-----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, DewscujcLYHt/PCzqV/gumoiUL9Z+xMYk/uYbDwUF3In5hT6l3j56EeeXpEora1S ITbxxtv98p2MXwKGWTxeOg== 0000074778-99-000004.txt : 19990816 0000074778-99-000004.hdr.sgml : 19990816 ACCESSION NUMBER: 0000074778-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: SEC FILE NUMBER: 001-04315 FILM NUMBER: 99689067 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 ORANGE AND ROCKLAND UTILITIES 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, 1999 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 13-1727729 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 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 Consolidated Edison, Inc. ("CEI") owns all issued and outstanding shares of registrant. On July 8, 1999, registrant became a wholly-owned subsidiary of CEI pursuant to an Agreement and Plan of Merger, dated May 10, 1998, by and among registrant, CEI and a subsidiary of CEI. 2 TABLE OF CONTENTS
PAGE ---- PART I. FINANCIAL INFORMATION - ------- --------------------- ITEM 1. Financial Statements Consolidated Balance Sheets (Unaudited) at June 30, 1999 and December 31, 1998 3 Consolidated Statements of Income (Unaudited) for the three months and six months ended June 30, 1999 and June 30, 1998 4 Consolidated Cash Flow Statements (Unaudited) for the six months ended June 30, 1999 and June 30, 1998 5 Notes to Consolidated Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 23 ITEM 6. Exhibits and Reports on Form 8-K 24 SIGNATURES 25
3 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS
JUNE 30, DECEMBER 31, 1999 1998 ---- ---- (THOUSANDS OF DOLLARS) UTILITY PLANT: Electric $ 639,867 $1,065,912 Gas 254,378 246,845 Common 104,149 103,064 ---------- ---------- Utility Plant in Service 998,394 1,415,821 Less accumulated depreciation 335,769 498,652 ---------- ---------- Net Utility Plant in Service 662,625 917,169 Construction work in progress 30,047 34,401 ---------- ---------- Net Utility Plant 692,672 951,570 ---------- ---------- NON-UTILITY PROPERTY: Non-utility property 6,790 7,780 Less accumulated depreciation, depletion and amortization 3,338 252 ---------- ---------- Net Non-utility Property 3,452 7,528 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 65,151 5,643 Temporary cash investments 217,268 500 Customer accounts receivable, less allowance for uncollectible accounts of $6,700 and $3,686 59,526 57,095 Accrued utility revenue 27,767 28,489 Other accounts receivable, less allowance for uncollectible accounts of $1,348 and $286 19,766 16,173 Materials and supplies (at average cost) 11,256 34,161 Prepaid property taxes 6,968 22,768 Prepayments and other current assets 38,364 30,019 ---------- ---------- Total Current Assets 446,066 194,848 ---------- ---------- DEFERRED DEBITS: Income tax recoverable in future rates 42,212 79,966 Deferred revenue taxes 10,947 11,915 Deferred pension and other postretirement benefits 45,971 4,097 IPP settlement costs 639 5,330 Unamortized debt expense (amortized over term of securities) 11,179 10,840 Other deferred debits 38,330 52,748 ---------- ---------- Total Deferred Debits 149,278 164,896 ---------- ---------- TOTAL $1,291,468 $1,318,842 ========== ==========
The accompanying notes are an integral part of these statements. 4 ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) CAPITALIZATION AND LIABILITIES
JUNE 30, DECEMBER 31, 1999 1998 ---- ---- (THOUSANDS OF DOLLARS) CAPITALIZATION: Common stock (13,529,931 & 13,519,988 shares outstanding) $ 67,650 $ 67,599 Premium on capital stock 132,221 132,321 Capital stock expense (5,392) (6,045) Retained earnings 160,298 186,520 ----------- ----------- Total 354,777 380,395 ----------- ----------- Long-term debt 301,476 357,156 ----------- ----------- Total Capitalization 656,253 737,551 ----------- ----------- NON-CURRENT LIABILITIES: Reserve for claims and damages 5,501 4,078 Provision for rate refunds 26,830 1,223 Postretirement benefits 43,617 9,759 Pension costs 31,186 47,481 ----------- ----------- Total Non-current Liabilities 107,134 62,541 ----------- ----------- CURRENT LIABILITIES: Notes payable and obligations due within one year 165,204 150,740 Preferred and Preference stock to be redeemed within one year 0 43,516 Accounts payable 77,110 60,573 Accrued Federal income and other taxes 72,064 22 Deferred fuel costs 14,878 6,609 Refunds to customers 7,131 4,838 Other current liabilities 19,023 18,055 ----------- ----------- Total Current Liabilities 355,410 284,353 ----------- ----------- DEFERRED TAXES AND OTHER: Deferred Federal income taxes 109,204 197,698 Deferred investment tax credits 7,571 13,654 Other deferred credits 55,896 23,045 ----------- ----------- Total Deferred Taxes and Other 172,671 234,397 ----------- ----------- TOTAL $ 1,291,468 $ 1,318,842 =========== ===========
The accompanying notes are an integral part of these statements. 5 ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, 1999 1998 1999 1998 -------------------------------------------------------------- (THOUSANDS OF DOLLARS) OPERATING REVENUES: Electric $ 115,409 $ 115,748 $ 224,323 $ 221,844 Gas 26,485 23,602 100,553 82,428 --------- --------- --------- --------- Total Utility Revenues 141,894 139,350 324,876 304,272 Diversified Activities 543 199 616 358 --------- --------- --------- --------- Total Operating Revenues 142,437 139,549 325,492 304,630 --------- --------- --------- --------- OPERATING EXPENSES: Operations: Fuel used in electric production 23,960 25,875 43,589 42,149 Electricity purchased for resale 10,384 10,183 23,064 26,170 Gas purchased for resale 14,981 12,510 57,044 43,465 Other expenses of operation 66,109 34,146 103,732 68,371 Maintenance 9,653 10,737 18,610 18,029 Depreciation and amortization 9,733 8,740 19,221 17,301 Taxes other than income taxes 21,458 21,532 46,255 45,336 Federal income taxes (4,712) 3,114 2,493 9,615 --------- --------- --------- --------- Total Operating Expenses 151,566 126,837 314,008 270,436 --------- --------- --------- --------- INCOME FROM OPERATIONS (9,129) 12,712 11,484 34,194 --------- --------- --------- --------- OTHER INCOME AND (DEDUCTIONS): Allowance for other funds used during construction 6 6 15 3 Other - net (1,789) 27 (1,954) 648 Taxes other than income taxes (201) (68) (158) (138) Federal income taxes _188 143 330 92 --------- --------- --------- --------- Total Other Income and(Deductions) (1,796) 108 (1,767) 605 --------- --------- --------- --------- INCOME BEFORE INTEREST CHARGES (10,925) 12,820 9,717 34,799 --------- --------- --------- --------- INTEREST CHARGES: Interest on long-term debt 6,734 6,016 12,801 11,961 Other interest 1,832 1,927 3,945 4,484 Amortization of debt premium, expense-net 304 285 599 568 Allowance for borrowed funds used during construction (70) (484) (118) (1,094) --------- --------- --------- --------- Total Interest Charges 8,800 7,744 17,227 15,919 --------- --------- --------- --------- NET INCOME (LOSS) (19,725) 5,076 (7,510) 18,880 Preferred and preference stock requirements 187 699 886 1,399 --------- --------- --------- --------- Earnings (Loss) applicable to common stock $ (19,912) $ 4,377 $ (8,396) $ 17,481 ========= ========= ========= ========= Avg. number of common shares outstanding (000's) 13,530 13,519 13,526 13,520 ========= ========= ========= ========= Earnings (Loss) Per Average Common Share Outstanding $ (1.47) $ .32 $ (.62) $ 1.29 ========= ========= ========= ========= Dividends declared per common share outstanding $ 1.29 $ 1.29 $ 1.94 $ 1.94 ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 6 ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999 1998 ---- ---- (THOUSANDS OF DOLLARS) CASH FLOW FROM OPERATIONS: Net income (loss) $ (7,510) $ 18,880 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 18,932 17,076 Deferred Federal income taxes (17,450) 776 Deferred investment tax credit (6,083) (385) Deferred and refundable fuel and gas costs 11,688 (671) Allowance for funds used during construction (133) (1,098) Other non-cash charges 577 78 Changes in certain current assets and liabilities: Accounts receivable (net) and accrued utility revenues (5,302) 20,612 Materials and supplies 5,721 7,566 Prepaid property taxes 15,800 9,108 Prepayments and other current assets (8,345) (16,841) Operating accounts payable 16,537 (9,501) Accrued Federal Income and other taxes (7,696) (867) Accrued interest 1,606 185 Refunds to customers 2,293 627 Other current liabilities 10,908 (4,425) Pension liability (14,311) 443 Other-net 41,326 508 --------- --------- Net Cash Provided from Operations 58,558 42,071 --------- --------- CASH FLOW FROM INVESTING ACTIVITIES: Additions to plant (18,211) (21,740) Net proceeds from the sale of the electric generating assets 339,272 -- Temporary cash investments -- -- Allowance for funds used during construction 133 1,098 --------- --------- Net Cash Provided By (Used In) Investing Activities 321,194 (20,642) --------- --------- CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from: Issuance of long-term debt 45,000 -- Issuance of capital lease obligations -- -- Retirements of: Common stock -- (3,225) Preference and preferred stock (43,516) -- Long-term debt (2,341) (19) Capital lease obligations (1,472) (79) Net borrowings (repayments) under short-term debt arrangements* (82,403) 4,285 Dividends on preferred and common stock (18,744) (18,857) --------- --------- Net Cash Used in Financing Activities (103,476) (17,895) --------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS 276,276 3,534 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,143 3,513 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 282,419 $ 7,047 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest, net of amounts capitalized $ 14,224 $ 15,729 Federal income taxes $ 11,000 $ 14,500
*Debt with maturities of 90 days or less The accompanying notes are an integral part of these statements. 7 ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. On May 10, 1998, Orange and Rockland Utilities, Inc. (the "Company"), Consolidated Edison, Inc. ("CEI") and C Acquisition Corp., a wholly owned subsidiary of CEI ("Merger Sub"), entered into an Agreement and Plan of Merger ("Merger Agreement") providing for a merger transaction among the Company, CEI and the Merger Sub. The Merger became effective on July 8, 1999 when the Merger Sub merged with and into the Company (the "Merger") and the Company became the surviving corporation and a wholly-owned subsidiary of CEI. As provided in the Merger Agreement, all of the Company's then outstanding Common Stock, $5 par value, was converted into the right to receive the merger consideration and each of the 1,000 issued and outstanding shares of the Merger Sub Common Stock, $.01 par value, was converted into one share of the Company's Common Stock, $5 par value. For accounting purposes, the Merger is being deemed by the Company to have been effective July 1, 1999. 2. The consolidated balance sheet as of June 30, 1999, the consolidated statements of income for the three month and six month periods ended June 30, 1999 and 1998, and the consolidated cash flow statements for the six month periods then ended have been prepared by the Company without an audit. In the opinion of management, all adjustments (which include normal recurring adjustments and certain adjustments related to the Merger) necessary to fairly present the financial position and results of operations at June 30, 1999, and for all periods presented, have been made. The amounts in the consolidated balance sheet as of December 31, 1998 have been derived from audited financial statements. 3. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These unaudited consolidated financial statements, notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements, the review of the Company's results of operations and financial condition and the notes to consolidated financial statements included in the Company's December 31, 1998 Annual Report to Shareholders, which material is incorporated by reference to the Company's Form 10-K Annual Report for the year ended December 31, 1998. The results of operations for the period ended June 30, 1999 are not necessarily indicative of the results of operations for the full year. 4. 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. 8 5. Contingencies at June 30, 1999 are substantially the same as the contingencies described in the "Notes to Consolidated Financial Statements" included in the Company's December 31, 1998 Annual Report to Shareholders, which material is incorporated by reference to the Company's December 31, 1998 Form 10-K Annual Report, and in Item 3, Legal Proceedings of the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1998, except changes in the status of regulatory matters which are updated in Part I, Item 2 under the caption "Regulatory Activities" and the status of certain Legal Proceedings which are updated in Part II, Item 1, "Legal Proceedings". 6. The Merger resulted in liabilities for contractual termination benefits, workforce reductions and curtailment losses under employee benefit plans triggered by the consummation of the business combination. Statement of Financial Accounting Standards No. 88 ("SFAS No. 88"), "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," applies to any employer that offers benefits to employees in connection with their termination of employment. In accordance with Emerging Issues Task Force 96-5, "Recognition of Liabilities for Contractual Termination Benefits or Changing Benefit Plan Assumptions in Anticipation of a Business Combination," the Company recognized SFAS No. 88 costs as of June 30, 1999. At June 30, 1999 the charge to income for these costs was approximately $20.9 million. 7. On November 24, 1998, the Company entered into four separate Asset Sales Agreements ("ASAs") with subsidiaries of Southern Energy, Inc. (collectively, with its subsidiaries, "Southern Energy"), a subsidiary of The Southern Company, for the sale of all of the Company's electric generating assets, including the two-thirds interest in the Bowline Point generating facility owned by Consolidated Edison Company of New York, Inc. The sales were completed on June 30, 1999. 