10-K 1 1994 FORM 10-K DPL INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 Form 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 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 File Number 1-9052 DPL INC. (Exact name of registrant as specified in its charter) OHIO 31-1163136 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Courthouse Plaza Southwest, Dayton, Ohio 45402 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 513-224-6000 Securities registered pursuant to Section 12(b) of the Act: Outstanding at Name of each exchange Title of each class February 28, 1995 on which registered ------------------- ----------------- --------------------- Common Stock $0.01 par value and 106,951,623 New York Stock Exchange Preferred Share Purchase Rights Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO ( ) The aggregate market value of the voting stock held by non-affiliates of the registrant as of February 28, 1995 was $2,232,615,130.00 based on the closing price of $20 7/8 on such date. DOCUMENTS INCORPORATED BY REFERENCE Parts I and II incorporate by reference the registrant's 1994 Annual Report to Shareholders. Portions of the definitive Proxy Statement dated March 1, 1995, relating to the 1995 Annual Meeting of Shareholders of the registrant, are incorporated by reference into Part III. PART I ------ Item 1 - BUSINESS* DPL INC. DPL Inc. was organized in 1985 under the laws of the State of Ohio to engage in the acquisition and holding of securities of corporations for investment purposes. The executive offices of DPL Inc. are located at Courthouse Plaza Southwest, Dayton, Ohio 45402 - telephone (513) 224-6000. DPL Inc.'s principal subsidiary is The Dayton Power and Light Company ("DP&L"). DP&L is a public utility incorporated under the laws of Ohio in 1911. Located in West Central Ohio, it furnishes electric service to 470,000 retail customers in a 24 county service area of approximately 6,000 square miles and furnishes natural gas service to 290,000 customers in 16 counties. In addition, DP&L provides steam heating service in downtown Dayton, Ohio. DP&L serves an estimated population of 1.2 million. Principal industries served include electrical machinery, automotive and other transportation equipment, non-electrical machinery, agriculture, paper, rubber and plastic products. DP&L's sales reflect the general economic conditions and seasonal weather patterns of the area. In 1994, electric revenues increased 5% with a 2% growth in retail sales reflecting the continued strength of the West Central Ohio economy. Gas revenues decreased 3% in 1994. An overall sales increase of 1% reflected strong sales to transportation gas customers despite mild temperatures in late 1994. During 1994, cooling degree days were 5% above the twenty year average and 1% above 1993. Heating degree days in 1994 were 2% below the thirty year average and 5% below 1993. Sales patterns will change in future years as weather and the economy fluctuate. Subsidiaries of DP&L include MacGregor Park Inc., an owner and developer of real estate; and DP&L Community Urban Redevelopment Corporation, the owner of a downtown Dayton office building. Other subsidiaries of DPL Inc. include Miami Valley CTC, Inc., which provides transportation services to DP&L and another unaffiliated Dayton-based company; Miami Valley Leasing, which leases vehicles, communications equipment and other miscellaneous equipment, owns real estate and has, for financial investment purposes, acquired limited partnership interests in natural gas storage facilities. Miami Valley Resources, Inc. ("MVR"), a natural gas supply management company; Miami Valley Lighting, Inc., a street lighting business; Miami Valley Insurance Company, an insurance company for DPL Inc. and its subsidiaries; and Miami Valley Development Company, which is engaged in the business of technology research and development. * Unless otherwise indicated, the information given in "Item 1 - BUSINESS" is current as of March 24, 1995. No representation is made that there have not been subsequent changes to such information. I-1 DPL Inc. and its subsidiaries are exempt from registration with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 because its utility business operates solely in the State of Ohio. DPL Inc. and its subsidiaries employed 3,078 persons as of December 31, 1994, of which 2,578 are full-time employees and 500 are part-time employees. Information relating to industry segments is contained in Note 12 of Notes to Consolidated Financial Statements on page 26 of the registrant's 1994 Annual Report to Shareholders ("1994 Annual Report"), which Note is incorporated herein by reference. COMPETITION DPL Inc. competes through its principal subsidiary, DP&L, with privately and municipally owned electric utilities and rural electric cooperatives, natural gas suppliers and other alternate fuel suppliers. DP&L competes on the basis of price and service. Like other utilities, DP&L from time to time may have electric generating capacity available for sale to other utilities. DP&L competes with other utilities to sell electricity provided by such capacity. The ability of DP&L to sell this electricity will depend on how DP&L's price, terms and conditions compare to those of other utilities. In addition, from time to time, DP&L also makes power purchases from neighboring utilities. In an increasingly competitive energy environment, cogenerated power may be used by customers to meet their own power needs. Cogeneration is the dual use of a form of energy, typically steam, for an industrial process and for the generation of electricity. The Public Utilities Regulatory Policies Act of 1978 ("PURPA") provides regulations that govern the purchases of excess electric energy from cogeneration and small power production facilities that have obtained qualifying status under PURPA. The National Energy Policy Act of 1992 which reformed the Public Utilities Holding Company Act of 1935, allows the federal government to mandate access by others to a utility's electric transmission system and may accelerate competition in the supply of electricity. I-2 MVR, established in 1986 as a subsidiary of DPL Inc., acts as a broker in arranging and managing natural gas supplies for business and industry. Deliveries of natural gas to MVR customers can be made through DP&L's transportation system, or another transportation system, on the same basis as deliveries to customers of other gas brokerage firms. Customers with alternate fuel capability can continue to choose between natural gas and their alternate fuel based upon overall economics. DP&L provides transmission and wholesale electric to 12 municipal customers which distribute electricity within their corporate limits. In 1994, 11 of these municipal customers signed new 20-year service agreements, which have been filed with the Federal Energy Regulatory Commission (the "FERC"), with approval expected in 1995. The twelfth municipal customer signed a 20-year agreement, approved by the FERC on February 13, 1995, that allows DP&L to supply 97% of its power requirements. In addition to these municipal customers, DP&L maintains an interconnection agreement with one municipality which has the capability to generate all or a portion of its energy requirements. Sales to municipalities represented 1.3% of total electricity sales in 1994. General deregulation of the natural gas industry has continued to prompt the influence of market competition as the driving force behind natural gas procurement. The maturation of the natural gas spot market in combination with open access interstate transportation provided by pipelines has provided DP&L, as well as its end-use customers, with an array of procurement options. Customers with alternate fuel capability can continue to choose between natural gas and their alternate fuel based upon overall economics. Therefore, demand for natural gas purchased from DP&L or purchased elsewhere transported to the end-use customer by DP&L could fluctuate based on the economics of each in comparison with changes in alternate fuel prices. For DP&L, price competition and reliability among both natural gas suppliers and interstate pipeline sources are major factors affecting procurement decisions. I-3 CONSTRUCTION AND FINANCING PROGRAM OF DPL INC. 1995-1999 Construction Program ------------------------------ The estimated construction additions for the years 1995-1999 are set forth below: Estimated 1995 1996 1997 1998 1999 1995-1999 ---- ---- ---- ---- ---- --------- millions Electric generation and transmission commonly owned with neighboring utilities................ $ 18 $ 26 $ 36 $ 32 $ 36 $148 Other electric generation and transmission facilities.. 31 36 32 32 32 163 Electric distribution...... 23 40 37 35 35 170 General.................... 2 2 2 2 2 10 Gas, steam and other facilities............... 15 15 15 15 16 76 ---- ---- ---- ---- ---- ---- Total construction..... $ 89 $119 $122 $116 $121 $567 Estimated construction costs over the next five years average $113 million annually which is less than the projected depreciation expense over the same period. The construction program includes plans for the construction of a series of 75 MW combustion turbine generating units, the first of which is scheduled for completion in Summer 1995. Construction plans are subject to continuing review and are expected to be revised in light of changes in financial and economic conditions, load forecasts, legislative and regulatory developments and changing environmental standards, among other factors. DP&L's ability to complete its capital projects and the reliability of future service will be affected by its financial condition, the availability of external funds at reasonable cost and adequate and timely rate increases. See ENVIRONMENTAL CONSIDERATIONS for a description of environmental control projects and regulatory proceedings which may change the level of future construction additions. The potential impact of these events on DP&L's operations cannot be estimated at this time. I-4 1995-1999 Financing Program --------------------------- DP&L will require a total of $76 million during the next five years for bond maturities and sinking funds in addition to any funds needed for the construction program. DPL Inc. will require an additional $9 million for mandatory redemptions. At year-end 1994, DPL Inc. had a cash and temporary investment balance of $96 million. Proceeds from temporary cash investments, together with internally generated cash and future outside financings, will provide for the funding of the construction program, sinking funds and general corporate requirements. In March 1994, DPL Inc. issued 3,200,000 shares of common stock through a public offering. Proceeds from the sale were used in connection with the redemption of all outstanding shares of DP&L's Preferred Stock Series D, E, F, H and I. During late 1992 and early 1993, DP&L took advantage of favorable market conditions to reduce its cost of debt and extend first mortgage bond maturities through early refundings. Overall, five new series of First Mortgage Bonds were issued, aggregating approximately $766 million with an average interest rate of 7.9%. The proceeds were used to redeem a similar principal amount of debt securities with an average interest rate of 8.7% The amounts and timings of future financings will depend upon market and other conditions, rate increases, levels of sales and construction plans. In November 1989, DPL Inc. entered into a revolving credit agreement ("the Credit Agreement") with a consortium of banks renewable through 1998 which allows total borrowings by DPL Inc. and its subsidiaries of $200 million. DP&L has authority from the Public Utilities Commission of Ohio (the "PUCO") to issue short term debt up to $200 million with a maximum debt limit of $300 million including loans from DPL Inc. under the terms of the Credit Agreement. At December 31, 1994, DPL Inc. had no outstanding borrowings under this Credit Agreement. DP&L also has $97 million available in short term informal lines of credit At year-end, DP&L had no borrowings outstanding from these lines of credit and no commercial paper outstanding. Under DP&L's First and Refunding Mortgage, First Mortgage Bonds may be issued on the basis of (i) 60% of unfunded property additions, subject to net earnings, as defined, being at least two times interest on all First Mortgage Bonds I-5 outstanding and to be outstanding, and (ii) 100% of retired First Mortgage Bonds. DP&L anticipates that, during 1995-99, it will be able to issue sufficient First Mortgage Bonds to satisfy its long-term debt requirements in connection with the financing of its construction and refunding programs discussed above. The maximum amount of First Mortgage Bonds which may be issued in the future will fluctuate depending upon interest rates, the amounts of bondable property additions, earnings and retired First Mortgage Bonds. There are no coverage tests for the issuance of preferred stock under DP&L's Amended Articles of Incorporation. ELECTRIC OPERATIONS AND FUEL SUPPLY DP&L's present winter generating capability is 3,053,000 KW. Of this capability, 2,843,000 KW (approximately 93%) is derived from coal-fired steam generating stations and the balance consists of combustion turbine and diesel-powered peaking units. Approximately 87% (2,472,000 KW) of the existing steam generating capability is provided by certain units owned as tenants in common with the Cincinnati Gas & Electric Company ("CG&E") or with CG&E and Columbus Southern Power Company ("CSP"). Under the agreements among the companies, each company owns a specified undivided share of each facility, is entitled to its share of capacity and energy output, and has a capital and operating cost responsibility proportionate to its ownership share. A merger agreement between CG&E and PSI Resources, Inc. to form CINergy Corp. was pending from late 1992 to October 1994. The merger was approved by the FERC on October 3, 1994 and by the SEC on October 21, 1994. A settlement agreement between DP&L, CG&E, PSI Resources and CINergy Corp. resolved DP&L's concerns regarding the impact of the merger on the operations of its commonly owned generating units. The remaining steam generating capability (371,000 KW) is derived from a generating station owned solely by DP&L. DP&L's all time net peak load was 2,824,000 KW, which occurred in June 1994. The present summer generating capability is 3,017,000 KW. I-6 GENERATING FACILITIES --------------------- MW Rating -------------- Owner- Operating DP&L Station ship* Company Location Portion Total ----------- ----- --------- --------------- ------- ----- Coal Units ---------- Hutchings W DP&L Miamisburg, OH 371 371 Killen C DP&L Wrightsville, OH 402 600 Stuart C DP&L Aberdeen, OH 820 2,340 Conesville-Unit 4 C CSP Conesville, OH 129 780 Beckjord-Unit 6 C CG&E New Richmond, OH 210 420 Miami Fort- Units 7&8 C CG&E North Bend, OH 360 1,000 East Bend-Unit 2 C CG&E Rabbit Hash, KY 186 600 Zimmer C CG&E Moscow, OH 365 1,300 Combustion Turbines or Diesel ----------------------------- Hutchings W DP&L Miamisburg, OH 32 32 Yankee Street W DP&L Centerville, OH 144 144 Monument W DP&L Dayton, OH 12 12 Tait W DP&L Dayton, OH 10 10 Sidney W DP&L Sidney, OH 12 12 * W = Wholly Owned; C = Commonly Owned In order to transmit energy to their respective systems from their commonly-owned generating units, the companies have constructed and own, as tenants in common, 847 circuit miles of 345,000-volt transmission lines. DP&L has several interconnections with other companies for the purchase, sale and interchange of electricity. DP&L derived over 99% of its electric output from coal-fired units in 1994. The remainder was derived from units burning oil or natural gas which were used to meet peak demands. DP&L estimates that approximately 65-85% of its coal requirements for the period 1995-1999 will be obtained through long-term contracts, with the balance to be obtained by spot market purchases. DP&L has been informed by CG&E and CSP through the procurement plans for the commonly owned units operated by them that sufficient coal supplies will be available during the same planning horizon. I-7 The prices to be paid by DP&L under its long-term coal contracts are subject to adjustment in accordance with various indices. Each contract has features that will limit price escalations in any given year. The total average price per million British Thermal Units ("MMBTU") of coal received was $1.39/MMBTU in 1994 and $1.46/MMBTU in 1993 and 1992. The average fuel cost per kWh generated of all fuel burned for electric generation (coal, gas and oil) for the year was 1.42 cents which represents a decrease from 1.43 cents in 1993 and 1.48 cents in 1992. Through the operation of a fuel cost adjustment clause applicable to electric sales, the increases and decreases in fuel costs are reflected in customer rates on a timely basis. See RATE REGULATION AND GOVERNMENT LEGISLATION and ENVIRONMENTAL CONSIDERATIONS. GAS OPERATIONS AND GAS SUPPLY DP&L has long-term firm pipeline transportation agreements with ANR Gas Pipeline Company ("ANR"), Texas Gas Transmission Corporation ("Texas Gas"), Panhandle Eastern Pipe Line Company ("Panhandle"), Columbia Gas Transmission Corporation ("Columbia") and Columbia Gulf Transmission Corporation for varying terms up to late 2004. Along with firm transportation services, DP&L has approximately 16 billion cubic feet of firm storage service with various pipelines. DP&L also maintains and operates four propane-air plants with a daily rated capacity of approximately 70,000 thousand cubic feet ("MCF") of natural gas. In addition, DP&L is interconnected with CNG Transmission Corporation and Texas Eastern Transmission Corporation. These interconnections with various interstate pipelines provide DP&L the opportunity to purchase competitively-priced natural gas supplies and pipeline services. DP&L purchases its natural gas supplies using a portfolio approach that minimizes price risks and ensures sufficient firm supplies, at peak demand times. The portfolio consists of long-term, short-term and spot supply agreements. In 1994, firm agreements provided approximately 95% of total supply, with the remaining supplies purchased on a spot/short-term basis. In April 1992, the FERC issued Order No. 636 ("Order 636") amending its regulations governing the service obligations, rate design and cost recovery of interstate pipelines. DP&L's interstate pipeline suppliers have received approval from FERC to implement their restructuring plans to comply with the regulations. I-8 In January 1994, DP&L, the Staff of the PUCO and the Office of the Ohio Consumers' Counsel submitted to the PUCO an agreement which resolved issues relating to the recovery of Order 636 "transition costs" to be billed to DP&L by FERC natural gas interstate pipeline companies. The agreement, which was approved by the PUCO on July 14, 1994, provides for the full recovery of these transition costs from DP&L's customers. The interstate pipelines will file with the FERC for authority to recover these transition costs, the exact magnitude of which has not been established. In 1994, DP&L purchased natural gas at an estimated average price of $3.34 per MCF, compared to $3.65 per MCF in 1993 and $3.31 per MCF in 1992. Through the operation of a natural gas cost