-----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, AyTLumsH8p7aGMo+GUDcM1M4Kc4PW9xfkQ+x5b9HQnX7yPm+i2oTeRTQett7QY1C eSLUXp0YKJefosM1WGtC2w== 0000074778-96-000011.txt : 19960813 0000074778-96-000011.hdr.sgml : 19960813 ACCESSION NUMBER: 0000074778-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORANGE & ROCKLAND UTILITIES INC CENTRAL INDEX KEY: 0000074778 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 131727729 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04315 FILM NUMBER: 96608223 BUSINESS ADDRESS: STREET 1: ONE BLUE HILL PLZ CITY: PEARL RIVER STATE: NY ZIP: 10965 BUSINESS PHONE: 9143526000 MAIL ADDRESS: STREET 1: ONE BLUE HILL PLAZA CITY: PEARL RIVER STATE: NY ZIP: 10965 FORMER COMPANY: FORMER CONFORMED NAME: ROCKLAND LIGHT & POWER CO DATE OF NAME CHANGE: 19681202 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 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 1-4315 ORANGE AND ROCKLAND UTILITIES, INC. (Exact name of registrant as specified in its charter) New York 13-1717729 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation of organization) One Blue Hill Plaza, Pearl River, New York 10965 (Address of principal executive offices) (Zip code) (914)352-6000 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) 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 class of common stock, as of the close of the latest practicable date. Common Stock - $5 Par Value 13,654,024 Shares (Class) (Outstanding at July 31, 1996) TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION ITEM 1.Financial Statements Consolidated Balance Sheets (Unaudited) at June 30, 1996 and December 31, 1995 1 Consolidated Statements of Income (Unaudited) for the three months and six months ended June 30, 1996 and June 30, 1995 3 Consolidated Cash Flow Statements (Unaudited) for the six months ended June 30, 1996 and June 30, 1995 4 Notes to Consolidated Financial Statements 5 ITEM 2.Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION ITEM 1.Legal Proceedings 16 ITEM 6.Exhibits and Reports on Form 8-K 16 Signatures 17 PART I. FINANCIAL INFORMATION Item I. Financial Statements ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) Assets
June 30, December 31, 1996 1995 (Thousands of Dollars) Utility Plant: Electric $1,005,498$ 993,926 Gas 214,439 211,135 Common 57,041 56,796 Utility Plant in Service 1,276,978 1,261,857 Less accumulated depreciation 428,402 419,844 Net Utility Plant in Service 848,576 842,013 Construction work in progress 30,594 31,655 Net Utility Plant 879,170 873,668 Non-utility Property: Non-utility property 20,255 34,376 Less accumulated depreciation, depletion and amortization 3,442 12,945 Net Non-utility Property 16,813 21,431 Current Assets: Cash and cash equivalents 1,948 5,164 Temporary cash investments 1,356 1,335 Customer accounts receivable, less allowance for uncollectible accounts of $2,316 and $2,307 60,349 61,653 Accrued utility revenue 17,594 22,198 Other accounts receivable, less allowance for uncollectible accounts of $86 and $169 6,726 9,752 Gas marketing accounts receivable, less allowance for uncollectible accounts of $363 and $133 32,681 51,198 Materials and supplies (at average cost) 29,666 32,668 Prepaid property taxes 12,642 20,687 Prepayments and other current assets 31,954 26,463 Total Current Assets 194,916 231,118 Deferred Debits: Income tax recoverable in future rates 74,393 72,631 Deferred revenue taxes 14,728 15,596 Deferred pension and other postretirement benefits 10,601 10,422 IPP settlements 28,956 40,034 Unamortized debt expense (amortized over term of securities) 10,728 11,417 Other deferred debits 28,698 32,821 Total Deferred Debits 168,104 182,921 Total $1,259,003$1,309,138 The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) Capitalization and Liabilities
June 30, December 31, 1996 1995 (Thousands of Dollars) Capitalization: Common stock (13,654,022 & 13,653,613 shares outstanding) $ 68,270 $ 68,268 Premium on capital stock 133,614 133,607 Capital stock expense (6,107) (6,107) Retained earnings 176,195 184,008 Total 371,972 379,776 Non-redeemable preferred stock (428,443 shares outstanding) 42,844 42,844 Non-redeemable cumulative preference stock (12,254 and 12,539 shares outstanding) 399 409 Total Non-Redeemable Stock 43,243 43,253 Redeemable preferred stock (13,896 shares outstanding) 1,390 1,390 Long-term debt 359,626 359,736 Total Capitalization 776,231 784,155 Non-current Liabilities: Reserve for claims and damages 3,597 3,848 Postretirement benefits 14,871 13,756 Pension costs 40,995 38,740 Total Non-current Liabilities 59,463 56,344 Current Liabilities: Notes payable and obligations due within one year 68,000 68,550 Accounts payable 47,405 62,082 Gas marketing accounts payable 23,174 44,630 Accrued Federal income and other taxes 1,518 2,050 Refundable fuel and gas costs 16,842 11,314 Refunds to customers 2,884 13,903 Other current liabilities 45,134 38,192 Total Current Liabilities 204,957 240,721 Deferred Taxes and Other: Deferred Federal income taxes 180,689 183,396 Deferred investment tax credits 15,812 16,217 Accrued IPP settlement agreements 14,529 17,500 Other deferred credits 7,322 10,805 Total Deferred Taxes and Other 218,352 227,918 Total $1,259,003 $1,309,138 The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Unaudited)
Three Months Six Months Ended June 30, Ended June 30, 1996 1995 1996 1995 (Thousands of Dollars)(Thousands of Dollars) Operating Revenues: Electric $120,772 $109,239 $228,791 $217,143 Gas 31,148 20,289 110,092 79,410 Total Utility Revenues 151,920 129,528 338,883 296,553 Diversified Activities 60,444 115,770 159,153 260,552 Total Operating Revenues 212,364 245,298 498,036 557,105 Operating Expenses: Operations: Fuel used in electric production 12,455 15,827 20,201 33,845 Electricity purchased for resale 19,691 13,680 45,627 25,140 Gas purchased for resale 18,011 10,185 65,648 40,176 Non-utility gas marketing purchases 58,093 113,985 153,994 256,110 Other expenses of operation 44,491 33,035 79,909 70,897 Maintenance 8,688 11,129 18,442 20,600 Depreciation and amortization 6,310 9,280 14,571 18,289 Taxes other than income taxes 24,948 22,124 50,805 47,348 Federal income taxes 3,068 3,669 10,704 11,767 Total Operating Expenses 195,755 232,914 459,901 524,172 Income from Operations 16,609 12,384 38,135 32,933 Other Income and (Deductions): Allowance for other funds used during construction 4 11 9 22 Investigation costs (800) (1,626) (800) (2,007) Other - net (2,126) 108 (1,092) 5,147 Taxes other than income taxes (92) (83) (183) (521) Federal income taxes 428 945 320 (507) Total Other Income and (Deductions) (2,586) (645) (1,746) 2,134 Income Before Interest Charges 14,023 11,739 36,389 35,067 Interest Charges: Interest on long-term debt 5,867 6,926 12,103 13,852 Other interest 1,598 936 2,955 2,137 Amortization of debt premium, expense-net 366 340 731 680 Allowance for borrowed funds used during during construction (128) (185) (275) (645) Total Interest Charges 7,703 8,017 15,514 16,024 Net Income 6,320 3,722 20,875 19,043 Dividends on preferred and preference stock, at required rates 757 785 1,513 1,569 Earnings applicable to common stock $5,563 $2,937 $19,362 $17,474 Avg. number of common shares outstanding (000's) 13,654 13,653 13,654 13,653 Earnings per average common share outstanding $ .41 $ .22 $ 1.42 $ 1.28 Dividends declared per common share outstanding $ 1.29 $ 1.29 $ 1.94 $ 1.93 The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Cash Flow Statements (Unaudited)
Six Months Ended June 30, 1996 1995 (Thousands of Dollars) Cash Flow from Operations: Net income $20,875 $19,043 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,779 18,415 Deferred Federal income taxes (717) 6,364 Deferred investment tax credit (405) (414) Deferred and refundable fuel and gas costs 5,528 3,486 Allowance for funds used during construction (284) (667) Other non-cash charges 2,470 3,617 Changes in certain current assets and liabilities: Accounts and gas marketing receivables (net) and accrued utility revenues 27,451 20,483 Materials and supplies 3,002 5,898 Prepaid property taxes 8,045 7,154 Prepayments and other current assets (5,491) (12,802) Operating and gas marketing accounts payable (36,133) (41,625) Accrued Federal Income and other taxes (532) (4,471) Accrued interest (464) 254 Refunds to customers (11,019) 2,033 Other current liabilities (1,887) 163 Other-net 10,873 (2,804) Net Cash Provided from Operations 37,091 24,127 Cash Flow from Investing Activities: Additions to plant (20,480) (22,532) Temporary cash investments (21) 518 Allowance for funds used during construction 284 667 Net Cash Used in Investing Activities (20,217) (21,347) Cash Flow from Financing Activities: Retirements of: Long-term debt (139) (384) Capital lease obligations (275) (275) Net borrowings (repayments) under short-term debt arrangements* (550) 6,615 Dividends on preferred and common stock (19,126) (19,045) Net Cash Used in Financing Activities (20,090) (13,089) Net Change in Cash and Cash Equivalents (3,216) (10,309) Cash and Cash Equivalents at Beginning of Period 5,164 16,081 Cash and Cash Equivalents at End of Period $1,948 $5,772 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized $14,788 $14,991 Federal income taxes $9,531 $10,850 *Debt with maturities of 90 days or less. The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of June 30, 1996, the consolidated statements of income for the three month and six month periods ended June 30, 1996 and 1995, and the consolidated cash flow statements for the six month periods then ended have been prepared by Orange and Rockland Utilities, Inc. (the "Company") without an audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations at June 30, 1996, and for all periods presented, have been made. The amounts in the consolidated balance sheet as of December 31, 1995 are from audited financial statements. 2. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these unaudited consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1995 Annual Report to Shareholders. The results of operations for the period ended June 30, 1996 are not necessarily indicative of the results of operations for the full year. 3. The consolidated financial statements include the accounts of the Company, all subsidiaries and the Company's pro rata share of an unincorporated joint venture. All inter-company balances and transactions have been eliminated. 4. Contingencies at June 30, 1996 are substantially the same as the contingencies described in the "Notes to Consolidated Financial Statements" included in the Company's December 31, 1995 Annual Report to Shareholders, which material is incorporated by reference to the Company's December 31, 1995 Form 10-K Annual Report, except the status of regulatory matters is updated in Part I, Item 2 under the caption "Rate Activities". 5. Certain amounts from prior years have been reclassified to conform with the current year presentation. 6. In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of". This Statement imposes criteria for the continued recognition of regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company adopted this standard on January 1, 1996. Based on the current regulatory structure in which the Company operates, the adoption did not have any effect on the financial position or results of operations of the Company. This conclusion may change in the future as competitive factors influence wholesale and retail pricing in the electric industry. 7. The Internal Revenue Service ("IRS") has completed its examination of the Company's tax returns for 1990, 1991 and 1992. The Company and IRS have agreed, during the second quarter, to an assessment for a tax deficiency of approximately $1.7 million plus interest, which primarily relates to the misuse and misappropriation of Company funds. After offsetting the assessment with established reserves and other related items, this settlement had a minimal effect on the operating results of the Company. 8. In February 1994, the Company's long-term contract with Pittston Coal Sales Corporation ("Pittston") was terminated due to Pittston's failure to meet coal quality specifications of the contract and failure to provide adequate assurance of future performance. The Company commenced an action against Pittston for a judgment declaring that the contract was properly terminated. Pittston filed a counterclaim against the Company for breach of contract. In June 1996, the Company reached a settlement with Pittston which has been deferred on the Company's books. The Company will seek approval from the New York Public Service Commission, New Jersey Board of Public Utilities and Pennsylvania Public Utilities Commission to defer and recover the settlement amount, including associated costs, from its ratepayers through its fuel adjustment clauses, as a partial offset to the savings generated from lower-cost replacement coal. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition: Financial Performance The Company's consolidated earnings per average common share outstanding for the second quarter of 1996 were $.41 as compared to $.22 for the second quarter of 1995. Fluctuations within the components of earnings are discussed in the "Results of Operations". The average number of common shares outstanding were 13.7 million for the second quarters of both 1996 and 1995. The current quarterly dividend rate of $.645 is equivalent to an annual dividend rate of $2.58 per share. Dividends declared during the twelve months ended June 30, 1996 amounted to $2.58 with a dividend payout ratio of 94.5% as compared to $2.57 a year ago with a payout ratio of 98.5%. The return on average common equity for the twelve months ended June 30, 1996 was 9.84% as compared to 9.41% for the twelve months ended June 30, 1995. Capital Resources and Liquidity At June 30, 1996, the Company and its utility subsidiaries had unsecured bank lines of credit totaling $67.5 million. The Company may borrow under the lines of credit through the issuance of promissory notes to the banks. The Company, however, utilizes such lines of credit to fully support commercial paper borrowings. The aggregate amount of borrowings through the issuance of promissory notes and commercial paper cannot exceed the aggregate lines of credit. In addition, non-utility lines of credit amounted to $20.0 million at June 30, 1996, and the non-utility subsidiaries may undertake short-term borrowings or make short-term investments. The average daily balance of short- term borrowings for the six months ended June 30, 1996 amounted to $58.9 million at an effective interest rate of 5.8% as compared to $34.5 million at an effective interest rate of 6.5% for the same period of 1995. The level of temporary cash investments for the six months ended June 30, 1996 decreased to an average daily balance of $1.4 million at an effective interest rate of 5.4% from $11.6 million at an effective interest rate of 5.8% for the same period of 1995. The New York Public Service Commission ("NYPSC") has authorized the Company to issue up to 750,000 shares of common stock under its Dividend Reinvestment and Stock Purchase Plan ("DRP") and its Employee Stock Purchase and Dividend Reinvestment Plan ("ESPP"). At the option of the Company, however, common stock used to satisfy the requirements of the DRP and ESPP may be purchased on the open market. Effective November 1, 1994, common stock needed to satisfy the DRP and ESPP requirements is being purchased on the open market. Rate Activities New York Gas: On January 16, 1992, the Company filed an application for an increase in gas rates with the NYPSC. The Settlement Agreement in that case, which was approved by the NYPSC on September 30, 1992 provided, among other things, for multi-year rate adjustments through 1996 and for certain gas incentives. The second adjustment to gas rates under the Settlement Agreement, which amounted to an increase of $3.8 million or 2.5%, was to become effective on January 1, 1994. As a result of an investigation of alleged financial improprieties, however, the increase was first extended to June 30, 1994 and then further extended to December 30, 1994. On November 4, 1994, the NYPSC issued an Order terminating the Settlement Agreement effective December 31, 1994. The Order denied the Company the opportunity for rate adjustments in the third and fourth years (1995 and 1996) of the four-year settlement agreement. However, the Order authorized the Company to defer the second-stage rate adjustments and all previously authorized reconciliations pertaining to periods prior to December 31, 1994, pending review and audit by the NYPSC Staff and the conclusion of the NYPSC's investigation of alleged financial improprieties. In addition, on February 7, 1995, the Accounting and Finance Division of the NYPSC issued an interpretation of the November 4, 1994 termination order which stated that the gas incentive mechanism related to the attainment of certain goals was no longer available. The Company did not contest this interpretation. On October 2, 1995, the Company, the NYPSC Staff and the New York State Consumer Protection Board ("CPB"), reached a settlement which resolves all outstanding issues relating to the NYPSC investigation of alleged financial improprieties as described below. The settlement provided for, among other things, the cancellation of the second stage gas base rate increase discussed above. All deferred balances resulting from expense reconciliations and deferral of the second stage rate adjustment are to be offset with an equal amount of deferred credits approved as part of the May 2, 1996 rate decision, discussed below. In addition, the settlement provides for the recognition in gas rates of the change in accounting required by SFAS 106, "Employer Accounting for Postretirement