-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AiuBivFTjIQ03pFHyv0cUK1lfPl1hAuP12Aouk24KeClh4jUAGTjBtwjahyHogJJ QuGLMXiCBE24j82peyhWOg== 0000787250-96-000003.txt : 19960401 0000787250-96-000003.hdr.sgml : 19960401 ACCESSION NUMBER: 0000787250-96-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DPL INC CENTRAL INDEX KEY: 0000787250 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 311163136 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09052 FILM NUMBER: 96540790 BUSINESS ADDRESS: STREET 1: PO BOX 8825 CITY: DAYTON STATE: OH ZIP: 45401 BUSINESS PHONE: 5132246000 MAIL ADDRESS: STREET 1: PO BOX 8825 CITY: DAYTON STATE: OH ZIP: 45401 10-K 1 1995 SEC 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, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 1-9052 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 29, 1996 on which registered - ------------------- ----------------- ---------------------- Common Stock, $0.01 par 106,696,923 New York Stock Exchange value and 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 nonaffiliates of the registrant as of February 29, 1996 was $2,547,389,037.00 based on the closing price of $23 7/8 on such date. DOCUMENTS INCORPORATED BY REFERENCE Parts I and II incorporate by reference the registrant's 1995 Annual Report to Shareholders. Portions of the definitive Proxy Statement dated March 1, 1996, relating to the 1996 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 476,000 retail customers in a 24 county service area of approximately 6,000 square miles and furnishes natural gas service to 294,000 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 1995, electric revenues increased 9% with a 5% growth in sales to business customers reflecting the continued strength of the West Central Ohio economy. Higher sales to other public utilities and increased residential sales due to weather conditions also contributed to the revenue increase. Gas revenues and gas purchased for resale decreased 6% and 12%, respectively, in 1995 as lower gas costs offset the 4% growth in volumes. During 1995, cooling degree days were 15% above the twenty year average and 9% above 1994. Heating degree days in 1995 were 3% above the thirty year average and 5% above 1994. 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; DP&L Community Urban Redevelopment Corporation, an agent for DP&L in the office space leasing business of an eleven story building owned by DP&L; and Miami Valley Equipment, Inc., which owns equipment and has made investments in non-utility interests. * Unless otherwise indicated, the information given in "Item 1 - BUSINESS" is current as of March 21, 1996. No representation is made that there have not been subsequent changes to such information. I-1 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 and wholesale electric generation; 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 and has, for financial investment purposes, acquired limited partnership interests in non-utility interests. 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 2,908 persons as of December 31, 1995, of which 2,424 are full-time employees and 484 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 1995 Annual Report to Shareholders ("1995 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 makes power purchases from neighboring utilities. I-2 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. DP&L provides transmission and wholesale electric service 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 were approved by the Federal Energy Regulatory Commission ("FERC"), in June 1995. The twelfth municipal customer signed a 20-year agreement, approved by FERC in February 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 1.2% of total electricity sales in 1995. In October 1994, the Public Utilities Commission of Ohio ("PUCO") initiated roundtable discussions on the introduction of competition in the electric industry. The "Electric Competition Series" is a result of the Ohio Energy Strategy issued in April 1994. To date, roundtable discussions have focused largely on short-term initiatives that are possible under the current regulatory framework. On February 15, 1996, the PUCO issued guidelines for interruptible service, including services that accommodate the attainment and delivery of replacement electricity during periods when the utility faces constraints on its own resources. Furthermore, legislative proposals at the federal level are pending concerning wholesale and retail wheeling which are designed to increase competition. These factors increase the risk that the DP&L's production plants and/or regulatory assets may not be fully recovered in rates. 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. I-3 On March 29, 1995, FERC issued a Notice of Proposed Rulemaking ("NOPR") seeking comments on an initiative to create a more competitive wholesale electric power market. In its NOPR, FERC announced its intent to require all electric utilities that own or control transmission facilities to file open-access transmission service tariffs. Open-access transmission tariffs provide third parties with non-discriminatory transmission service comparable to what the utility provides itself. In this proposed rulemaking, FERC also states that it will enact a principle that will entitle utilities to full recovery of legitimate and verifiable stranded costs on both the state and federal level. On December 13, 1995, FERC issued a NOPR that prescribes rules for establishing and governing real-time information networks ("RINs"). According to the NOPR, RINs would provide potential wholesale transmission customers with information about a utility's transmission system that would enable them to obtain open-access, non-discriminatory transmission service. Comments on this NOPR were due to FERC by February 5, 1996. Final rules on these matters are expected in 1996. 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 evolution of an efficient 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 and 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. CONSTRUCTION AND FINANCING PROGRAM OF DPL INC. 1996-2000 Construction Program The estimated construction additions for the years 1996- 2000 are set forth below: Estimated 1996 1997 1998 1999 2000 1996-2000 ---- ---- ---- ---- ---- --------- millions Electric generation and transmission commonly owned with neighboring utilities..... $ 29 $ 32 $ 34 $ 35 $ 37 $ 167 Other electric generation and transmission facilities........ 37 36 36 37 36 182 Electric distribution............ 34 36 35 35 35 175 General.......................... 3 2 3 3 4 15 Gas, steam and other facilities.. 18 18 18 19 19 92 --- --- --- --- --- --- Total construction.......... $121 $124 $126 $129 $131 $631 I-4 Estimated construction costs over the next five years average $126 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 unit was completed under budget and ahead of schedule in May 1995. The next unit is scheduled for completion in 1997. 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 recovery. 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. 1996-2000 Financing Program DPL Inc. and its subsidiaries will require a total of $81 million during the next five years for debt maturities and sinking funds in addition to any funds needed for the construction program. At year-end 1995, DPL Inc. had a cash and temporary investment balance of $150 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 September 1995, a new series of Air Quality Development Revenue Refunding Bonds was issued in principal amount of $110 million with an interest rate of 6.10%. Proceeds from the financing were used to redeem a similar principal amount of DP&L First Mortgage Bonds with an interest rate of 9.50%. 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. In November 1989, DPL Inc. entered into a revolving credit agreement ("the Credit Agreement") with a consortium of banks renewable through 1999 which allows total borrowings by DPL Inc. and its subsidiaries of $200 million. DP&L has I-5 authority from 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, 1995, 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 outstanding and to be outstanding, and (ii) 100% of retired First Mortgage Bonds. DP&L anticipates that, during 1996-2000, 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 3,148,000 KW. Of this capability, 2,843,000 KW (approximately 90%) 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. 