9 The total gross proceeds from the sale amounted to approximately $486.2 million, of which approximately $349.3 million was attributable to the Company and approximately $136.9 million was attributable to Con Edison for its two-thirds ownership share of the Bowline Point Plant. The net book value of the Company's generating facilities sold was approximately $258.2 million, and the value of certain fuel and other plant inventory included in the sale was approximately $17.2 million for a total combined net book value of assets sold of $275.4 million. After deducting approximately $7.1 million of direct selling costs and approximately $11.3 million of employee retraining, retention and severance pay, the pre-tax gain on the sale amounted to approximately $55.5 million. The provision for income taxes-net amounted to approximately $40.8 million, and the net gain on the sale was, therefore, approximately $14.7 million. As required by regulatory orders approving the sale, the net gain from the sale was deferred pending final review by the New York State Public Service Commission ("NYPSC"), the New Jersey Board of Public Utility Commissioners ("NJBPU") and the Pennsylvania Public Utility Commission ("PAPUC") of the calculation of the gain as well as final disposition of the net gain, and did not, therefore, impact net income. The Company's reported net income for the three months and the six months ended June 30, 1999 were adversely impacted by approximately $3.6 million (before tax) as a result of regulatory adjustments included as part of the NYPSC order approving the sale. These amounts will either reduce previous deferred regulatory assets or will be passed back to customers. The divestiture triggered curtailment and special termination benefits accounting as required by SFAS No. 88. The Company's Transition Program for its generation employees contains special provisions that allow early vesting and enhancements to the benefit plans for those employees not offered employment or who are involuntarily terminated by the new owner within five years from the date of transfer. The expected costs of these enhancements, together with curtailment costs, is estimated to result in additional pension and post-retirement benefit costs of $1.6 million and $0.8 million, respectively. These estimates are included in the $11.3 million of employee costs in determining the cost of the sale. The Company will retain the pension assets and liabilities as well as the 10 obligation relating to the employees which were employed by the Company prior to the sale. The Company made a $10.0 million settlement payment to Southern Engergy with respect to certain pension calculations and reduced the Company's pension and other post-retirement benefit liability by $10.0 million. 8. In accordance with the requirements of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," the Company defines its principal business segments as utility (electric and gas) and diversified activities. The diversified segment includes energy services and land development.
THREE MONTHS ENDED JUNE 30, 1999 1998 --------------------------- (THOUSANDS OF DOLLARS) Operating Information: Operating revenues: Sales to unaffiliated customers: Electric $ 115,406 $ 115,746 Gas 26,480 23,602 Other sales: Electric 3 2 Gas 5 0 Total Utility Operating Revenues 141,894 139,350 Diversified activities 543 199 Total Operating Revenues $ 142,437 $ 139,549 --------- --------- Operating income before income taxes: Electric $ (7,264) $ 17,184 Gas (6,472) (928) Diversified activities (105) (430) --------- --------- Total Operating Income Before Income Taxes $ 13,841) $ 15,826
9. Certain amounts reported for the prior year have been reclassified to conform with the current year presentation. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company, upon the completion of the Merger on July 8, 1999, became a wholly-owned subsidiary of CEI. This discussion and analysis relates to the June 30, 1999 interim consolidated financial statements of the Company and its subsidiaries in Item I, Part 1 of this report and should be read in conjunction with the discussion and analysis in Item 7 of the Company's 1998 Form 10-K. Reference is also made to the Notes to Consolidated Financial Statements in Part I, Item 1 of this report, which notes are incorporated herein by reference. FINANCIAL CONDITION: FINANCIAL PERFORMANCE The Company's consolidated earnings per average common share outstanding for the second quarter of 1999 were $(1.47) as compared to $0.32 for the second quarter of 1998. The earnings for the six-month period ended June 30, 1999 and June 30, 1998 was $(0.62) and $1.29, respectively. Earnings for both the quarter and the six month period were significantly impacted by the Merger. Fluctuations within the components of earnings are discussed in the "Results of Operations". The average number of common shares outstanding was 13.5 million for each of these periods. CAPITAL RESOURCES AND LIQUIDITY At June 30, 1999, the Company and its utility subsidiaries had unsecured bank lines of credit totaling $155.0 million. The Company borrows under the lines of credit through the issuance of promissory notes to the banks. However, the Company primarily 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. The average daily balance of short-term borrowings for the six months ended June 30, 1999 amounted to $131.5 million at an effective interest rate of 5.1% as compared to $119.7 million at an effective interest rate of 5.9% for the same period of 1998. The average daily balance of temporary cash investments for the six months ended June 30, 1999 was $2.9 million with an effective interest rate of 4.7% compared to $0.6 million at an effective interest rate of 5.2% for the same period of 1998. The non-utility subsidiaries of the Company and of Rockland Electric Company ("RECO"), a wholly owned utility subsidiary of the Company, had no bank lines of credit at June 30, 1999. 12 The Federal Energy Regulatory Commission ("FERC") regulates the issuance of short-term debt by the Company and by RECO. The Company and RECO have received authorization from FERC sufficient to issue up to $150 million and $15 million, respectively, of short-term debt from time to time through 2001. The Company's cash position was affected by the sale of the Company's electric generating facilities, which was completed on June 30, 1999. The gross cash proceeds from the sale amounted to $349.3 million. After making an employee-benefit related payment to Southern Energy of approximately $10.4 million and making tax payments related to the sale of approximately $82 million, the Company paid all short-term debt outstanding, as it became due and payable, while investing the proceeds in the interim. At July 31, 1999 the Company had no short-term debt outstanding and temporary cash investments amounted to approximately $123 million. The Merger Agreement required that the Company call for redemption all of its outstanding Preference Stock and Preferred Stock. The Company's $1.52 Convertible Cumulative Preference Stock, Series A, no par value, the only Preference Stock outstanding, was redeemed on April 6, 1999. All outstanding series of the Company's Cumulative Preferred Stock, par value $100 per share, were redeemed on April 20, 1999. The aggregate redemption price of the Preferred and Preference Stock, including call premiums was $43.5 million. To fund the redemptions, the Company on March 9, 1999 issued $45 million of 7% Debentures due 2029, Series G (the "Series G Debentures"). The Series G Debentures were sold by means of competitive bid at a price of 98.458%. 