-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, RHp2jYgATe6DulWqJvP8iRYeShf2jiHPwEW0k/abznNd9vMon+NhzRsf2phDmJy8 9XjotNz98vXHdmrRViOCgQ== 0000774197-94-000024.txt : 19940520 0000774197-94-000024.hdr.sgml : 19940520 ACCESSION NUMBER: 0000774197-94-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTERIOR ENERGY CORP CENTRAL INDEX KEY: 0000774197 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 341479083 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09130 FILM NUMBER: 94528103 BUSINESS ADDRESS: STREET 1: 6200 OAK TREE BLVD CITY: INDEPENDENCE STATE: OH ZIP: 44131 BUSINESS PHONE: 2164473100 MAIL ADDRESS: STREET 1: PO BOX 94661 CITY: CLEVELAND STATE: OH ZIP: 44101-4661 FORMER COMPANY: FORMER CONFORMED NAME: NORTH HOLDING CO /OH/ DATE OF NAME CHANGE: 19851002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEVELAND ELECTRIC ILLUMINATING CO CENTRAL INDEX KEY: 0000020947 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 340150020 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02323 FILM NUMBER: 94528104 BUSINESS ADDRESS: STREET 1: 55 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44101 BUSINESS PHONE: 2166229800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOLEDO EDISON CO CENTRAL INDEX KEY: 0000352049 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 344375005 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03583 FILM NUMBER: 94528105 BUSINESS ADDRESS: STREET 1: 300 MADISON AVE CITY: TOLEDO STATE: OH ZIP: 43652 BUSINESS PHONE: 4192495000 10-Q 1 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 March 31, 1994 OR [ ] Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from _____ to _____ Commission Registrant; State of Incorporation; I.R.S. Employer File Number Address; and Telephone Number Identification No. 1-9130 CENTERIOR ENERGY CORPORATION 34-1479083 (An Ohio Corporation) 6200 Oak Tree Boulevard Independence, Ohio 44131 Telephone (216) 447-3100 1-2323 THE CLEVELAND ELECTRIC 34-0150020 ILLUMINATING COMPANY (An Ohio Corporation) 55 Public Square Cleveland, Ohio 44113 Telephone (216) 622-9800 1-3583 THE TOLEDO EDISON COMPANY 34-4375005 (An Ohio Corporation) 300 Madison Avenue Toledo, Ohio 43652 Telephone (419) 249-5000 Indicate by check mark whether each of the registrants (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 registrants were required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No On May 5, 1994, there were 147,929,555 shares of Centerior Energy Corporation Common Stock outstanding. Centerior Energy Corporation is the sole holder of the 79,590,689 shares and 39,133,887 shares of common stock of The Cleveland Electric Illuminating Company and The Toledo Edison Company, respectively, outstanding on that date. This combined Form 10-Q is separately filed by Centerior Energy Corporation ("Centerior Energy"), The Cleveland Electric Illuminating Company ("Cleveland Electric") and The Toledo Edison Company ("Toledo Edison"). Centerior Energy, Cleveland Electric and Toledo Edison are sometimes referred to collectively as the "Companies". Cleveland Electric and Toledo Edison are sometimes collectively referred to as the "Operating Companies". Information contained herein relating to any individual registrant is filed by such registrant on its behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to either or both of the Operating Companies is also attributed to Centerior Energy. TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Centerior Energy Corporation and Subsidiaries The Cleveland Electric Illuminating Company and Subsidiaries The Toledo Edison Company Notes to Financial Statements 1 Centerior Energy Corporation and Subsidiaries Income Statement 4 Balance Sheet 5 Cash Flows 6 Management's Discussion and Analysis of Financial 7 Condition and Results of Operations The Cleveland Electric Illuminating Company and Subsidiaries Income Statement 10 Balance Sheet 11 Cash Flows 12 Management's Discussion and Analysis of Financial 13 Condition and Results of Operations The Toledo Edison Company Income Statement 16 Balance Sheet 17 Cash Flows 18 Management's Discussion and Analysis of Financial 19 Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders 22 Item 5. Other Information 24 Item 6. Exhibits and Reports on Form 8-K 24 Signatures 25 -i- CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES, THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIES, AND THE TOLEDO EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) Interim Financial Statements Centerior Energy Corporation (Centerior Energy) is a holding company of Centerior Service Company (Service Company) and two electric utilities, The Cleveland Electric Illuminating Company (Cleveland Electric) and The Toledo Edison Company (Toledo Edison). These two utilities are referred to collec- tively herein as the "Operating Companies". Centerior Energy, Cleveland Electric and Toledo Edison are referred to collectively herein as the "Companies". Each comparative income statement and balance sheet and the related statement of cash flows have been prepared from the records of each of the Companies without audit by independent public accountants. In the opinion of manage- ment, all adjustments necessary for a fair statement of financial position at March 31, 1994 and results of operations for the three months ended March 31, 1994 and 1993 have been included. All such adjustments were normal recurring adjustments, except for those related to the adoption of the new accounting standard discussed in Note 2. These financial statements and notes should be read in conjunction with the financial statements and notes included in the Companies' combined Annual Report on Form 10-K for the year ended December 31, 1993 (1993 Form 10-K). These interim period financial results are not necessarily indicative of results for a 12-month period. (2) New Accounting Standard Effective January 1, 1994, the Companies adopted the new accounting standard for certain investments in debt and equity securities (SFAS 115). SFAS 115 addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. The adoption of SFAS 115 did not materially affect the financial positions or first quarter 1994 results of operations of the Companies. (3) Equity Distribution Restrictions The Operating Companies can make cash available for the funding of Centerior Energy's common stock dividends by paying dividends on their respective common stock, which are held solely by Centerior Energy. Federal law prohibits the Operating Companies from paying dividends out of capital accounts. However, the Operating Companies may pay preferred and common stock dividends out of appropriated retained earnings and current earnings. At March 31, 1994, Cleveland Electric and Toledo Edison had $139.6 million and $56 million, respectively, of appropriated retained