adjustment clause applicable to gas sales, increases and decreases in DP&L's natural gas costs are reflected in customer rates on a timely basis. SEE RATE REGULATION AND GOVERNMENT LEGISLATION. The PUCO supports open access, nondiscriminatory transportation of natural gas by the state's local distribution companies for end-use customers. The PUCO has guidelines to provide a standardized structure for end-use transportation programs which requires a tariff providing the prices, terms and conditions for such service. DP&L has an approved tariff which provides transportation service to 300 end-use customers, delivering a total quantity of 15,146,664 MCF. On July 31, 1991, Columbia Gas System Inc. and Columbia, one of DP&L's major pipeline suppliers, filed separate Chapter 11 petitions in U.S. Bankruptcy Court. The bankruptcy court permitted Columbia to break approximately 4,500 long-term natural gas contracts with upstream suppliers. The Court also granted approval of an agreement between the customers and Columbia which assures the continuation of all firm service agreements (including storage) through the winter of 1993, with year-to-year continuation unless adequate notice is provided. After extensive litigation, the U.S. Supreme Court denied an appeal by the Unsecured Creditors Committee from the third Circuit Court of Appeals decision to treat take-or-pay refunds as being outside of the Columbia estate, and thus refundable to customers. DP&L has received all post petition take-or-pay refunds ordered by the Third Circuit. Pre-petition take-or-pay refunds will remain in the estate until a plan of reorganization is approved. I-9 On June 24, 1994, the U.S. Court of Appeals for the District of Columbia Circuit decided in favor of Columbia's customers by holding that a 1985 settlement between the parties should have prohibited Columbia from collecting pre-1987 upstream take-or-pay costs from its customers. FERC has been ordered by the Court of Appeals to determine the actual amount of the refund due to DP&L and other customers. Such refunds will remain in the bankruptcy estate until a plan of reorganization is approved. The parties to the bankruptcy are currently evaluating Columbia's proposed plan of reorganization. Based upon a July 1993 FERC order disallowing the recovery of natural gas producer contracts rejected in the bankruptcy case, DP&L does not expect the bankruptcy proceedings to have a material adverse effect on its earnings or competitive position. On October 6, 1994, the PUCO authorized DP&L's plan to use pipeline supplier refunds to partially offset transition cost billings to natural gas customers. This approval will help stabilize gas costs while continuing to ensure DP&L's full recovery of transition costs. RATE REGULATION AND GOVERNMENT LEGISLATION DP&L's sales of electricity, natural gas and steam to retail customers are subject to rate regulation by the PUCO and various municipalities. DP&L's wholesale electric rates to municipal corporations and other distributors of electric energy are subject to regulation by FERC under the Federal Power Act. Ohio law establishes the process for determining rates charged by public utilities. Regulation of rates encompasses the timing of applications, the effective date of rate increases, the cost basis upon which the rates are based and other related matters. Ohio law also establishes the Office of the Ohio Consumers' Counsel (the "OCC"), which has the authority to represent residential consumers in state and federal judicial and administrative rate proceedings. DP&L's electric and natural gas rate schedules contain certain recovery and adjustment clauses subject to periodic audits by, and proceedings before, the PUCO. Electric fuel and gas costs are expensed as recovered through rates. I-10 Ohio legislation extends the jurisdiction of the PUCO to the records and accounts of certain public utility holding company systems, including DPL Inc. The legislation extends the PUCO's supervisory powers to a holding company system's general condition and capitalization, among other matters, to the extent that they relate to the costs associated with the provision of public utility service. Additionally, the legislation requires PUCO approval of (i) certain transactions and transfers of assets between public utilities and entities within the same holding company system, and (ii) prohibits investments by a holding company in subsidiaries which are not public utilities in an amount in excess of 15% of the aggregate capitalization of the holding company on a consolidated basis at the time such investments are made. In April 1991, DP&L filed an application with the PUCO to increase its electric rates to recover costs associated with the construction of the William H. Zimmer Generating Station ("Zimmer"), earn a return on DP&L's investment and recover the current costs of providing electric service to its customers. In November 1991, DP&L entered into a settlement agreement with various consumer groups resolving all issues in the case. The PUCO approved the agreement on January 22, 1992. Pursuant to that agreement, new electric rates took effect February 1, 1992, January 2, 1993 and January 3, 1994. The agreement also established a baseline return on equity of 13% (subject to upward adjustment) until DP&L's next electric rate case. In the event that the DP&L's return exceeds the allowed return by between one and two percent, then one half of the excess return will be used to reduce the unrecovered cost of demand-side management ("DSM") programs. Any return that exceeds the allowed return by more than two percent will be entirely credited to these programs. Amounts deferred during the phase-in period, including carrying charges, will be capitalized and recovered over seven years commencing in 1994. Deferrals were $58 million in 1992 and $28 million in 1993. The recovery in 1994, net of additional carrying cost deferrals, was $10 million. The phase-in plan meets the requirements of the Financial Accounting Standards Board ("FASB") Statement No. 92. In addition, DP&L agreed to undertake cost-effective demand-side management ("DSM") programs with an average annual cost of $15 million for four years commencing in 1992. The amount recoverable through rates was $4.6 million in 1992, and $7.8 million in subsequent years. The difference between expenditures and amounts recovered through rates is deferred and is eligible for recovery in future rates in accordance with existing PUCO rulings. I-11 In March 1991, the PUCO granted DP&L the authority to defer interest charges, net of income tax, on its 28.1% ownership investment in Zimmer from the March 30, 1991, commercial in-service date through January 31, 1992. Deferred interest charges on the investment in Zimmer have been adjusted to a before tax basis in 1993 as a result of FASB Statement No. 109. Amounts deferred are being amortized over the life of the plant. Regulatory deferrals on the balance sheet were: Dec. 31 Dec. 31 1994 1993 ------- ------- --millions-- Phase-in $ 75.9 $ 85.8 DSM 31.9 20.3 Deferred interest - Zimmer 61.0 63.7 ------ ------ Total $168.8 $169.8 ====== ====== In 1989 the PUCO approved rules for the implementation of a comprehensive Integrated Resource Planning ("IRP") program for all investor-owned electric utilities in Ohio. Under this program, each utility is required to file an IRP as part of its Long Term Forecast Report ("LTFR"). The IRP requires each utility to evaluate available demand-side resource options in addition to supply-side options to determine the most cost-effective means for satisfying customer requirements. The rules currently allow a utility to apply for deferred recovery of DSM program expenditures and lost revenues between LTFR proceedings. Ultimate recovery of expenditures is contingent on review and approval of such programs as cost-effective and consistent with the most recent IRP proceeding. The rules also allow utilities to submit alternative proposals for the recovery of DSM programs and related costs. In 1991 the PUCO issued a Finding and Order which encourages electric utilities to undertake the competitive bidding of new supply-side energy projects. The policy also encourages utilities to provide transmission grid access to those supply-side energy providers awarded bids by utilities. Electric utilities are permitted to bid on their own proposals. The PUCO has issued for comment proposed rules for competitive bidding but has not issued final rules at this time. I-12 DP&L has in place a percentage of income payment plan ("PIPP") for eligible low-income households as required by the PUCO. This plan prohibits disconnections for nonpayment of customer bills if eligible low-income households pay a specified percentage of their household income toward their utility bill. The PUCO has approved a surcharge by way of a temporary base rate tariff rider which allows companies to recover arrearages accumulated under PIPP. In 1993 DP&L reached a settlement with the PUCO staff, the Office of the Ohio Consumers' Counsel and the Legal Aid Society to provide new and expanded programs for PIPP eligible customers. The expanded programs include greater arrears crediting, lower monthly payments, educational programs and information reports. In exchange, DP&L may accelerate recovery of PIPP and pre-PIPP arrearages and recover program costs. The settlement also established a four year moratorium on changes to the program. The PUCO approved the settlement on December 2, 1993. Pursuant to the terms of the settlement, DP&L filed an application on January 21, 1994 to lower its PIPP rate. The application was approved by the PUCO on March 24, 1994. DP&L initiated a competitive bidding process in January 1993 for the construction of up to 140 MW of electric peaking capacity and energy by 1997. Through an Ohio Power Siting Board ("OPSB") investigative process, DP&L's self-built option was evaluated to be the least cost option. On March 7, 1994, the OPSB approved DP&L's applications for up to three combustion turbines and two natural gas supply lines for the proposed site. The OPSB issued rules on March 22, 1993 to provide electric and magnetic field information in applications for construction of major generating and transmission facilities. DP&L has addressed the topics covered by the new rules in all recent projects. One utility requested a rehearing on the rules which was denied by the OPSB on May 24, 1993. At this time DP&L cannot predict the ultimate impact on timing and costs associated with the siting of new transmission lines. In March 1994, Governor Voinovich appointed Commissioner Jolynn Barry-Butler to a second five-year term as PUCO commissioner, which began April 12, 1994. Also, on February 7, 1995 Governor Voinovich appointed Ronda H. Fergus, currently director of the PUCO's Telecommunications Division, to the PUCO for a five year term commencing April 11, 1995, pending approval by the Senate of the State of Ohio. On February 22, 1994 a bill was introduced in the State of Ohio House of Representatives which, if approved, would give electric consumers the opportunity to obtain "retail" and "wholesale at retail" services from electric suppliers other than their current supplier. The bill was not reported out of Committee. I-13 On June 1, 1994, DP&L filed its natural gas LTFR with the PUCO. DP&L filed its electric LTFR with the PUCO on June 15, 1994. An IRP filed as part of the electric LTFR included plans for the construction of a series of 75 MW combustion turbine generating units, the first of which is scheduled for completion in June 1995, and also the implementation of DSM programs. ENVIRONMENTAL CONSIDERATIONS The operations of DP&L, including the commonly owned facilities operated by DP&L, CG&E and CSP, are subject to federal, state, and local regulation as to air and water quality, disposal of solid waste and other environmental matters, including the location, construction and initial operation of new electric generating facilities and most electric transmission lines. DP&L expended $9 million for environmental control facilities during 1994. The possibility exists that current environmental regulations could be revised which could change the level of estimated 1995-1999 construction expenditures. See CONSTRUCTION AND FINANCING PROGRAM OF DPL INC. Air Quality ----------- Changing environmental regulations continue to increase the cost of providing service in the utility industry. The Clean Air Act Amendments of 1990 (the "Act") will limit sulfur dioxide and nitrogen oxide emissions nationwide. The Act will restrict emissions in two phases with Phase I compliance completed by 1995 and Phase II completed by 2000. Final regulations were issued by the U.S. EPA on January 11, 1993. These regulations are consistent with earlier Act restrictions and do not change the expected costs of compliance of DP&L. DP&L's environmental compliance plan ("ECP") was approved by the PUCO on May 6, 1993. Phase I requirements are met by switching to lower sulfur coal at several commonly owned electric generating facilities and increasing existing scrubber removal efficiency. Cost estimates to comply with Phase I of the Act are approximately $10 million in capital expenditures. Phase II requirements can be met primarily by switching to lower sulfur coal at all non-scrubbed coal-fired electric generating units. Overall compliance is projected to have a minimal 1% to 2% approximate price impact. DP&L anticipates that costs to comply with the Act will be eligible for recovery in future fuel hearings and other regulatory proceedings. The PUCO is expected I-14 to initiate a hearing in 1995 to review DP&L's Phase I compliance plans. DP&L is currently in the process of updating its ECP and anticipates submitting it to the PUCO in the second half of 1995. In December 1988, the United States Environmental Protection Agency ("U.S. EPA") notified the State of Ohio that the portion of its State Implementation Plan ("SIP") dealing with sulfur dioxide emission limitations for Hamilton County (in southwestern Ohio) was deficient and required the Ohio Environmental Protection Agency ("Ohio EPA") to develop a new SIP within 18 months. The notice affected industrial and utility sources and could have required significant reductions in sulfur dioxide emission limitations at CG&E's Miami Fort Units 7 and 8 which are jointly owned with DP&L. In October 1991, the Ohio EPA adopted new SO2 regulations for Hamilton County. These regulations did not change the preexisting requirements for Miami Fort Units 7 and 8. These regulations became effective September 22, 1994. Land Use -------- DP&L and numerous other parties have been notified by the U.S. EPA or Ohio EPA that it considers them Potentially Responsible Parties ("PRPs") for clean-up at four superfund sites in Ohio: the Sanitary Landfill Site on Cardington Road in Montgomery County, Ohio, the United Scrap Lead Site in Miami County, Ohio, the Powell Road Landfill in Huber Heights, Montgomery County, Ohio, and the North Sanitary (a.k.a. Valleycrest) Landfill in Dayton, Montgomery County, Ohio. DP&L received notification from the U.S. EPA in July 1987, for the Cardington Road site. DP&L has not joined the PRP group formed at that site because of the absence of any known evidence that DP&L contributed hazardous substances to this site. The Record of Decision issued by the U.S. EPA identifies the chosen clean-up alternative at a cost estimate of $8.1 million. The final resolution will not have a material effect on DP&L's financial position, earnings or cashflow. I-15 DP&L received notification from the U.S. EPA in September 1987, for the United Scrap Lead Site. DP&L has joined a PRP group for this site, which is actively conferring with the U.S. EPA. The Record of Decision issued by the U.S. EPA estimates clean-up costs at $27.1 million. DP&L is one of over 200 parties to this site, and its estimated contribution to the site is less than .01%. Nearly 60 PRPs are actively working to settle the case. DP&L is participating in the sponsorship of a study to evaluate alternatives to the U.S. EPA's clean-up plan. The final resolution of these investigations will not have a material effect on DP&L's financial position, earnings or cashflow. DP&L and numerous other parties received notification from the U.S. EPA on May 21, 1993 that it considers them PRPs for clean-up of hazardous substances at the Powell Road Landfill Site in Huber Heights, Ohio. DP&L has joined the PRP group for the site. On October 1, 1993, the U.S. EPA issued its Record of Decision identifying a cost estimate of $20.5 million for the chosen remedy. DP&L is one of over 200 PRPs to this site, and its estimated contribution is less than 1%. The final resolution will not have a material effect on DP&L's financial position, earnings or cashflow. DP&L and numerous other parties received notification from the Ohio EPA on July 27, 1994 that it considers them PRPs for clean-up of hazardous substances at the North Sanitary Landfill site in Dayton, Ohio. DP&L has not joined the PRP group formed for the site because the available information does not demonstrate that DP&L contributed wastes to the site. The final resolution will not have a material effect on DP&L's financial position, earnings or cashflow. I-16
THE DAYTON POWER AND LIGHT COMPANY OPERATING STATISTICS ELECTRIC OPERATIONS Years Ended December 31, ----------------------------------- 1994 1993 1992 ---- ---- ---- Electric Output (millions of kWh) Generation - Coal-fired units.................. 14,483 14,729 13,639 Other units....................... 27 17 3 Power purchases...................... 897 1,107 1,514 Exchanged and transmitted power...... 3 (7) 14 Company use and line losses.......... (1,191) (1,170) (1,116) -------- -------- -------- Total............................. 14,219 14,676 14,054 ======== ======== ======== Electric Sales (millions of kWh) Residential.......................... 4,465 4,558 4,260 Commercial........................... 3,068 3,006 2,896 Industrial........................... 4,388 4,089 3,938 Public authorities and railroads..... 1,333 1,356 1,311 Private utilities and wholesale...... 965 1,667 1,649 -------- -------- -------- Total............................. 14,219 14,676 14,054 ======== ======== ======== Electric Customers at End of Period Residential.......................... 420,487 416,508 413,040 Commercial........................... 41,647 40,606 39,685 Industrial........................... 2,400 2,387 2,415 Public authorities and railroads..... 5,320 5,287 5,130 Other................................ 18 17 16 -------- -------- -------- Total............................. 469,872 464,805 460,286 ======== ======== ======== Operating Revenues (thousands) Residential.......................... $390,531 $373,760 $326,547 Commercial........................... 218,046 200,124 180,890 Industrial........................... 228,546 205,996 189,720 Public authorities and railroads..... 75,387 72,859 67,596 Private utilities and wholesale...... 24,273 38,491 35,174 Other................................ 9,110 10,090 9,372 -------- -------- -------- Total............................. $945,893 $901,320 $809,299 ======== ======== ======== Residential Statistics (per customer-average) Sales - kWh.......................... 10,676 10,998 10,358 Revenue.............................. $ 933.70 $ 901.91 $ 794.03 Rate per kWh (Month of Dec.)(cents).. 8.68 7.99 7.23