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 2,961,000 KW, which occurred in August 1995. The present summer generating capability is 3,092,000 KW. I-6 GENERATING FACILITIES MW Rating -------------- Operating DP&L Station Ownership* 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 Tait Gas Turbine 1 W DP&L Moraine, OH 95 95 *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 1995. 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 1996-2000 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 $1.35/MMBTU in 1995, $1.39/MMBTU in 1994 and $1.46/MMBTU in 1993. The average fuel cost per kWh generated of all fuel burned for electric generation (coal, gas and oil) for the year was 1.36 cents which represents a decrease from 1.42 cents in 1994 and 1.43 cents in 1993. 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. Interconnections with 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 1995, firm agreements provided approximately 50% of total supply, with the remaining supplies purchased on a spot/short-term basis. In 1995, DP&L purchased natural gas at an average price of $2.79 per MCF, compared to $3.34 per MCF in 1994 and $3.65 per MCF in 1993. 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. I-8 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 and provides transportation service to approximately 300 end-use customers, delivering a total quantity of nearly 16,376,000 MCF per year. 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. Columbia's reorganization plan was approved by the United States Bankruptcy Court for the District of Delaware on November 15, 1995 and became effective November 28, 1995. On the effective date, Columbia made distributions to customers, including DP&L, for refunds and other claims made by customers against Columbia, as provided in the Customer Settlement Agreement approved by FERC on June 15, 1995. The resolution of the bankruptcy was favorable to DP&L, the shareholders of DPL Inc. and its customers. On June 24, 1994, in Baltimore Gas & Electric Company v. FERC, the U.S. Court of Appeals for the District of Columbia Circuit decided in favor of Columbia's customers, including DP&L, by holding that a 1985 settlement between the parties prohibited Columbia from collecting pre-1987 upstream take-or-pay costs from its customers. FERC has approved a settlement of this issue as a part of the bankruptcy settlement which was favorable to DP&L, the shareholders of DPL Inc. and its customers. 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 has helped stabilize gas costs while ensuring 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. I-9 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. 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. As part of a 1992 PUCO-approved settlement agreement ("Agreement") among DP&L and various consumer groups, the third and final phase of an electric rate increase of 6.4% took effect in January 1994. Deferrals (including carrying charges) during the phase-in period are being recovered in current rates. In addition DP&L agreed to undertake cost-effective demand-side management ("DSM") programs with an average annual cost of $15 million for 1992-1995. These costs are deferred and are being recovered at approximately $9 million per year. The Agreement and a subsequent stipulation in 1995 (the "1995 stipulation") allowed accelerated recovery of DSM costs and, thereafter, production plant costs in the event that DP&L return on equity exceeds a baseline 13% (subject to upward adjustment). If the return exceeds the baseline return by one to two percent, one-half of the excess will be used to accelerate recovery of these costs. If the return is greater than two percent over the baseline, the entire excess will be used for such purpose. The 1995 stipulation also included commitments to demand reduction programs through 2001. Deferred interest charges on the William H. Zimmer Generating Station ("Zimmer") are being amortized at approximately $3 million per year over the projected life of the asset. Regulatory deferrals on the balance sheet were: Dec. 31 Dec. 31 1995 1994 ------- ------- --millions-- Phase-in $ 61.4 $ 75.9 DSM 36.2 31.9 Deferred interest - Zimmer 58.1 61.0 ------ ------ Total $155.7 $168.8 ====== ====== I-10 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. 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. 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 first combustion turbine was completed in May 1995 and became operational June 1, 1995. On May 31, 1995 and June 1, 1995, respectively, DP&L filed its electric and natural gas LTFR with the PUCO. 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 electric LTFR was approved by the PUCO on October 5, 1995. The natural gas LTFR was approved by the PUCO on November 22, 1995. Ronda H. Fergus was appointed to serve as a PUCO commissioner for a five-year term, which commenced April 11, 1995. Commissioner Fergus was previously chief of the telecommunications section of the Utilities Department at the PUCO. I-11 On January 25, 1996, Governor Voinovich reappointed Chairman Craig A. Glazer to the PUCO for a five year term, pending approval by the Senate of the State of Ohio. Chairman Glazer's next term will commence after the expiration of his current term on April 10, 1996 and extend until April 10, 2001. 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 $4 million for environmental control facilities during 1995. The possibility exists that current environmental regulations could be revised which could change the level of estimated 1996-2000 construction expenditures. See CONSTRUCTION AND FINANCING PROGRAM OF DPL INC. Air Quality The Clean Air Act Amendments of 1990 (the "Act") have limited sulfur dioxide and nitrogen oxide emissions nationwide. The Act restricts emissions in two phases. Phase I compliance requirements became effective on January 1, 1995 and Phase II requirements will become effective on January 1, 2000. Compliance by DP&L has not caused any material changes in DP&L's costs or operations. DP&L's environmental compliance plan ("ECP") was approved by the PUCO on May 6, 1993. Phase I requirements are being met by switching to lower sulfur coal at several commonly owned electric generating facilities and increasing existing scrubber removal efficiency. Total capital expenditures to comply with Phase I of the Act were approximately $5.5 million. 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. Costs to comply with the Act are eligible for recovery in fuel hearings and other regulatory proceedings. As required by Ohio law, in April 1995, the PUCO initiated proceedings to conduct a review of DP&L's ECP. On November 9, 1995, the PUCO approved the continued prudency of DP&L's ECP and the related update report. I-12 Land Use DP&L and numerous other parties have been notified by the United States Environmental Protection Agency ("U.S. EPA") or the Ohio Environmental Protection Agency ("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. 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 initial Record of Decision issued by the U.S. EPA estimating clean-up costs at $27.1 million has been amended. The amended alternative estimates clean-up costs at $32 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 U.S. EPA is also currently considering a proposal for a less expensive clean-up method. 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 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-13 THE DAYTON POWER AND LIGHT COMPANY OPERATING STATISTICS ELECTRIC OPERATIONS Years Ended December 31, ------------------------ 1995 1994 1993 ---- ---- ---- Electric Output (millions of kWh) General - Coal-fired units.............. 15,679 14,483 14,729 Other units................... 29 27 17 Power purchases.................. 2,115 897 1,107 Exchanged and transmitted power.. 1 3 (7) Company use and line losses...... (1,010) (1,191) (1,170) ---------- -------- -------- Total......................... 16,814 14,219 14,676 ========== ======== ======== Electric Sales (millions of kWh) Residential...................... 4,871 4,465 4,558 Commercial....................... 3,425 3,068 3,006 Industrial....................... 4,401 4,388 4,089 Public authorities and railroads. 1,378 1,333 1,356 Private utilities and wholesale.. 2,739 965 1,667 ---------- -------- -------- Total......................... 16,814 14,219 14,676 ========== ======== ======== Electric Customers at End of Period Residential...................... 425,347 420,487 416,508 Commercial....................... 42,582 41,647 40,606 Industrial....................... 2,017 2,400 2,387 Public authorities and railroads. 5,573 5,320 5,287 Other............................ 17 18 17 ---------- -------- -------- Total......................... 