earnings for the payment of dividends. However, Toledo Edison is prohibited from paying a common stock dividend by a provision in its mortgage. (4) Common Stock Dividends Dividends per common share declared by Centerior Energy during the three months ended March 31, 1994 and 1993 were as follows: 1994 1993 Paid February 15 $.20 $.40 Paid May 15 .20 .40 Common stock dividends declared by Cleveland Electric during the three months ended March 31, 1994 and 1993 were as follows: 1994 1993 (millions) Paid in February $18.6 $46.7 Toledo Edison did not declare any common stock dividends during the three months ended March 31, 1994 and 1993. (5) Financing Activity During the three months ended March 31, 1994, the Operating Companies retired debt and preferred stock as follows: Cleveland Electric Mandatory redemptions consisted of $15 million of Serial Preferred Stock, $9.125 Series N and $1.1 million of bank loans and other long-term debt. Toledo Edison Mandatory redemptions consisted of $3.2 million of unsecured notes, bank loans and other long-term debt. (6) Long-Term Debt and Other Borrowing Arrangements As discussed in Centerior Energy's Note 11(e) and the Operating Companies' respective Note 11(d) in the Notes to the Financial Statements for 1993 in the 1993 Form 10-K, certain unsecured debt agreements contain covenants relating to capitalization, fixed charge coverage ratios and secured financings. The write-offs recorded at December 31, 1993 caused Centerior Energy and the Operating Companies to violate certain of those covenants. The affected creditors have waived those violations in exchange for commitments to provide them with a second mortgage security interest on the Operating Companies' property and other considerations. The Companies expect to complete this process in the second quarter of 1994. The Companies will provide the same security interest to certain other creditors because their agreements require equal treatment. The Companies expect to provide second mortgage collateral for $219 million of unsecured debt ($47 million for Cleveland Electric and $172 million for Toledo Edison), $228 million of bank letters of credit and a $205 million revolving credit facility. The bank letters of credit and revolving credit facility are joint and several obligations of the Operating Companies. (7) Commitments and Contingencies Various legal actions, claims and regulatory proceedings covering several matters are pending against the Companies. See "Item 3. Legal Proceedings" in the 1993 Form 10-K. CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES INCOME STATEMENT (Unaudited) (Thousands, Except Per Share Amounts)
Three Months Ended March 31, --------------------- 1994 1993 -------- -------- OPERATING REVENUES $ 587,567 $ 598,082 OPERATING EXPENSES Fuel and Purchased Power 115,353 123,876 Other Operation and Maintenance 186,818 200,629 Depreciation and Amortization 68,314 65,959 Taxes, Other Than Federal Income Taxes 83,008 83,077 Deferred Operating Expenses, Net (14,851) (16,800) Federal Income Taxes 20,282 19,021 -------- -------- Total Operating Expenses 458,924 475,762 -------- -------- OPERATING INCOME 128,643 122,320 NONOPERATING INCOME Allowance for Equity Funds Used During Construction 842 1,348 Other Income and Deductions, Net 2,555 1,629 Deferred Carrying Charges 9,917 13,849 Federal Income Taxes - Credit (Expense) (1,263) 386 -------- -------- Total Nonoperating Income 12,051 17,212 -------- -------- INCOME BEFORE INTEREST CHARGES 140,694 139,532 INTEREST CHARGES Long-term Debt 88,347 87,027 Short-term Debt 1,466 2,211 Allowance for Borrowed Funds Used During Construction (782) (1,020) -------- -------- Net Interest Charges 89,031 88,218 -------- -------- INCOME AFTER INTEREST CHARGES 51,663 51,314 Preferred Dividend Requirements of Subsidiaries 16,660 16,097 -------- -------- NET INCOME $ 35,003 $ 35,217 ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 147,446 143,364 ======== ======== EARNINGS PER COMMON SHARE $ .24 $ .25 ======== ======== The accompanying notes to financial statements as they relate to Centerior Energy are an integral part of this statement.
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES BALANCE SHEET (Thousands)
March 31, December 31, 1994 1993 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 9,529,622 $ 9,571,124 Accumulated Depreciation and Amortization (2,619,867) (2,677,368) ----------- ----------- 6,909,755 6,893,756 Construction Work In Progress 140,793 180,931 ----------- ----------- 7,050,548 7,074,687 Nuclear Fuel, Net of Amortization 327,641 344,642 Other Property, Less Accumulated Depreciation 29,436 40,808 ----------- ----------- 7,407,625 7,460,137 CURRENT ASSETS Cash and Temporary Cash Investments 183,458 225,253 Amounts Due from Customers and Others, Net 244,586 220,500 Unbilled Revenues 109,844 123,844 Materials and Supplies, at Average Cost 138,639 135,511 Fossil Fuel Inventory, at Average Cost 27,221 32,159 Taxes Applicable to Succeeding Years 214,163 249,544 Other 11,470 6,235 ----------- ----------- 929,381 993,046 DEFERRED CHARGES AND OTHER ASSETS Amounts Due from Customers for Future Federal Income Taxes 986,207 968,267 Unamortized Loss from Beaver Valley Unit 2 Sale 104,067 105,190 Unamortized Loss on Reacquired Debt 90,106 92,385 Carrying Charges and Operating Expenses 886,347 861,660 Nuclear Plant Decommissioning Trusts 61,597 55,682 Other 170,717 173,463 ----------- ----------- 2,299,041 2,256,647 ----------- ----------- $ 10,636,047 $ 10,709,830 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 1,771,108 $ 1,785,122 Preferred Stock With Mandatory Redemption Provisions 298,575 313,575 Without Mandatory Redemption Provisions 450,871 450,871 Long-Term Debt 4,013,905 4,018,554 ----------- ----------- 6,534,459 6,568,122 OTHER NONCURRENT LIABILITIES Nuclear Fuel Lease Obligations 254,954 253,666 Other 192,924 195,377 ----------- ----------- 447,878 449,043 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 127,685 127,253 Current Portion of Lease Obligations 101,687 111,490 Accounts Payable 159,611 188,409 Accrued Taxes 309,103 377,887 Accrued Interest 99,747 87,394 Dividends Declared 50,165 15,795 Other 60,508 57,399 ----------- ----------- 908,506 965,627 DEFERRED CREDITS Unamortized Investment Tax Credits 316,674 329,290 Accumulated Deferred Federal Income Taxes 1,617,140 1,578,955 Unamortized Gain from Bruce Mansfield Plant Sale 544,706 551,268 Accumulated Deferred Rents for Bruce Mansfield Plant and Beaver Valley Unit 2 131,855 127,661 Other 134,829 139,864 ----------- ----------- 2,745,204 2,727,038 COMMITMENTS AND CONTINGENCIES (Note 7) ----------- ----------- $ 10,636,047 $ 10,709,830 =========== =========== The accompanying notes to financial statements as they relate to Centerior Energy are an integral part of this statement.