I-17
THE DAYTON POWER AND LIGHT COMPANY OPERATING STATISTICS GAS OPERATIONS Years Ended December 31, ---------------------------------- 1994 1993 1992 ---- ---- ---- Gas Output (thousands of MCF) Direct market purchases .............. 43,140 44,284 46,229 Liquefied petroleum gas............... 144 58 7 Company use and unaccounted for....... (1,227) (1,164) (1,717) Transportation gas received........... 15,141 13,704 10,973 -------- -------- -------- Total.............................. 57,198 56,882 55,492 ======== ======== ======== Gas Sales (thousands of MCF) Residential........................... 27,911 28,786 27,723 Commercial............................ 8,081 8,468 8,642 Industrial............................ 3,150 3,056 4,914 Public authorities.................... 2,909 3,171 3,402 Transportation gas delivered.......... 15,147 13,401 10,811 -------- -------- -------- Total.............................. 57,198 56,882 55,492 ======== ======== ======== Gas Customers at End of Period Residential........................... 266,116 262,834 260,471 Commercial............................ 21,060 20,853 20,589 Industrial............................ 1,528 1,527 1,577 Public authorities.................... 1,317 1,333 1,311 -------- -------- -------- Total.............................. 290,021 286,547 283,948 ======== ======== ======== Operating Revenues (thousands) Residential........................... $157,193 $161,254 $127,532 Commercial............................ 42,382 44,321 36,148 Industrial............................ 14,949 14,890 18,633 Public authorities.................... 14,165 15,248 12,516 Other................................. 8,433 9,366 8,953 -------- -------- -------- Total.............................. $237,122 $245,079 $203,782 ======== ======== ======== Residential Statistics (per customer-average) Sales - MCF........................... 105.7 110.2 107.0 Revenue............................... $595.30 $617.33 $492.33 Rate per MCF (Month of December)...... $ 5.57 $ 5.66 $ 5.27
I-18
EXECUTIVE OFFICERS OF THE REGISTRANT (As of March 1, 1995) Business Experience, Last Five Years (Positions with Registrant Name Age Unless Otherwise Indicated) Dates --------------------- --- ----------------------------- ------------------ Peter H. Forster 52 Chairman, President and Chief 4/05/88 - 3/01/95 Executive Officer Chairman, DP&L 4/06/92 - 3/01/95 Chairman and Chief Executive 8/02/88 - 4/06/92 Officer, DP&L Allen M. Hill 49 President and Chief Executive 4/06/92 - 3/01/95 Officer, DP&L President and Chief Operating 8/02/88 - 4/06/92 Officer, DP&L Paul R. Anderson 52 Controller, DP&L 4/12/81 - 3/01/95 Stephen P. Bramlage 48 Assistant Vice President, DP&L 1/01/94 - 3/01/95 Director, Service Operations, 10/29/89 - 1/01/94 DP&L Robert M. Combs 49 Vice President, DP&L 5/09/94 - 3/01/95 Treasurer, DP&L 3/17/93 - 5/09/94 Director, J. M. Stuart 9/16/91 - 3/17/93 Electric Generating Station United States Navy Production Officer, 8/01/88 - 9/16/91 Charleston Naval Shipyard Georgene H. Dawson 45 Assistant Vice President, DP&L 1/01/94 - 3/01/95 Director, Service Operations, 4/03/92 - 1/01/94 DP&L Service Center Manager 6/11/89 - 4/03/92 Jeanne S. Holihan 38 Assistant Vice President, DP&L 3/17/93 - 3/01/95 Treasurer, DP&L 11/06/90 - 3/17/93 Director, Financial 4/01/90 - 11/06/90 Administration and Planning Manager, Financial 4/02/89 - 4/01/90 Administration and Planning
I-19
EXECUTIVE OFFICERS OF THE REGISTRANT (As of March 1, 1995) Business Experience, Last Five Years (Positions with Registrant Name Age Unless Otherwise Indicated) Dates --------------------- --- ----------------------------- ------------------ Thomas M. Jenkins 43 Group Vice President and 5/09/94 - 3/01/95 Treasurer, DPL Inc. and DP&L Group Vice President and 11/06/90 - 5/09/94 Treasurer, Group Vice President, DP&L Vice President and Treasurer, 11/01/88 - 11/06/90 DPL Inc. and DP&L Stephen F. Koziar, Jr. 50 Group Vice President and 1/31/95 - 3/01/95 Secretary, DPL Inc. and DP&L Group Vice President, 12/10/87 - 1/31/95 DPL Inc. and DP&L Judy W. Lansaw 43 Group Vice President, DPL Inc. 1/31/95 - 3/01/95 and DP&L Group Vice President and 12/07/93 - 1/31/95 Secretary, DPL Inc. and DP&L Vice President and Secretary 8/01/89 - 12/07/93 DPL Inc. and DP&L Bryce W. Nickel 38 Assistant Vice President, DP&L 1/01/94 - 3/01/95 Director, Service Operations, 10/29/89 - 1/01/94 DP&L H. Ted Santo 44 Group Vice President, DP&L 12/08/92 - 3/01/95 Vice President, DP&L 2/28/88 - 12/08/92
I-20 Item 2- PROPERTIES Electric -------- Information relating to DP&L's electric properties is contained in Item 1 - BUSINESS, DPL INC. (pages I-1 and I-2), CONSTRUCTION AND FINANCING PROGRAM OF DPL INC. (pages I-4 through I-6) and ELECTRIC OPERATIONS AND FUEL SUPPLY (pages I-6 through I-8) - Notes 2 and 5 of Notes to Consolidated Financial Statements on pages 21 and 23, respectively, of the registrant's 1994 Annual Report, which pages are incorporated herein by reference. Natural Gas ----------- Information relating to DP&L's gas properties is contained in Item 1 - BUSINESS, DPL INC. (pages I-1 and I-2) and GAS OPERATIONS AND GAS SUPPLY (pages I-8 through I-10), which pages are incorporated herein by reference. Steam ----- DP&L owns two steam generating plants and the steam distribution facility serving downtown Dayton, Ohio. Other ----- DP&L owns a number of area service buildings located in various operating centers. Substantially all property and plant of DP&L is subject to the lien of the Mortgage securing DP&L's First Mortgage Bonds. Item 3 - LEGAL PROCEEDINGS Information relating to legal proceedings involving DP&L is contained in Item 1 - BUSINESS, DPL INC. (pages I-1 and I-2), COMPETITION (pages I-2 through I-3), ELECTRIC OPERATIONS AND FUEL SUPPLY (pages I-6 through I-8), GAS OPERATIONS AND GAS SUPPLY (pages I-8 through I-10), RATE REGULATION AND GOVERNMENT LEGISLATION (pages I-10 through I-14) and ENVIRONMENTAL CONSIDERATIONS (pages I-14 through I-16) and - Note 2 of Notes of Consolidated Financial Statements on page 21 of the registrant's 1994 Annual Report, which pages are incorporated herein by reference. Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS DPL Inc.'s Annual Meeting of Shareholders ("Annual Meeting") was held on April 19, 1994. Three directors of DPL Inc. were elected at the Annual Meeting, each of whom will serve a three year term expiring in 1997. The nominees were elected as follows: Ernie Green, 90,918,169 shares FOR, 989,620 shares WITHHELD; David R. Holmes, 90,677,633 shares FOR, 1,230,156 shares WITHHELD; and Burnell R. Roberts, 90,959,663 shares FOR, 948,126 shares WITHHELD. I-21 PART II ------- Item 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item of Form 10-K is set forth on pages 14, 27 and 28 of the registrant's 1994 Annual Report, which pages are incorporated herein by reference. As of December 31, 1994, there were 51,270 holders of record of DPL Inc. common equity, excluding individual participants in security position listings. DP&L's Mortgage restricts the payment of dividends on DP&L's Common Stock under certain conditions. In addition, so long as any Preferred Stock is outstanding, DP&L's Amended Articles of Incorporation contain provisions restricting the payment of cash dividends on any of its Common Stock if, after giving effect to such dividend, the aggregate of all such dividends distributed subsequent to December 31, 1946 exceeds the net income of DP&L available for dividends on its Common Stock subsequent to December 31, 1946, plus $1,200,000. As of year end, all earnings reinvested in the business of DP&L were available for Common Stock dividends. The Credit Agreement requires that the aggregate assets of DP&L and its subsidiaries (if any) constitute not less than 60% of the total consolidated assets of DPL Inc., and that DP&L maintain common shareholder's equity (as defined in the Credit Agreement) at least equal to $550 million. Item 6 - SELECTED FINANCIAL DATA The information required by this item of Form 10-K is set forth on page 14 of the registrant's 1994 Annual Report, which page is incorporated herein by reference. Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item of Form 10-K is set forth in Note 2 of Notes to Consolidated Financial Statements on page 21 and on pages 1, 13, 15 and 16 of the registrant's 1994 Annual Report, which pages are incorporated herein by reference. Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item of Form 10-K is set forth on page 14 and on pages 17 through 27 of the registrant's 1994 Annual Report, which pages are incorporated herein by reference. II-1 Report of Independent Accountants on Financial Statement Schedules -------------------------------- To The Board of Directors of DPL Inc. Our audits of the consolidated financial statements referred to in our report dated January 18, 1995 appearing on page 27 of the 1994 Annual Report to Shareholders of DPL Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Price Waterhouse LLP Price Waterhouse LLP Dayton, Ohio January 18, 1995 II-2 Item 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III -------- Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Directors of the Registrant --------------------------- The information required by this item of Form 10-K is set forth on pages 2 through 5 of DPL Inc.'s definitive Proxy Statement dated March 1, 1995, relating to the 1995 Annual Meeting of Shareholders ("1995 Proxy Statement"), which pages are incorporated herein by reference, and on pages I-19 and I-20 of this Form 10-K. Item 11 - EXECUTIVE COMPENSATION The information required by this item of Form 10-K is set forth on pages 9 through 15 of the 1995 Proxy Statement, which pages are incorporated herein by reference. Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item of Form 10-K is set forth on pages 3 through 6 and on pages 14 and 15 of the 1995 Proxy Statement, which pages are incorporated herein by reference. Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. III-1 PART IV ------- Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K Pages of 1994 Form 10-K Incorporated by Reference ------------------ Report of Independent Accountants..................... II-2 (a) Documents filed as part of the Form 10-K 1. Financial Statements Pages of 1994 Annual -------------------- Report Incorporated by Reference -------------------- Consolidated Statement of Results of Operations for the three years in the period ended December 31, 1994..................................... 17 Consolidated Statement of Cash Flows for the three years in the period ended December 31, 1994..... 18 Consolidated Balance Sheet as of December 31, 1994 and 1993......................................... 19 Notes to Consolidated Financial Statements............ 20 - 26 Report of Independent Accountants..................... 27 2. Financial Statement Schedule ---------------------------- For the three years in the period ended December 31, 1994: Page No. ------------- Schedule II - Valuation and qualifying accounts IV-7 The information required to be submitted in schedules I, III and IV is omitted as not applicable or not required under rules of Regulation S-X. IV-1 3. Exhibits -------- The following exhibits have been filed with the Securities and Exchange Commission and are incorporated herein by reference. Incorporation by Reference ----------------- 2 Copy of the Agreement of Merger among Exhibit A to the DPL Inc., Holding Sub Inc. and DP&L 1986 Proxy Statement dated January 6, 1986.................. (File No. 1-2385) 3(a) Copy of Amended Articles of Exhibit 3 to Report on Incorporation of DPL Inc. dated Form 10-K for year ended January 4, 1991, and amendment dated December 31, 1991 December 3, 1991....................... (File No. 1-9052) 3(b) Copy of Amendment dated April 20, 1993 Exhibit 3(b) to Report to DPL Inc.'s Amended Articles of on Form 10-K for the Incorporation.......................... year ended December 31, 1993 (File No. 1-9052) 4(a) Copy of Composite Indenture dated as of Exhibit 4(a) to October 1, 1935, between DP&L and Report on Form 10-K The Bank of New York, Trustee with all for year ended amendments through the Twenty-Ninth December 31, 1985 Supplemental Indenture................. (File No. 1-2385) 4(b) Copy of the Thirtieth Supplemental Exhibit 4(h) to Indenture dated as of March 1, 1982, Registration Statement and The Bank of New York, Trustee...... No. 33-53906 4(c) Copy of the Thirty-First Supplemental Exhibit 4(h) to Indenture dated as of November 1, 1982, Registration Statement between DP&L and The Bank of New York, No. 33-56162 Trustee................................ 4(d) Copy of the Thirty-Second Supplemental Exhibit 4(i) to Indenture dated as of November 1, 1982, Registration Statement between DP&L and The Bank of New York, No. 33-56162 Trustee................................ 4(e) Copy of the Thirty-Third Supplemental Exhibit 4(e) to Indenture dated as of December 1, 1985, Report on Form 10-K between DP&L and The Bank of New York, for year ended Trustee................................ December 31, 1985 (File No. 1-2385) 4(f) Copy of the Thirty-Fourth Supplemental Exhibit 4 to Report Indenture dated as of April 1, 1986, on Form 10-Q for between DP&L and The Bank of New York, quarter ended Trustee................................ June 30, 1986 (File No. 1-2385) IV-2 4(g) Copy of the Thirty-Fifth Supplemental Exhibit 4(h) to Indenture dated as of December 1, 1986, report on Form 10-K between DP&L and The Bank of New York, for the year ended Trustee................................ December 31, 1986 (File No. 1-9052) 4(h) Copy of the Thirty-Sixth Supplemental Exhibit 4(i) to Indenture dated as of August 15, 1992, Registration Statement between DP&L and The Bank of New York, No. 33-53906 Trustee............................... 4(i) Copy of the Thirty-Seventh Supplemental Exhibit 4(j) to Indenture dated as of November 15, 1992, Registration Statement between DP&L and The Bank of New York, No. 33-56162 Trustee............................... 4(j) Copy of the Thirty-Eighth Supplemental Exhibit 4(k) to Indenture dated as of November 15, 1992, Registration Statement between DP&L and The Bank of New York, No. 33-56162 Trustee............................... 4(k) Copy of the Thirty-Ninth Supplemental Exhibit 4(k) to Indenture dated as of January 15, 1993, Registration Statement between DP&L and The Bank of New York, No. 33-57928 Trustee................................ 4(l) Copy of the Fortieth Supplemental Exhibit 4(m) to Report Indenture dated as of February 15, 1993, on Form 10-K for the between DP&L and The Bank of New York, year ended December 31, Trustee................................ 1992 (File No. 1-2385) 4(m) Copy of the Credit Agreement dated as Exhibit 4(k) to DPL of November 2, 1989 between DPL Inc., Inc.'s Registration the Bank of New York, as agent, and Statement on Form S-3 the banks named therein................ (File No. 33-32348) 4(n) Copy of Shareholder Rights Agreement Exhibit 4 to Report between DPL Inc. and The First on Form 8-K dated National Bank of Boston................ December 13, 1991 (File No. 1-9052) 10(a) Description of Management Incentive Exhibit 10(c) to Compensation Program for Certain Report on Form 10-K Executive Officers..................... for the year ended December 31, 1986 (File No. 1-9052) 10(b) Copy of Severance Pay Agreement Exhibit 10(f) to Report with Certain Executive Officers........ on Form 10-K for the year ended December 31, 1987 (File No. 1-9052) IV-3 10(c) Copy of Supplemental Executive Exhibit 10(e) to Report Retirement Plan amended August 6, on Form 10-K for the 1991................................... year ended December 31, 1991 (File No. 1-9052) 10(d) Amended description of Directors' Exhibit 10(d) to Report Deferred Stock Compensation Plan on Form 10-K for the effective January 1, 1993.............. year ended December 31, 1993 (File No. 1-9052) 10(e) Amended description of Deferred Exhibit 10(e) to Report Compensation Plan for Non-Employee on Form 10-K for the Directors effective January 1, 1993.... year ended December 31, 1993 (File No. 1-9052) 10(f) Copy of Management Stock Incentive Exhibit 10(f) to Report Plan amended January 1, 1993........... on Form 10-K for the year ended December 31, 1993 (File No. 1-9052) 18 Copy of preferability letter relating Exhibit 18 to Report on to change in accounting for unbilled Form 10-K for the year revenues from Price Waterhouse......... ended December 31, 1987 (File No. 1-9052) 21 Copy of List of Subsidiaries of Exhibit 21 to Report DPL Inc................................ on Form 10-K for the year ended December 31, 1993 (File No. 1-9052) The following exhibits are filed herewith: Page No. ---------------------- 13 Copy of DPL Inc.'s 1994 Annual Report to Shareholders........................ 23 Consent of Price Waterhouse............ Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, DPL Inc. has not filed as an exhibit to this Form 10-K certain instruments with respect to long-term debt if the total amount of securities authorized thereunder does not exceed 10% of the total assets of DPL Inc. and its subsidiaries on a consolidated basis, but hereby agrees to furnish to the SEC on request any such instruments. (b) Reports on Form 8-K ------------------- None IV-4 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. DPL Inc. Registrant March 28, 1995 Peter H. Forster --------------------------------- Peter H. Forster Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Director March , 1995 ------------------------- (T. J. Danis) Director March , 1995 ------------------------- (J. F. Dicke, II) Peter H. Forster Director and Chairman March 28, 1995 ------------------------- (principal executive (P. H. Forster) officer) Ernie Green Director March 29, 1995 ------------------------- (E. Green) Director March , 1995 ------------------------- (J. G. Haley) IV-5 Allen M. Hill Director March 30, 1995 ------------------------- (A. M. Hill) Director March , 1995 ------------------------- (W A. Hillenbrand) David R. Holmes Director March 30, 1995 ------------------------- (D. R. Holmes) Thomas M. Jenkins Group Vice President March 30, 1995 ------------------------- and Treasurer (T. M. Jenkins) (principal financial and accounting officer) Burnell R. Roberts Director March 30, 1995 ------------------------- (B. R. Roberts) IV-6
Schedule II DPL INC. VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 1994, 1993 and 1992 -------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E -------------------------------------------------------------------------------------------------------- Additions Balance at ------------------- Balance Beginning Charged to Deductions at End Description of Period Income Other (1) of Period -------------------------------------------------------------------------------------------------------- ------------------------thousands---------------------------- 1994: Deducted from accounts receivable-- Provision for uncollectible accounts... $ 9,122 $ 1,553 $ - $2,874 $ 7,801 1993: Deducted from accounts receivable-- Provision for uncollectible accounts... $ 10,461 $ 1,353 $ - $2,692 $ 9,122 1992: Deducted from accounts receivable-- Provision for uncollectible accounts... $ 11,510 $ 1,675 $ - $2,724 $10,461 (1) Amounts written off, net of recoveries of accounts previously written off.