475,536 469,872 464,805 ========== ======== ======== Operating Revenues (thousands) Residential...................... $ 422,153 $390,531 $373,760 Commercial....................... 237,799 218,046 200,124 Industrial....................... 224,135 228,546 205,996 Public authorities and railroads. 78,225 75,387 72,859 Private utilities and wholesale.. 57,799 24,273 38,491 Other............................ 9,807 9,110 10,090 ---------- -------- -------- Total......................... $1,029,918 $945,893 $901,320 ========== ======== ======== Residential Statistics (per customer-average) Sales - kWh...................... 11,518 10,676 10,998 Revenue.......................... $ 998.27 $ 933.70 $ 901.91 Rate per kWh (month of December) (cents)......................... 8.01 8.68 7.99 I-14 THE DAYTON POWER AND LIGHT COMPANY OPERATING STATISTICS GAS OPERATIONS Years Ended December 31, ------------------------ 1995 1994 1993 ---- ---- ---- Gas Output (thousands of MCF) Direct market purchases.......... 44,376 43,140 44,284 Liquefied petroleum gas.......... 18 144 58 Company use and unaccounted for.. (1,594) (1,227) (1,164) Transportation gas received...... 16,870 15,141 13,704 -------- -------- -------- Total......................... 59,670 57,198 56,882 ======== ======== ======== Gas Sales (thousands of MCF) Residential...................... 29,397 27,911 28,786 Commercial....................... 8,307 8,081 8,468 Industrial....................... 2,584 3,150 3,056 Public authorities............... 3,006 2,909 3,171 Transportation gas delivered..... 16,376 15,147 13,401 -------- -------- -------- Total......................... 59,670 57,198 56,882 ======== ======== ======== Gas Customers at End of Period Residential...................... 269,694 266,116 262,834 Commercial....................... 21,451 21,060 20,853 Industrial....................... 1,574 1,528 1,527 Public authorities............... 1,423 1,317 1,333 -------- -------- -------- Total......................... 294,142 290,021 286,547 ======== ======== ======== Operating Revenues (thousands) Residential...................... $149,006 $157,193 $161,254 Commercial....................... 39,047 42,382 44,321 Industrial....................... 11,447 14,949 14,890 Public authorities............... 12,589 14,165 15,248 Other............................ 9,950 8,433 9,366 -------- -------- -------- Total......................... $222,039 $237,122 $245,079 ======== ======== ======== Residential Statistics (per customer-average) Sales - MCF...................... 109.8 105.7 110.2 Revenue.......................... $ 556.72 $ 595.30 $ 617.33 Rate per MCF (month of December). $ 4.44 $ 5.57 $ 5.66 I-15
EXECUTIVE OFFICERS OF THE REGISTRANT (As of March 1, 1996) Business Experience, Last Five Years (Positions with Registrant Name Age Unless Otherwise Indicated) Dates ---- --- --------------------------- ------------------ Peter H. Forster 53 Chairman and Chief Executive 9/26/95 - 3/01/96 Officer Chairman, President and Chief 4/05/88 - 9/26/95 Executive Officer Chairman, DP&L 4/06/92 - 3/01/96 Chairman and Chief Executive 8/02/88 - 4/06/92 Officer, DP&L Allen M. Hill 50 President and Chief Operating 9/26/95 - 3/01/96 Officer President and Chief Executive 4/06/92 - 3/01/96 Officer, DP&L President and Chief Operating 8/02/88 - 4/06/92 Officer, DP&L Paul R. Anderson 53 Controller 4/12/81 - 3/01/96 Stephen P. Bramlage 49 Assistant Vice President, DP&L 1/01/94 - 3/01/96 Director, Service Operations, 10/29/89 - 1/01/94 DP&L Robert M. Combs 50 Vice President, DP&L 5/09/94 - 3/01/96 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 46 Assistant Vice President, DP&L 1/01/94 - 3/01/96 Director, Service Operations, 4/03/92 - 1/01/94 DP&L Service Center Manager 6/11/89 - 4/03/92 Jeanne S. Holihan 39 Assistant Vice President, DP&L 3/17/93 - 3/01/96 Treasurer, DP&L 11/06/90 - 3/17/93
I-16
EXECUTIVE OFFICERS OF THE REGISTRANT (As of March 1, 1996) Business Experience, Last Five Years (Positions with Registrant Name Age Unless Otherwise Indicated) Dates ---- --- -------------------------- -------------------- Thomas M. Jenkins 44 Group Vice President and 6/27/95 - 3/01/96 Treasurer Group Vice President, DP&L Group Vice President and 5/09/94 - 6/27/95 Treasurer, DPL Inc. and DP&L Group Vice President and 11/06/90 - 5/09/94 Treasurer Group Vice President, DP&L Stephen F. Koziar, Jr. 51 Group Vice President and 1/31/95 - 3/01/96 Secretary, DPL Inc. and DP&L Group Vice President, 12/10/87 - 1/31/95 DPL Inc. and DP&L Judy W. Lansaw 44 Group Vice President, 1/31/95 - 3/01/96 DPL Inc. and DP&L Group Vice President and 12/07/93 - 1/31/95 Secretary, DPL Inc. and DP&L Vice President and 8/01/89 - 12/07/93 Secretary, DPL Inc. and DP&L Arthur G. Meyer 46 Treasurer, DP&L 6/27/95 - 3/01/96 Director, Financial Activities, DP&L 5/09/94 - 6/27/95 Manager, South Dayton Service 1/31/94 - 5/09/94 Center Associate General Counsel, DP&L 7/13/92 - 1/31/94 President, Dayton Business 2/01/89 - 7/13/92 Committee Bryce W. Nickel 39 Assistant Vice President, DP&L 1/01/94 - 3/01/96 Director, Service Operations, 10/29/89 - 1/01/94 DP&L H. Ted Santo 45 Group Vice President, DP&L 12/08/92 - 3/01/96 Vice President, DP&L 2/28/88 - 12/08/92
I-17 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 1995 Annual Report, which pages are incorporated herein by reference. 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 and I-9), 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-4), ELECTRIC OPERATIONS AND FUEL SUPPLY (pages I-6 through I-8), GAS OPERATIONS AND GAS SUPPLY (pages I-8 and I-9), RATE REGULATION AND GOVERNMENT LEGISLATION (pages I-9 through I-12) and ENVIRONMENTAL CONSIDERATIONS (pages I-12 and I-13) and - Note 2 of Notes of Consolidated Financial Statements on page 21 of the registrant's 1995 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 18, 1995. Three directors of DPL Inc. were elected at the Annual Meeting, each of whom will serve a three year term expiring in 1998. The nominees were elected as follows: Thomas J. Danis, 91,287,187 shares FOR, 1,001,355 shares WITHHELD; Allen M. Hill, 91,441,712 shares FOR, 846,830 shares WITHHELD; and W August Hillenbrand, 91,426,127 shares FOR, 862,415 shares WITHHELD. I-18 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 1995 Annual Report, which pages are incorporated herein by reference. As of December 31, 1995, there were 48,919 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 1995 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 1995 Annual Report, which pages are incorporated herein by reference. Subsequent to the completion of the 1995 Annual Report, DP&L was notified that the U.S. EPA amended its Record of Decision at one superfund site, with a revised estimate for clean-up. The total cost estimate for three sites changed from $56 million to $61 million. 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 1995 Annual Report, which pages are incorporated herein by reference. II-1 Report of Independent Accountants on Financial Statement Schedule --------------------------------- To the Board of Directors of DPL Inc. Our audits of the consolidated financial statements referred to in our report dated January 18, 1996 appearing on page 27 of the 1995 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 Schedule listed in Item 14(a) of this Form 10- K. In our opinion, this Financial Statement Schedule presents 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, 1996 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, 1996, relating to the 1996 Annual Meeting of Shareholders ("1996 Proxy Statement"), which pages are incorporated herein by reference, and on pages I-16 and I-17 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 1996 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 1996 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 1995 Form 10K Incorporated by Reference ------------------ Report of Independent Accountants II-2 (a) Documents filed as part of the Form 10-K 1. Financial Statements Pages of 1995 Annual -------------------- Report Incorporated by Reference -------------------- Consolidated Statement of Results of Operations for the three years in the period ended December 31, 1995................................. 17 Consolidated Statement of Cash Flows for the three years in the period ended December 31, 1995....... 18 Consolidated Balance Sheet as of December 31, 1995 and 1994..................................... 