Benefits Other Than Pensions". The annual cost increase due to gas operations as a result of SFAS 106 will be offset by an equal amount of previously deferred credits. On May 3, 1996, the NYPSC issued an order approving the settlement (the "May Order"). By orders issued December 20, 1994, August 11, 1995, and March 28, 1996, the NYPSC has initiated the restructuring of gas service in New York by requiring gas distributors to file tariffs providing for the transportation of third party gas supplies for residential, commercial and industrial customers. Small customers' volumes will be aggregated for purposes of obtaining unbundled gas distribution service. The Company has received an extension of time for implementation of its unbundled gas tariffs pending resolution of a Request for Rehearing and Clarification of the NYPSC's March 28, 1996 order. The NYPSC's orders provide for recovery of stranded costs that may be incurred over the next three years. Electric: On June 10, 1994, the NYPSC issued an Order (the "June Order") which terminated the Company's January 1993 electric rate increase application. The June Order provided, among other things, for a reduction in the threshold for measuring excess earnings from 12.0% to 10.6% effective retroactively to January 1, 1994. All earnings in excess of 10.6% were to be deferred for future disposition pending the conclusion of the ongoing investigation. On September 19, 1994, the Company filed an appeal with the Supreme Court of New York challenging the legality of the June Order. The appeal argued that by changing the excess earnings threshold from 12.0% to 10.6% for the first six months of 1994, the NYPSC engaged in retroactive ratemaking. The appeal also argued that there was no evidence in the record to support a determination that the cost of equity was 10.6%. This appeal was withdrawn pursuant to a Stipulation approved by the NYPSC on August 1, 1995, as described below. On February 17, 1995, O&R submitted a compliance filing regarding the operation of the Revenue Decoupling Mechanism ("RDM"). The filing included a proposal to eliminate the RDM Adjustment Factor of $7.7 million, effective May 1, 1995, reflecting the completion of the recovery of an RDM undercollection applicable to the year 1993. This equates to a 2.3% annual reduction in revenues. In addition, the filing requested that a net RDM overcollection of $0.7 million for the year 1994 be retained by the Company as a future rate moderator, subject to NYPSC verification. On April 19, 1995, the NYPSC approved the proposals, and the reduction of $7.7 million in the RDM Adjustment Factor became effective on May 1, 1995. On May 25, 1995, the Company filed with the NYPSC for a decrease in electric revenues of $6.1 million to be effective April 1, 1996 (Case 95-E-0491). This equates to an overall reduction of 1.8% in annual retail revenues. The filing reflected a reduction in operating expenses due to the complete recovery of the Company's share of the Sterling Nuclear Project and other cost reductions. The Company proposed a multi-year rate plan covering the three-year period ending on March 31, 1999 with no base rate increases in the second and third years of the plan. The Company proposed an overall return on capital of 9.17% with a sharing mechanism governing any return on common equity above 11.2%. On August 1, 1995, the NYPSC approved a Stipulation which provided for the early implementation of the Company's proposed annual rate reduction of $6.1 million. As a result, reduced rates became effective August 1, 1995, which produced a revenue reduction of approximately $3.8 million for the period August 1, 1995 to March 31, 1996. The Stipulation also increased the excess earnings threshold from 10.6% to 11.3%, with equal sharing of earnings above 11.3% between shareholders and ratepayers for the period January 1, 1995 through March 31, 1996. The Stipulation also provided that the Company would withdraw its September 19, 1994 appeal to the Supreme Court of New York challenging the June Order. The revenue reduction has been offset by the deferred revenue associated with the 1994 electric equity return in excess of 10.6% and the customers' share of earnings under the new sharing mechanism effective January 1, 1995. On April 2, 1996, the Company, NYPSC Staff, the CPB and the Industrial Energy Users Association ("IEUA") reached a settlement agreement (which was approved by the NYPSC in its May Order) which resolved all the remaining outstanding revenue requirement issues in the electric rate proceeding (Case 95-E-0491). Under the agreement, the Company reduced its annual retail revenues from electric utility service by an additional $7.75 million, or 2.3% effective May 1, 1996. The base rate decrease will remain effective until April 30, 1999. For the three-year term of the settlement agreement, the authorized return on equity will be 10.4% and the Company will be permitted to retain all earnings up to 10.9%. Earnings in excess of 10.9% will be shared equally between customers and shareholders. The agreement also provides for the recovery of all non-utility generator contract termination costs over approximately a four-year amortization period. In addition, the settlement agreement contains several performance mechanisms (related to service reliability and customer service), a service guarantee program as well as a retail access pilot program called "PowerPickTM". The PowerPickTM pilot program will allow a limited number of customers to choose an alternative supplier of energy. The Company will continue to provide all other services such as reliability, customer service and billing. PowerPickTM is designed to have a minimal impact on shareholders and non-participating customers. The settlement agreement also eliminates all revenue and most expense reconciliation provisions of the RDM. Other: On November 10, 1994, the Company filed with the NYPSC a quantification of the rate-making effects of its ongoing investigation into prior financial improprieties. The Company requested that the NYPSC approve a refund of approximately $3.4 million to its New York electric and gas customers. That amount was in addition to the $369,000 previously refunded by the Company. This amount was charged to operations in the fourth quarter of 1994. The NYPSC had instituted a proceeding (Case 93-M-0849) to provide the opportunity for other parties, including the NYPSC Staff which was conducting an independent investigation of the Company, to be heard on this matter. On July 6, 1995, the NYPSC issued an order stating that the issues of the amount, timing and allocation of New York ratepayer refunds as a result of the investigation in Case 93-M-0849 should be considered in the context of the Company's electric base rate case and ordered the consolidation of the two cases. On October 2, 1995, the Company, the NYPSC Staff, the CPB and IEUA reached a settlement which resolved all outstanding issues relating to the NYPSC investigation of alleged financial improprieties. The settlement provided for a total of $8.5 million in rate relief for the Company's New York customers. The amount attributable to electric operations was $6.5 million and the amount attributable to gas operations was $2.0 million. The full impact of the settlement is reflected in the Company's results of operations after recording a charge of approximately $2.8 million during the third quarter of 1995. The May Order approved the settlement. The electric portion was refunded to customers in May and June of 1996. The gas portion was offset by deferred base rate increases. The above parties agreed that no further rate disallowances, rebates, refunds or rate reductions of any kind are appropriate in connection with the investigation referred to above or to the activities or transactions reviewed in performing such investigations. New Jersey Under an agreement with the New Jersey Board of Public Utilities ("NJBPU") to return to customers any funds found to be misappropriated or otherwise questionable as a result of its investigation of certain Company officers and former employees, Rockland Electric Company ("RECO"), a wholly-owned utility subsidiary of the Company, refunded to New Jersey ratepayers $93,000 through reductions in the applicable fuel adjustment charges in February and March 1994. In December 1994, RECO submitted a proposal to the NJBPU to refund an additional $704,000. By order dated January 27, 1995, the NJBPU approved this proposal and the refund was made in February 1995. On November 3, 1993, the NJBPU commenced its periodic management audit of RECO. The NJBPU audit included, in addition to a standard review of operating procedures, policies and practices, a review of the posture of RECO management regarding business ethics and a determination regarding the effect of such events on RECO ratepayers. The audit findings are contained in a report