13 REGULATORY ACTIVITIES MERGER WITH CEI Reference is made to Item 1, Business, under the caption "Merger with Consolidated Edison, Inc." in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, for information regarding the various regulatory bodies from which approval of the Merger was required. On April 1, 1999, the NJBPU issued an order approving the Merger Agreement subject to certain conditions, including the following: (1) the Company must file a cost allocation manual with the NJBPU by January 1, 2000; (2) net merger savings will be allocated between ratepayers and shareholders on a 75%/25% basis; (3) costs to achieve the Merger will be amortized by RECO over a ten year period effective upon consummation of the Merger; (4) upon consummation of the Merger, RECO will reduce its electric base rates by $1.434 million or 1.05%, which represents 75% of the average annual net merger savings allocated to RECO over the first four years following the consummation of the Merger; (5) this electric base rate decrease will be applied on an equal percentage basis across all rate classes and shall be included in the percentage rate reduction required by the restructuring legislation signed into law on February 9, 1999; and(6) simultaneous with the merger related base rate decrease, RECO will increase its deferred fuel balance recovery component of its Levelized Energy Adjustment Charge ("LEAC") rate by a dollar amount equal to that of the base rate decrease. The NJBPU also found that there will be no adverse impact on competition as a result of the Merger. On April 15, 1999, RECO submitted a letter to the NJBPU advising it of its plan to implement the NJBPU's Order by reducing the LEAC deferred balance without the need to reduce rates. RECO has not received any objection to its plan. On March 8, 1999, the Company, CEI, the staff of the New York Department of Public Service (the "NYPSC Staff") and several other parties submitted a settlement agreement in the Merger proceeding to the NYPSC ("Settlement Agreement"). The Settlement Agreement provides for the approval of the Merger Agreement subject to certain conditions, including the following: (1) On December 1, 1999, the Company will reduce its electric base rates by $5.8 million, or 1.9%; (2) The Company will not seek to effectuate an increase in its base electric rates prior to January 1, 2003; (3) The Company's electric operations will no longer be subject to an earnings sharing mechanism which currently requires sharing with electric customers equity 14 returns in excess of 11.4%; (4) the Company will reduce its gas base rates by $1.0 million, or 0.7%, effective in the month following consummation of the Merger; and (5) The Company will withdraw its December 1998 gas rate filing upon consummation of the Merger and may not file to increase its gas rates prior to December 1, 1999. On April 2 and April 14, 1999, the NYPSC issued orders authorizing the Merger and adopting the Settlement Agreement. The Company has also received approval to complete the Merger from the PAPUC. The PAPUC settlement agreement, which was approved by an Administrative Law Judge ("ALJ") and the PAPUC, allows the Company to retain all merger savings, net of costs to achieve, until its next electric and gas rate case at which time the treatment of net merger savings will be determined. On May 13, 1999 the Securities and Exchange Commission issued an order authorizing the completion of the Merger. On July 2, 1999 the Department of Justice announced the resolution of antitrust concerns regarding the Merger. On July 8, 1999 the Merger was completed. NEW YORK COMPETITIVE OPPORTUNITIES PROCEEDING Reference is made to Item 3, Legal Proceedings, under the caption "New York Competitive Opportunities Proceeding" in the Company's Annual Report on Form 10-K for the year ended December 31, 1998 for a description of the NYPSC's Competitive Opportunities Proceeding. On August 13, 1998, the Company, NYPSC Staff and interested parties reached an agreement to establish production related revenue requirements for the purposes of unbundling the Company's electric tariffs in the revenue requirement phase of the New York Unbundling proceeding. On September 18, 1998, a settlement concerning the rate design and all other issues had been reached as well. The settlements were submitted to an ALJ for review. The NYPSC approved the settlement agreements by Order issued February 4, 1999. As a result, unbundled rates became effective on May 1, 1999. As provided for in the Settlement Agreement in Case 96-E-0900, the Company has divested its generating assets. See Note 7 of Notes To Consolidated Financial Statements in Item I, Part 1 of this report. NEW JERSEY ENERGY MASTER PLAN Reference is made to Item 3, Legal Proceedings, under the caption "New Jersey - Energy Master Plan" in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, for information regarding the NJBPU order "Adopting and Releasing Final Report in its 15 Energy Master Plan Phase II Proceeding to Investigate the Future Structure of the Electric Power Industry (Docket No. EX 94120585Y)." The Order required RECO and other New Jersey investor owned electric utilities each to file unbundled rates, a stranded cost proposal and a restructuring plan. In July 1997, RECO made such filings and hearings on RECO's unbundled rates and stranded cost filings were held before an ALJ while hearings on the restructuring filing were held before the NJBPU. Legislation was passed in New Jersey on February 9, 1999 which provides the NJBPU the requisite authority to make generation a competitive service. The legislation provides for (1) the implementation of full retail access for all customers by August 1, 1999, and (2) a reduction in aggregate rate levels for each customer class of at least 10% relative to the aggregate level of bundled rates in effect as of April 30, 1997. The NJBPU may allow the 10% reduction to be phased in over 36 months, provided that the electric utility shall implement a reduction in rates of at least 5% effective with the implementation of customer choice. The maximum level of reduction must be maintained at least until the 48th month following the starting date for implementation of full retail access. On July 13, 1999, RECO filed a proposed Plan for Resolution of Proceedings for the Board's consideration in full and final resolution of all issues involved in RECO's fillings. On July 20, 1999, RECO filed a Stipulation of Settlement ("Settlement") by and among RECO and New Jersey Transit which incorporates the Plan for Resolution of Proceedings in its entirety. As required by the legislation, the Settlement provides for a 5% reduction in overall rates effective August 1, 1999 and an additional 6.6% reduction effective August 1, 2002. The additional reduction of 6.6% reflects a reduction of 11.6% from current rates and 10% from rates effective at April 30, 1997 as required by the legislation. The Settlement also separates RECO's rates into the following unbundled charges: a Basic Generation Service Charge/Shopping Credit ("BGS/Shopping Credit"), an Energy Cost Adjustment ("ECA"), a Market Transition Charge ("MTC"), a Delivery Charge and a Societal Benefits Charge ("SBC")for each class of customers served. On July 28, 1999, the NJBPU issued a Summary Order approving the Settlement with modifications. The rate reductions were modified to provide reductions of 5% effective August 1, 1999, 7% effective January 1, 2001 and 11.6% effective August 1, 2002. Moreover, the residential BGS/Shopping Credit was increased to the fourth year level included in the Settlement with an offsetting reduction in the residential ECA. The additional 2% reduction effective January 1, 2001 will consist in part of an additional permanent reduction to Delivery Charges of $1 million (0.7%) and in part from the implementation of a temporary rate refund consisting of RECO customers' pro-rata share of net divestiture proceeds. 