IV-7 EX-13 2 1994 DPL INC. ANNUAL REPORT Exhibit 13 (see appendix for logo description) (see appendix for photo description) (see appendix for logo description) 1994 Annual Report [cover] (see appendix for logo description) Newsflash December 8, 1994 DP&L Selected as Top Electric Company in the Country The Dayton Power and Light Company has been selected as the 1994 Utility of the Year by Electric Light and Power magazine. In a special ceremony today at DP&L's Energy Resource Center, DPL Inc. Chairman Pete Forster received the award from Wayne Beaty, managing editor of EL&P, the electric industry's premiere publication. "This award belongs to you, the employees of DP&L," said Pete. "You are the ones who made it happen. Being selected as Utility of the Year recognizes your hard work, commitment to excellence and quality customer service." EL&P cited DP&L's outstanding performance to customers, employees and shareholders and responsible, caring corporate citizenship as the major factors for the Company's selection as the number one investor-owned utility in the country. DP&L is the 26th recipient of this annual honor. The Company and our 1994 accomplishments will be featured in the December issue of the publication. The Company was also recognized as Utility of the Year at the POWER-GEN AMERICAS '94 conference, December 7, a yearly forum for electric industry leaders to discuss energy issues. "Every employee plays a vital role in making the Company successful," said Pete. "This award is an excellent example of what people can accomplish when they work together as a team toward a common goal." "Now, more than ever, it's important to set our sights on the future and use this award as a stepping stone to reach a higher level of performance in 1995," said Pete. CONTENTS Setting The Direction/Corporate Profile 2 Creating The Strategies/Letter to Shareholders 3 Distinguished Performance 4 Making It Happen 6 Financial Review 13, 15-16 Financial & Statistical Summary 14 Financial Statements & Notes 17-27 Corporate Information 28 [inside front cover]
Financial & Operating Highlights 1994 1993 %change ---------------------------------------------------------------------- Financial Performance: Earnings per share of common stock $ 1.54 1.42 9 Dividends paid per share $ 1.18 1.12 5 Return on shareholders' equity % 14.1 13.7 Return on total capital % 11.3 11.0 Market value per share at December 31 $ 20-1/2 20-5/8 (1) Book value per share at December 31 $ 11.17 10.51 6 Total electric and natural gas revenues (millions) $ 1,180.6 1,144.0 3 Taxes per share $ 2.21 1.95 13 Number of common shareholders 51,270 53,275 (4) Cash provided by operating activities (millions) $ 286.9 235.3 22 First Mortgage Bond Ratings: Duff & Phelps, Inc. AA AA- Standard & Poor's Corporation AA- A Moody's Investors Service A1 A2 Capital Investment Performance: Construction additions (millions) $ 101.1 88.9 14 Construction expenditures paid from internal funds % 100 100 DP&L Operating Performance: Electric -- Average price per kWh-retail and wholesale customers (calendar year) cents 6.59 6.07 9 Fuel efficiency -- Heat rate-Btu per kWh 9,836 9,793 - Industry average 10,351 10,340 - Fuel savings (millions) $ 11.0 12.0 (8) System peak load-MW (calendar year) 2,824 2,765 2 Reserve margin-capacity relative to peak load % 6.8 9.1 Gas -- Average price per MCF-retail customers (calendar year) $ 5.44 5.42 -
1 DIRECTORS Pictured from left to right: BURNELL R. ROBERTS (2)(3) Retired Chairman and Chief Executive Officer, The Mead Corporation, Dayton, Ohio DAVID R. HOLMES (1)(4) Chairman, President and Chief Executive Officer, The Reynolds and Reynolds Company, Dayton, Ohio JAMES F. DICKE, II (2)(3) President, Crown Equipment Corporation, New Bremen, Ohio PETER H. FORSTER (1)(3)(4) Chairman, President and Chief Executive Officer, DPL Inc., Chairman, DP&L, Dayton, Ohio W AUGUST HILLENBRAND (2)(3) President and Chief Executive Officer, Hillenbrand Industries, Batesville, Indiana JANE G. HALEY (1)(4) President, Gosiger, Inc., Dayton, Ohio ALLEN M. HILL (1)(4) President and Chief Executive Officer, DP&L, Dayton, Ohio THOMAS J. DANIS (1) Former Chairman and Chief Executive Officer, The Danis Companies, Dayton, Ohio ERNIE GREEN (1)(4) President and Chief Executive Officer, Ernie Green Industries, Dayton, Ohio All Directors of DPL Inc. are also Directors of DP&L. 1994 Committee Assignments: DPL Inc. - Finance and Audit Review (1) Compensation and Management Review (2) Executive (3) DP&L - Community and External Relations (4) (see appendix for photo description) Setting The Direction DP&L Service Area West Central Ohio (see appendix for artwork description) Corporate Profile: The interests of shareholders, employees and the community are all interrelated. These relationships are guided by the Board of Directors and Management setting the direction and creating the strategies. These strategies are fulfilled by our employees making it happen and working together with individual communities. Performing responsibly in all these areas leads to greater value for the shareholder. DPL Inc. was formed in 1986 as a holding company. Its principal subsidiary is The Dayton Power and Light Company ("DP&L"). DP&L sells electricity and natural gas to residential, commercial, industrial and governmental customers in a 6,000 square mile area of West Central Ohio, and employs over 3,000 people. Electricity for DP&L's 24 county service area is generated at eight power plants and is distributed to 470,000 retail customers. On a wholesale basis, electric energy is supplied to 12 municipalities. Natural gas service is provided to 290,000 customers in 16 counties. DP&L also provides steam service to 200 customers in downtown Dayton for heating and industrial processing. The corporate offices of DPL Inc. are located at: Courthouse Plaza Southwest Dayton, Ohio 45402 (513) 224-6000 2 Creating The Strategies (see appendix for logo description) Dear Shareholders: Nationally, 1994 saw utility common stock prices being battered by a combination of increases in long-term rates, inflation fears, uncertain economic growth and generally below average dividend and earnings growth over-shadowed by certain change for the utility industry as we know it today. Against this backdrop, at DPL we focused our effort heavily on keeping the stock price up, generating above average earnings, substantially increasing dividends and taking advantage of the healthy economy in our region. Getting our success story out by visiting 20 cities, and talking with over 400 analysts helped us swim against the tide this past year. While the industry total return was off 16%, we finished up 5% with the stock price closing at $20- 1/2. The people who heard our strategy generally agreed that it was right for DPL and many of them, who are long-term investors, bought our stock. In addition, during 1994, our credit ratings were upgraded by all three major rating agencies, including most recently, an upgrade to "AA" by Duff & Phelps. Our basic belief, incorporated in our strategy since 1978, is that we sell a commodity, and a commodity sells on price. The components that support this belief and make DPL successful remain unchanged: - Consistent, superior plant operations and low, but adequate reserves - Closely managed costs and adoption of best practices - Competitive retail electric and gas prices - A growing service area economy - Strong financial performance and a strong balance sheet We also believe that we have to produce a meaningful return to you, our shareholder, every year. We increased our annual dividend rate by six cents a year, or 5.4%, in February 1994 to $1.18 per share and increased it again on January 31, 1995 by six cents, or 5.1%, to $1.24 per share. Our continuing goal is sustainable above average earnings and sustainable above average dividend growth. We finished the year with earnings per share at $1.54 compared to $1.42 last year. A proud moment for DPL and its employees was being named the 1994 Utility of the Year. This achievement reaffirms the public's confidence in us and recognizes our commitment to the communities we serve. We believe, nationally, 1995 could be a lot like 1994. The year will begin with a lot political change, but of unknown impact, and an increasing interest rate environment. We are going to stay with the basics that we know and do well. We like our business and believe in our customers in West Central Ohio. It's a growing, healthy part of America and we are proud to be the energy supplier. The State of Ohio is pro growth with a reasonable balance in government, an experienced utility commission and elected officials committed to growth. Thanks for letting us work for you. Best regards, Peter H. Forster Peter H. Forster Chairman, President & CEO, DPL Inc. Total Return- Five Year Average Annual Return Percent (with reinvested Dividends) --Industry Average (see appendix for graph description) Dividends Per Share Dollars (see appendix for graph description) Earnings Per Share Dollars (see appendix for graph description) 3 Distinguished Performance Growing Service Area Economy - 1 Setting the Direction Enhance strong partnership with West Central Ohio to achieve economic growth Creating The Strategies Promote the strengths of West Central Ohio Attract new business and encourage expansion of existing business Work with local communities to enhance the quality of life in West Central Ohio Promote wise energy use Making It Happen Regional unemployment at less than 5% is below that of Ohio and the United States State of Ohio #1 ranked in economic development and expansion 1991 - 1993 Solid growth in value-added jobs, business customers and sales to business in 1994 Nationally recognized, effective and comprehensive demand- side management program Distinguished Performance Managing Costs - 2 Setting The Direction Manage costs at all levels while achieving performance goals Creating The Strategies Improve Company-wide culture of cost control Predict and control operating and maintenance expense Manage capital expenditures to maximize reliability in least cost manner Making It Happen All employees are shareholders and have incentive pay tied directly to cost control Predictable labor costs through the rest of the century DP&L employment remains below 1980 levels Capital expenditures at or below depreciation Distinguished Performance Strong Financial Performance - 3 Setting The Direction Produce strong financial performance while minimizing future risk Creating The Strategies Achieve above average earnings growth through energy sales growth and control of expenses Create and maintain financial risk profile that results in improved credit ratings Produce strong cashflow Finance all capital expenditures through internal cashflow Making It Happen EPS growth of 8.5% in 1994 and 6.0% in 1993 Credit ratings have been upgraded from BBB+ to AA since 1992, versus trend of downgrades in industry 100% cash earnings in 1994 Refinancing stretched maturities - no short or medium-term interest rate risk 4 Distinguished Performance Competitive Prices - 4 Setting The Direction Keep prices competitive relative to the state and the region Creating The Strategies Achieve successful solutions which balance the needs of customers, shareholders and employees Implement cost-effective compliance plans for regulatory initiatives Making It Happen Minimal Clean Air Act exposure will solidify competitive position with no material price impact Non-nuclear, 100% fossil fuel Company reduces operating risk Production costs are low and will be reduced further Natural gas pipeline access and contracts ensure low overall energy prices Distinguished Performance Superior Operations - 5 Setting The Direction Achieve consistent, superior operations with the most efficient use of existing assets Creating The Strategies Focus on customer service throughout the organization Operate with low, but adequate electric reserves Maintain national leadership position in efficiency and productivity Continue with fuel contracts that will ensure low costs and enhance flexibility Making It Happen Customer satisfaction remains at historically high levels Top ten in power plant efficiency and productivity nine times out of the last ten years Fuel contracts allow type and amount of coal procurement options at low and predictable prices Distinguished Performance Return to Shareholders - 6 Setting The Direction Deliver above average and sustainable earnings and dividend growth - maximize shareholder value Creating The Strategies Achieve sustainable, above average earnings and dividend growth Produce strong financial performance Differentiate the Company from the industry in terms of performance and position Minimize future risk through "Plain Vanilla" Balance Sheet Making It Happen Dividend increases in seven of last eight years, averaging 3.6% per year Total return of 110% since 1989 versus 6% for the industry Intensive investor relations effort in 1994 that resulted in nearly 100 meetings with investors managing total capital of over $4 trillion 5 Caption to photograph: Growing Service Area Economy - 1 General Motors Corp. continues its presence in the Dayton area. The Moraine Assembly Plant builds the popular redesigned Chevy Blazer and GMC Jimmy. (see appendix for photo description) 6 Making It Happen (see appendix for logo description) Caption: Managing Costs - 2 DPL is recognized as being among the best in the energy industry at managing costs. Employees are key to our success, as all employees are shareholders and have incentive pay tied directly to cost control. DPL Inc. continued to distinguish itself as one of the nation's top-performing energy companies in an extremely challenging year. The formula for success and continued improvement remains simple. Combine a strong West Central Ohio economy with a quality product and excellent customer service to produce solid financial returns for DPL shareholders. The West Central Ohio economy experienced remarkable growth in 1994. Productivity and expansion is on the rise in all sectors of West Central Ohio's diverse economy, including light manufacturing, research and development, high technology, transportation and professional services. This growth means new, value-added jobs for our region which, in turn, supports additional economic development opportunities and expansion. Unemployment in our area was below five percent, well under the national average, reflecting essentially full employment. The economic growth within our service territory continues to outpace state and national performance. This is due, in part, to expansion of already significant operations at General Motors Corporation, Honda of America, Copeland Corporation, Emery Worldwide and Whirlpool Corporation. For the past three years, Ohio ranked first in the nation for new manufacturing facilities and plant expansions, both in square footage and investment dollars. That's better than states such as Texas, North Carolina and California -- and indications are that the state and West Central Ohio will continue this positive trend. We play a major role in developing our customer base and highlighting the strengths of West Central Ohio. Through our energy incentive programs, we have supported the creation of more than 54,000 new jobs since 1986. These initiatives include WorkSmart, which promotes job creation through energy- efficient growth, and TargetSearch, which helps our communities attract new business. In a year when industry stock prices were down significantly, DPL was one of only a few utilities that produced a positive overall