titled "Final Report on An Ethics Review of Rockland Electric Company" (Docket No. EA900302-48) dated December 1, 1994. The NJBPU subsequently initiated an examination of senior management appointments and changes to the composition of the Company's Board of Directors and the development of an ethics program. The results of this examination are contained in a report titled "Final Report of an Ethics Oversight Review of Rockland Electric Company". The final Management Audit, Ethics Review, and Ethics Oversight Review reports were approved by the NJBPU on July 7, 1995. The Ethics Oversight Review report acknowledges that the NJBPU had approved refunds to the Company's New Jersey customers and generally comments favorably about the changes instituted by the Company. On February 21, 1996, the NJBPU approved RECO's 1996 Levelized Energy Adjustment Clause ("LEAC") filing whereby RECO will pass back an additional $482,000 of refunds related to the investigation of certain former officers of the Company, making the total amount refunded to RECO's customers $1,279,000. The Company believes that this is the final refund applicable to RECO. In addition, as part of this LEAC filing, RECO was granted full recovery of its share of buyout costs associated with non-utility generator contracts entered into by the Company. QUARTERLY COMPARISON Results of Operations Earnings per average common share outstanding for the second quarter of 1996 amounted to $.41 per share as compared to $.22 per share for the second quarter of 1995. The earnings increase is the result of higher electric and gas sales, lower investigation and related litigation costs and continued success in controlling operating and maintenance expenses. Electric and Gas Revenues Electric and gas operating revenues, including fuel cost and purchased gas cost recoveries, increased by $22.4 million. Increased gas sales and the elimination of the New York electric weather normalization adjustment had a positive effect on revenues in the second quarter of 1996 as compared to the same quarter of 1995. Electric operating revenues during the current quarter were $120.8 million as compared to $109.2 million for the second quarter of 1995, an increase of $11.6 million. This increase is the result of the termination of the revenue reconciliation and regulatory adjustments deferred in prior periods as required by the May Order, as well as increased sales and fuel cost recoveries. These increases were offset by additional base rate reductions and the final New York refund to customers of $5.7 million relating to the investigation. Actual total sales of electric energy to retail customers during the second quarter of 1996 were 1,103,959 megawatt hours ("Mwh"), compared with 1,064,366 Mwh during the comparable period a year ago. This increase is attributable to increased usage and average number of customers when compared to the same period a year ago. Before reflecting the effect of the RDM revenues in the Company's New York jurisdiction, electric revenues associated with these sales were $108.5 million, (which were reduced by investigation refunds of $5.7 million during the current quarter) compared to $113.2 million during the second quarter of 1995. In accordance with RDM procedures, deviations between New York electric revenue targets and actual sales revenue are either recovered from or returned to customers. These procedures were eliminated effective May 3, 1996. The variation between the revenue targets and the Company's actual sales revenue for the period April 1, 1996 through May 2, 1996 was $0.9 million, which was recorded as a reduction to revenues. In the second quarter of 1995, the Company recorded $3.7 million as a reduction to revenues. The Company has eliminated all revenue and expense reconciliation provisions of the RDM. Refer to the information contained under the caption "Rate Activities" in this Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Quarterly Report on Form 10-Q. Gas operating revenues during the quarter were $31.1 million compared to $20.3 million for the second quarter of 1995, an increase of $10.8 million. This increase is primarily the result of increases in sales to both firm and interruptible customers, higher gas cost recoveries and regulatory adjustments. The gas cost recoveries and the regulatory adjustments had no impact on earnings. Gas sales to firm customers during the second quarter of 1996 totaled 3,169 million cubic feet ("Mmcf"), compared with 2,910 Mmcf during the same period a year ago. Gas revenues from firm customers were $25.3 million, compared with $18.8 million in the second quarter of 1995. Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas Marketing The cost of fuel used in the production of electricity and purchased electricity costs increased by $2.6 million during the second quarter of 1996 when compared to the same quarter of 1995. This increase reflects the increase in the cost of fuel and purchased power and increased demand. Purchased gas costs for utility operations were $18.0 million in the second quarter of 1996 compared to $10.2 million in 1995, an increase of $7.8 million. This increase in gas costs is primarily attributable to the volume of gas purchased for resale and to higher prices. Other Operating and Maintenance Expenses The Company's total operating expenses excluding fuel, purchased power, gas purchased for resale and non-utility gas marketing purchases for the second quarter, increased by $8.3 million compared with the same period in 1995, all of which is associated with utility operations. This increase is the result of the amortization of recoverable Independent Power Producer (IPP) costs, offset by regulatory adjustments associated with the termination of the RDM procedures as required by the May Order. These adjustments had no impact on earnings. Diversified Activities The Company's diversified activities consist of gas marketing and land development businesses conducted by wholly owned non-utility subsidiaries. Revenues from diversified activities decreased by $55.3 million for the second quarter of 1996 as compared to the same quarter of 1995. The decrease in operating expenses for all diversified activities of $55.9 million is the result of decreased gas purchases. The primary reason for the decrease in revenues and gas purchases is a result of continuing to restructure the gas marketing subsidiary business from large volume, wholesale customers towards securing higher margin retail customers. The gas marketing subsidiary is operating at a net loss for the quarter which is attributable to the continued restructuring. Other Income, Deductions and Interest Charges - Net Other income, net of interest charges and other deductions, decreased by $1.6 million during the second quarter of 1996 when compared to the same quarter of 1995. Most of the variations are reversals of cumulative RDM balances partially offset by lower investigation charges. YEAR TO DATE COMPARISON Results of Operations Earnings per average common share outstanding for the first half of 1996 amounted to $1.42 per share as compared to $1.28 per share for the first six months of 1995. Consistent with the second quarter, the six-month increase in earnings is the result of increased electric and gas sales, lower investigation and related litigation costs and continued success in controlling operating and maintenance expenses. Diversified operations had lower earnings because a gain was realized on the formation of NORSTAR Energy Limited Partnership ("NORSTAR Partnership") which was reflected in the first quarter of 1995. Electric and Gas Revenues Electric and gas operating revenues, including fuel cost and purchased gas cost recoveries, increased by $42.3 million in the first six months of 1996 as compared to the same period of 1995. Electric operating revenues during the current period were $228.8 million as compared to $217.1 million for the first six months of 1995, an increase of $11.7 million. This increase, as mentioned previously, is the result of the termination of the revenue reconciliation and regulatory adjustments deferred in prior periods as required by the May Order, as well as increased sales and fuel cost recoveries. These increases were offset by additional base rate reductions and the final New York refund to customers of $5.7 million relating to the investigation. Actual total sales of electric energy to retail customers during the first six months of 1996 were 2,232,657 Mwh, compared with 2,136,529 Mwh during the comparable period a year ago. This increase is attributable to increased usage and average number of customers when compared to the same period a year ago. Before reflecting the effect of the RDM revenues in the Company's New York jurisdiction, electric revenues associated with these sales were $220.0 million (which was reduced by the refund of $5.7 million in investigation refunds during the current period) compared to $218.5 million during the first six months of 1995, an increase of $1.5 million. Gas operating revenues during the first six months were $110.1 million compared to $79.4 million for the first six months of 1995, an increase of $30.7 million. Revenues were increased by gas cost recoveries of $20.1 million, sales volume changes of $4.3 million, interruptible sales of $6.9 million and regulatory adjustments of $0.7 million. This was offset by price changes of $1.3 million. The gas cost recoveries and regulatory adjustments had no impact on earnings. Gas sales to firm customers during the first six months of 1996 totaled 13,112 Mmcf, compared with 11,713 Mmcf during the same period a year ago. Gas revenues from firm customers were $98.1 million, compared with $75.0 million in the first six months of 1995. Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas Marketing The cost of fuel used in the production of electricity and purchased electricity costs increased by $6.8 million during the first six months of 1996 when compared to the same period of 1995. This increase reflects the increase in the cost of fuel and purchased power as well as increased demand. Purchased gas costs for utility operations were $65.6 million in the first six months of 1996 compared to $40.2 million in 1995, an increase of $25.4 million. This increase in gas costs is attributable to the volume of gas purchased for resale and higher prices. Other Operating and Maintenance Expenses The Company's total operating expenses, excluding fuel, purchased power, gas purchased for resale and non-utility gas marketing purchases, for the first six months increased by $5.5 million compared with the same period in 1995. The increase in expenses associated with utility operating expenses amounted to $5.9 million. The change in diversified operation and maintenance expenses was a decrease of $0.4 million. As previously mentioned in the discussion of the second quarter variance, this increase is primarily the result of the amortization of recoverable Independent Power Producer (IPP) costs and regulatory adjustments associated with the termination of the RDM procedures as required by the May Order. These adjustments had no impact on earnings. Diversified Activities Revenues from diversified activities decreased by $101.4 million for the first six months of 1996 as compared to the same period of 1995. The decrease in operating expenses for all diversified activities of $102.5 million is the result of decreased gas purchases of $102.1 million and decreased operation expenses of $0.4 million. The primary reason for the decrease in revenues and gas purchases is a result of continuing to restructure the gas marketing subsidiary business from large volume, wholesale customers towards securing higher margin retail customers. The gas marketing subsidiary is operating at a net loss for the current period which is attributable to the continued restructuring. Other Income, Deductions and Interest Charges - Net Other income, net of interest charges and other deductions, decreased by $3.4 million during the first six months of 1996 when compared to the same period of 1995. The decrease reflects the impact of the gain realized on the formation of the NORSTAR Partnership in the first quarter of 1995 which amounted to $2.9 million and the reversals of RDM balances discussed previously, somewhat offset by decreases in investigation charges of $1.2 million. PART II. OTHER INFORMATION Item I. Legal Proceedings Reference is made to Item 3, Legal Proceedings, in the Company's Annual Reports on Form 10-K for the fiscal years ended December 31, 1994 and December 31, 1995 for a description of litigation entitled Payran v. Orange and Rockland Utilities, Inc. and James Donnery. On May 6, 1996, the Supreme Court of the State of New York, County of Rockland granted the Company's motion for summary judgment dismissing the plaintiff's complaint. Item 6. Exhibits and Reports on Form 8-K (a)Exhibits +10.29 Deferred Compensation Plan for Non-Employee Directors as amended and restated effective August 15, 1996. + Denotes executive compensation plans and arrangements. (b)Reports on Form 8-K None. 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. ORANGE AND ROCKLAND UTILITIES, INC. (Registrant) Date: August 9, 1996 By ROBERT J. McBENNETT Robert J. McBennett Treasurer Date: August 9, 1996 By EDWARD M. McKENNA Edward M. McKenna Controller EX-10.29 2 ORANGE AND ROCKLAND UTILITIES, INC. DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS As Amended and Restated Effective August 15, 1996 ORANGE AND ROCKLAND UTILITIES, INC. DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS 1. Eligibility Each member of the Board of Directors of Orange and Rockland Utilities, Inc. (the "Company") who is not a current or former employee of the Company, or of any of its subsidiaries (an "Eli- gible Director"), is eligible to become a participant (a "Participant") in the Orange and Rockland Utilities, Inc. Deferred Compensation Plan for Non-Employee Directors (the "Plan"). 2. Participation (a) Prior to the beginning of any calendar quarter, each Eligible Director may elect to participate in the Plan by direct- ing that all or any percentage of his or her Director's fees (in- cluding annual retainer fees and meeting fees for services as a member of the Board of Directors and any committee thereof, and fees for additional services on behalf of the Board or a committee) which would otherwise have been payable currently for services as a Director (the "Fees") during such upcoming calendar quarter and subsequent calendar quarters shall be credited to a deferred compensation account (the "Participant's Account") subject to the terms of the Plan. Any person who shall become an Eligible Director during any calendar quarter and who was not an Eligible Director immediately prior to the beginning of such calendar quarter may elect, within 30 calendar days after becoming an Eligible Director, to defer payment of all or any part of the Fees for the remainder of such calendar quarter and subsequent calendar quarters. (b) An election to participate in the Plan shall be made by written notice executed by the Eligible Director and filed with the Secretary of the Company within the time specified in para- graph 2(a) hereof. An election to participate in the Plan, re- lated to Fees otherwise payable with respect to services as an Eligible Director in a given and subsequent calendar quarters, shall be irrevocable for such quarter and shall become irrevocable as of the close of the calendar quarter preceding each such sub- sequent calendar quarter. An election to participate in the Plan shall continue until a Participant ceases to be an Eligible Director, or until the Participant terminates or modifies such election by written notice executed by the Participant and filed with the Secretary of the Company. Any such termination or modi- fication of an election to participate in the Plan shall become effective as of the close of the calendar quarter in which such notice is given and only with respect to Fees payable with respect to services in subsequent calendar quarters. Amounts credited to a Participant's Account prior to the effective date of any termi- nation or modification of an election to participate in the Plan shall not be affected by such termination or modification and shall be distributed only in accordance with the terms of the Plan. (c) A Participant who has filed a termination of election to participate in the Plan may thereafter file another written notice with the Secretary of the Company electing to participate for any calendar quarter commencing after the filing of such election and subsequent calendar quarters during which he or she is an Eligible Director. 