.0% and 0.4%, respectively, compared to last year. Industrial sales were up 0.8% for the quarter in spite of reduced production (until mid-1995) by a major steel customer that is modernizing its facilities. Sales to all other industrial customers were up 4.0% for the quarter due to strong demand by companies in the rubber and plastics industries. Total kilowatt-hour sales were down 6.0% in the first quarter of 1995 due to a 24.8% decrease in sales to other utilities. Generating capacity constraints and market conditions limited the Companies' wholesale sales opportunities during the quarter. Because of lower kilowatt-hour sales, the Companies spent less on fuel and purchased power during the first quarter of 1995, compared to last year. Nuclear expenses were lower in 1995 than they were last year because of corrective maintenance work that was performed during the scheduled refueling outage at the Perry Plant in 1994. The Companies continue to review their operations to identify opportunities to increase revenues and improve operating efficiency. As part of this effort, Burger Plant Units 1 and 2 were shut down during the first quarter of 1995 and Unit 3 was reserved as a low priority peaking unit. The workforce at the plant was reduced by 100 employees in connection with these changes. Additional workforce reductions occurred at the Sammis and New Castle plants as a result of productivity improvements. Staffing at Sammis and New Castle was reduced by 108 and 19 employees, respectively. The shutdown of the generating units at Burger, coupled with the above staffing reductions, is expected to reduce annual operating costs by about $13,000,000. Increased depreciation charges in 1995 reflect an increase in the accrual for nuclear decommissioning costs. The change in amortization of net regulatory assets resulted principally from the absence of credits in 1995 compared to last year due to limitations contained in the Company's Rate Stabilization and Service Area Development Program authorized by the Public Utilities Commission of Ohio in 1992. -8- OHIO EDISON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Cont'd) Overall, interest costs were lower during the first quarter of 1995 than they were last year. Interest on long-term debt decreased due to refinancing and redemption of higher-cost debt that occurred subsequent to March 31, 1994. Other interest expense increased compared to last year due primarily to higher levels of short-term borrowings. Capital Resources and Liquidity The Companies have continuing cash requirements for planned capital expenditures and debt maturities. During the last three quarters of 1995, capital requirements for property additions and capital leases are expected to be about $160,000,000, including $22,000,000 for nuclear fuel. The Companies have additional cash requirements of approximately $114,000,000 to meet maturities of long-term debt during the remainder of 1995. These cash requirements are expected to be satisfied with internal cash and/or short-term credit arrangements. In addition, approximately $70,000,000 of variable rate pollution control put bonds are subject to repricing during the remainder of the year. As of March 31, 1995, the Companies had about $24,000,000 of cash and temporary investments and $159,000,000 of short-term indebtedness. OES Fuel had approximately $64,000,000 of unused borrowing capability at March 31, 1995 that was available for reloan to the Company. The Companies also had $50,000,000 of unused short-term bank lines of credit, and $72,000,000 of bank facilities that provide for borrowings on a short-term basis at the banks' discretion. OES Capital had approximately $11,000,000 of unused, short-term borrowing capability at March 31, 1995. During the first quarter of 1995, Penn Power purchased $16,500,000 of its 8.5% first mortgage bonds in the open market. Subsequent to March 31, 1995, Penn Power purchased an additional $13,250,000 of first mortgage bonds with a weighted average interest rate of 8.04%. -9- PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number ------- 15 Letter from independent public accountants. Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, the Company has not filed as an exhibit to this Form 10-Q any instrument with respect to long- term debt if the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis, but hereby agrees to furnish to the Commission on request any such documents. (b) Reports on Form 8-K None 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. May 4, 1995 OHIO EDISON COMPANY ------------------- Registrant /s/ H. P. Burg ----------------------------- H. P. Burg Senior Vice President and Chief Financial Officer EX-15 2 EXHIBIT 15 Ohio Edison Company 76 South Main Street Akron, Ohio 44308 Gentlemen: We are aware that Ohio Edison Company has incorporated by reference in previously filed Registration Statements No. 33-49135, No. 33- 49259, No. 33-49413 and No. 33-51139, the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, which includes our report dated May 4, 1995, covering the unaudited interim consolidated financial statements contained therein. Pursuant to Rule 436(c) of Regulation C of the Securities Act of 1933, such report is not considered a part of the Registration Statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP Cleveland, Ohio May 4, 1995 EX-27 3
OPUR1 (Amounts in 1,000's, except earnings per share) Income tax expense includes $2,376,000 related to other income. 3-MOS DEC-31-1995 MAR-31-1995 PER-BOOK 5,814,895 483,493 512,617 2,152,509 0 8,963,514 1,373,125 556,026 402,021 2,331,172 40,000 328,240 3,064,197 50,000 0 108,861 255,126 0 0 6,337 2,779,581 8,963,514 587,734 45,815 410,482 453,921 133,813 2,997 136,810 65,214 71,596 5,359 66,237 53,817 61,931 204,104 .46 .46
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