return for 1994. Positioning itself as a low-risk investment in an industry currently challenged by uncertainty, DPL followed a financial strategy that provides shareholders with above average earnings and dividend growth. Caption to photograph: Whirlpool, the world's leading manufacturer and marketer of home appliances, announced construction of a new, world-class assembly facility at its Greenville, Ohio division. Currently producing mixers and blenders, the $12.5 million project is expected to add 100 new jobs to the current work force of 350. Selected from 27 potential sites, Greenville and the dedicated loyal work force have proven their ability to consistently build world- class products. (see appendix for photo and logo description) 7 (see appendix for logo description) In 1994, earnings per share rose to $1.54, an increase of 8.5%. Dividends to our shareholders, which have increased seven of the last eight years, were increased six cents to $1.18 per share. And return on shareholders' equity was 14.1%. As measured by the market-to-book ratio, DPL ranks in the top ten nationally in our industry. As an indicator of DP&L's solid financial condition, our credit ratings were upgraded in November 1994 by Duff & Phelps and in March 1994 by both Standard and Poor's and Moody's Investors Service. Duff & Phelps raised our ratings to "AA" from "AA-", our highest rating in more than twenty years. S&P's upgrade to "AA-" was the second two-grade jump for DP&L in two years. DP&L is the only electric utility to achieve such upgrades in the last five years. The Company successfully issued 3.2 million common shares in March 1994 through a public offering in difficult market conditions. The offering was well-received by key institutional buyers and proceeds from the sale of shares were used to redeem 75% of DP&L's outstanding preferred stock. This action saves millions of dollars each year in preferred dividends. DP&L again achieved national recognition for its high standard of excellence in operating performance. In Electric Light and Power magazine's review of 1993 power generation marks at more than 100 utilities, DP&L's heat rate ranked as the second most efficient in the nation. This ranking was our best ever for heat rate, which measures the amount of energy it takes to produce one kilowatt of electricity. DP&L has placed in the top ten nine of the past ten years and in the top five for four consecutive years. Our 1994 heat rate of 9,836 Btu/kWh is expected to again be among the industry leaders. High operational standards and the effective use of resources combined with planned maintenance resulted in an equivalent forced outage rate ("EFOR") of 4.6%. EFOR measures the amount of time that an unplanned outage occurs at a generating unit. Over the past ten years, we saved our customers more than $250 million through our efficiency and productivity improvements. DP&L remains committed to its energy strategy of being an all-coal company. Flexible coal procurement contracts, in terms of cost, quality and volume, are in Caption to artwork: Sidney, Ohio is one of the many thriving West Central Ohio communities known for a quality work force and strong work ethic. DP&L continues to help communities attract new business and works closely with local, regional and state organizations to build partnerships for success in economic growth. (see appendix for artwork description) Caption: Strong Financial Performance - 3 DPL is committed to providing above average financial performance for shareholders. In 1994, 3.2 million Common Shares were issued, with the proceeds used to redeem Preferred Stock of The Dayton Power and Light Company. This action results in preferred dividend savings of $7 million annually. 8 Caption to photograph: Competitive Prices - 4 Airborne Express continues to expand its current operational hub in Wilmington, Ohio to a nightly lift capacity of about three million pounds - with a fleet of nearly 100 aircraft. The complex also includes the Airborne Stock Exchange, a combined critical parts warehouse and rapid response delivery system. (see appendix for photo description) 9 Caption to photograph: Superior Operations - 5 Corning has formed a partnership with both its customers and employees. Glass melting and forming in the Greenville, Ohio plant is a complex process using state-of- the-art technology. This plant manufactures consumer Pyrex(trademark), and pressed glass for both the automotive lighting and consumer markets. Employees work to continuously improve production processes, product quality, and customer service. (see appendix for photo description) 10 (see appendix for logo description) place and take advantage of plentiful coal supplies in the region. As a result, the Company is well-positioned to meet the requirements of the Clear Air Act Amendments, and compliance is expected to have only an insignificant impact on prices. Our employees were put to the test in 1994 when severe weather pushed DP&L's natural gas and electric system capabilities to new levels. This June, DP&L set an all-time peak of 2,824,000 kilowatts of electricity. In January, our electric system set a new winter peak of 2,747,000 kilowatts, and our natural gas customer use was 630,000 MCF, the largest one day usage in over 20 years. During both peaks, there were no forced service curtailments, particularly significant in light of DP&L's low reserve margin of 7% versus an industry average of 20%. Our customers also experienced only minimal weather-related outages. Anticipating the growing energy needs of West Central Ohio, DP&L continues to operate its plants as efficiently as possible and plans to add a small number of peaking units. The new units will be clean, dual-fired combustion turbines that can burn natural gas or low sulfur fuel oil. Because of their small size, the units can be built economically, providing additional flexibility to efficiently meet the increasing energy demands of our customers. The first peaking unit is planned to be operational in Summer 1995. DP&L is uniquely positioned for the future as a full- service electric and natural gas provider. This year, the Company added 53 miles of new gas pipelines in the northern part of our service territory. These additions strengthen the Company's natural gas distribution system and increase customers' supply and transportation options, supporting our regional strength as a total energy provider. Exceeding our customers' expectations continues to be a priority at DP&L and we regularly seek customer feedback on our progress. Our track record of providing quality customer service is confirmed by the results of frequent surveys. To ensure ongoing customer satisfaction, all employees have incentive compensation tied to factors related to quality customer service. To accomplish our customer service goals, we start with the basics. DP&L's 23 customer service centers, located throughout West Central Ohio, ensure our customers receive Caption to photograph: Way To Go, the umbrella name for our energy conservation programs, emphasizes our belief that being energy smart and money wise is definitely the Way To Go! Lucky the Dog, featured in numerous promotions, has attained local celebrity status and is part of our award winning consumer awareness campaign and an energy awareness program. (see appendix for artwork and logo description) Caption: Return to Shareholders - 6 DPL worked hard to provide top of the industry returns to our shareholders in 1994. 11 (see appendix for logo description) reliable, quality service 24 hours a day, seven days a week. From there, we take additional steps to offer programs and services that go beyond our customers expectations. DP&L's Way To Go energy conservation program has reached a broad section of our customer base. Over the past two years, more than 100,000 business and residential customers have been introduced to the value of energy efficiency through our energy and money-saving programs that include energy audits, lighting and motor rebates, and workshops. Supporting DP&L's commitment to the customer is our Energy Resource Center which showcases the latest in energy saving technology. In the first year of operation, this state-of- the-art learning center set new standards for customer service within the industry. More than 7,000 customers, including energy professionals, participated in hands-on programs at the Center. DP&L invests in the communities it serves through our education activities and employees' volunteer efforts. In 1994, DPL's "In Concert With the Environment" reached 10,000 future energy users and taught the importance of energy efficiency and protection of the environment. Additionally, 36,000 children learned energy conservation techniques and electricity and natural gas safety from DP&L employee volunteers. DP&L's Way To Go Scholars initiative combines academic excellence with valuable on-the-job experience. Since 1991, DP&L has instituted 11 scholarship programs at area universities and colleges, providing up to 44 students with tuition assistance and cooperative education opportunities each year. In recognition of a defining year of accomplishment for our customers, shareholders and employees, DP&L was named "1994 Utility of the Year" by Electric Light and Power magazine. Looking forward, we will seek out every opportunity for improvement, no matter how small. We are committed to being a full service electricity and natural gas provider that meets our customers' total energy needs -- and we continue to chart a steady financial course to ensure that DPL remains a low-risk investment in the heart of America that provides you, our shareholders, with an above average return on your investment. Caption to artwork and logo: Located in Washington Court House, Ohio, FoxMeyer's 300,000-square foot pharmaceutical distribution center is scheduled to be operational by May 1995. Employing up to 200 people in the eastern edge of DP&L's service area, the FoxMeyer facility will be the largest, most automated distribution center in the world. (see appendix for artwork and logo description) 12 Financial Review Electric Revenues Gas Revenues Total Taxes $ in millions $ in millions $ in millions (see appendix for (see appendix for (see appendix for graph description) graph description) graph description) Electric Sales Gas Sales Operating Expenses Thousands of GWH Millions of MCF $ in millions (see appendix for (see appendix for (see appendix for graph description) graph description) graph description) Average Price-Electric Average Price-Gas Construction Costs Calendar Year Calendar Year $ in millions cents/kWh $/MCF (see appendix for (see appendix for (see appendix for graph description) graph description) graph description) 13
Financial and Statistical Summary DPL Inc. 1994 1993 1992 1991 1990 ----------------------------------------------------------------------------------------------------------------------- For the years ended December 31, DPL Inc.: Earnings per share of common stock . . . . . $ 1.54 1.42 1.34 1.15 1.49 Dividends paid per share . . . . . . . . . . $ 1.18 1.12 1.08 1.08 1.04 Dividend payout ratio . . . . . . . . . . . % 76.6 78.9 80.6 93.9 69.8 Return on shareholders' equity . . . . . . . % 14.1 13.7 13.0 11.0 14.7 Net income (millions) . . . . . . . . . . . $ 154.9 139.0 138.8 119.2 153.0 Utility service revenues (millions) . . . . $ 1,187.9 1,151.3 1,017.3 995.6 945.5 Construction additions (millions) . . . . . $ 101.1 88.9 59.0 117.4 249.2 Market value per share at December 31 . . . $ 20-1/2 20-5/8 19-3/4 17-1/4 12-7/8 DP&L: Electric sales (millions of kWh)-- Residential . . . . . . . . . . . . . . . 4,465 4,558 4,260 4,571 4,125 Commercial . . . . . . . . . . . . . . . . 3,068 3,006 2,896 2,945 2,738 Industrial . . . . . . . . . . . . . . . . 4,388 4,089 3,938 3,949 3,958 Other . . . . . . . . . . . . . . . . . . 2,298 3,023 2,960 1,850 1,807 ------ ------ ------ ------ ------ Total . . . . . . . . . . . . . . . . . 14,219 14,676 14,054 13,315 12,628 Gas sales (thousands of MCF)-- Residential . . . . . . . . . . . . . . . 27,911 28,786 27,723 26,594 25,486 Commercial . . . . . . . . . . . . . . . . 8,081 8,468 8,642 8,368 8,259 Industrial . . . . . . . . . . . . . . . . 3,150 3,056 4,914 6,014 5,934 Other . . . . . . . . . . . . . . . . . . 2,909 3,171 3,402 3,187 3,076 Transportation gas delivered . . . . . . . 15,147 13,401 10,811 8,494 8,093 ------ ------ ------ ------ ------ Total . . . . . . . . . . . . . . . . . 57,198 56,882 55,492 52,657 50,848 At December 31, DPL Inc.: Book value per share . . . . . . . . . . . . $ 11.17 10.51 9.75 10.38 10.31 Total assets (millions) . . . . . . . . . . $ 3,232.7 3,302.0 2,976.7 2,972.7 2,914.8 Long-term debt and preferred stock with mandatory redemption provisions (millions) $ 1,093.7 1,132.9 990.6 1,047.1 1,055.5 DP&L: First mortgage bond ratings-- Duff & Phelps, Inc. . . . . . . . . . . . AA AA- A+ BBB+ BBB+ Standard & Poor's Corporation . . . . . . AA- A A BBB+ BBB+ Moody's Investors Service . . . . . . . . A1 A2 A2 A3 A3 Number of Shareholders DPL Inc.: Common . . . . . . . . . . . . . . . . . . . 51,270 53,275 54,023 53,846 53,030 DP&L: Preferred . . . . . . . . . . . . . . . . . 795 1,873 1,969 2,034 2,100
14 Financial Review The 1994 earnings are $1.54 per share, compared to earnings per share of $1.42 in 1993 and $1.34 in 1992. The return on shareholders' equity was 14.1% in 1994 compared to 13.7% in 1993 and 13.0% in 1992. In 1994, electric revenues increased 5% with a 2% growth in retail sales reflecting the continued strength of the West Central Ohio economy. In 1993, warm summer temperatures contributed to an 11% increase in electric revenues and a 5% increase in retail sales. Implementation of the second and third steps of the electric rate increase phased in at 6.4% in 1993 and 1994 also caused revenues to increase in both years. (See Financial Statement Note 2.) Gas revenues decreased 3% in 1994. An overall sales increase of 1% reflected strong sales to transportation gas customers despite mild temperatures in late 1994. The 20% increase in gas revenues in 1993 reflected significantly higher gas cost rates and the 6.2% increase in base rates in March 1992. Interest and other income includes interest income associated with federal income tax refunds of $3 million in 1994 and $6 million in 1993. Operating and administrative expenses decreased 13% in 1994 and increased 17% in 1993. Bond redemption costs of $23 million and $9 million were incurred in 1993 and 1992, respectively. Maintenance expense decreased 5% in 1994 and increased 17% in 1993 reflecting changes in the level of planned maintenance programs on the Company's production and distribution equipment. Regulatory assets recorded during the phase-in of electric rates are now being amortized over a seven year recovery period that began in 1994. Additionally, deferred interest charges on the William H. Zimmer Generating Station ("Zimmer") are being amortized at a rate of $3 million annually over the life of the plant. In conjunction with the Public Utilities Commission of Ohio ("PUCO")-approved electric phase-in plan, a baseline return on equity of 13% (subject to upward adjustment) was established for DP&L. In the event the return exceeds the allowed return by between one to two percent, then one half of the excess return will be used to reduce the unrecovered cost of demand-side management programs, and any return that exceeds the allowed return by more than two percent will be entirely credited to these programs. Total income taxes increased in 1994 and 1993 resulting from higher pre-tax income. Additionally, in 1993, the corporate tax rate was increased to 35%, increasing income taxes by $3 million. Credit Ratings In late 1994, DP&L's first mortgage bond credit rating was upgraded to "AA" from "AA-" and preferred stock to "AA-" from "A+" by Duff & Phelps. The Company's senior debt credit ratings were also upgraded to "AA-" by Standard & Poor's and to "A1" by Moody's Investors Service earlier in 1994. These upgrades reflect the Company's strong financial performance, cost reductions and competitive position. Duff & Phelps had