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, 1995: Page No. -------- Schedule II - Valuation and qualifying accounts IV-7 The information required to be submitted in schedules I, III, IV and V 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 1986 DPL Inc., Holding Sub Inc. and DP&L dated Proxy Statement January 6, 1986.......................... (File No. 1-2385) 3(a) Copy of Amended Articles of Incorporation Exhibit 3 to Report on of DPL Inc. dated January 4, 1991, and Form 10-K for the year amendment dated December 3, 1991......... ended December 31, 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 year Incorporation............................ ended December 31, 1993 (File No. 1-9052) 4(a) Copy of Composite Indenture dated as of Exhibit 4(a) to Report October 1, 1935, between DP&L and The on Form 10-K for the year Bank of New York, Trustee with all ended December 31, 1985 amendments through the Twenty-Ninth (File No. 1-2385) Supplemental Indenture................... 4(b) Copy of the Thirtieth Supplemental Exhibit 4(h) to Indenture dated as of March 1, 1982, Registration Statement between DP&L and The Bank of New York, No. 33-53096 Trustee.................................. 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 Report Indenture dated as of December 1, 1985, on Form 10-K for the year between DP&L The Bank of New York, ended December 31, 1985 Trustee.................................. (File No. 1-2385) 4(f) Copy of the Thirty-Fourth Supplemental Exhibit 4 to Report on Indenture dated as of April 1, 1986, Form 10-Q for the quarter Between DP&L and The Bank of New York, ended June 30, 1986 Trustee.................................. (File No. 1-2385) IV-2 4(g) Copy of the Thirty-Fifth Supplemental Exhibit 4(h) to Report on Indenture dated as of December 1, 1986, Form 10-K for the year between DP&L and The Bank of New York, ended December 31, 1986 Trustee.................................. (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 on Indenture dated as of February 15, 1993 Form 10-K for the year Betwenn DP&L and The Bank of New York, ended December 31, 1992 Trustee.................................. (File No. 1-2385) 4(m) Copy of the Credit Agreement dated as of Exhibit 4(k) to DPL Inc.'s November 2, 1989 between DPL Inc., the Registration Statement Bank of New York, as agent, and the banks on Form S-3 (File No. named therein............................ 33-32348) 4(n) Copy of Shareholder Rights Agreement Exhibit 4 to Report on between DPL Inc. and The First National Form 8-K dated December 13, Bank of Boston........................... 1991 (File No. 1-9052) 10(a) Description of Management Incentive Exhibit 10(c) to Report on Compensation Program for Certain Form 10-K for the year Executive Officers....................... ended December 31, 1986 (File No. 1-9052) 10(b) Copy of Severance Pay Agreement with Exhibit 10(f) to Report on Certain Executive Officers............... Form 10-K for the year ended December 31, 1987 (File No. 1-9052) IV-3 10(c) Copy of Supplemental Executive Retirement Exhibit 10(e) to Report on Plan amended August 6, 1991.............. Form 10-K for the year ended December 31, 1991 (File No. 1-9052) 10(d) Amended description of Directors' Deferred Exhibit 10(d) to Report Stock Compensation Plan effective January on Form 10-K for the year 1, 1993.................................. 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 year Directors effective January 1, 1993...... ended December 31, 1993 (File No. 1-9052) 10(f) Copy of Management Stock Incentive Plan Exhibit 10(f) to Report 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 to Exhibit 18 to Report on change in accounting for unbilled revenues Form 10-K for the year from Price Waterhouse LLP................. ended December 31, 1987 (File No. 1-9052) The following exhibits are filed herewith: Page No. -------- 13 Copy of DPL Inc.'s 1995 Annual Report to Shareholders.............................. 21 Copy of List of Subsidiaries of DPL Inc... 23 Consent of Price Waterhouse LLP........... 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 21, 1996 Peter H. Forster ---------------------------- Peter H. Forster Chairman 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. Thomas J. Danis Director March 26, 1996 ------------------- (T. J. Danis) Director March , 1996 ------------------- (J. F. Dicke, II) Peter H. Forster Director, Chairman and March 21, 1996 ------------------- Chief Executive Officer (P. H. Forster) (principal executive officer) Ernie Green Director March 22, 1996 ------------------- (E. Green) Director March , 1996 ------------------- (J. G. Haley) Allen M. Hill Director, President and March 21, 1996 ------------------- Chief Operating Officer (A. M. Hill) IV-5 Director March , 1996 -------------------- (W A. Hillenbrand) Director March , 1996 -------------------- (D. R. Holmes) Thomas M. Jenkins Group Vice President and March 21, 1996 -------------------- Treasurer (principal (T. M. Jenkins) financial and accounting officer) Burnell R. Roberts Director March 25, 1996 -------------------- (B. R. Roberts) IV-6
Schedule II DPL Inc. VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 1995, 1994 and 1993 - ---------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------------------------------------------------------------------------- Additions ---------------- Balance at Charged Balance Beginning to Deductions at End Description of Period Income Other (1) of Period - ---------------------------------------------------------------------------------------------- ------------------------thousands--------------------- 1995: Deducted from accounts receivable-- Provision for uncollectible accounts... $ 7,801 $ 1,096 $ - $ 2,416 $ 6,481 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 (1) Amounts written off, net of recoveries of accounts previously written off.
IV-7 EX-13 2 1995 DPL INC. ANNUAL REPORT 1995 ANNUAL REPORT (see appendix for logo description) Caption to photograph: EXCELLING IN A COMPETITIVE ENVIRONMENT (see appendix for photograph description) [cover] KEY FACTORS FOR HIGH PERFORMANCE RETURN TO SHAREHOLDERS. Deliver above average and sustainable earnings and dividend growth--maximize shareholder value. SUPERIOR OPERATIONS. Achieve consistent, superior operations with the most efficient use of existing assets. COMPETITIVE PRICES. Keep prices competitive relative to the state and the region. STRONG FINANCIAL PERFORMANCE. Produce strong financial performance while minimizing risk. GROWING SERVICE AREA ECONOMY. Enhance strong partnership with West Central Ohio to achieve economic growth. MANAGING COSTS. Manage costs at all levels while achieving performance goals. ABOUT THE COVER Excelling in a Competitive Environment--A rich tradition in manufacturing technology and quality educational and training programs support the dynamic business climate of West Central Ohio. The Advanced Integrated Manufacturing Center, shown on the cover, is jointly sponsored by Sinclair Community College and The University of Dayton. Its accomplishments include an award-winning student project in manufacturing design. This Report highlights DPL Inc.'s industry-leading performance in 1995, and its partnership with the people and businesses of West Central Ohio to achieve high performance in a competitive world. DP&L SERVICE AREA WEST CENTRAL OHIO (see appendix for artwork description) CORPORATE PROFILE 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. Electricity for DP&L's 24 county service area is generated at eight power plants and is distributed to 476,000 retail customers. Natural gas service is provided to 294,000 customers in 16 counties. The corporate offices of DPL Inc. are located at: Courthouse Plaza Southwest, Dayton, Ohio 45402 (513) 224-6000. [inside front cover] FINANCIAL & OPERATING HIGHLIGHTS 1995 1994 % change - ----------------------------------------------------------------------------- FINANCIAL PERFORMANCE Earnings per share of common stock $ 1.63 1.54 6 Dividends paid per share $ 1.24 1.18 5 Return on equity of regulated business % 13.2 13.1 Return on total capital % 11.5 11.3 Market value per share at December 31 $ 24 3/4 20 1/2 21 Book value per share at December 31 $ 11.54 11.17 3 Total electric and natural gas revenues (millions) $ 1,249.6 1,180.6 6 Taxes per share $ 2.25 2.21 2 Number of common shareholders 48,919 51,270 (5) Cash provided by operating activities (millions) $ 305.3 286.9 6 FIRST MORTGAGE BOND RATINGS: Duff & Phelps, Inc. AA AA Standard & Poor's Corporation AA- AA- Moody's Investor Service Aa3 A1 CAPITAL INVESTMENT PERFORMANCE: Construction additions (millions) $ 87.3 101.1 (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 6.07 6.59 (8) Fuel efficiency-- Heat rate - Btu per kWh 9,773 9,836 (1) Industry average 10,425 10,351 1 Fuel savings (millions) $ 14.3 11.0 30 System peak load - MW (calendar year) 2,961 2,824 5 Gas-- Average price per MCF - retail customers (calendar year) $ 4.90 5.44 (10) DPL 