16 PENNSYLVANIA - COMPETITIVE LEGISLATION Reference is made to Item 3, Legal Proceedings, under the caption "Pennsylvania - - Competition Legislation" in the Company's Annual Report on Form 10-K for the year ended December 31, 1998 for a description of the "Electricity Generation Customer Choice and Competition Act". The Company's subsidiary, Pike County Light & Power Company ("Pike") is a Pennsylvania electric and gas utility company. On July 23, 1998 the PAPUC issued an Order approving the Joint Petition for Complete Settlement of Pike's Proposed Restructuring Plan. This Joint Petition, dated May 15, 1998, was supported by all parties in Pike's electric restructuring proceeding and provides for full retail access for all customers as of May 1, 1999. The settlement provides for the recovery, through a competitive transition charge, of stranded costs relating to non-utility generator ("NUG") contract, other postemployment benefit costs, NUG contract buyout costs previously incurred and deferred fuel costs incurred to May 1, 1999. Pike's share of any net gains from the divestiture of the Company's electric generating facilities will be used to offset stranded costs. The settlement does not provide for any rate reductions. YEAR 2000 UPDATE Since 1996, the Company has been working to address Year 2000 ("Y2K") issues. Y2K issues arise as a result of a computer programming standard that traditionally recorded a year as two digits (e.g., 99) rather than four digits (e.g., 1999). With the change in the century, software and embedded chip technology that use a two-digit field to record a year may malfunction or provide inaccurate results. Overall responsibility for the Company's Y2K efforts resides with an Executive Sponsorship Committee ("Committee") which includes several members of senior management and which monitors the Company's Y2K progress and is responsible for ensuring that appropriate plans are implemented and adequate resources are available. The Company has developed a Y2K Plan ("Y2K Plan")which details the actions the Company is taking to mitigate the impact of the century change. The Company believes that with the full implementation of its Y2K Plan, the possibility of significant Y2K problems will be greatly reduced, if not eliminated. However, the failure of the Company, or one or more of the Company's key suppliers or vendors, to correct a material Y2K problem could result in the interruption of service to customers 17 or the failure of certain normal business operations. Accordingly, the Company is unable to determine at this time whether Y2K issues will have a material adverse effect on the Company's results of operations, liquidity or financial condition. In accordance with its Y2K Plan, the Company has completed an inventory and assessment of its information technology and embedded technology and prioritized such inventoried technology as either Mission Critical or Business Critical. Pursuant to the definitions adopted by the Company, the malfunction of a Mission Critical system or device could directly contribute to the interruption of electric or gas service or could adversely affect the safety of the general population and/or employees. Similarly, the malfunction of a Business Critical system or device could directly contribute to the loss of a department's capability to perform its function (e.g., customer service, accounting). Consistent with the target date established for the energy industry, the Company's Mission Critical systems/devices were Y2K ready as of July 1, 1999, and its Business Critical systems/devices will be Y2K ready by October 1, 1999. The Company has evaluated and replaced various computer applications, including its electric and gas Energy Management Systems, Customer Information Management System, Fixed Asset System and other core accounting and management systems. This effort was undertaken to provide additional functionality, automated processing, and improved access to information, as well as to address Y2K issues. The Company's remaining computer applications and hardware have been remedied and approximately 64% of the integrated testing has been completed as of June 30, 1999. As noted above, an inventory and assessment of embedded technology throughout the Company has been completed. The assessment indicates that a relatively small number of critical systems require further testing or remediation. These embedded chips have been substantially remediated and the Company has met the targeted completion dates of July 1, 1999 and will meet the October 1, 1999 for Mission and Business Critical systems, respectively. The Company's systems may be vulnerable to its critical suppliers should such suppliers themselves not be Y2K ready. The Company has identified and contacted its critical suppliers. Each such supplier has provided assurances that they are taking appropriate steps to address Y2K issues. The Company is working with the New York Power Pool("NYPP") and the North American Electric Reliability Council to ensure that 18 appropriate steps are being taken to address the reliability of the power grid. The Company successfully participated in a nationwide drill designed to test contingency communication networks on April 9, 1999 and will participate in a second drill on September 9, 1999. The drill will simulate the partial loss of voice and data communications between the NYPP, the Company's Energy Control Center, power plants and critical substations and require participants to utilize two-way radios and cellular and satellite telephones to transmit readings which ordinarily are transmitted instantaneously via computers. The Company has procedures in place should a system failure occur. The Company has developed contingency plans based on the results of its testing and critical supplier assessments and has reviewed existing emergency plans and procedures which were modified as appropriate to address Y2K-specific issues. Contingency plans for Mission Critical systems and suppliers were completed as of July 1, 1999, and will be completed for Business Critical systems by October 1, 1999. The total estimated cost to execute the Company's Y2K Plan is approximately $7.5 million, of which approximately $6.5 million has been incurred through June 30, 1999. These expenditures include costs related to the replacement of certain core accounting systems so as to provide enhanced functionality while also addressing Y2K issues; however, such expenditures do not include costs related to other systems that were replaced in the normal course of business for operating reasons, even though such replacement also addressed Y2K issues. The Company has and will continue to fund these costs from the operations of the Company. QUARTERLY COMPARISON RESULTS OF OPERATIONS The Company's total consolidated earnings per average common share outstanding for the second quarter of 1999 were $(1.47) as compared to earnings of $0.32 for the second quarter of 1998. This decline is primarily the result of costs associated with the Merger and the divestiture of the Company's generating assets and costs associated with the Company's customer information system, offset by lower taxes compared with the same period a year ago. 19 ELECTRIC AND GAS REVENUES Electric and gas operating revenues, including fuel cost and purchased gas cost recoveries, increased by $2.5 million during the second quarter of 1999 as compared to the same quarter of 1998, primarily as a result of increased retail electric and gas sales, offset by regulatory adjustments and lower sales to other utilities. Electric operating revenues during the current quarter were $115.4 million as compared to $115.7 million for the second quarter of 1998, an decrease of $0.3 million. Total sales of electric energy to retail customers during the second quarter of 1999 were 1,200,352 megawatt hours ("Mwh"), compared with 1,182,936 Mwh during the comparable period a year ago, an increase of 1.5%. Revenues from these sales were $116.0 million for the second quarter of 1999 compared with $110.4 million