Income Statement Highlights $ in millions except per share amounts 1994 1993 1992 --------------------------------------------------------------------------------------------------------- Electric Utility: Revenues . . . . . . . . . . . . . . . . . . . . . . $944 $899 $807 Fuel used in production . . . . . . . . . . . . . . 218 225 219 ---- ---- ---- Net revenues . . . . . . . . . . . . . . . . . . . 726 674 588 Gas Utility: Revenues . . . . . . . . . . . . . . . . . . . . . . 237 245 204 Gas purchased for resale . . . . . . . . . . . . . . 151 156 118 ---- ---- ---- Net revenues . . . . . . . . . . . . . . . . . . . 86 89 86 Interest and other income . . . . . . . . . . . . . . . 30 27 22 Operating and administrative . . . . . . . . . . . . . 160 185 158 Maintenance of equipment and facilities . . . . . . . . 86 90 77 Amortization (deferral) of regulatory assets, net . . . 11 (26) (59) Income taxes . . . . . . . . . . . . . . . . . . . . . 101 78 68 Net income . . . . . . . . . . . . . . . . . . . . . . 155 139 139 Earnings per share of common stock . . . . . . . . . . 1.54 1.42 1.34 Return on shareholders' equity . . . . . . . . . . . . 14.1% 13.7% 13.0%
15 previously upgraded the Company's credit ratings in 1993. During the first quarter of 1992, DP&L's bond, preferred stock and commercial paper ratings were upgraded by all three credit rating agencies, reflecting the positive outcome of the Zimmer coal conversion project and rate settlement agreement. Each of these credit ratings is considered investment grade. Construction Program and Financing Construction additions were $101 million, $89 million and $59 million in 1994, 1993 and 1992, respectively. Construction additions are expected to total $567 million during 1995-1999. The construction program includes plans for the construction of a series of 70 MW combustion turbine generating units, the first of which is scheduled for completion in Summer 1995. During this same period, a total of $85 million will be required for debt maturities and sinking funds for bonds and notes. During 1994, total cash provided by operating activities was $287 million. At year-end, cash and temporary cash investments were $96 million and there were no short-term borrowings. In March 1994, DPL Inc. issued 3,200,000 shares of common stock through a public offering. Proceeds from the sale were used in connection with the redemption of all outstanding shares of DP&L's Preferred Stock Series D, E, F, H and I. During late 1992 and early 1993, DP&L took advantage of favorable market conditions to reduce its cost of debt and extend maturities through early refundings. Overall, five new series of First Mortgage Bonds were issued, aggregating approximately $766 million with an average interest rate of 7.9%. The proceeds were used to redeem a similar principal amount of debt securities with an average interest rate of 8.7%. Issuance of additional amounts of First Mortgage Bonds by DP&L is limited by provisions of its mortgage. The amounts and timing of future financings will depend upon market and other conditions, rate increases, levels of sales and construction plans. DPL Inc. anticipates that it has sufficient capacity to issue DP&L First Mortgage Bonds to satisfy its requirements in connection with its construction and refunding program during 1995-1999. DPL Inc. has a revolving credit agreement, renewable through 1999, which allows total borrowings by DPL Inc. and its subsidiaries of $200 million. At year-end 1994, DPL Inc. had no borrowings outstanding under this credit agreement. DP&L also has $97 million available in short-term lines of credit. At year-end, DP&L had no borrowings outstanding from these lines of credit and no commercial paper outstanding. Issues and Financial Risks As a public utility, DP&L is subject to processes which determine the rates it charges for energy services. Regulators determine which costs are eligible for recovery in the rate setting process and when the recovery will occur. They also establish the rate of return on utility investments which are valued under Ohio law based on historical costs. The utility industry is subject to inflationary pressures similar to those experienced by other capital-intensive industries. Because rates for regulated services are based on historical costs, cash flows may not cover the total future costs of providing services. Projected construction costs over the next five years average $113 million annually, which is less than the projected depreciation over the same period. The National Energy Policy Act allows the federal government to mandate access by others to a utility's transmission system and may accelerate competition in the supply of electricity. In January 1994, DP&L, the Staff of the PUCO and the Office of the Ohio Consumers' Counsel submitted to the PUCO an agreement which resolves issues relating to the recovery of natural gas "transition costs" to be billed to DP&L by interstate pipeline companies. The agreement, which was approved by the PUCO in July 1994, provides for the full recovery of these transition costs from DP&L customers. The interstate pipelines are continuing to file with the Federal Energy Regulatory Commission for authority to recover these transition costs, the exact magnitude of which has not been established. The Federal Environmental Protection Agency ("EPA") has notified numerous parties, including DP&L, that they are considered "Potentially Responsible Parties" for clean up of four hazardous waste sites in Ohio. The EPA has estimated total costs of $56 million for its preferred clean-up plans at three of these sites and has not established an estimated cost for the fourth site. The final resolution of these investigations will not have a material effect on DP&L's financial position, earnings or cash flow. Changing environmental regulations continue to increase the cost of providing service in the utility industry. The Clean Air Act Amendments of 1990 (the "Act") limit sulfur dioxide and nitrogen oxide emissions nationwide. The Act will restrict emissions in two phases with the Phase I compliance completed by 1995 and Phase II completed by 2000. In 1993, the PUCO approved DP&L's Clean Air Act Compliance Plan. This plan outlines the methods by which the emission reduction requirements will be met. Overall compliance is expected to have a minimal 1% to 2% price impact. DP&L anticipates that costs to comply with the Act will be eligible for recovery in future fuel hearings and other regulatory proceedings. 16
CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS DPL Inc. For the years ended December 31, $ In millions except per share amounts 1994 1993 1992 --------------------------------------------------------------------------------------------------- Income Utility service revenues . . . . . . . . . . . . . . . . . . $1,187.9 $1,151.3 $1,017.3 Interest and other income . . . . . . . . . . . . . . . . . 30.1 26.7 22.3 ------------------------------------- Total income . . .. . . . . . . . . . . . . . . . . . . 1,218.0 1,178.0 1,039.6 ------------------------------------- Expenses Fuel used in electric and steam production . . . . . . . . . 220.7 226.6 220.7 Gas purchased for resale . . . . . . . . . . . . . . . . . . 150.8 156.4 117.6 Operating and administrative (Note 1) . . . . . . . . . . . 159.9 184.6 157.8 Maintenance of equipment and facilities . . . . . . . . . . 85.9 90.2 77.3 Depreciation and amortization . . . . . . . . . . . . . . . 114.7 110.9 105.6 Amortization (deferral) of regulatory assets, net (Note 2) . 10.9 (25.8) (58.7) General taxes . . . . . . . . . . . . . . . . . . . . . . . 121.1 112.0 108.5 Interest expense . . . . . . . . . . . . . . . . . . . . . . 93.2 97.0 94.3 Preferred dividend requirements of The Dayton Power & Light Company (Note 9). . . . . . . . . 4.7 8.7 9.4 ------------------------------------- Total expenses . . . . . . . . . . . . . . . . . . . . . 961.9 960.6 832.5 ------------------------------------- Income Before Income Taxes . . . . . . . . . . . . . . . . . 256.1 217.4 207.1 Income taxes (Notes 1 and 3) . . . . . . . . . . . . . . . . 101.2 78.4 68.3 ------------------------------------- Net Income . . . . . . . .. . . .. . . . . . . . . . . . . . $ 154.9 $ 139.0 $ 138.8 ===================================== Average Number of Common Shares . . . . . . . . . . . . . . 100.4 97.7 103.5 Outstanding (millions) (Note 8) Earnings Per Share of Common Stock . . . . . . . . . . . . . $ 1.54 $ 1.42 $ 1.34 Dividends Paid Per Share of Common Stock . . . . . . . . . . $ 1.18 $ 1.12 $ 1.08 Return on Shareholders' Equity . . . . . . . . . . . . . . . 14.1% 13.7% 13.0% See Notes to Consolidated Financial Statements. 17
CONSOLIDATED STATEMENT OF CASH FLOWS DPL Inc. For the years ended December 31, $ in millions 1994 1993 1992 ------------------------------------------------------------------------------------------------------- Operating Activities Cash received from utility customers . . . . . . . . . . . $1,199.0 $1,137.5 $1,003.8 Other operating cash receipts . . . . . . . . . . . . . . 25.4 26.4 23.5 Cash paid for: Fuel and purchased power . . . . . . . . . . . . . . . . (226.0) (216.6) (234.0) Purchased gas . . . . . . . . . . . . . . . . . . . . . (142.8) (146.9) (137.5) Operating and maintenance labor . . . . . . . . . . . . (90.0) (83.3) (84.2) Nonlabor operating expenditures . . . . . . . . . . . . (159.4) (232.7) (152.7) Interest (net of amounts capitalized) . . . . . . . . . (92.1) (83.3) (96.8) Income taxes . . . . . . . . . . . . . . . . . . . . . . (105.8) (54.4) (50.1) Property, excise and payroll taxes . . . . . . . . . . . (121.4) (111.4) (98.7) ------------------------------------- Net cash provided by operating activities . . . . . . . . 286.9 235.3 173.3 ------------------------------------- Investing Activities Net cash used for property expenditures and other . . . . (94.3) (113.6) (63.0) ------------------------------------- Financing Activities Dividends paid on common stock . . . . . . . . . . . . . . (118.3) (109.5) (110.8) Redemption of preferred stock . . . . . . . . . . . . . . (94.2) (8.5) (4.3) Issuance (retirement) of common stock . . . . . . . . . . 77.5 - (0.1) Purchase of treasury stock . . . . . . . . . . . . . . . . (9.4) - - Issuance (retirement) of short-term debt . . . . . . . . . (25.0) (127.0) 67.5 Retirement of long-term debt . . . . . . . . . . . . . . . (9.2) (439.2) (321.0) Issuance of long-term debt . . . . . . . . . . . . . . . . - 536.0 320.4 Common stock held by ESOP . . . . . . . . . . . . . . . . - - (90.0) Receipt of funds on deposit with trustee . . . . . . . . . - - 21.7 ------------------------------------- Net cash used for financing activities . . . . . . . . . . (178.6) (148.2) (116.6) ------------------------------------- Cash and temporary cash investments - Net change . . . . . . . . . . . . . . . . . . . . 14.0 (26.5) (6.3) Balance at beginning of year . . . . . . . . . . . 81.6 108.1 114.4 ------------------------------------- Balance at end of year . . . . . . . . . . . . . . $ 95.6 $ 81.6 $108.1 ===================================== See Notes to Consolidated Financial Statements.
18
CONSOLIDATED BALANCE SHEET DPL Inc. At December 31, $ in millions 1994 1993 --------------------------------------------------------------------------------------------------------- Assets Utility property and plant . . . . . . . . . . . . . . . . . $3,254.1 $3,204.7 Other property and plant . . . . . . . . . . . . . . . . . . 62.3 55.5 Construction work in progress . . . . . . . . . . . . . . . . 68.6 35.8 ------------------------------------- 3,385.0 3,296.0 Less-- Accumulated depreciation and amortization . . . . . . . . . (1,072.8) (977.2) ------------------------------------- Net property and plant . . . . . . . . . . . . . . . . . . 2,312.2 2,318.8 ------------------------------------- Current Assets Cash and temporary cash investments . . . . . . . . . . . . . 95.6 81.6 Accounts receivable, less provision for uncollectible accounts of $7.8 and $9.1, respectively . . . . . . . . . . 103.4 135.0 Inventories, at average cost . . . . . . . . . . . . . . . . 84.6 86.4 Taxes applicable to subsequent years . . . . . . . . . . . . 78.3 72.8 Gas costs recoverable . . . . . . . . . . . . . . . . . . . . - 23.1 Prepayments and other . . . . . . . . . . . . . . . . . . . . 24.9 41.7 ------------------------------------- Total current assets . . . . . . . . . . . . . . . . . . . 386.8 440.6 ------------------------------------- Other Assets Income taxes recoverable through future revenues (Note 1) . . 249.3 269.1 Regulatory assets (Note 2) . . . . . . . . . . . . . . . . . 168.8 169.8 Other assets . . . . . . . . . . . . . . . . . . . . . . . . 115.6 103.7 ------------------------------------- Total other assets . . . . . . . . . . . . . . . . . . . 533.7 542.6 ------------------------------------- Total Assets . . . . . . . . . . . . . . . . . . . . . . . $3,232.7 $3,302.0 ===================================== Capitalization and Liabilities Capitalization Common shareholders' equity (Note 8)-- Common stock . . . . . . . . . . . . . . . . . . . . . . . . $ 1.1 $ 1.0 Other paid-in capital . . . . . . . . . . . . . . . . . . . 776.6 708.1 Common stock held by employee plans . . . . . . . . . . . . (108.7) (105.2) Earnings reinvested in the business . . . . . . . . . . . . 459.3 423.4 ----------------------------------- Total common shareholders' equity . . . . . . . . . . . . 1,128.3 1,027.3 Preferred stock of The Dayton Power and Light Company (Note 9)-- Without mandatory redemption provisions . . . . . . . . . . 22.9 82.9 With mandatory redemption provisions . . . . . . . . . . . . - 30.0 Long-term debt (Note 7) . . . . . . . . . . . . . . . . . . . 1,093.7 1,102.9 ----------------------------------- Total capitalization . . . . . . . . . . . . . . . . . . . 2,244.9 2,243.1 ----------------------------------- Current Liabilities Accounts payable . . . . . . . . . . . . . . . . . . . . . . 75.3 113.1 Short-term debt (Note 6) . . . . . . . . . . . . . . . . . . - 25.0 Current portion of first mortgage bonds and preferred stock . . . . . . . . . . . . . . . . . . . . 4.7 9.0 Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . 123.9 114.4 Accrued interest . . . . . . . . . . . . . . . . . . . . . . 24.0 24.3 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.0 51.4 ------------------------------------ Total current liabilities . . . . . . . . . . . . . . . . . 254.9 337.2 ------------------------------------ Deferred Credits and Other Deferred taxes (Note 3) . . . . . . . . . . . . . . . . . . . 511.8 519.3 Unamortized investment tax credit . . . . . . . . . . . . . . 81.5 85.1 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139.6 117.3 ------------------------------------ Total deferred credits and other . . . . . . . . . . . . . 732.9 721.7 ------------------------------------ Total Capitalization and Liabilities . . . . . . . . . . . . $3,232.7 $3,302.0 ==================================== See Notes to Consolidated Financial Statements.