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES CASH FLOWS (Unaudited) (Thousands)
Three Months Ended March 31, -------------------- 1994 1993 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $35,003 $35,217 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 68,314 65,959 Deferred Federal Income Taxes 12,980 11,308 Unbilled Revenues 14,000 10,000 Deferred Fuel (3,265) 2,585 Deferred Carrying Charges (9,917) (13,849) Leased Nuclear Fuel Amortization 28,954 16,686 Deferred Operating Expenses, Net (14,851) (16,800) Allowance for Equity Funds Used During Construction (842) (1,348) Changes in Amounts Due from Customers and Others, Net (24,086) (4,333) Changes in Inventories 1,810 17,622 Changes in Accounts Payable (28,798) (18,508) Changes in Working Capital Affecting Operations (23,176) (22,472) Other Noncash Items 6,348 2,088 ------- ------- Total Adjustments 27,471 48,938 ------- ------- Net Cash from Operating Activities 62,474 84,155 CASH FLOWS FROM FINANCING ACTIVITIES Bank Loans, Commercial Paper and Other Short-Term Debt -- (7,501) Debt Issues: First Mortgage Bonds -- 200,200 Secured Medium-Term Notes -- 128,000 Common Stock Issues 9,988 18,348 Reacquired Common Stock -- 249 Maturities, Redemptions and Sinking Funds (19,322) (237,807) Nuclear Fuel Lease Obligations (20,122) (35,943) Common Stock Dividends Paid (29,432) (57,184) Premiums, Discounts and Expenses -- (4,499) ------- ------- Net Cash from Financing Activities (58,888) 3,863 CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (37,843) (45,309) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (782) (1,020) Other Cash Received (Applied) (6,756) 1,284 ------- ------- Net Cash from Investing Activities (45,381) (45,045) ------- ------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (41,795) 42,973 CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 225,253 92,949 ------- ------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $183,458 $135,922 ======= ======= Other Payment Information: Interest (net of amounts capitalized) $64,000 $60,000 Federal Income Taxes -- 6,000 The accompanying notes to financial statements as they relate to Centerior Energy are an integral part of this statement.
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity Reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7 of the 1993 Form 10-K. The information under "Capital Resources and Liquidity" remains un- changed with the following exceptions: During the first quarter of 1994, the Operating Companies redeemed various securities as discussed in Note 5. In the second quarter of 1994, Cleveland Electric and Toledo Edison expect to issue $46.1 million and $30.5 million, respectively, of first mortgage bonds as collateral security for the sale by a public authority of equal principal amounts of tax-exempt bonds. The proceeds from the sales of the public authority's bonds will be used to refund equal principal amounts of the authority's tax-exempt bonds that were issued in 1988 and have been continuously remarketed on a floating rate basis. Each new series of bonds will be issued at a fixed rate of interest for the remaining term to July 1, 2023. Centerior Energy expects to raise about $35 million in 1994 from the sale of authorized but unissued common stock under certain of its employee and share owner stock purchase plans. Additional first mortgage bonds may be issued by the Operating Companies under their respective mortgages on the basis of property additions, cash or refund- able first mortgage bonds. Under their respective mortgages, each Operating Company may issue first mortgage bonds on the basis of property additions and, under certain circumstances, refundable bonds only if the applicable interest coverage test is met. At March 31, 1994, Cleveland Electric and Toledo Edison would have been permitted to issue approximately $139 million and $323 million of additional first mortgage bonds, respectively. After the fourth quarter of 1994, Cleveland Electric's ability to issue first mortgage bonds is expected to increase substantially when its interest coverage ratio will no longer be affected by the write-offs recorded at December 31, 1993. Results of Operations Factors contributing to the 1.8% decrease in first quarter 1994 operating revenues are shown as follows: Factors Millions Sales Volume and Mix $ 24.6 Wholesale Revenues (7.7) Fuel Cost Recovery Revenues (15.5) Base Rates and Miscellaneous Revenues (11.9) Total $(10.5) Percentage changes between 1994 and 1993 first quarter billed electric kilowatt-hour sales are summarized as follows: Customer Categories % Change Residential 5.0% Commercial 5.1 Industrial 4.9 Other (4.2) Total 4.1 First quarter 1994 total kilowatt-hour sales increased as a result of increased economic activity and weather-related demand. Industrial sales increased on the strength of increased sales to large automotive manufacturers, large steel industry customers and the broad-based, smaller industrial customer group. Residential and commercial sales increased as a result of colder weather in the first quarter of 1994 than in the first quarter of 1993, which increased heating-related demand. Other sales decreased as lower wholesale sales were partially offset by higher sales to public authorities. The decreases in first quarter 1994 wholesale sales and revenues were attributable to the expiration of a wholesale power agreement, softer market conditions and limited power availability for bulk power transactions because of generating plant outages. The decrease in first quarter 1994 fuel cost recovery revenues included in customer bills resulted from decreases in the fuel cost recovery factors used by the Operating Companies to calculate these revenues. The weighted averages of the fuel cost recovery factors used for the first quarter of 1994 decreased about 19% and 2% for Cleveland Electric and Toledo Edison, respectively, compared to those used in the 1993 first quarter. The decrease in first quarter 1994 base rates