1 1995 EXCELLING IN A COMPETITIVE ENVIRONMENT RETURN TO SHAREHOLDERS Total financial return to shareholders in 1995 was 27%, and has averaged more than 21% annually over the last five years, compared to an industry average of less than 8%. Dear Shareholders: We enjoy being in the electric and gas business, interacting in a positive way with our customers, being a part of the communities we serve and each and every one of us at "Team DPL" works hard at making West Central Ohio a better place to work and live. So it comes as no surprise to you that in 1995 at DPL we continued to focus on doing what we do best, providing energy to West Central Ohio and working to create reasonable growth of earnings, dividends and stock price. It was a good year, we were able to reach or surpass almost all of our operating and financial goals. Earnings were up to $1.63 per share, 5.8% over the $1.54 per share earned in 1994. On January 30, 1996 we increased the annual dividend rate by six cents per share to $1.30 per share, a 4.8% increase over 1995's dividend rate. This increase is the ninth in the last ten years and is part of our effort to provide you a meaningful, competitive return every year. Our stock price closed 1995 at $24 3/4 per share, increasing 21% over year end 1994 and near our all-time high of $25 5/8. Our total return to you in 1995 was 27% and our five year compounded annual total return is over 21%. A growing service area economy is vital and, thanks to the one and a half million people in West Central Ohio, our regional economy is among the best in the nation. Growth is both expansive and diverse providing the basis for continued sales increases and a degree of insurance against the risk of a downturn in the economy. Electric sales to our business customers were up 5% in 1995 over 1994 sales, and the number of customers we serve continues to grow. In fact, this summer contained nine of our top ten peak days in DP&L's history, as a result of our strong economy and warmer than usual temperatures. I'm especially proud of the efforts of DP&L in developing partnerships with our communities, educational institutions, industries and individuals. Our new program, "Partners in Business," joins together business, education and government to strengthen the economy and helps to constantly upgrade an already well- trained workforce in West Central Ohio. We continued our extensive investor analyst effort in 1995 to communicate our business plans directly to these decision makers across the nation. We visited with more than 300 analysts in 26 cities, ensuring that our operating belief is heard... DPL 2 1995 ...and understood. The foundation of this belief is unchanged since 1978-- we are in the business of selling a commodity, and a commodity sells on price. In order to succeed in the commodity business, plant operations have to be among the best in the industry, and reserves must be low but adequate to meet our customers' needs. Costs must be closely managed, in order to have competitive prices--one of our highest priorities. We believe it is beneficial to be a combination electric and natural gas company, and we intend to take full advantage of our position as a low cost gas provider to produce the best energy package for each of our customers. Finally, strong financial performance accompanied by a clean, sound balance sheet help to protect against future financial and regulatory risk and ensure the growth of the Company. Working together and shared success have been a key part of our belief in the past. We enjoyed working for you, our shareholders, in 1995 and will continue to stick with the basics in 1996. Best regards, Peter H. Forster Peter H. Forster Chairman & CEO DPL Inc. Caption to photogragh: PICTURED FROM LEFT TO RIGHT ARE: 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 (see appendix for photograph description) Earnings Per Share Dollars (see appendix for graph description) Dividends Per Share Dollars (see appendix for graph description) DPL 3 1995 EXCELLING IN A COMPETITIVE ENVIRONMENT SUPERIOR OPERATIONS DPL maintains a national leadership position in power plant efficiency and productivity, overall system reliability, and customer satisfaction. DPL Inc. will continue to focus on a commitment to strong financial performance, quality customer service, efficient operations and effective cost management efforts. By keeping energy prices competitive while meeting the total energy needs of our customers, we will continue to improve in an ever-changing environment. During 1995, DPL Inc. again produced solid financial returns for shareholders to remain one of the nation's top-performing energy companies. The formula for transitioning this success to a potentially more competitive and less regulated environment will be much the same -- a strong West Central Ohio economy combined with a quality product and excellent customer service. The West Central Ohio economy continues to outperform many areas in the nation. Productivity and expansion is accelerating in all sectors of our service territory's diverse economy, including high technology, research and development, light manufacturing, distribution and transportation and professional services. This growth means additional value-added jobs for our region that supports further economic development opportunities and expansion. In 1995, the average unemployment rate for the areas we serve was 4.4%, compared to 4.7% in Ohio and 5.7% nationally. Business activity showed strength over a broad base of industrial and commercial customers. This year, General Motors added more than one thousand new positions at one of their largest Dayton area plants. The plant, which builds the popular Chevy Blazer, Oldsmobile Bravada and GMC Jimmy, employs three shifts working six days per week. Significant economic expansion is also occurring at Emery Worldwide Inc., Panasonic, F&P America, Whirlpool, Honda of America and The Chrysler Corporation. Putting this growth into a broader perspective, in 1995, with a total of 911 new and expanded facilities constructed over a twelve month time period, the State of Ohio was once again declared the winner for economic growth and development. That's almost 400 facilities more than its closest competitor, North Carolina, and significantly more than Texas and California. Ohio's success is driven in part by the fact that West Central Ohio businesses invested over $720 million in new plant and expanded facilities. This trend of impressive economic growth and expansion will provide a solid base for future financial growth and ongoing success for the Company. Caption to logo: Way To Go is the umbrella name for our award winning energy efficiency programs, many of which feature the popular Lucky the Dog. (see appendix for logo description) DPL 4 1995 Caption to photograph: EMERY WORLDWIDE, A SUBSIDIARY OF CONSOLIDATED FREIGHTWAYS, INC., HAS ITS OPERATIONAL NORTH AMERICAN HUB IN DAYTON, OHIO. EACH NIGHT, EMERY TRANSPORTS UP TO FOUR MILLION POUNDS OF FREIGHT VIA NEARLY SEVENTY AIRCRAFT. EMERY IS CURRENTLY EXPANDING ITS RUNWAY FACILITIES AND ADDING A NEW LOGISTICS WAREHOUSE FACILITY. (see appendix for photograph description) DPL 5 1995 EXCELLING IN A COMPETITIVE ENVIRONMENT COMPETITIVE PRICES As a combination electric and natural gas company, we can meet our customers' total energy needs at a competitive price. DP&L works closely with large and small companies to provide incentives for growth. In September, DP&L unveiled "Partners in Business", a program designed to help stimulate the economy by awarding credits to new or existing customers that expand or create new jobs. The credits, which are based on energy use, can be used to strengthen employee skills, enhance productivity or increase efficiency. Overall, since 1986, our energy incentive programs have supported the creation of 57,000 new jobs in West Central Ohio. A total customer focus throughout the Company continues to be a priority at DP&L. To exceed our customers' expectations and accomplish our customer service goals, we start with the basics -- hardworking, dedicated employees. DP&L's twenty-one customer service centers located throughout West Central Ohio ensure our customers receive reliable, quality service around-the-clock, seven days a week. To monitor and improve customer satisfaction, customers are frequently surveyed and all employees have incentive compensation tied to the quality of customer service as well as cost control. To keep energy prices competitive in the region, DP&L remains committed to managing costs at all levels in the Company while continuing to achieve high operational standards. The effective use of resources in