3. The Participant's Account (a) All deferred Fees shall be credited to the Participant's Account as of the date such Fees would otherwise have been paid. Each Participant's Account shall consist of two subaccounts. One subaccount, which shall bear interest as provided in paragraph 3(c) hereof, shall be designated the "Cash Account." The other subaccount, which shall be valued as if invested in shares of the Company's Common Stock, $5 par value per share ("Shares"), as provided in paragraph 3(d) hereof, shall be designated the "Phantom Share Unit Account." An Eligible Director's election to participate in the Plan shall specify that his or her deferred Fees shall be credited (i) 100% to the Cash Account, (ii) 100% to the Phantom Share Unit Account or (iii) 50% to the Cash Account and 50% to the Phantom Share Unit Account (the "Deferred Fee Allocation"); provided, however, that a Participant in the Plan at August 15, 1996, who has not filed an election prior to the commencement of the calendar quarter on July 1, 1996 specifying the Deferred Fee Allocation, shall be deemed to have elected crediting of deferred Fees 100% to the Cash Account. An Eligible Director's Deferred Fee Allocation shall apply, in any calendar quarter in which such Deferred Fee Allocation is in effect, to deferred Fees that are otherwise payable during the entire calendar quarter; provided, however, that a Deferred Fee Alloca- tion filed prior to July 1, 1996 electing to have deferred Fees credited 100% or 50% to the Phantom Share Unit Account shall apply, during the calendar quarter beginning July 1, 1996, only to deferred Fees otherwise payable on or after August 15, 1996; deferred Fees otherwise payable between July 1, 1996 and August 14, 1996 will be credited 100% to the Cash Account. Any modifica- tion of a Deferred Fee Allocation shall be made in a written modi- fication notice provided for in, and shall become effective in accordance with, paragraph 2(b) hereof. (b) The balance, if any, credited to a Participant's Account as of the close of business on August 14, 1996 shall be recorded in the Cash Account as of August 15, 1996 and shall thereafter be considered for all purposes of the Plan to be a part of the Cash Account. The opening balance of the Phantom Share Unit Account as of August 15, 1996 shall be zero. Deferred Fees that have been credited to the Cash Account (including any interest credited under paragraph 3(c) hereof) may not be reallocated or switched to the Phantom Share Unit Account, and deferred Fees that have been credited as units denominated in Shares ("Phantom Share Units") in the Phantom Share Unit Account (including any additional Phantom Share Units credited under paragraph 3(d) hereof) may not be re- allocated or switched to the Cash Account. (c) Interest shall be credited on the deferred Fees credited to a Cash Account, commencing on the date such Fees would other- wise have been paid and continuing through the date of distribu- tion, at a rate per annum equivalent to the Company's allowable rate of return in effect from time to time as set by the Public Service Commission of the State of New York. Amounts so determined shall be credited to the Cash Account as of the close of such calendar quarter, based on the daily balances of the Cash Account during such quarter; provided, however, that, with respect to any final distribution from a Cash Account not made as of the close of a calendar quarter, interest shall be credited to the Cash Account as of the date of distribution, based on the daily balances of the Cash Account for such final calendar quarter. (d) Deferred Fees credited to a Phantom Share Unit Account shall be deemed invested in Phantom Share Units as of the date such Fees would otherwise have been paid. Such deferred Fees shall be deemed to be invested in such number of Phantom Share Units which results from dividing the dollar amount of such Fees by the Fair Market Value (as hereinafter defined) of a Share at the date such Fees would otherwise have been paid and, for purposes of such Phantom Share Unit Account, thereafter shall be reflected as a number of Phantom Share Units and not as a dollar amount. The number of Phantom Share Units credited to the Phantom Share Unit Account shall for all purposes be calculated to not less than three decimal places. (1) If the Company declares and pays a dividend or distribution in the form of cash or property other than Shares in respect of Shares, then a number of additional Phantom Share Units shall be credited to the Phantom Share Unit Account as of the payment date for such dividend or distribution equal to (i) the number of Phantom Share Units credited to such Account as of the record date for such dividend or distribution, multiplied by (ii) the amount of cash plus the Fair Market Value of any property other than Shares actually paid as a dividend or distribution on each Share at such payment date, divided by (iii) the Fair Market Value of a Share at such payment date. (2) If the Company declares and pays a dividend or distribution in the form of additional Shares payable in respect of Shares, or there occurs a forward stock split of Shares, then a number of additional Phantom Share Units shall be credited to the Phantom Share Unit Account as of the pay- ment date for such dividend or distribution or forward stock split equal to (i) the number of Phantom Share Units credited to such Account as of the record date for such dividend or distribution or split multiplied by (ii) the number of addi- tional Shares actually paid as a dividend or distribution or issued in such split on each Share. (3) The number of Phantom Share Units credited to a Phantom Share Unit Account shall be appropriately adjusted to reflect any changes in the number of outstanding Shares of stock resulting from reverse stock splits, recapitalizations, reorganizations or other extraordinary transactions. If, as a result of a merger, consolidation, share exchange, recapi- talization, reorganization or other extraordinary transac- tion, Shares cease to be a class of outstanding securities, each Phantom Share Unit shall be deemed to be invested in the aggregate type and amount of consideration received for one Share in the transaction or series of transactions by which Shares ceased to be a class of outstanding securities. (4) In the case of Shares, "Fair Market Value" as of a given date shall mean the average of the high and the low sales prices of a Share reported in the table entitled "New York Stock Exchange Composite Transactions" contained in The Wall Street Journal (or an equivalent successor table) for such date or, if no such prices were reported for such date, for the most recent trading day prior to such date for which such prices were reported. In the case of property other than Shares, "Fair Market Value" as of a given date shall be determined in good faith by the Secretary of the Company. 4. Distribution From the Participant's Account (a) Distributions under the Plan shall be made solely in cash. In the case of a distribution relating to a Cash Account, cash shall be distributed based on the balance credited to such Account at the date of distribution. In the case of a distri- bution relating to a Phantom Share Unit Account, cash shall be distributed based upon the Full Settlement Value (as hereinafter defined) of the Phantom Share Unit Account or the Rule 16b-3 Limited Settlement Value (as hereinafter defined) of the Phantom Share Unit Account as of the date of distribution (the "Settlement Value"). For purposes of the Plan, the "Full Settlement Value" as of a given distribution date shall mean the number of Phantom Share Units then credited to the Phantom Share Unit Account multiplied by the Fair Market Value of a Share at that date, and the "Rule 16b-3 Limited Settlement Value" as of a given distribution date shall mean the number of Phantom Share Units originally credited to the Phantom Share Unit Account more than six months before such distribution date plus any additional Phantom Share Units credited at any time under paragraph 3(d) hereof in respect of such originally credited Phantom Share Units and such previously credited additional Phantom Share Units then credited to the Phantom Share Unit Account multiplied by the Fair Market Value of a Share at that date. (b) At the time of an election to participate in the Plan under paragraph 2(b) hereof, a Participant shall also make a written election with respect to the post-termination distribution of amounts credited to the Participant's Account (an "Initial Election"). A Participant may elect to receive such distribution in one lump-sum payment or in some other number of ratable annual installments (not exceeding 10). The lump-sum payment or the first installment, as elected by the Participant, shall be dis- tributed as of the following date, as elected by the Participant: (i) the later of the first business day of the calendar year immediately following the year in which such Participant ceases to be a Director or the date six months and one day following the date such Participant ceases to be a Director; or (ii) the first business day of such later calendar year as such Participant shall have elected. Subsequent installments, if any, shall be dis- tributed as of the first business day of each succeeding calendar year until the entire amount credited to the Participant's Account shall have been distributed. The "ratable" amount distributable in any given installment shall equal the sum of the balance of the Cash Account plus the Full Settlement Value of the Phantom Share Unit Account divided by the number of installments (including the given installment) remaining to be distributed. (c) A Participant may, while a Director, at any time modify any Initial Election or prior modification of an election with re- spect to the distribution of amounts credited or to be credited to the Participant's Account. The Participant's modification may re- late to distributions of amounts to be credited