and miscellaneous revenues was primarily attributable to three factors: lower base rate revenues in 1994 from certain large industrial customers under economic incentive contracts; lower base rate revenues in 1994 from certain large commercial customers as a result of lower tariff rates based on changes in their load characteristics; and a disproportionate increase in kilowatt-hour sales to residential customers in 1994 at lower incremental rates under the declining rate schedules based on usage. First quarter operating expenses in 1994 decreased 3.5% from the 1993 amount. Other operation and maintenance expenses decreased primarily as a result of cost reduction measures, including the work force reduction in 1993. Fuel and purchased power expenses decreased because of lower fuel expense, including less amortization of previously deferred fuel costs than the amount amortized in 1993. A change in the system generation mix (more nuclear generation and less coal-fired generation in the 1994 first quarter than in the 1993 period) accounted for a large part of the lower fuel expense for the first quarter of 1994. Depreciation and amortization expense increased because of higher nuclear plant decommissioning expense accruals related to revisions in the cost estimates in 1993. A decrease in deferred operating expenses resulted primarily from the cessation in 1994 of deferrals related to the rate phase-in plans for the investments in Perry Nuclear Power Plant Unit 1 and Beaver Valley Power Station Unit 2 under a 1989 rate agreement for the Operating Companies. Federal income taxes increased as a result of higher pretax operating income. First quarter credits for carrying charges in 1994 decreased from the 1993 amount primarily because of the cessation in 1994 of accruals related to the phase-in plans. The first quarter federal income tax provision for non- operating income in 1994 increased from the 1993 amount because the expense increase resulting from a lower tax allocation of interest charges to non- operating activities exceeded the decrease related to the lower carrying charge credits. First quarter net income in 1994 decreased $0.2 million, or 0.6%, from the 1993 amount. Quarterly earnings per common share decreased $.01 per share, or 4%. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIES INCOME STATEMENT (Unaudited) (Thousands)
Three Months Ended March 31, --------------------- 1994 1993 -------- -------- OPERATING REVENUES $ 407,855 $ 421,107 OPERATING EXPENSES Fuel and Purchased Power (1) 99,939 112,540 Other Operation and Maintenance 112,052 118,804 Depreciation and Amortization 47,992 46,460 Taxes, Other Than Federal Income Taxes 59,085 58,963 Deferred Operating Expenses, Net (9,719) (9,872) Federal Income Taxes 12,994 12,102 -------- -------- Total Operating Expenses 322,343 338,997 -------- -------- OPERATING INCOME 85,512 82,110 NONOPERATING INCOME Allowance for Equity Funds Used During Construction 630 1,024 Other Income and Deductions, Net 1,899 2,005 Deferred Carrying Charges 6,237 7,648 Federal Income Taxes - Credit (Expense) (1,056) 138 -------- -------- Total Nonoperating Income 7,710 10,815 -------- -------- INCOME BEFORE INTEREST CHARGES 93,222 92,925 INTEREST CHARGES Long-term Debt 60,433 59,994 Short-term Debt 626 1,007 Allowance for Borrowed Funds Used During Construction (744) (813) -------- -------- Net Interest Charges 60,315 60,188 -------- -------- NET INCOME 32,907 32,737 Preferred Dividend Requirements 11,502 10,181 -------- -------- EARNINGS AVAILABLE FOR COMMON STOCK $ 21,405 $ 22,556 ======== ======== (1) Includes purchased power expense for purchases from Toledo Edison. $ 29,669 $ 30,418 The accompanying notes to financial statements as they relate to Cleveland Electric are an integral part of this statement.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIES BALANCE SHEET (Thousands)
March 31, December 31, 1994 1993 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 6,685,254 $ 6,734,130 Accumulated Depreciation and Amortization (1,816,016) (1,889,584) ----------- ----------- 4,869,238 4,844,546 Construction Work In Progress 107,477 141,422 ----------- ----------- 4,976,715 4,985,968 Nuclear Fuel, Net of Amortization 193,459 202,200 Other Property, Less Accumulated Depreciation 29,848 41,041 ----------- ----------- 5,200,022 5,229,209 CURRENT ASSETS Cash and Temporary Cash Investments 14,604 77,374 Amounts Due from Customers and Others, Net 172,383 155,899 Amounts Due from Affiliates 10,047 5,399 Unbilled Revenues 89,000 99,000 Materials and Supplies, at Average Cost 92,732 92,659 Fossil Fuel Inventory, at Average Cost 15,397 20,188 Taxes Applicable to Succeeding Years 153,043 178,577 Other 3,664 2,967 ----------- ----------- 550,870 632,063 DEFERRED CHARGES AND OTHER ASSETS Amounts Due from Customers for Future Federal Income Taxes 598,392 586,494 Unamortized Loss on Reacquired Debt 59,186 60,293 Carrying Charges and Operating Expenses 534,550 518,613 Nuclear Plant Decommissioning Trusts 33,114 29,955 Other 96,561 102,546 ----------- ----------- 1,321,803 1,297,901 ----------- ----------- $ 7,072,695 $ 7,159,173 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 1,054,266 $ 1,039,947 Preferred Stock With Mandatory Redemption Provisions 270,225 285,225 Without Mandatory Redemption Provisions 240,871 240,871 Long-Term Debt 2,792,437 2,793,162 ----------- ----------- 4,357,799 4,359,205 OTHER NONCURRENT LIABILITIES Nuclear Fuel Lease Obligations 152,119 150,775 Other 95,596 96,352 ----------- ----------- 247,715 247,127 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 70,057 70,394 Current Portion of Lease Obligations 57,439 62,610 Accounts Payable 94,503 122,385 Accounts Payable to Affiliates 54,299 60,956 Accrued Taxes 257,333 304,621 Accrued Interest 70,225 60,376 Dividends Declared 7,533 19,258 Other 34,159 32,632 ----------- ----------- 645,548 733,232 DEFERRED CREDITS Unamortized Investment Tax Credits 224,508 235,293 Accumulated Deferred Federal Income Taxes 1,129,950 1,104,859 Unamortized Gain from Bruce Mansfield Plant Sale 339,120 343,183 Accumulated Deferred Rents for Bruce Mansfield Plant 77,902 77,304 Other 50,153 58,970 ----------- ----------- 1,821,633 1,819,609 COMMITMENTS AND CONTINGENCIES (Note 7) ----------- ----------- $ 7,072,695 $ 7,159,173 =========== =========== The accompanying notes to financial statements as they relate to Cleveland Electric are an integral part of this statement.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIES CASH FLOWS (Unaudited) (Thousands)