the generating part of our business combined with predictive and preventative maintenance results in some of the best operating units in the country. By effectively scheduling maintenance and repairs during off-peak periods, DP&L keeps purchased power costs to a minimum and reduces the need for new plant construction. Highlighting the importance of this strategy, DP&L customers established several new records for utility usage throughout the summer months. On August 14, an all-time peak demand of 2,961,000 kilowatts of electricity was set, marking the third consecutive year there has been record demand on the Company's electric system. Throughout the year, the Company maintained high levels of electric system reliability, despite extreme summer weather and the multiple system peaks. In order to meet the growing energy needs of West Central Ohio, the first of a small number of combustion peaking units was placed in service in June -- just in time to assist in meeting the record-setting demands for electricity by our customers. Caption to logo: West Central Ohio plays a significant role in Ohio's number one ranking nationally for new business development and expansion. (see appendix for logo description) DPL 6 1995 Caption to photograph: THE PANASONIC FACILITY IN TROY, OHIO ASSEMBLES, TESTS AND SHIPS TELEVISION SCREENS TO MANUFACTURERS THROUGHOUT THE COUNTRY. A $120 MILLION EXPANSION CURRENTLY IN PROGRESS WILL SPECIALIZE IN 31" AND 35" SCREENS, MORE THAN DOUBLING THE SIZE OF THE FACILITY AND ADDING 350 JOBS. (see appendix for photograph description) DPL 7 1995 Caption to photograph: SPECTRA-PHYSICS LASERPLANE, HEADQUARTERED IN DAYTON, OHIO, IS THE WORLD LEADER IN LEVELING, ALIGNING, AND GRADE CONTROL SYSTEMS. EMPLOYING OVER 600 PEOPLE IN THE DAYTON AREA, SPECTRA-PHYSICS IS A PARTICIPANT IN DP&L'S PARTNERS IN BUSINESS PROGRAM. (see appendix for photograph description) EXCELLING IN A COMPETITIVE ENVIRONMENT STRONG FINANCIAL PERFORMANCE DPL earnings and dividend growth continue to rank among the best in the industry. In 1995 earnings per share were $1.63, representing 5.8% growth over 1994 and dividends were increased to $1.24 per share, representing a 5.1% higher dividend rate than in 1994. Completed ahead of schedule and below its expected cost, this natural gas- fired unit has a capacity of 75 megawatts and can be brought on-line quickly to meet peak energy requirements. With their small size, the units can be built economically, providing the flexibility to meet energy usage growth as it occurs. Efficient operation of power plants also helps to meet customer demand for energy. DP&L has repeatedly been recognized for its production efficiency, as measured by heat rate. The Company's 1995 heat rate, which measures the amount of energy it takes to produce one kilowatt of electricity, of 9,773 Btu/kWh is expected to be among the industry leaders once again. Over the past ten years, we have saved our customers almost $250 million through our efficiency and productivity improvements. To further improve reliability, DP&L worked closely with local government, community groups and customers to install new transmission lines throughout our service territory. The teamwork between DP&L employees and the community enables projects to be completed as planned, strengthening the Company's overall transmission system and improving reliability. Positioning itself as a low-risk investment in the energy industry, DP&L remains committed to produce the majority of its energy from coal. Flexible coal procurement contracts are in place and take advantage of plentiful, quality coal supplies in the region. In addition, DP&L's long- standing practice of using low sulfur coal finds the Company well- positioned to meet the requirements of the Clean Air Act Amendments. Due to the flexibility built into our coal contracts, the compliance plan for the Clean Air Act Amendments is fully implemented, with little or no impact on energy prices for Phase I or Phase II, creating a significant competitive advantage. A total energy provider with easy access to five major gas pipelines, our gas business strengthens our competitive position within the region. As a combination electric and natural gas company, we can provide our customers the best total energy package in terms of both their existing and future energy needs and at a competitive price. Reflecting DP&L's outstanding performance and cost management efforts, Moody's Investors Service upgraded our credit rating in March 1995 from "A1" to "Aa3". This upgrade marks the third increase by Moody's since 1992 and is the highest... Caption to logo: Partners in Business is DP&L's innovative and new economic development program awarding energy credits to companies that expand or create new jobs. (see appendix for logo description) DPL 9 1995 EXCELLING IN A COMPETITIVE ENVIRONMENT GROWING SERVICE AREA ECONOMY The growth in the West Central Ohio economy continues to be robust and diverse. As a result, sales to business customers in 1995 increased 5% over 1994 totals. ...credit rating we've achieved with that agency in more than twenty years. DP&L is one of only two companies in the industry that has been upgraded to "Aa3" or higher by Moody's over the past two years. This increase follows credit rating upgrades in 1994 by both Duff & Phelps and Standard and Poor's ("S&P"). Duff & Phelps currently rates DP&L's senior debt as "AA" and S&P as "AA-". In September, DP&L took advantage of low interest rates and further reduced the cost of its long-term debt. By refinancing $110 million of 9.50% Pollution Control Bonds with a series of 6.10% Air Quality Development Bonds due 2030, the Company will save nearly $4 million in annual interest costs and effectively reduce the embedded cost of debt to below 7.6%. The average maturity of all of our debt is extended to nearly 28 years. This refinancing further strengthens our balance sheet and reduces future financial risk. In total, our financial performance provides the flexibility and resources to achieve a lowest quartile cost position in our region while supporting quality customer service efforts and efficient power plant operations. Based on the Company's strong operations and DPL's solid financial performance, we are able to provide shareholders with above average earnings and dividend growth. DP&L supports our customers through our Way To Go programs, including community and volunteer initiatives. Our goal is to use our resources to benefit the overall quality of life in West Central Ohio. The Company's Way To Go energy efficiency programs continue to reach a broad section of our customer base providing information, rebates and technology relating to energy-efficient lighting, motors and construction techniques. Over the past four years, 125,000 business and residential customers have been introduced to the value of energy efficiency through our energy-and money- saving initiatives. In addition, our employee volunteers staffed more than 40 community events attended by more than 230,000 people giving us the opportunity to talk with our customers about the benefits of the energy-saving services we provide. We are also recognizing those business customers who are taking strides to improve the efficiency of their operations. Over the past two years, sixteen companies, representing the industrial, commercial, government, small business and community sectors, have been named DP&L Way To Go Energy Leaders. Caption to logo: DP&L invests in area communities through numerous education activities and volunteer efforts of employees, supporting West Central Ohio's quality of life and business environment. (see appendix for logo description) DPL 10 1995 Caption to photograph: WEST CENTRAL OHIO PROVIDES GREAT EDUCATIONAL OPPORTUNITIES FOR YOUTH, WITH A DIVERSITY OF OPTIONS FOR CULTURAL AND ATHLETIC ACTIVITIES. IN TOTAL, THERE ARE APPROXIMATELY 90 HIGH SCHOOLS AND OVER 20 COLLEGES AND UNIVERSITIES IN THE AREA. DP&L'S STRONG COMMITMENT TO EDUCATION INCLUDES NUMEROUS ENVIRONMENTAL, SAFETY AND ENERGY AWARENESS PROGRAMS THAT REACHED MORE THAN 50,000 STUDENTS IN 1995. (see appendix for photograph description) DPL 11 1995 EXCELLING IN A COMPETITIVE ENVIRONMENT MANAGING COSTS The Company's success in managing costs results in stable enery prices for our customers and sustainable earnings for our shareholders. Showcasing the latest in energy-saving technology, DP&L's Energy Resource Center continues to set the industry standard for offering innovative workshops and seminars to help our business customers become more energy- efficient and competitive. From hosting energy conferences for organizations like Delphi's Worldwide Facilities