with respect to services as an Eligible Director in calendar quarters that com- mence after the effective date of such modification, including amounts to be credited to the Cash Account or the Phantom Share Unit Account, and/or to distributions of amounts credited with respect to services as an Eligible Director in calendar quarters that commenced prior to the effective date of such modification ("Prior Service Amounts," which includes any interest and addi- tional Phantom Share Units credited thereon); provided, however, that any modification with respect to Prior Service Amounts may only provide for the further deferral of such Prior Service Amounts. In the event that a Participant has made more than one modification of his or her distribution election with respect to specific amounts credited or to be credited to his or her Parti- cipant's Account, the most recent such modification shall control the distribution of such amounts. Any modification of a distri- bution election shall become effective as of the close of the calendar quarter in which such notice of modification is given. (d) Notwithstanding the terms of any Initial Election or modification thereof made pursuant to paragraphs 4(b) and (c) hereof, if a Participant becomes employed by any governmental agency having jurisdiction over the activities of the Company or any of its subsidiaries, then the Company shall distribute to such Participant, in a single lump-sum cash payment, as soon as practicable after the commencement of such employment, the entire amount credited to the Participant's Cash Account and the entire amount equal to the Full Settlement Value of the Participant's Phantom Share Unit Account as of the date of distribution; provided, however, that such distribution shall not be made until such time as the distribution will not cause the Participant to incur short-swing profits liability under Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (e) If a Participant should die before payment in full of the entire amount credited to his or her Participant's Account, the Company shall distribute to such Participant's Beneficiary (as hereinafter defined), in a single lump-sum cash payment, as of the later of the first business day of the calendar year immediately following the year of death or the date six months and one day following the date such Participant ceased to be a Director (whether due to death or otherwise), the entire amount remaining credited to the Participant's Cash Account and an amount equal to the Settlement Value of the Participant's Phantom Share Unit Account as of the date of distribution. (f) Notwithstanding the terms of any election with respect to the distribution of amounts credited to the Participant's Account or modification thereof made by a Participant hereunder, the Secretary of the Company may, in his or her sole discretion, permit the distribution in the form of a withdrawal of all or a portion of (i) the amount credited to the Participant's Cash Account and (ii) the amount equal to the Rule 16b-3 Limited Settlement Value of the Participant's Phantom Share Unit Account if, upon the request of the Participant or the Participant's representative, or following the death of the Participant upon the request of the Participant's Beneficiary or such Beneficiary's representative, the Secretary determines that the Participant or Beneficiary, as the case may be, is confronted with an unfore- seeable emergency. For this purpose, an unforeseeable emergency is an unanticipated emergency caused by an event that is beyond the control of the Participant or Beneficiary and that would result in severe financial hardship to the Participant or Beneficiary if an early hardship withdrawal were not permitted. The Participant or Beneficiary shall provide to the Secretary such evidence as the Secretary may require to demonstrate that such emergency exists and financial hardship would occur if the with- drawal were not permitted. Any such withdrawal under this para- graph shall be limited to the amount necessary to meet the emergency. (g) The Company shall deduct from the distributions to be made from a Participant's Account any Federal, State or local withholding or other taxes or charge which the Company is from time to time required to deduct under applicable law. 5. Designation of Beneficiaries Each Participant may file with the Secretary of the Company a written designation of one or more persons as the beneficiary who, from and after the death of the Participant, shall have the rights of the Participant under the Plan (the "Beneficiary"). A Partic- ipant may at any time and from time to time revoke or change the Participant's Beneficiary designation without the consent of any previously designated Beneficiary by filing a new designation with the Secretary of the Company. The last such designation received by the Secretary of the Company shall be controlling; provided, how- ever, that no designation or revocation or change thereof shall be effective unless received by the Secretary of the Company prior to the Participant's death, and in no event shall it be effective as of a date prior to such receipt. If no such Beneficiary designa- tion is in effect at the time of a Participant's death, or if no Beneficiary survives the Participant, or if such designation conflicts with law, the Participant's estate shall be the Benefi- ciary entitled to receive the amount, if any, distributable under the Plan upon the death of the Participant. If the Secretary of the Company is in doubt as to the right of any person to receive such amount, the Company may delay the distribution of such amount (which shall remain credited to the Participant's Account) until the Secretary determines the rights thereto, or the Company may distribute such amount into any New York State or Federal Court of appropriate jurisdiction and such distribution shall be a complete discharge of the liability of the Company therefor. 6. Miscellaneous (a) Neither a Participant nor any Beneficiary shall have the right to, directly or indirectly, alienate, assign, transfer, pledge, anticipate or encumber (except by reason of death) any amount that is or may be distributable hereunder, nor shall any such amount be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or any Beneficiary or to the debts, contracts, liabilities, engagements or torts of the Participant or any Beneficiary or transfer by operation of law in the event of bankruptcy or insolvency of the Participant or any Beneficiary, or any legal process. (b) All distributions provided for under the Plan shall be made by check from the general funds of the Company within 10 business days following the date of distribution as provided in the Plan; provided, however, that such distributions shall be reduced by the amount of any payments made to the Participant or his or her Beneficiary from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, no Participant or Beneficiary shall have any right, title or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind between the Company and any person. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company. (c) Copies of the Plan and any and all amendments thereto shall be made available at all reasonable times at the office of the Secretary of the Company to all Participants and Benefi- ciaries. (d) The Plan shall be administered by the Secretary of the Company who shall have full power, discretion and authority to interpret, construe and administer the Plan and any part thereof. The Secretary's interpretations and constructions of the Plan, and the actions taken thereunder by the Secretary, shall, except as otherwise determined by the Board of Directors of the Company, be binding and conclusive on all persons for all purposes. (e) The Board of Directors may at any time amend or termi- nate the Plan. No amendment or termination of the Plan shall impair the rights of any person with respect to amounts then in the Participant's Account. (f) The Company, its officers and its Board of Directors shall have the right to rely upon a written opinion of legal counsel, which may be independent legal counsel or legal counsel regularly employed by the Company, if any question should arise as to any distribution from a Participant's Account or any obligation under the Plan. (g) Each Participant or his or her Beneficiary shall receive an annual statement indicating the amount credited to the Partic- ipant's Account as of the close of the preceding calendar year. (h) All elections, designations, requests, notices, instruc- tions and other communications from a Participant, Beneficiary or other person to the Secretary of the Company required or permitted under the Plan shall be in such form as is prescribed from time to time by the Secretary and shall be mailed by first class mail or delivered to such location as shall be specified by the Secretary. (i) It is the intent