for the same period in 1999. Sales to other utilities for the second quarter of 1999 amounted to 71,400 Mwh with revenues of $1.9 million compared to 198,585 Mwh and $4.7 million in 1998. Revenue from these sales are primarily a recovery of costs, and under the applicable tariff regulations, have a minimal impact on earnings. Gas operating revenues during the second quarter of 1999 were $26.5 million compared to $23.6 million for the second quarter of 1998, a increase of $2.9 million. This increase is primarily the result of a increase in the volume of gas sold and the timing of fuel cost recoveries. Sales to firm customers totaled 3,023 million cubic feet ("Mmcf"), compared with 2,878 Mmcf during the same period a year ago, an increase of 5%. Gas revenues from firm customers were $23.1 million, compared with $20.3 million in the second quarter of 1998. The level of revenues from gas sales in New York is subject to a weather normalization clause that compares actual gas heating season sales levels as measured by heating degree days to the number of forecasted degree days used to establish gas base revenue requirements. Interruptible gas sales were 1,178 Mmcf for the second quarter of 1999 compared to 696 Mmcf for the same period of 1998. Revenues from interruptible customers were $2.6 million in 1999 compared to $2.3 million in 1998. FUEL, PURCHASED ELECTRICITY AND PURCHASED GAS COSTS The cost of fuel used in the production of electricity and purchased electricity costs amounted to $34.3 million for the 20 second quarter of 1999 compared to $36.1 million for the second quarter of 1998, a decrease of $1.8 million. This decrease reflects lower sales to other utilities and lower fuel cost recoveries, offset by the change in fuel prices. Purchased gas costs for utility operations were $15.0 million in the second quarter of 1999 compared to $12.5 million in 1998, an increase of $2.5 million. This increase in gas costs is attributable to the higher volume of gas purchased for resale to satisfy the higher demand in the current period. OTHER OPERATING AND MAINTENANCE EXPENSES The Company's total operating and maintenance expenses excluding fuel, purchased power and gas purchased for resale for the second quarter increased by $24.0 million compared with the same period in 1998. Utility operating expenses increased $23.9 million of which $21.7 was attributable to the costs associated with the Merger. Diversified operating expenses increased by $0.1 million. The increase in utility operating expenses is the result of costs associated with the Merger (includes employee severance, pension costs, etc.), higher depreciation expense due to normal plant additions and the amortization of the Company's customer accounting system, offset by a decrease in Federal income tax. DIVERSIFIED ACTIVITIES The Company's diversified activities consist of energy services and land development conducted through wholly owned non-utility subsidiaries. Revenues from diversified activities were $543,407 for the second quarter of 1999 compared with approximately $199,000 a year ago. This increase is the result of land sales within the current period. OTHER INCOME, DEDUCTIONS AND INTEREST CHARGES - NET Other income, net of interest charges and other deductions, decreased by $3.0 million during the second quarter of 1999 when compared to the same quarter of 1998 due primarily to the write-down of assets to fair market value in diversified operations. 21 YEAR TO DATE COMPARISON RESULTS OF OPERATIONS Earnings per average common share outstanding for the first half of 1999 amounted to $(0.62) per share as compared to $1.29 per share for the first six months of 1998. The decrease in the first six months of 1999 when compared to the same period of 1998 primarily reflects various valuations and regulatory adjustments related to the Merger and the divestiture of the Company's generating assets. ELECTRIC AND GAS REVENUES Electric and gas operating revenues, including fuel cost and purchased gas cost recoveries, increased by $20.6 million in the first six months of 1999 as compared to the same period of 1998. Electric operating revenues during the current period were $224.3 million as compared to $221.8 million for the first six months of 1998, an increase of $2.5 million. Total sales of electric energy to retail customers during the first six months of 1999 were 2,365,609 Mwh, compared to 2,312,447 Mwh during the comparable period a year ago, an increase of 2.3%. This increase is attributable to warmer than normal weather when compared to the same period a year ago. Revenues from these sales during the first six months of 1999 were $222.3 as compared to $212.0 for the same period in 1998. Sales to other utilities for the first six months of 1999 amounted to 108,230 Mwh with revenues of $2.7 million compared to 319,563 Mwh and $8.1 million in 1998. Revenue from these sales are primarily a recovery of costs and under the applicable tariff regulations, have a minimal impact on earnings. Gas operating revenues during the first six months of 1999 were $100.6 million compared to $82.4 million for the first six months of 1998, an increase of $18.2 million. Revenues increased due to fuel cost recoveries and higher sales volumes when compared to the same period a year ago. Sales to firm customers during the first six months of 1999 totaled 12,484 Mmcf, compared with 10,738 Mmcf during the same period a year ago, an increase of 16.3%. Gas revenues from firm customers were $92.3 million, compared with $74.9 million in the first six months of 1998. The level of revenues from gas sales in New York is subject to a weather normalization clause that 22 compares actual gas heating season sales levels as measured by heating degree days to the number of forecasted degree days used to establish gas base revenue requirements. FUEL, PURCHASED ELECTRICITY AND PURCHASED GAS COSTS The cost of fuel used in the production of electricity and purchased electricity costs decreased by $1.7 million during the first six months of 1999 when compared to the same period of 1998. This decrease reflects a decrease volume requirements (including Sales for Resale) and the lower fuel cost recoveries, offset by the increase in the cost of fuel and purchased power. Purchased gas costs were $57.0 million in the first six months of 1999 compared to $43.5 million in 1998, an increase of $13.6 million. This increase in gas costs is attributable to a higher volume of gas purchased for resale and the higher gas costs recoveries offset by lower price of gas purchases. OTHER OPERATING AND MAINTENANCE EXPENSES The Company's total operating and maintenance expenses, excluding fuel, purchased power and gas purchased for resale for the first six months of 1999 increased by $31.7 million compared with the same period in 1998. The increase in expenses associated with utility operating expenses amounted to $31.8 million. The change in diversified operation and maintenance expenses was a decrease of $0.1 million. The increase in utility operating expenses is primarily the result of costs associated with the Merger (includes employee severance, pension costs, etc.) which resulted in a $21.7 million of the increase. The amortization of the Company's customer accounting system and depreciation expense also contributed to the increase which was offset by a reduction in taxes. DIVERSIFIED ACTIVITIES Revenues from diversified activities increased by $259,292 for the first six months of 1999 as compared to the same period of 1998. This increase is the result of land sales that took place in the second quarter of 1999. OTHER INCOME, DEDUCTIONS AND INTEREST CHARGES - NET Other income, net of interest charges and other deductions decreased by $3.7 million during the first six months of 1999 when compared to the same period of 1998, primarily as a result of the write-down of assets to fair market value in diversified operations and lower investment revenues. 