Group to working one-on- one with facility managers, Energy Resource Center staff have helped more than 12,000 customers and energy professionals improve the energy efficiency of West Central Ohio businesses. DP&L's education programs continue to make a positive impact on energy users throughout our service territory. In Concert With the Environment teaches students about energy efficiency and protection of the environment using hands-on computer applications. Our one-of-a-kind scouting program highlights the fundamentals of energy conservation, electric generation, transmission and distribution and awards scouts Way To Go energy conservation patches for completing the workshop. And DP&L's Think Hot! initiative ensures students learn the importance of electric and gas safety in the classroom. In total, we have reached almost 50,000 students and teachers last year with our messages on energy conservation, the environment and safety education. DP&L's Way To Go Scholars combines academic excellence with valuable on- the-job experience. Since 1991, DP&L has instituted programs at eleven area universities and colleges, providing nearly thirty students each year with tuition assistance and cooperative education opportunities. DP&L employee volunteers were also present at virtually every city, township and county elected officials meetings within our service territory to insure that we stay informed on the critical issues facing the communities we serve. In this same spirit, DP&L employees volunteer significant time in their local communities through individual participation in educational, charitable, religious, and civic organizations. As the energy industry environment evolves, the combination of a strong West Central Ohio economy, top of the industry operational achievements and excellent financial performance will continue to distinguish DPL Inc. as a leader in the industry. In order to attain our future goals, our focus will remain on the fundamentals, specifically, the Company's underlying commitments to quality customer service and furnishing our shareholders with a low-risk investment that provides above average returns and dividend growth. Caption to logo: DP&L recognizes those companies who improve their business position through energy efficiency. (see appendix for logo description) DPL 12 1995 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 Revenues 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 descripiton) DPL 13 1995
FINANCIAL AND STATISTICAL SUMMARY DPL INC. 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------- For the years ended DPL December 31, Inc.: Earnings per share of common stock $ 1.63 1.54 1.42 1.34 1.15 Dividends paid per share $ 1.24 1.18 1.12 1.08 1.08 Dividend payout ratio % 76.1 76.6 78.9 80.6 93.9 Net income (millions) $ 164.7 154.9 139.0 138.8 119.2 Utility service revenues (millions) $1,255.1 1,187.9 1,151.3 1,017.3 995.6 Construction additions $ 87.3 101.1 88.9 59.0 117.4 (millions) Market value per share at December 31 $ 24-3/4 20-1/2 20-5/8 19-3/4 17-1/4 DP&L: Electric sales (millions of kWh) -- Residential 4,871 4,465 4,558 4,260 4,571 Commercial 3,425 3,068 3,006 2,896 2,945 Industrial 4,401 4,388 4,089 3,938 3,949 Other 4,117 2,298 3,023 2,960 1,850 ------- ------- ------- ------- ------- Total 16,814 14,219 14,676 14,054 13,315 Gas sales (thousands of MCF) -- Residential 29,397 27,911 28,786 27,723 26,594 Commercial 8,307 8,081 8,468 8,642 8,368 Industrial 2,584 3,150 3,056 4,914 6,014 Other 3,006 2,909 3,171 3,402 3,187 Transported gas 16,376 15,147 13,401 10,811 8,494 ------- ------- ------- ------- ------- Total 59,670 57,198 56,882 55,492 52,657 DPL At December 31, Inc.: Book value per share $ 11.54 11.17 10.51 9.75 10.38 Total assets (millions) $3,322.8 3,232.7 3,302.0 2,976.7 2,972.7 Long-term debt and preferred stock with mandatory redemption provisins (millions) $1,081.5 1,093.7 1,132.9 990.6 1,047.1 DP&L: First mortgage bond ratings-- Duff & Phelps, Inc. AA AA AA- A+ BBB+ Standard & Poor's Corporation AA- AA- A A BBB+ Moody's Investors Service Aa3 A1 A2 A2 A3 Number of Shareholders DPL Inc.: Common 48,919 51,270 53,275 54,023 53,846 DP&L: Preferred 733 795 1,873 1,969 2,034
DPL 14 1995 FINANCIAL REVIEW The 1995 earnings increased to $1.63 per share, compared to earnings per share of $1.54 in 1994 and $1.42 in 1993. In 1995, electric revenues increased 9% with a 5% growth in sales to business customers reflecting the continued strength of the West Central Ohio economy. Higher sales to other public utilities and increased residential sales due to weather conditions also contributed to the revenue increase. Fuel and purchased power expense increased 17% primarily related to the increased electric sales. In 1994, electric revenues increased 5% with a 2% increase in retail sales. Implementation of the last step of the electric rate increase phase-in of 6.4% also caused 1994 revenues to increase. (See Financial Statement Note 2.) Gas revenues and gas purchased for resale decreased 6% and 12%, respectively, in 1995, as lower gas costs offset the 4% growth in volumes. 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. Operation and maintenance expenses increased 11% in 1995 over 1994 primarily due to higher compensation and benefit expenses, computer system development and bond redemption costs. Operation and maintenance expense decreased 11% in 1994 from 1993 principally due to bond redemption costs incurred in 1993. Regulatory assets recorded during the phase-in of electric rates are being amortized and recovered in current rates. In addition, deferred interest charges on the William H. Zimmer Generating Station ("Zimmer") are being amortized at $3 million per year over the projected life of the asset. A 1992 Public Utilities Commission of Ohio ("PUCO")-approved settlement agreement and a subsequent stipulation in 1995 allowed accelerated recovery of demand-side management costs and, thereafter, production plant costs in the event that DP&L return on equity exceeds a baseline 13% (subject to upward adjustment). If the return exceeds the baseline return by one to two percent, one-half of the excess will be used to accelerate recovery of these costs. If the return is greater than two percent over the baseline, the entire excess will be used for such purpose. Preferred stock dividends decreased $4 million in 1995 and 1994 due to redemptions of several series of preferred stock in 1994. Total income taxes increased slightly in 1995 after a 29% increase in 1994 resulting from higher pre-tax earnings. Credit Ratings In March 1995, DP&L's senior debt credit rating was upgraded to "Aa3" from "A1" by Moody's Investors Service. This marks the third credit rating increase from Moody's since 1992 and the highest credit rating with the agency since 1974. The Moody's upgrade follows upgrades in 1994 by both Duff & Phelps and Standard & Poors ("S&P"). Duff & Phelps now rates DP&L's senior debt as "AA" and S&P as "AA-". Duff & Phelps had previously upgraded the Company's credit ratings in 1993. All of these upgrades are considered investment grade and reflect the Company's strong financial performance, cost reductions and competitive position. INCOME STATEMENT HIGHLIGHTS $ in millions except per share amounts 1995 1994 1993 - ------------------------------------------------------------------ ELECTRIC UTILITY: Revenues $1,028 $944 $899 Fuel and purchased power 256 218 225 ----- ----- ----- Net revenues 772 726 674 GAS UTILITY: Revenues 222 237 245 Gas purchased for resale 133 151 156 ----- ----- ----- Net revenues 89 86 89 Interest and other income 30 30 27 Operation and maintenance expense 272 246 275 Amortization (deferral) of regulatory assets, net 15 11 (26) Income taxes 102 101 78 Net income 165 155 139 Earnings per share of common stock 1.63 1.54 1.42 DPL 15 1995 Construction Program and Financing Construction additions were $87 million, $101 million and $89 million in 1995, 1994 and 1993, respectively. During 1995, total cash provided by operating activities was $305 million. At year-end, cash and temporary cash investments were $150 million. In September 1995, a new series of Air Quality Development Revenue Refunding Bonds was issued in principal amount of $110 million with an interest rate of 6.10%. Proceeds from the financing were used to redeem a similar principal amount of first mortgage bonds with an interest rate of 9.5%. 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. The capital program for the five years ending 2000 consists of construction costs of $631 million, which includes a series of 75 MW combustion turbine generating units, and debt maturities and sinking fund payments of $81 million. 