19 Notes to Consolidated Financial Statements DPL Inc. 1. Summary of Significant Accounting Policies Principles of Consolidation The accounts of DPL Inc. and its wholly-owned subsidiaries are included in the accompanying consolidated financial statements. The consolidated financial statements of DPL Inc. principally reflect the results of operations and financial condition of DPL Inc.'s public utility subsidiary, The Dayton Power and Light Company ("DP&L"). DP&L is engaged in the business of selling electric energy, natural gas and steam. The results of operations of DPL Inc.'s non-utility subsidiaries currently do not have a material financial impact on the consolidated results. Revenues and Fuel Revenues include amounts charged to customers through fuel and gas recovery clauses, which are adjusted periodically for changes in such costs. Related costs that are recoverable or refundable in future periods are deferred along with the related income tax effects. Also included in revenues are amounts charged to customers through a surcharge for recovery of arrearages from certain eligible low-income households. DP&L records revenue for services provided but not yet billed to more closely match revenues with expenses. Accounts receivable on the Consolidated Balance Sheet includes unbilled revenue of (in millions) $13.1 in 1994 and $30.0 in 1993. Operating and Administrative Operating and administrative expenses include $22.8 million in 1993 and $9.1 million in 1992 of redemption premiums and other costs relating to the refinancing of various bond issues. Property and Plant, Maintenance and Depreciation Property and plant is shown at its original cost. Cost includes direct labor and material, allocable overhead costs and allowance for funds used during construction ("AFC"). AFC is reflected in the Consolidated Statement of Results of Operations in Interest and other income and amounts to (in millions) $0.5 in 1993 and $0.3 in 1992. When a unit of property is retired, the original cost of that property plus the cost of removal less any salvage value is charged to accumulated depreciation. Maintenance costs and replacements of minor items of property are charged to expense. Depreciation expense is calculated using the straight-line method, which depreciates the cost of property over its estimated useful life, at a rate of 3.4% for 1994, 1993 and 1992. Income Taxes Income taxes are deferred under the liability method in accordance with the Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes" effective in 1993. Under the liability method, deferred income taxes are provided for all differences between the financial statement basis and the tax basis of assets and liabilities using the enacted tax rate. Additional deferred income taxes and offsetting regulatory assets or liabilities are recorded to recognize that the income taxes will be recoverable/refundable through future revenues. Investment tax credits, previously deferred, are being amortized over the lives of the related properties. Consolidated Statement of Cash Flows The temporary cash investments presented on this Statement consist of liquid investments with an original maturity of three months or less. Reclassifications Reclassifications have been made in certain prior years' amounts to conform to the current reporting presentation. 20 ------------------------------------------------------------------------------- 2. Regulatory Matters Pursuant to the 1992 PUCO-approved settlement agreement ("Agreement") among DP&L and various consumer groups, the third and final phase of the electric rate increase of 6.4% took effect in January 1994. Deferrals (including carrying charges) during the phase-in period of $28.1 million in 1993 and $57.7 million in 1992 were capitalized as Regulatory assets on the Consolidated Balance Sheet and are being recovered over a seven year period that began in 1994. Amortization, net of additional carrying charges, was $9.8 million in 1994. This settlement included an agreement by DP&L to undertake cost-effective demand-side management ("DSM") programs with an average annual cost of $15 million for four years commencing in 1992. The amount recovered in rates was $4.6 million in 1992. This amount increased to $7.8 million in 1993 and subsequent years. The difference between expenditures and amounts recovered through rates is deferred as a Regulatory asset and is eligible for future recovery in accordance with existing PUCO rulings. Regulatory assets also include interest charges on Zimmer which were previously deferred pursuant to PUCO approval. Amounts are being amortized at $2.8 million per year over the life of Zimmer. Regulatory assets on the Consolidated Balance Sheet were: At December 31, $ in millions 1994 1993 ----------------------------------------------------------------- Phase-in $ 75.9 $ 85.8 DSM 31.9 20.3 Deferred interest-Zimmer 61.0 63.7 ----- ----- Total $168.8 $169.8 ===== ===== The Agreement established a baseline return on equity for DP&L of 13% (subject to upward adjustment). In the event that the return exceeds the allowed return by between one to two percent, then one half of the excess return will be used to reduce the unrecovered cost of DSM programs, and any return that exceeds the allowed return by more than two percent will be entirely credited to these programs. ------------------------------------------------------- 3. Income Taxes For the years ended December 31, $ in millions 1994 1993 1992 ------------------------------------------------------- Computation of Tax Expense Statutory income tax rate . . 35% 35% 34% Federal income tax (a) . . . $ 91.3 $79.1 $74.1 Increases (decreases) in tax from - Regulatory assets . . . . . 2.2 (6.1) (11.8) Depreciation . . . . . . . 10.4 10.2 9.3 Investment tax credit amortized. . . . . . . . . (3.7) (3.0) (3.0) Other, net. . . . . . . . . 1.0 (1.8) 1.1 ----------------------- Total Tax Expense . . . . $101.2 $78.4 $69.7 ======================= Components of Tax Expense Taxes currently payable . . . $107.9 $61.2 $38.4 Deferred taxes-- Regulatory assets . . . . . 1.6 7.1 9.2 Liberalized depreciation and amortization . . . . . 17.2 17.6 18.6 Property taxes . . . . . . (6.1) (6.1) (5.9) Fuel and gas costs . . . . (12.7) 5.8 10.5 Other . . . . . . . . . . . (3.1) (4.6) 2.4 Deferred investment tax credit, net . . . . . . . . (3.6) (2.6) (3.5) ----------------------- Total Tax Expense . . . . $101.2 $78.4 $69.7 ======================= Classification of Tax Expense Income taxes . . . . . . . . $101.2 $78.4 $68.3 Regulatory assets . . . . . . - - 1.4 ----------------------- Total Tax Expense . . . . $101.2 $78.4 $69.7 ======================= (a) Statutory rates applied to pre-tax income before preferred dividends and before tax expenses included in Regulatory assets. Components of Deferred Tax Assets and Liabilities At December 31, $ in millions 1994 1993 ---------------------------------------------------------------------- Depreciation/property basis . . . $(437.4) $(429.5) Income taxes recoverable . . . . (88.9) (93.8) Regulatory assets . . . . . . . . (57.0) (57.4) Investment tax credit . . . . . . 28.4 29.7 Other . . . . . . . . . . . . . 43.1 31.7 ------ ----- Net non-current liability . . . $(511.8) $(519.3) ====== ===== Net current asset (liability) . $ 2.3 $ (13.4) ====== ===== 21 ------------------------------------------------------------------------------- 4. Pensions and Postretirement Benefits A. Pensions Substantially all DP&L employees participate in pension plans paid for by the Company. Employee benefits are based on their years of service, age at retirement and, for salaried employees, their compensation. The plans are funded in amounts actuarially determined to provide for these benefits. In developing the amounts in the following tables, an interest rate of 6.25% was used in 1994 and 6.0% was used in 1993 and 1992. Actual returns on plan assets for 1994, 1993 and 1992 were 0.9%, 6.2% and 8.8%, respectively. Increases in compensation levels approximating 5% were used for all years. The following table presents the components of pension cost (portions of which were capitalized): $ in millions 1994 1993 1992 ------------------------------------------------------- Service cost-benefits earned $ 6.1 $5.4 $ 4.3 Interest cost 13.4 12.0 12.5 Expected return on plant assets of 7.5% in each year (18.2) (16.9) (15.2) Net amortization (1.5) (2.0) (2.6) ---------------------- Net pension cost $(0.2) $(1.5) $(1.0) ====================== The following table sets forth the plans' funded status and amounts recorded in Other assets on the Consolidated Balance Sheet at December 31: $ in millions 1994 1993 ----------------------------------------------------- Plan assets at fair value (a) $247.6 $255.0 Actuarial present value of projected benefit obligation 229.9 230.6 ----------------- Plan assets in excess of projected benefit obligation 17.7 24.4 Unamortized transition obligation (23.8) (28.0) Prior service cost 20.2 22.9 Changes in plan assumptions and actuarial gains and losses 32.8 25.1 ----------------- Net pension assets $ 46.9 $ 44.4 ================= Vested benefit obligation $179.7 $183.9 Accumulated benefit obligation without projected wage increases $211.1 $207.4 (a) Invested in guaranteed investment contracts, fixed income investments and equities including $22.4 million and $22.5 million of DPL Inc. common stock in 1994 and 1993, respectively. ------------------------------------------------------------------------------- B. Postretirement Benefits Qualified employees who retired prior to 1987 and their dependents are eligible for health care and life insurance benefits. The unamortized transition obligation associated with these benefits is being amortized over the approximate average remaining life expectancy of the retired employees. Active employees are eligible for life insurance benefits, and this unamortized transition obligation is being amortized over the average remaining service period. The following table sets forth the accumulated postretirement benefit amounts at December 31: $ in millions 1994 1993 --------------------------------------------------- Accumulated postretirement benefit obligation: - retirees and dependents $61.4 $63.1 - active employees 1.1 1.2 ---- ---- Total 62.5 64.3 Unamortized transition obligation (24.8) (27.7) Actuarial gains and losses 3.0 - ---- ---- Accrued postretirement benefit liability $40.7 $36.6 ==== ==== The following table presents the components of postretirement benefit cost: $ in millions 1994 1993 --------------------------------------------------- Interest cost $ 3.7 $ 3.7 Net amortization 3.0 3.0 ---- ---- Postretirement benefit cost $ 6.7 $ 6.7 ==== ==== The assumed health care cost trend rate used in measuring the unfunded accumulated postretirement benefit obligation is 15% for 1994 and decreases to 8% by 2004. A one percentage point increase in each future year's assumed health care trend rate would increase postretirement benefit cost by $0.4 million annually and would increase the accumulated postretirement benefit obligation by $6.1 million. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 6.25% in 1994 and 6.0% in 1993. 22 ------------------------------------------------------------------------------ 5. Commonly Owned Facilities DP&L owns certain electric generating and transmission facilities as tenants in common with other Ohio utilities. Each utility is obligated to pay its ownership share of construction and operation costs of each facility. As of December 31, 1994, DP&L had $12.8 million of commonly owned facilities under construction. DP&L's share of expenses is included in the Consolidated Statement of Results of Operations. The following table presents DP&L's share of the commonly owned facilities: DP&L DP&L Share Investment ----------- ---------- Owner- Prod. Plant in ship Capacity Service (%) (MW) ($ in mil.) ------------------------------------------------------- Production Units: Beckjord Unit 6 . . . . . 50.0 210 50 Conesville Unit 4 . . . . 16.5 129 30 East Bend Station . . . . 31.0 186 149 Killen Station . . . . . 67.0 402 406 Miami Fort Units 7 & 8. . 36.0 360 113 Stuart Station . . . . . 35.0 820 236 Zimmer Station. . . . . . 28.1 365 985 Transmission (at varying percentages) . . . . . . 66 ------------------------------------------------------------------------------ 6. Notes Payable and Compensating Balances DPL Inc. and its subsidiaries have $200 million available through a revolving credit agreement. This agreement with a consortium of banks is renewable through 1999. Commitment fees are approximately $350,000 per year, depending upon the aggregate unused balance of the loan. At December 31, 1994, DPL Inc. had no outstanding borrowings under this credit agreement. DP&L also has $97.1 million available in short-term informal lines of credit. To support these lines of credit, DP&L is required to maintain average daily compensating balances of approximately $700,000 and also pay $168,000 per year in fees. At year-end, DP&L had no borrowings from these lines of credit and no commercial paper outstanding. ------------------------------------------------------------------------------- 7. Long-term Debt At December 31, $ in millions 1994 1993 ----------------------------------------------------- First mortgage bonds maturing: 1997 5-5/8% . . . . . . . $ 40.0 $ 40.0 1998 6.87% and 7.06% (a) . 26.4 29.0 1999-2003 8.16% and 8.41% (a) . 43.0 49.0 2022-2026 8.14% . . . . . . . . 671.0 671.0 Pollution control series . . . . maturing through 2027 - 7.97% . . . . . . . . . . . . 218.4 218.8 -------------------- 998.8 1,007.8 Unamortized debt discount and premium (net) . . . . . . (2.5) (2.5) -------------------- 996.3 1,005.3 Notes due 2007 - 7.83% . . . . . 90.0 90.0 Mortgage note due in install- ments through 2012-10.0% . . . 7.4 7.6 -------------------- Total . . . . . . . . . . $1,093.7 $1,102.9 ==================== (a) Weighted average interest rates for 1994 and 1993, respectively. The amounts of maturities and mandatory redemptions for first mortgage bonds and notes are (in millions) $4.7 in 1995 and 1996, $42.5 in 1997, $28.4 in 1998 and $4.4 in 1999. Substantially all property and plant of DP&L is subject to the mortgage lien securing the first mortgage bonds. 23
------------------------------------------------------------------------------------------------------------------------- 8. Common Shareholders' Equity Common Common Stock(a) Stock ---------------------- Other Held By Earnings Outstanding Paid-in Employee Reinvested in $ in millions Shares Amount Capital Plans the Business Total ----------------------------------------------------------------------------------------------------------------- 1992: Beginning balance . . . . . 69,010,903 $ 0.7 $708.1 $ - $366.2 $1,075.0 Net income . . . . . . . . 138.8 138.8 Common stock dividends . . (110.8) (110.8) Three-for-two stock split 34,499,095 0.3 (0.3) - Employee stock plans . . . (103.0) (103.0) Other . . . . . . . . . . 0.2 (0.2) - ------------------------------------------------------------------------------ Ending balance . . . . . . 103,509,998 1.0 708.0 (103.0) 394.0 1,000.0 1993: Net Income . . . . . . . . 139.0 139.0 Common stock dividends . . (109.5) (109.5) Employee stock plans . . . (2.2) (2.2) Other . . . . . . . . . . 0.1 (0.1) - ------------------------------------------------------------------------------ Ending balance . . . . . . 103,509,998 1.0 708.1 (105.2) 423.4 1,027.3 1994: Net income . . . . . . . . 154.9 154.9 Common stock dividends . . (118.3) (118.3) Public offering . . . . . 3,200,000 0.1 63.1 63.2 Dividend reinvestment plan 720,225 - 14.4 14.4 Treasury stock . . . . . . (478,600) - (9.4) (9.4) Employee stock plans . . . 0.2 (3.5) (3.3) Other . . . . . . . . . . 0.2 (0.7) (0.5) ------------------------------------------------------------------------------ Ending balance . . . . . . 106,951,623 $ 1.1 $776.6 $(108.7) $459.3 $1,128.3 ============================================================================== (a) $0.01 par value, 250,000,000 shares authorized.
In March 1994, DPL Inc. issued 3,200,000 shares of common stock through a public offering. The net proceeds from the sale were used in connection with the redemption of all outstanding shares of several series of DP&L's preferred stock. (See Note 9.) DPL Inc. had 2,107,323 authorized but unissued shares reserved for the dividend reinvestment plan at December 31, 1994. The plan provides that either original issue shares or shares purchased on the open market may be used to satisfy plan requirements. DPL Inc. established a leveraged Employee Stock Ownership Plan ("ESOP") in 1992 to fund matching contributions to the Company's 401(k) retirement savings plan and certain other payments to employees. The ESOP borrowed $90.0 million from DPL Inc. and acquired 4,706,550 shares of common stock on the open market. Common shareholders' equity is reduced for the cost of unallocated shares held by the trust and for 1,496,848 shares related to another employee plan. These shares reduce the number of common shares used in the calculation of earnings per share. Dividends received by the ESOP are used to repay the loan to DPL Inc. As debt service payments are made on the loan, shares are released on a pro-rata basis. Dividends on the allocated shares are charged to retained earnings, and dividends on the unallocated shares reduce accrued interest. In 1994 and 1993, 209,281 shares and 100,498 shares, respectively, were allocated to employees and are outstanding for the calculation of earnings per share. Compensation expense, which is based on the fair value of the shares allocated, amounted to $4.0 million in 1994 and $2.0 million in 1993. DPL Inc. has a Shareholder Rights Plan pursuant to which two-thirds of a Right is attached to and trades with each outstanding DPL Inc. Common Share. The Rights would separate from the Common Shares and become exercisable in the event of certain attempted business combinations. 24
--------------------------------------------------------------------------------------------------------------- 9. Preferred Stock DPL Inc.: No par value, 8,000,000 shares authorized, no shares outstanding. DP&L: $25 par value, 4,000,000 shares authorized, no shares outstanding; and $100 par value, 4,000,000 shares authorized, 228,508 shares outstanding. Without Mandatory With Mandatory Redemption Provisions Redemption Provisions(a) -------------------------------------------------------- Current Exercised Current ($ in millions) Series/ Redemption Redemption Shares At December 31, At December 31, Rate Price Price Outstanding 1994 1993 1994 1993 ------------------------------------------------------------------------------------------------------------------ A 3.75% $102.50 - 93,280 $ 9.3 $ 9.3 B 3.75% $103.00 - 69,398 7.0 7.0 C 3.90% $101.00 - 65,830 6.6 6.6 D 7.48% - $103.23 - - 15.0 E 7.70% - $101.00 - - 20.0 F 7.375% - $101.00 - - 25.0 H 8-5/8% - $101.00 - - $12.0 I 9-3/8% - $101.00 - - 18.0 ------- ----- ----- ----- ----- Total 228,508 $22.9 $82.9 - $30.0 ======= ===== ===== ===== ===== a)Exclusive of sinking fund payment due within one year.