Three Months Ended March 31, -------------------- 1994 1993 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $32,907 $32,737 -------- -------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 47,992 46,460 Deferred Federal Income Taxes 5,885 5,700 Unbilled Revenues 10,000 9,000 Deferred Fuel (5,616) 7,530 Deferred Carrying Charges (6,237) (7,648) Leased Nuclear Fuel Amortization 16,053 9,254 Deferred Operating Expenses, Net (9,719) (9,872) Allowance for Equity Funds Used During Construction (630) (1,024) Changes in Amounts Due from Customers and Others, Net (16,484) (2,167) Changes in Inventories 4,718 7,011 Changes in Accounts Payable (27,882) (34,741) Changes in Working Capital Affecting Operations (22,380) 2,375 Other Noncash Items 968 (1,123) ------- ------- Total Adjustments (3,332) 30,755 ------- ------- Net Cash from Operating Activities 29,575 63,492 CASH FLOWS FROM FINANCING ACTIVITIES Bank Loans, Commercial Paper and Other Short-Term Debt -- 10,001 Notes Payable to Affiliates -- 7,000 Debt Issues: First Mortgage Bonds -- 180,000 Secured Medium-Term Notes -- 35,000 Maturities, Redemptions and Sinking Funds (16,138) (188,637) Nuclear Fuel Lease Obligations (11,140) (20,110) Dividends Paid (30,328) (56,705) Premiums, Discounts and Expenses -- (3,617) ------- ------- Net Cash from Financing Activities (57,606) (37,068) CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (30,366) (36,311) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (744) (813) Other Cash Applied (3,629) (542) ------- ------- Net Cash from Investing Activities (34,739) (37,666) ------- ------- NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (62,770) (11,242) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 77,374 33,524 ------- ------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $14,604 $22,282 ======= ======= Other Payment Information: Interest (net of amounts capitalized) $43,000 $38,000 Federal Income Taxes -- 4,700 The accompanying notes to financial statements as they relate to Cleveland Electric are an integral part of this statement.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity Reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7 of the 1993 Form 10-K. The information under "Capital Resources and Liquidity" remains unchanged with the following exceptions: During the first quarter of 1994, Cleveland Electric redeemed various securities as discussed in Note 5. In the second quarter of 1994, Cleveland Electric expects to issue $46.1 million of first mortgage bonds as collateral security for the sale by a public authority of an equal principal amount of tax-exempt bonds. The proceeds from the sale of the public authority's bonds will be used to refund $46.1 million of the authority's tax-exempt bonds that were issued in 1988 and have been continuously remarketed on a floating rate basis. The new series of bonds will be issued at a fixed rate of interest for the remaining term to July 1, 2023. Additional first mortgage bonds may be issued by Cleveland Electric under its mortgage on the basis of property additions, cash or refundable first mortgage bonds. Under its mortgage, Cleveland Electric may issue first mortgage bonds on the basis of property additions and, under certain circumstances, refund- able bonds only if the applicable interest coverage test is met. At March 31, 1994, Cleveland Electric would have been permitted to issue approximately $139 million of additional first mortgage bonds. After the fourth quarter of 1994, Cleveland Electric's ability to issue first mortgage bonds is expected to increase substantially when its interest coverage ratio will no longer be affected by the write-offs recorded at December 31, 1993. Results of Operations Factors contributing to the 3.1% decrease in first quarter 1994 operating revenues are shown as follows: Factors Millions Sales Volume and Mix $ 15.6 Wholesale Revenues (9.2) Fuel Cost Recovery Revenues (14.7) Base Rates and Miscellaneous Revenues (5.0) Total $(13.3) Percentage changes between 1994 and 1993 first quarter billed electric kilowatt-hour sales are summarized as follows: Customer Categories % Change Residential 4.3% Commercial 4.5 Industrial 3.3 Other (25.6) Total 1.3 First quarter 1994 total kilowatt-hour sales increased as a result of weather- related demand and increased economic activity. Residential and commercial sales increased as a result of colder weather in the first quarter of 1994 than in the first quarter of 1993, which increased heating-related demand. Industrial sales increased on the strength of increased sales to large automotive manufacturers and steel industry customers. Other sales decreased as lower wholesale sales were partially offset by higher sales to public authorities. The decreases in first quarter 1994 wholesale sales and revenues were attributable to the expiration of a wholesale power agreement, softer market conditions and limited power availability for bulk power transactions because of generating plant outages. The decrease in fuel cost recovery revenues included in customer bills resulted from a 19% decrease in the weighted average of the fuel cost recovery factors used in the first quarter of 1994 to calculate these revenues compared to the 1993 first quarter average. The decrease in first quarter 1994 base rates and miscellaneous revenues was primarily attributable to three factors: lower base rate revenues in 1994 from certain large industrial customers under