23 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On June 25, 1999, five shareholders of the Company filed a purported class action on behalf of all persons who owned the Company's common stock "at the time [the Company] and Consolidated Edison, Inc. signed a definitive merger agreement under which Consolidated Edison will acquire all of [the Company's] common stock." The complaint asserts various claims against certain former as well as then current directors and officers of the Company and certain other defendants, alleging that the actions of the defendants resulted in a reduction in the price paid by CEI for the Company's stock pursuant to the Merger Agreement. Plaintiffs filed the action, entitled Suzanne Hennessy, et al. v. D. Louis Peoples, et al., in the Supreme Court of the State of New York, County of New York. The plaintiffs are seeking various types of relief, including compensatory damages in the approximate amount of $81 million. In connection with this action, the defendant officers and directors have requested indemnification and advancement of expenses from the Company pursuant to the provisions of the Company's By-laws. The Company cannot predict the ultimate outcome of this proceeding. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION The Company has made forward-looking statements in this Form 10-Q Quarterly Report with respect to the financial condition, results of operations and business of the Company in the future, which involve certain risks and uncertainties. Forward-looking statements are included in Item I of Part I in the Notes to Consolidated Financial Statements and in Item 2 of Part I, Management's Discussion and Analysis of Financial Condition and Results of Operations, under the captions "Capital Resources and Liquidity," "Regulatory Activities," and "Year 2000 Update" and "Quarterly Comparison." Actual results or developments might differ materially from those included in the forward-looking statements because of factors such as competition and industry restructuring, changes in economic conditions, changes in laws, regulations or regulatory policies, uncertainties relating to the ultimate outcome of the Merger and the sale of the Company's generating assets, the outcome of certain assumptions made in regard to Year 2000 (Y2K) issues and other uncertainties. For all of those statements, the Company claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 24 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1.1 Certificate of Amendment of the Certificate of Incorporation of the Company, dated July 14, 1999. 3.1.2 Restated Certificate of Incorporation of the Company, dated May 7, 1996. (Incorporated by reference to Exhibit 3.4 to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996 - File No. 1-4315.) 3.2 By Laws of the Company, as amended on July 8, 1999. 27 Financial Data Schedule (b) Reports on Form 8-K On July 13, 1999, the Company filed a report on Form 8-K dated July 8, 1999 regarding the completion of the Merger and the change in the Company's certifying accountant. 25 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 13, 1999 By ROBERT R. STELBEN Robert P. Stelben Vice President and Treasurer and Duly Authorized Officer Date: August 13, 1999 By EDWARD RASMUSSEN Edward Rasmussen Acting Vice President and Controller and Chief Accounting Officer EX-3.1 2 EXHIBIT 3.1 TO FORM 10-Q CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF ORANGE AND ROCKLAND UTILITIES, INC. Under Section 805 of the Business Corporation Law We, the undersigned KEVIN BURKE and PETER A. IRWIN, being, respectively, the President and the Secretary of Orange and Rockland Utilities, Inc. a corporation formed under the laws of the State of New York (hereinafter sometimes called the "Company"), DO HEREBY CERTIFY as follows: 1. The name of the Company is Orange and Rockland Utilities, Inc. It was originally incorporated under the name of Rockland Light and Power Company. 2. The Certificate of Incorporation of the Company (being the Certificate of Consolidation dated February 8, 1926, pursuant to which it was organized) was filed in the office of the Secretary of State of the State of New York on May 21, 1926. A Restated Certificate of Incorporation was filed in the office of the Secretary of State of the State of New York on May 7, 1996 (hereinafter referred to as the "Certificate of Incorporation"). 3. The Certificate of Incorporation of the Company, is hereby amended in the following respects: (a) Article FIFTH of said Certificate of Incorporation which provides for (i) the authorized number of directors, (ii) the classification of directors, (iii) for the filling of vacancies on the Board of Directors, (iv) the removal of directors, (v) factors the Board of Directors shall take into consideration when evaluating certain business combination and (vi) for the amendment of Article FIFTH is hereby amended to read in its entirety as follows: "FIFTH: The number of Directors of the Company shall be no less than three, the exact number of Directors shall be determined from time to time solely by the affirmative vote of a majority of the total number of Directors the Company would have if there were no vacancies in the Board of Directors." (b) Article EIGHTH of said Certificate of Incorporation, which provides for a super-majority vote of shareholders for certain business combinations and for the amendment of Article EIGHTH, is hereby eliminated in its entirety and existing Article NINTH, is hereby renumbered as Article EIGHTH. 4. This amendment of the Certificate of Incorporation was duly authorized and approved, pursuant to sections 803(a) and 615(a) of the Business Corporation Law, by the unanimous vote of the Directors present at a meeting of the Board of Directors of the Company duly called and held on July 8, 1999, at which meeting a quorum was present and acting throughout, followed by the unanimous written consent of the sole shareholder of the Company. IN WITNESS WHEREOF, the undersigned have subscribed this certificate this 14th day of July, 1999, and the undersigned affirm the statements contained in this certificate as true under the penalties of perjury. Kevin Burke President Peter Irwin Secretary One Blue Hill Plaza Pearl River, New York 10965 EX-3.2 3 EXHIBIT 3.2 TO FORM 10-Q BY-LAWS of ORANGE AND ROCKLAND UTILITIES, INC. SECTION 1. ANNUAL MEETINGS. The annual meeting of shareholders of the Corporation for the election of Directors and the transaction of other business shall be held on the Tuesday following the third Monday in May at the hour and place, within or without the State of New York, as may be designated by the Board of Directors. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders of the Corporation may be called by the Board of Directors, and shall be called upon the request of shareholders holding a majority of the outstanding shares of stock entitled to vote at such meeting. SECTION 3. NOTICE OF MEETINGS. Written notice of the place, date and hour of every meeting of shareholders, the purpose of such meeting and, in case of a special meeting, the person or persons by or at whose direction the meeting is being called, shall be given, personally or by mail, or if permitted by applicable law by electronic means, by the Secretary, or other officer performing his or her duties, at least ten days, but not more than sixty days, before the meeting to each shareholder entitled to vote at such meeting. If mailed, such notice shall be directed to the shareholder at his or her address as it appears on the record of shareholders or to such other address as the shareholder shall have filed with the Secretary for such purpose; provided, however, that if a shareholder be present at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of the meeting, or in writing waives notice thereof before or after the meeting, the mailing to such shareholder of notice of the meeting is unnecessary. SECTION 4. QUORUM. At any meeting, the holders of a majority of the outstanding shares of stock of the Corporation entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum, but less than a quorum shall have power to adjourn. SECTION 5. CHAIRMAN AND SECRETARY OF SHAREHOLDERS' MEETINGS. The Chairman of the Board, or a Director or officer designated by the Chairman of the Board, shall preside over all meetings of shareholders. The Secretary shall act as secretary of the meeting, if present. In his or her or her absence, the chairman of the meeting may appoint any person to act as secretary of the meeting. SECTION 6. NUMBER OF DIRECTORS. The business of the Corporation shall be managed under the direction of a Board consisting of three Directors, who shall be elected annually by the shareholders and shall hold office until their successors are elected and qualified. The number of Directors may be increased or decreased by the Board of Directors; provided that no decrease shall shorten the term of any incumbent Director. Vacancies occurring in the Board for any reason except the removal of Directors without cause may be filled by the Board of Directors. SECTION 7. REMOVAL OF DIRECTORS. Any or all of the Directors may be removed for cause by vote of the shareholders or by action of the Board of Directors. Any or all of the Directors may be removed without cause by vote of the shareholders. SECTION 8. MEETINGS OF DIRECTORS. Meetings of the Board of Directors shall be held at the time and place fixed by the Board of Directors or upon call of the Chairman of the Board or President. The Secretary, or officer performing his or her duties, shall give 24 hours notice of all meetings of Directors; provided that a meeting may be held without notice immediately after the annual election of Directors, and notice need not be given of regular meetings held at times fixed by the Board of Directors. Meetings may be held at any time without notice if all the Directors are present and none protest the lack of notice either prior to the meeting or at its commencement, or if those not present waive notice either before or after the meeting. A majority of the entire Board shall constitute a quorum, but less than a quorum shall have the power to adjourn. The Chairman of the Board, or a Director designated by the Chairman of the Board, shall preside at all meetings of the Board. SECTION 9. COMMITTEES OF THE BOARD. The Board of Directors may designate from among its members an Executive Committee and other committees, each consisting of one or more Directors and each of which, to the extent provided in such resolution, shall have all the authority of the Board, except as otherwise provided by law. SECTION 10. ACTION BY BOARD OF DIRECTORS WITHOUT A MEETING. Any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all the members of the Board or the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and written consents thereto shall be filed with the minutes of the proceedings of the Board or the committee. SECTION 11. DIRECTOR AND COMMITTEE ACTION BY CONFERENCE TELEPHONE. Any one or more of the members of Board of Directors or any committee thereof may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. SECTION 12. ELECTION OF CHAIRMAN OF THE BOARD AND OFFICERS. The Board of Directors, promptly after the election of Directors in each year, shall elect from among its members a Chairman of the Board, and shall elect a President and a Secretary, and may from time to time elect one or more Vice Presidents and such other officers as they may deem proper. Any two or more offices may be held by the same person. SECTION 13. TERM OF OFFICE AND VACANCIES. The term of office of all officers shall be until the meeting of the Board of Directors following the next annual meeting of shareholders and until their respective successors are chosen and qualify, but any officer may be removed from office at any time by the Board of Directors with or without cause. Vacancies among the officers may be filled by the Board of Directors at any meeting. SECTION 14. DUTIES OF OFFICERS. The President shall have such duties as usually pertain to his or her office, except as otherwise directed by the Board of Directors, and shall also have such powers and duties as may from time to time be conferred upon him or her by the Board of Directors. The other officers of the Corporation shall have such duties as usually pertain to their respective offices, except as otherwise directed by the Board of Directors, and shall also have such powers and duties as may from time to time be conferred upon them by the Board of Directors. SECTION 15. ETHICS PROGRAM. The Board of Directors shall have the following responsibilities and duties with regard to the Corporation's ethics program: (A) Provide oversight and direction with regard to the Corporation's Ethics Program and to the ethics officer (the "Ethics Officer") appointed pursuant thereto in a manner that insures that the Corporation will operate in accordance with ethical principles; (B) Receive reports at least quarterly from the Ethics Officer detailing the status of ethics initiatives, investigations, disciplinary procedures, compliance efforts and other related activities; (C) Review and determine the actions, if any, beyond those undertaken by the Ethics Officer, that are necessary to satisfactorily resolve any reported violations of the Corporation's Ethics Program; (D) Be available, through the Ethics Officer, as an avenue for employees, vendors and others to express concerns regarding possible ethical transgressions involving senior management of the Corporation. SECTION 16. AMENDMENTS OF BY-LAWS. The Board of Directors or shareholders may alter, amend or repeal any of these By-laws or adopt new By-laws at any meeting duly held as above provided. SECTION 17. INDEMNIFICATION. (a) Any Director or officer of the Corporation shall be indemnified by the Corporation to the full extent permitted by the Law of the State of New York in connection with any proceeding involving a Director or officer by reason of his or her being or having been a Director or officer. (b) Any Director or officer may be insured by insurance purchased and maintained by or for the Corporation against any expenses incurred in any proceeding and any liabilities asserted against him or her in his or her capacity as Director or officer, whether or not the Corporation would have the power to indemnify him or her against such liability. EX-27 4 EXHIBIT 27 TO FORM 10-Q
UT 6-MOS DEC-31-1999 JUN-30-1999 PER-BOOK 692,672 3,452 446,066 149,278 0 1,291,468 67,650 126,829 160,298 354,777 0 0 301,476 0 0 65,150 100,054 0 0 0 470,011 1,291,468 325,492 2,493 311,515 314,008 11,484 (1,767) 9,717 17,227 (7,510) 886 (8,396) 17,858 12,801 58,558 (0.62) 0
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