The shares without mandatory redemption provisions may be redeemed at the option of DP&L at the per share prices indicated, plus accrued dividends. Mandatory and optional redemptions (at par) of outstanding shares of Series H and I were 40,000 and 45,000, respectively, in both 1994 and 1993. In 1994, DP&L redeemed all outstanding shares of its Preferred Stock Series D, E, F, H and I.
---------------------------------------------------------------------------------------------------------------- 10. Fair Value of Financial Instruments At December 31, 1994 1993 ----------------------- -------------------- $ in millions Fair Value Cost Fair Value Cost ---------------------------------------------------------------------------------------------------------------- $ $ $ $ Assets Available for sale equity securities 11.2 12.1 0.5 0.5 Held to maturity securities, including temporary cash investments of $93.7 in 1994 and $81.1 in 1993 (a) 124.8 125.3 123.9 123.1 Liabilities Debt (b) 1,043.3 1,098.5 1,214.0 1,132.6 Capitalization Preferred stock with mandatory redemptions (b) - - 34.6 34.3 Unallocated stock in ESOP 90.1 84.1 95.0 88.1
(a) Contractual maturities range from 1995 to 2005. (b) Includes current maturities. Available for sale marketable equity securities are carried at market; the remaining financial instruments are carried at cost. The fair value is based upon quoted market prices or securities with similar characteristics.
------------------------------------------------------------------------------------------------------------------------ 11. Reconciliation of Net Income to Net Cash Provided by Operating Activities For the years ended December 31, $ in millions 1994 1993 1992 ----------------------------------------------------------------------------------------------------------------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $154.9 $139.0 $138.8 Adjustments for noncash items: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 114.7 110.9 105.6 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . (6.7) 17.2 29.9 Amortization (deferral) of regulatory assets, net . . . . . . . . . . . 10.9 (25.8) (58.7) Changes in working capital: Accounts receivable and unbilled revenue . . . . . . . . . . . . . . . 27.9 (2.5) (2.9) Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . (40.0) 15.0 3.0 Deferred gas costs . . . . . . . . . . . . . . . . . . . . . . . . . . 28.7 (7.9) (28.8) Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.3) 11.8 (4.2) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 10.2 (11.4) DSM deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . (14.4) (20.3) (2.2) Other operating activities . . . . . . . . . . . . . . . . . . . . . . . 7.7 (12.3) 4.2 ------------------------------ Net cash provided by operating activities . . . . . . . . . . . . . . . $286.9 $235.3 $173.3 ==============================
25
------------------------------------------------------------------------------------------------------------- 12. Financial Information by Business Segments For the years ended December 31, $ in millions 1994 1993 1992 ------------------------------------------------------------------------------------------------------------- Utility service revenues Electric . . . . . . . . . . . . . . . . . . . $ 943.5 $ 898.9 $ 806.9 Gas . . . . . . . . . . . . . . . . . . . . . . 237.1 245.1 203.8 Other . . . . . . . . . . . . . . . . . . . . . 7.3 7.3 6.6 -------------------------------------------- Total utility service revenues . . . . . . . . . . . 1,187.9 1,151.3 1,017.3 Interest and other income . . . . . . . . . . . . . . 30.1 26.7 22.3 -------------------------------------------- Total income . . . . . . . . . . . . . . . . . . . $1,218.0 $1,178.0 $1,039.6 ============================================ Operating profit before tax Electric . . . . . . . . . . . . . . . . . . . $ 325.2 $ 310.8 $ 284.7 Gas . . . . . . . . . . . . . . . . . . . . . . 10.3 19.9 22.1 Other . . . . . . . . . . . . . . . . . . . . . 6.5 5.4 8.8 -------------------------------------------- Total operating profit before tax . . . . . . . . . . 342.0 336.1 315.6 Other income, net (a) . . . . . . . . . . . . . . . . 12.0 (13.0) (4.8) Interest expense . . . . . . . . . . . . . . . . . . (93.2) (97.0) (94.3) Preferred dividends . . . . . . . . . . . . . . . . . (4.7) (8.7) (9.4) -------------------------------------------- Income before income taxes . . . . . . . . . . . . $ 256.1 $ 217.4 $ 207.1 ============================================ Depreciation and amortization Electric . . . . . . . . . . . . . . . . . . . $ 104.8 $ 102.4 $ 97.9 Gas . . . . . . . . . . . . . . . . . . . . . . 6.2 5.7 5.6 Other . . . . . . . . . . . . . . . . . . . . . 3.7 2.8 2.1 -------------------------------------------- Total depreciation and amortization . . . . . . . . $ 114.7 $ 110.9 $ 105.6 ============================================ Construction additions Electric . . . . . . . . . . . . . . . . . . . $ 82.1 $ 66.3 $ 46.6 Gas . . . . . . . . . . . . . . . . . . . . . . 11.6 11.9 11.0 Other . . . . . . . . . . . . . . . . . . . . . 7.4 10.7 1.4 -------------------------------------------- Total construction additions . . . . . . . . . . . $ 101.1 $ 88.9 $ 59.0 ============================================ Assets Electric . . . . . . . . . . . . . . . . . . . $2,772.3 $2,822.5 $2,522.8 Gas . . . . . . . . . . . . . . . . . . . . . . 201.7 236.0 219.5 Other (b) . . . . . . . . . . . . . . . . . . . 258.7 243.5 234.4 -------------------------------------------- Total assets at year-end . . . . . . . . . . . . . $3,232.7 $3,302.0 $2,976.7 ============================================ (a) Includes primarily interest income less bond redemption costs in 1993 and 1992. (b) Includes primarily cash, temporary cash investments and certain deferred items.
26 Report of Independent Accountants Price Waterhouse LLP (see appendix for logo description) To the Board of Directors and Shareholders of DPL Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of results of operations and of cash flows present fairly, in all material respects, the financial position of DPL Inc. and its subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Dayton, Ohio January 18, 1995
Selected Quarterly Information For the Three Months Ended $ in millions except March 31, June 30, September 30, December 31, per share amounts 1994 1993 1994 1993 1994 1993 1994 1993 ----------------------------------------------------------------------------------------------------------- $ $ $ $ $ $ $ $ Utility service revenues . . . . 372.1 345.8 257.3 238.0 263.3 262.0 295.2 305.5 Income before income taxes . . . 92.6 80.0 56.9 47.0 61.7 55.7 44.9 34.7 Net income . . . . . . . . . . . 55.4 53.2 34.9 31.4 36.9 33.1 27.7 21.3 Earnings per share of common stock 0.57 0.54 0.34 0.33 0.36 0.33 0.27 0.22 Dividends paid per share . . . . 0.295 0.28 0.295 0.28 0.295 0.28 0.295 0.28 Common stock market price-High . 21-1/4 21-1/4 21-5/8 21 20-3/4 21-7/8 21 21-5/8 -Low . . 19-3/8 19-1/4 18-7/8 19 18-5/8 20-3/8 19 19
27 Corporate Information Transfer Agent and Registrar-- Common Stock and DP&L Preferred Stock Securities Transfer & Shareholder Inquiries: The First National Bank of Boston Mail Stop 45-02-09 Box 644 Boston, MA 02102-0644 (617) 575-2900 (800) 736-3001 Dividend Reinvestment: The First National Bank of Boston Mail Stop 45-01-06 Box 1681 Boston, MA 02105-1681 Also dividend paying agent (617) 575-2900 (800) 736-3001 Trustee--DP&L First Mortgage Bonds The Bank of New York Corporate Trust Administration 101 Barclay Street New York, New York, 10286 Also interest paying agent Securities Listing The New York Stock Exchange is the only national securities exchange on which DPL Inc. Common Stock and DP&L First Mortgage Bonds are listed. The trading symbol of the Common Stock is DPL. Federal Income Tax Status of 1994 Dividend Payments Dividends paid in 1994 on Common and Preferred Stock are fully taxable as dividend income. Annual Meeting The Annual Meeting of Shareholders will be held at 10:00 a.m., Tuesday, April 18, 1995, at Edison Community College Piqua, Ohio. Communications DPL Inc. staffs an Investor Relations Department to meet the information needs of shareholders and investors. Inquiries are welcomed. Communications relating to shareholder accounts should be directed to the DPL Investor Relations Department (513) 259-7150 or (800) 322-9244 or to The First National Bank of Boston (617) 575-2900 or (800) 736-3001. Form 10-K Report DPL Inc. reports details concerning its operations and other matters annually to the Securities and Exchange Commission on Form 10-K, which will be supplied upon request. Please direct inquiries to the Investor Relations Department. Officers--DPL Inc. and DP&L (Age/Years of Service) Peter H. Forster(52/21) Chairman, President and Chief Executive Officer--DPL Inc. Chairman--DP&L Allen M. Hill(49/27) President and Chief Executive Officer--DP&L Paul R. Anderson(52/16) Controller--DP&L Stephen P. Bramlage(48/26) Assistant Vice President--DP&L Robert M. Combs(49/4) Vice President--DP&L Georgene H. Dawson(45/20) Assistant Vice President--DP&L Jeanne S. Holihan(38/14) Assistant Vice President--DP&L Thomas M. Jenkins(43/17) Group Vice President and Treasurer--DPL Inc. and DP&L Stephen F. Koziar, Jr.(50/27) Group Vice President and Secretary--DPL Inc. and DP&L Judy W. Lansaw(43/16) Group Vice President--DPL Inc. and DP&L Bryce W. Nickel(38/14) Assistant Vice President--DP&L H. Ted Santo(44/23) Group Vice President--DP&L 28 As required by Rule 304 of Regulation S-T, the following appendix lists the graphic material contained in the 1994 DPL Inc. Annual Report to Shareholders. This graphic material, which appears in the paper copy of the report, was omitted from the electronically filed copy of the report. APPENDIX Page Item Description ----- ------ ------------------------------------------------------ Cover: Artwork: Logo - DPL Inc. Photograph: Picture of six children, an elderly man and a dog standing in a scenic setting with Dayton skyline in the background. Artwork: Logo - "DP&L 1994 Utility of the Year" with "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Inside Cover: Artwork: Logo - "DP&L 1994 Utility of the Year" with "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Page 2: Photograph: The following are pictured with their names and titles appearing above the photo: Burnell R. Roberts, David R. Holmes, James F. Dicke, II, Peter H. Forster, W August Hillenbrand, Jane G. Haley, Allen M. Hill, Thomas J. Danis, Ernie Green. Artwork: Map of the State of Ohio, with DP&L service territory highlighted. Page 3: Artwork: Logo - "DP&L 1994 Utility of the Year" with "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Bar Chart: Total Return - Five Year Average Annual Return Percent (with reinvested Dividends) --------------------------------- 1992 1993 1994 ---- ---- ---- DPL Inc. 22.6% 21.1% 16.0% Industry Average 12.4% 11.2% 1.1% Bar Chart: Dividends Per Share Dollars ----------------------------- 1992 $1.08 1993 $1.12 1994 $1.18 Page Item Description ----- ----- ------------------------------------------------------- Page 3: (cont.) Bar Chart: Earnings Per Share Dollars --------------------------- 1992 $1.34 1993 $1.42 1994 $1.54 Page 6: Photograph: Assembly line at a General Motors plant. Page 7: Artwork: Logo - "DP&L 1994 Utility of the Year" with "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Photograph: Whirlpool mixer. Artwork: Logo - Whirlpool Corporation. Page 8: Artwork: Logo - "DP&L 1994 Utility of the Year" with "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Artwork: Sign containing a map of the State of Ohio and "Western Ohio Where Agriculture, People, and Companies Grow". Page 9: Photograph: Airborne Express aircraft being loaded with cargo. Page 10: Photograph: View of glass manufacturing process at a Corning Glass plant. Page 11: Artwork: Logo - "DP&L 1994 Utility of the Year" with "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Artwork: Lucky the Dog, promotional mascot for the energy conservation programs of the Company. Artwork: "DP&L" logo and "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Page 12: Artwork: Logo - "DP&L 1994 Utility of the Year" with "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Artwork: Artist's rendering of FoxMeyer Corporation facility that is currently under construction. Artwork: Logo -"FoxMeyer Corporation" Page Item Description ----- ----- ---------------------------------------- Page 13: Bar Charts: Electric Revenues $ in millions Year --------------------- 1992 1993 1994 ---- ---- ---- Residential 326 374 390 Commercial 181 200 218 Industrial 190 206 229 Other 112 121 109 Total 809 901 946 Gas Revenues $ in millions Year --------------------- 1992 1993 1994 ---- ---- ---- Residential 128 161 157 Commercial 36 44 42 Industrial 19 15 15 Transportation & Other 21 25 23 Total 204 245 237 Total Taxes $ in millions Year --------------------- 1992 178 1993 190 1994 222 Electric Sales Thousands of GWH Year --------------------- 1992 1993 1994 ---- ---- ---- Residential 4.3 4.6 4.4 Commercial 2.9 3.0 3.1 Industrial 3.9 4.1 4.4 Other 3.0 3.0 2.3 Total 14.1 14.7 14.2 Page Item Description ---- ---- ------------------------------------------ Page 13: (cont.) Bar Charts: Gas Sales Millions of MCF Year --------------------- 1992 1993 1994 ---- ---- ---- Residential 28 29 28 Commercial 8 8 8 Industrial 5 3 3 Transportation & Other 14 17 18 Total 55 57 57 Operating Expenses $ in millions Year --------------------- 1992 1993 1994 ---- ---- ---- Fuel Used In Production 221 227 221 Gas Purchased For Resale 118 156 151 Operating & Administrative 158 185 159 Maintenance 77 90 86 Total 574 658 617 Average Price - Electric Calendar Year cents/kWh ------------------------ 1992 5.69 1993 6.07 1994 6.59 Average Price - Gas Calendar Year $/MCF ----------------------- 1992 4.36 1993 5.42 1994 5.44 Construction Costs $ in millions Year ----------------------- 1992 59 1993 89 1994 101 Page 27: Artwork: Logo - Price Waterhouse LLP (Independent Auditors). EX-23 3 1994 DPL INC. EX-23 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statement on Form S-3 (Registration No. 33-34316) of DPL Inc., with respect to its Automatic Dividend Reinvestment and Stock Purchase Plan, and Post-Effective Amendment No. 3 on Form S-8, to DPL Inc.'s Registration Statement on Form S-4 (Registration No. 33-2551), with respect to The Dayton Power and Light Company's Employees' Stock Plan, of our report dated January 18, 1995, appearing on page 27 of the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page II-2 of this Form 10-K. Price Waterhouse LLP Price Waterhouse LLP Dayton, Ohio March 29, 1995 EX-27 4 1994 DPL INC. EX-27
UT 1,000 YEAR DEC-31-1994 DEC-31-1994 PER-BOOK 2249900 62300 386800 418100 115600 3232700 1100 667900 459300 1128300 0 22900 1093700 0 0 0 4700 0 0 0 983100 3232700 1187900 101200 864000 965200 222700 30100 252800 93200 159600 4700 154900 118300 92100 286900 1.54 1.54