economic incentive contracts; lower base rate revenues in 1994 from certain large commercial customers as a result of lower tariff rates based on changes in their load characteristics; and a disproportionate increase in kilowatt-hour sales to residential customers in 1994 at lower incremental rates under the declining rate schedule based on usage. First quarter operating expenses in 1994 decreased 4.9% from the 1993 amount. Lower fuel and purchased power expenses resulted primarily from less amortization of previously deferred fuel costs than the amount amortized in 1993. Other operation and maintenance expenses decreased primarily as a result of cost reduction measures, including the work force reduction in 1993. Depreciation and amortization expense increased because of higher nuclear plant decommissioning expense accruals related to revisions in the cost estimates in 1993. Federal income taxes increased as a result of higher pretax operating income. First quarter credits for carrying charges in 1994 decreased from the 1993 amount primarily because of the cessation in 1994 of accruals related to the rate phase-in plan for the investments in Perry Nuclear Power Plant Unit 1 and Beaver Valley Power Station Unit 2 under a 1989 rate agreement. The first quarter federal income tax provision for nonoperating income in 1994 increased from the 1993 amount because the expense increase resulting from a lower tax allocation of interest charges to nonoperating activities exceeded the decrease related to the lower carrying charge credits. First quarter preferred dividend requirements in 1994 increased from the 1993 amount primarily because of the new issue of preferred stock in 1993. First quarter earnings available for common stock in 1994 decreased $1 million, or 5.1%, from the 1993 amount. THE TOLEDO EDISON COMPANY INCOME STATEMENT (Unaudited) (Thousands)
Three Months Ended March 31, --------------------- 1994 1993 -------- -------- OPERATING REVENUES (1) $ 216,572 $ 214,815 OPERATING EXPENSES Fuel and Purchased Power 45,673 42,583 Other Operation and Maintenance 81,583 89,330 Depreciation and Amortization 20,322 19,500 Taxes, Other Than Federal Income Taxes 23,748 23,995 Deferred Operating Expenses, Net (5,133) (6,928) Federal Income Taxes 7,371 6,976 -------- -------- Total Operating Expenses 173,564 175,456 -------- -------- OPERATING INCOME 43,008 39,359 NONOPERATING INCOME Allowance for Equity Funds Used During Construction 213 324 Other Income and Deductions, Net 468 273 Deferred Carrying Charges 3,680 6,200 Federal Income Taxes - Credit (Expense) (26) 421 -------- -------- Total Nonoperating Income 4,335 7,218 -------- -------- INCOME BEFORE INTEREST CHARGES 47,343 46,577 INTEREST CHARGES Long-term Debt 27,913 27,033 Short-term Debt 892 1,443 Allowance for Borrowed Funds Used During Construction (38) (207) -------- -------- Net Interest Charges 28,767 28,269 -------- -------- NET INCOME 18,576 18,308 Preferred Dividend Requirements 5,158 5,915 -------- -------- EARNINGS AVAILABLE FOR COMMON STOCK $ 13,418 $ 12,393 ======== ======== (1) Includes revenues from bulk power sales to Cleveland Electric. $ 29,669 $ 30,418 The accompanying notes to financial statements as they relate to Toledo Edison are an integral part of this statement.
THE TOLEDO EDISON COMPANY BALANCE SHEET (Thousands)
March 31, December 31, 1994 1993 (Unaudited) ----------- ----------- ASSETS PROPERTY, PLANT AND EQUIPMENT Utility Plant In Service $ 2,844,368 $ 2,836,993 Accumulated Depreciation and Amortization (803,852) (787,784) ----------- ----------- 2,040,516 2,049,209 Construction Work In Progress 33,316 39,509 ----------- ----------- 2,073,832 2,088,718 Nuclear Fuel, Net of Amortization 134,182 142,442 Other Property, Less Accumulated Depreciation (412) (234) ----------- ----------- 2,207,602 2,230,926 CURRENT ASSETS Cash and Temporary Cash Investments 102,746 82,042 Amounts Due from Customers and Others, Net 68,486 62,979 Amounts Due from Affiliates 14,067 15,682 Unbilled Revenues 20,844 24,844 Materials and Supplies, at Average Cost 45,907 42,852 Fossil Fuel Inventory, at Average Cost 11,824 11,971 Taxes Applicable to Succeeding Years 61,120 70,966 Other 266 2,284 ----------- ----------- 325,260 313,620 DEFERRED CHARGES AND OTHER ASSETS Amounts Due from Customers for Future Federal Income Taxes 387,772 381,729 Unamortized Loss from Beaver Valley Unit 2 Sale 104,067 105,190 Unamortized Loss on Reacquired Debt 30,920 32,093 Carrying Charges and Operating Expenses 351,796 343,046 Nuclear Plant Decommissioning Trusts 28,484 25,727 Other 73,542 77,523 ----------- ----------- 976,581 965,308 ----------- ----------- $ 3,509,443 $ 3,509,854 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common Stock Equity $ 636,112 $ 622,375 Preferred Stock With Mandatory Redemption Provisions 28,350 28,350 Without Mandatory Redemption Provisions 210,000 210,000 Long-Term Debt 1,221,468 1,225,392 ----------- ----------- 2,095,930 2,086,117 OTHER NONCURRENT LIABILITIES Nuclear Fuel Lease Obligations 102,836 102,891 Other 80,841 82,757 ----------- ----------- 183,677 185,648 CURRENT LIABILITIES Current Portion of Long-Term Debt and Preferred Stock 57,629 56,859 Current Portion of Lease Obligations 44,248 48,880 Accounts Payable 53,875 63,384 Accounts Payable to Affiliates 31,383 26,608 Accrued Taxes 67,702 89,574 Accrued Interest 29,583 27,022 Other 21,430 16,948 ----------- ----------- 305,850 329,275 DEFERRED CREDITS Unamortized Investment Tax Credits 92,166 93,997 Accumulated Deferred Federal Income Taxes 484,856 471,471 Unamortized Gain from Bruce Mansfield Plant Sale 205,586 208,085 Accumulated Deferred Rents for Bruce Mansfield Plant and Beaver Valley Unit 2 53,953 50,357 Other 87,425 84,904 ----------- ----------- 923,986 908,814 COMMITMENTS AND CONTINGENCIES (Note 7) ----------- ----------- $ 3,509,443 $ 3,509,854 =========== =========== The accompanying notes to financial statements as they relate to Toledo Edison are an integral part of this statement.