of the Company that the crediting of Phantom Share Units to the Phantom Share Unit Account of a Partic- ipant who is then subject to Section 16 of the Exchange Act with respect to the Company shall be exempt from Section 16(b) liabil- ity under Rule 16b-3(d) under the Exchange Act (effective August 15, 1996 and as in effect thereafter), and that distributions of amounts from such a Participant's Phantom Share Unit Account shall be exempt under Rule 16b-3(e) or (f), or such other exemptions from Section 16(b) liability as may be available at the time. Accordingly, the Plan shall be construed in a manner consistent with the applicable requirements of Rule 16b-3 necessary to ensure that each such transaction is exempt, and, if any provision of the Plan does not comply with any such applicable requirement, then such provision shall be construed or deemed amended to the extent necessary to conform to such applicable requirement. In further- ance thereof, any distribution of the Settlement Value of a Participant's Phantom Share Unit Account shall be deemed to be a disposition to the Company of the Phantom Share Units earliest credited to such Phantom Share Unit Account and not previously deemed disposed of in a prior distribution. (j) The terms of the Plan shall be binding upon the Company and its successors and assigns. (k) All disputes and controversies arising out of or re- lating to the Plan shall be settled exclusively by arbitration in New York, New York in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any State or Federal Court sitting in the State of New York having jurisdiction thereof. Notwith- standing any provision of the Plan to the contrary, Participants and Beneficiaries shall be entitled to seek in any State or Federal Court sitting in the State of New York having jurisdic- tion thereof specific performance of their respective rights to receive distributions provided for in the Plan during the pendency of any such dispute or controversy arising out of or relating to the Plan. (l) The Plan shall be governed by and construed in accord- ance with the laws of the State of New York, as from time to time in effect, without regard to the conflicts of law rules thereof, and applicable Federal law. Each Participant and his or her Beneficiary and any other person claiming from or through them irrevocably submit to the exclusive jurisdiction of any State or Federal Court sitting in the State of New York over any suit, action or proceeding arising out of or relating to the Plan, and such persons agree and consent that, to the extent provided for under applicable law, all service of process in any such suit, action or proceeding in any State or Federal Court sitting in the State of New York may be made by certified or registered mail, return receipt requested, directed to him or her at the address indicated in the records of the Company, unless the Company is otherwise notified in writing of a new address, and service so made shall be complete 10 days after the same shall have been so mailed. 7. Change in Control; Potential Change in Control (a) A Participant shall be deemed to have irrevocably elected the distribution of his or her Participant's Account in the event of the occurrence of a Change in Control (as hereinafter defined) or a Potential Change in Control (as hereinafter de- fined), as specified in this paragraph 7(a). Notwithstanding anything else herein to the contrary, in the event of the occurrence of a Change in Control or a Potential Change in Con- trol, each Participant or his or her Beneficiary shall have the right to receive, and shall be paid, as soon as practicable after such Change in Control or Potential Change in Control, a lump-sum cash distribution equal to (i) the entire unpaid balance of the Participant's Cash Account as of the date of distribution (includ- ing interest credited through the date of such distribution in accordance with paragraph 3(c) hereof) plus (ii) a lump-sum cash distribution equal to the Rule 16b-3 Limited Settlement Value of the Participant's Phantom Share Unit Account as of the date immedi- ately preceding the Change in Control or the Potential Change in Control. In addition, if any Phantom Share Units remain credited to the Participant's Phantom Share Unit Account after such dis- tribution, such Participant or his or her Beneficiary shall have the right to receive, and shall be paid, on the date (the "Second Settlement Date") six months and one day following the date Phan- tom Share Units were last previously credited to such Phantom Share Unit Account upon a deferral of Fees, a lump-sum cash dis- tribution equal to the Full Settlement Value of the Participant's Phantom Share Unit Account as of the Second Settlement Date. Notwithstanding anything else herein to the contrary, Fees which are otherwise payable to an Eligible Director in the calendar quarter in which a Change in Control or Potential Change in Control occurs after the date the Change in Control or Potential Change in Control has occurred may not be deferred under the Plan, and Fees otherwise payable in subsequent calendar quarters may not be deferred under the Plan unless an Eligible Director has filed, after the occurrence of the Change in Control or Potential Change in Control, a new election to participate in the Plan in accor- dance with paragraph 2 hereof. (b) A "Change in Control" shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (i) any Person (as hereinafter defined) is or becomes the Beneficial Owner (as hereinafter defined), directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securi- ties acquired directly from the Company or its affiliates other than in connection with the acquisition by the Company or its affiliates of a business) representing 20% or more of either the then-outstanding Shares or the combined voting power of the Company's then-outstanding securities; or (ii) the following individuals cease for any reason to constitute a majority of the number of Directors then serv- ing: individuals who, on August 15, 1996, constitute the Board of Directors of the Company and any new Director (other than a Director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act)) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors on August 15, 1996 or whose appointment, election or nomination for election was previously so approved; or (iii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation or approve the issuance of voting securities of the Company in connection with a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable stock exchange requirements, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fidu- ciary holding securities under an employee benefit plan of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its affiliates other than in connection with the acquisition by the Company or its affiliates of a business) representing 20% or more of either the then-outstanding Shares or the combined voting power of the Company's then-outstanding securities; or (iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantial- ly all of the Company's assets to an entity, at least 65% of the combined voting power of the voting securities of which are owned by Persons in substantially the same pro- portions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, no "Change in Control" shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of Shares immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substan- tially all of the assets of the Company immediately following such transaction or series of transactions. (c) "Potential Change in Control" shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (ii) the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control; (iii) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 10% or more of either the then-outstanding Shares or the combined voting power of the Company's then-outstanding securities; or (iv) the Board of Directors adopts a resolution to the effect that, for purposes of any severance agreement to which the Company is a party, a Potential Change in Control has occurred. (d) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. (e) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its affiliates (as defined in Rule 12b-2 prom- ulgated under the Exchange Act), (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their own- ership of stock of the Company. EX-27 3
UT This shedule contains summary financial information extracted from Orange and Rockland Utilities, Inc. quarterly report on form 10Q for the quarter ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1996 JUN-30-1996 PER-BOOK 879,170 16,813 194,916 168,104 0 1,259,003 68,270 127,507 176,195 371,972 1,390 43,243 356,626 2,800 0 65,200 196 1,384 0 0 416,192 1,259,003 498,036 10,704 449,197 459,901 38,135 (1,746) 36,389 15,514 20,875 1,513 19,362 17,613 12,103 37,091 1.42 0
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