THE TOLEDO EDISON COMPANY CASH FLOWS (Unaudited) (Thousands)
Three Months Ended March 31, -------------------- 1994 1993 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $18,576 $18,308 ------- ------- Adjustments to Reconcile Net Income to Cash from Operating Activities: Depreciation and Amortization 20,322 19,500 Deferred Federal Income Taxes 7,387 5,519 Unbilled Revenues 4,000 1,000 Deferred Fuel 2,351 (4,945) Deferred Carrying Charges (3,680) (6,200) Leased Nuclear Fuel Amortization 12,901 7,432 Deferred Operating Expenses, Net (5,133) (6,928) Allowance for Equity Funds Used During Construction (213) (324) Changes in Amounts Due from Customers and Others, Net (5,507) (1,547) Changes in Inventories (2,908) 10,611 Changes in Accounts Payable (9,509) 7,659 Changes in Working Capital Affecting Operations 3,425 (26,002) Other Noncash Items 5,380 3,211 ------ ------ Total Adjustments 28,816 8,986 ------ ------ Net Cash from Operating Activities 47,392 27,294 CASH FLOWS FROM FINANCING ACTIVITIES Bank Loans, Commercial Paper and Other Short-Term Debt -- (17,502) Debt Issues: First Mortgage Bonds -- 20,200 Secured Medium-Term Notes -- 93,000 Maturities, Redemptions and Sinking Funds (3,184) (49,170) Nuclear Fuel Lease Obligations (8,982) (15,833) Dividends Paid (152) (5,939) Premiums, Discounts and Expenses -- (882) ------- ------ Net Cash from Financing Activities (12,318) 23,874 CASH FLOWS FROM INVESTING ACTIVITIES Cash Applied to Construction (7,477) (8,998) Interest Capitalized as Allowance for Borrowed Funds Used During Construction (38) (207) Loans to Affiliates -- (18,000) Other Cash Received (Applied) (6,855) 5,943 ------ ------ Net Cash from Investing Activities (14,370) (21,262) ------ ------ NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS 20,704 29,906 CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 82,042 15,731 ------- ------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $102,746 $45,637 ======= ======= Other Payment Information: Interest (net of amounts capitalized) $21,000 $22,000 Federal Income Taxes -- 1,800 The accompanying notes to financial statements as they relate to Toledo Edison are an integral part of this statement.
THE TOLEDO EDISON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity Reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7 of the 1993 Form 10-K. The information under "Capital Resources and Liquidity" remains unchanged with the following exceptions: During the first quarter of 1994, Toledo Edison redeemed various securities as discussed in Note 5. In the second quarter of 1994, Toledo Edison expects to issue $30.5 million of first mortgage bonds as collateral security for the sale by a public authority of an equal principal amount of tax-exempt bonds. The proceeds from the sale of the public authority's bonds will be used to refund $30.5 million of the authority's tax-exempt bonds that were issued in 1988 and have been continuously remarketed on a floating rate basis. The new series of bonds will be issued at a fixed rate of interest for the remaining term to July 1, 2023. Additional first mortgage bonds may be issued by Toledo Edison under its mortgage on the basis of property additions, cash or refundable first mortgage bonds. Under its mortgage, Toledo Edison may issue first mortgage bonds on the basis of property additions and, under certain circumstances, refundable bonds only if the applicable interest coverage test is met. At March 31, 1994, Toledo Edison would have been permitted to issue approximately $323 million of additional first mortgage bonds. Results of Operations Factors contributing to the 0.8% increase in first quarter 1994 operating revenues are shown as follows: Factors Millions Sales Volume and Mix $ 9.0 Wholesale Revenues 0.5 Base Rates and Miscellaneous Revenues (6.9) Fuel Cost Recovery Revenues (0.8) Total $ 1.8 Percentage changes between 1994 and 1993 first quarter billed electric kilowatt-hour sales are summarized as follows: Customer Categories % Change Residential 6.6% Commercial 6.9 Industrial 8.4 Other 17.3 Total 10.1 First quarter 1994 total kilowatt-hour sales increased as a result of increased wholesale sales (included in the "Other" category), increased economic activity and weather-related demand. Industrial sales increased on the strength of increased sales to large automotive manufacturers and the broad-based, smaller industrial customer group. Residential and commercial sales increased as a result of colder weather in the first quarter of 1994 than in the first quarter of 1993, which increased heating-related demand. The decrease in first quarter 1994 base rates and miscellaneous revenues was primarily attributable to three factors: lower base rate revenues in 1994 from certain large industrial customers under economic incentive contracts; lower base rate revenues in 1994 from certain large commercial customers as a result of lower tariff rates based on changes in their load characteristics; and a disproportionate increase in kilowatt-hour sales to residential customers in 1994 at lower incremental rates under the declining rate schedule based on usage. The decrease in fuel cost recovery revenues included in customer bills resulted from a 2% decrease in the weighted average of the fuel cost recovery factors used in the first quarter of 1994 to calculate these revenues compared to the 1993 first quarter average. First quarter operating expenses in 1994 decreased 1.1% from the 1993 amount. Other operation and maintenance expenses decreased primarily as a result of cost reduction measures, including the work force reduction in 1993. Higher fuel and purchased power expenses resulted primarily from increased amortization of previously deferred fuel costs than the amount amortized in 1993. Depreciation and amortization expense increased because of higher nuclear plant decommissioning expense accruals related to revisions in the cost estimates in 1993. A decrease in deferred operating expenses resulted from the cessation in 1994 of deferrals related to the rate phase-in plan for the investments in Perry Nuclear Power Plant Unit 1 and Beaver Valley Power Station Unit 2 under a 1989 rate agreement and less deferrals under the Rate Stabilization Program in the first quarter of 1994. Federal income taxes increased as a result of higher pretax operating income. First quarter credits for carrying charges in 1994 decreased from the 1993 amount primarily because of the cessation in 1994 of accruals related to the phase-in plan. The first quarter federal income tax provision for non- operating income in 1994 increased from the 1993 amount because the expense increase resulting from a lower tax allocation of interest charges to non- operating activities exceeded the decrease related to the lower carrying charge credits. First quarter preferred dividend requirements in 1994 decreased from the 1993 amount because of the retirement of preferred stock in 1993. First quarter earnings available for common stock in 1994 increased $1 million, or 8.3%, from the 1993 amount. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders 1. Centerior Energy a. Centerior Energy's Annual Meeting of share owners was held on April 26, 1994. b. Proxies for the Annual Meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934. There was no solicitation in opposition to management's nominees for directors as listed in the proxy statement dated March 23, 1994, and all such nominees were elected. c. Five matters were submitted to share owners for a vote at the Annual Meeting. Issue 1 was the election of 12 directors of Centerior Energy. The vote on this issue was as follows: Broker Nominee For Withheld Non-Vote R. P. Anderson 91,467,251 6,062,438 22,446,350 A. C. Bersticker 91,485,281 6,044,408 22,446,350 L. Carter 91,441,479 6,088,210 22,446,350 T. A. Commes 90,851,749 6,677,940 22,446,350 W. R. Embry 91,266,849 6,262,840 22,446,350 R. J. Farling 91,404,621 6,125,068 22,446,350 G. H. Kaull 91,607,769 5,921,920 22,446,350 R. A. Miller 91,313,524 6,216,165 22,446,350 F. E. Mosier 91,526,326 6,003,363 22,446,350 Sr. M. M. Reinhard 91,161,218 6,368,471 22,446,350 R. C. Savage 91,445,158 6,084,531 22,446,350 W. J. Williams 91,491,285 6,038,404 22,446,350 Issue 2 was the ratification of the appointment by the Board of Directors of Arthur Andersen & Co. as the independent accountants of Centerior Energy, Cleveland Electric and Toledo Edison for 1994. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 93,897,566 2,172,892 1,459,231 22,446,350 Issue 3 was a share owner proposal recommending that a salary ceiling be instituted such that no senior executive officer or director of Centerior Energy receive a combined salary and other compensation which is more than one hundred and fifty percent of the salary provided to the President of the United States. The vote on this issue was as follows: - 22 - Broker For Against Abstain Non-Vote 26,174,707 52,588,695 2,947,868 38,355,769 Issue 4 was a share owner proposal to cut by ten percent the salaries of, and all the incentives received by, the chief executive officer and all directors of Centerior Energy effective immediately upon approval of the proposal. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 27,064,568 51,763,516 2,883,186 38,355,769 Issue 5 was a share owner proposal that no expenditure or investment by Centerior Energy of one million dollars or more could be made without the approval of the holders of a majority of the common shares issued and outstanding unless such expenditure or investment would constitute "ordinary business" as that term is used in Rule 14a-8(c)(7) of the Securities and Exchange Commission, and that all such "ordinary business" expenditures or investments of one million dollars or more shall be reported by the board of directors to the share holders at least quarterly. The vote on this issue was as follows: Broker For Against Abstain Non-Vote 19,888,995 57,825,026 3,997,249 38,355,769 2. Cleveland Electric a. In lieu of an Annual Meeting, Cleveland Electric's sole share owner, Centerior Energy (the sole share owner of all 79,590,689 outstanding shares of Cleveland Electric common stock), elected directors of Cleveland Electric through a Written Action of Sole Share Owner on April 26, 1994. b. The directors elected pursuant to the Written Action were: Robert J. Farling Murray R. Edelman Fred J. Lange, Jr. c. No other matters were addressed in the Written Action in lieu of an Annual Meeting. 3. Toledo Edison a. In lieu of an Annual Meeting, Toledo Edison's sole share owner, Centerior Energy (the sole share owner of all 39,133,887 outstanding - 23 - shares of Toledo Edison common stock), elected directors of Toledo Edison through a Written Action of Sole Share Owner on April 26, 1994. b. The directors elected pursuant to the Written Action were: Robert J. Farling Murray R. Edelman Fred J. Lange, Jr. c. No other matters were addressed in the Written Action in lieu of an Annual Meeting. Item 5. Other Information 1. Potential Downgrading of Certain Securities of the Operating Companies On May 9, 1994, Moody's Investors Service, Inc. announced that it had placed the credit ratings of certain securities of Cleveland Electric and Toledo Edison under review for possible downgrade. Moody's indicated that the ratings for the following securities were being reviewed: preferred stock of both Operating Companies, Toledo Edison debentures and secured lease obligation bonds issued by CTC Beaver Valley Funding Corporation, Beaver Valley II Funding Corporation and CTC Mansfield Funding Corporation which are secured by rental payments made by Cleveland Electric and Toledo Edison. Item 6. Exhibits and Reports on Form 8-K a. Exhibits None. b. Reports on Form 8-K During the quarter ended March 31, 1994, Centerior Energy, Cleveland Electric and Toledo Edison each filed the following Current Report on Form 8-K: A Form 8-K dated December 22, 1993 was filed on January 4, 1994 to report, under "Item 5. Other Events", on the following: 1. Cleveland Electric and Toledo Edison Securities Downgraded (Moody's Investors Service, Inc. and Standard & Poor's Corporation lowered their ratings on the Operating Companies' debt and preferred stock) and 2. Strategic Plan, Dividends and Write-offs (Centerior Energy's Board of Directors approved a new strategic plan to strengthen the Companies' financial and competitive condition, reduced Centerior Energy's quarterly common stock dividend by one-half and authorized the write-off of $1.02 billion, after taxes, in assets). - 24 - Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The person signing this report on behalf of each such registrant is also signing in his capacity as each registrant's Principal Financial Officer. CENTERIOR ENERGY CORPORATION (Registrant) THE CLEVELAND ELECTRIC ILLUMINATING COMPANY (Registrant) THE TOLEDO EDISON COMPANY (Registrant) By: PAUL G. BUSBY Paul G. Busby, Controller and Chief Accounting Officer of each Registrant Date: May 12, 1994 - 25 - -----END PRIVACY-ENHANCED MESSAGE-----