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 capital program during 1996- 2000. In addition, 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 1995, 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 approximate projected depreciation over the same period. In March 1995, the Federal Energy Regulatory Commission ("FERC") issued a Notice of Proposed Rulemaking ("NOPR") that seeks comments on FERC's initiative to create a more competitive wholesale electric power market. In this NOPR, FERC states its intention to require all electric utilities that own or control transmission facilities to file open access transmission tariffs. Open access transmission tariffs provide third parties non-discriminatory transmission service comparable to what the utility provides itself. In this proposed rulemaking, FERC also states that it will enact a principle that will entitle utilities to full recovery of legitimate and verifiable stranded costs on both the state and federal level. The PUCO is holding roundtable discussions on the introduction of competition in the electric industry. Furthermore, legislative proposals have been introduced in Ohio concerning wholesale and retail wheeling which are designed to increase competition. These factors increase the risk that the Company's production plant and/or regulatory assets may not be fully recovered in rates. A stipulation approved by the PUCO allows accelerated recovery of demand-side management and production plant costs to the extent that future DP&L income exceeds the allowed return. 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. Also, the Company partially insures against losses for business risks through its wholly-owned captive insurance company and third party carriers. DPL 16 1995 CONSOLDIATED STATEMENT OF OPERATIONS DPL INC. For the years ended December 31, $ in millions except per share amounts 1995 1994 1993 - ------------------------------------------------------------------------------ INCOME Utility service revenues $1,255.1 $1,187.9 $1,151.3 Interest and other income 29.7 30.1 26.7 -------- -------- -------- Total income 1,284.8 1,218.0 1,178.0 -------- -------- -------- EXPENSES Fuel and purchased power 257.5 220.7 226.6 Gas purchased for resale 133.2 150.8 156.4 Operation and maintenance (Note 1) 272.3 245.8 274.8 Depreciation and amortization (Note 1) 118.9 114.7 110.9 Amortization (deferral) of regulatory assets, net (Note 2) 15.4 10.9 (25.8) General taxes 125.2 121.1 112.0 Interest expense 94.3 93.2 97.0 Preferred dividend requirements of The Dayton Power and Light Company (Note 9) 0.9 4.7 8.7 -------- -------- -------- Total expenses 1,017.7 961.9 960.6 -------- -------- -------- INCOME BEFORE INCOME TAXES 267.1 256.1 217.4 Income taxes (Notes 1 and 3) 102.4 101.2 78.4 -------- -------- -------- NET INCOME $ 164.7 $ 154.9 $ 139.0 ======== ======== ======== Average Number of Common Shares Outstanding (millions) (Note 8) 101.1 100.4 97.7 Earnings Per Share of Common Stock $ 1.63 $ 1.54 $ 1.42 Dividends Paid Per Share of Common Stock $ 1.24 $ 1.18 $ 1.12 See Notes to Consolidated Financial Statements. DPL 17 1995 CONSOLIDATED STATEMENT OF CASH FLOWS DPL INC. For the years ended December 31, $ in millions 1995 1994 1993 - ------------------------------------------------------------------------------ OPERATING ACTIVITIES Cash received from utility customers $1,203.5 $1,199.0 $1,137.5 Other operating cash receipts 28.7 25.4 26.4 Cash paid for: Fuel and purchased power (249.8) (226.0) (216.6) Purchased gas (131.7) (142.8) (146.9) Operation and maintenance labor (89.3) (90.0) (83.3) Nonlabor operating expenditures (136.9) (159.4) (232.7) Interest (net of amounts capitalized) (91.9) (92.1) (83.3) Income taxes (103.1) (105.8) (54.4) Property, excise and payroll taxes (124.2) (121.4) (111.4) -------- -------- -------- Net cash provided by operating activities (Note 11) 305.3 286.9 235.3 -------- -------- -------- INVESTING ACTIVITIES Net cash used for property expenditures and other (101.6) (94.3) (113.6) -------- -------- -------- FINANCING ACTIVITIES Dividends paid on common stock (124.9) (118.3) (109.5) Retirement of long-term debt (126.7) (9.2) (439.2) Issuance of long-term debt 108.8 - 536.0 Purchase of treasury stock (6.1) (9.4) - Redemption of preferred stock - (94.2) (8.5) Retirement of short-term debt - (25.0) (127.0) Issuance of common stock - 77.5 - -------- -------- -------- Net cash used for financing activities (148.9) (178.6) (148.2) -------- -------- -------- Cash and temporary cash investments -- Net change 54.8 14.0 (26.5) Balance at beginning of year 95.6 81.6 108.1 -------- -------- -------- Balance at end of year $ 150.4 $ 95.6 $ 81.6 ======== ======== ======== See Notes to Consolidated Financial Statements. DPL 18 1995 CONSOLIDATED BALANCE SHEET DPL INC. At December 31, $ in millions 1995 1994 - -------------------------------------------------------------------------- ASSETS Property Utility property $3,370.7 $3,254.1 Other property 55.4 62.3 Construction work in progress 23.5 68.6 -------- -------- 3,449.6 3,385.0 Less-- Accumulated depreciation and amortization (1,167.8) (1,072.8) -------- -------- Net Property 2,281.8 2,312.2 -------- -------- Current Assets Cash and temporary cash investments 150.4 95.6 Accounts receivable, less provision for uncollectible accounts of $6.5 and $7.8, respectively 148.0 103.4 Inventories, at average cost 82.7 84.6 Taxes applicable to subsequent years 82.4 78.3 Prepayments and other 39.7 24.9 -------- -------- Total current assets 503.2 386.8 -------- -------- Other Assets Income taxes recoverable through future revenues (Note 1) 238.6 249.3 Regulatory assets (Note 2) 155.7 168.8 Other assets 143.5 115.6 -------- -------- Total other assets 537.8 533.7 -------- -------- TOTAL ASSETS $3,322.8 $3,232.7 ======== ======== CAPITALIZATION AND LIABILITIES Capitalization Common shareholders' equity (Note 8)-- Common stock $ 1.1 $ 1.1 Other paid-in capital 771.4 776.6 Common stock held by employee plans (107.2) (108.7) Earnings reinvested in the business 499.5 459.3 -------- -------- Total common shareholders' equity 1,164.8 1,128.3 Preferred stock (Note 9) 22.9 22.9 Long-term debt (Note 7) 1,081.5 1,093.7 -------- -------- Total capitalization 2,269.2 2,244.9 -------- -------- Current Liabilities Accounts payable 97.0 75.3 Accrued taxes 119.4 123.9 Accrued interest 24.9 24.0 Other 43.5 31.7 -------- -------- Total current liabilities 284.8 254.9 -------- -------- Deferred Credits and Other Deferred taxes (Note 3) 516.3 511.8 Unamortized investment tax credit 79.6 81.5 Other 172.9 139.6 -------- -------- Total deferred credits and other 768.8 732.9 -------- -------- TOTAL CAPITALIZATION AND LIABILITIES $3,322.8 $3,232.7 ======== ======== See Notes to Consolidated Financial Statements. DPL 19 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DPL INC. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Nature of Operations 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 primarily engaged in the business of selling electric energy and natural gas to residential, commercial, industrial and governmental customers in a 6,000 square mile area of West Central Ohio. The majority of DPL Inc.'s earnings come from electricity and natural gas sales. Earnings from other operations 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) $40.7 in 1995 and $13.1 in 1994. Operation and Maintenance Operation and maintenance expenses include $4.7 million in 1995 and $22.8 million in 1993 of redemption premiums and other costs relating to the refinancing of bond issues. Property, Maintenance and Depreciation Property is shown at its original cost. Cost includes direct labor and material and allocable overhead costs. 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%. The Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which is required to be adopted by 1996. The implementation of this Statement will not have a material impact on the Company's financial statements. Income Taxes Income taxes are deferred under the liability method. Deferred income taxes are provided for all temporary 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. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions related to future events. DPL 20 1995 - ------------------------------------------------------------------------------ 2. REGULATORY MATTERS Regulatory assets on the Consolidated Balance Sheet were: At December 31, $ in millions 1995 1994 - ------------------------------------- a. Phase-in $ 61.4 $ 75.9 b. DSM 36.2 31.9 c. Deffered interest 58.1 61.0 ------ ------ Total $155.7 $168.8 ====== ====== a. As part of a 1992 PUCO-approved settlement agreement ("Agreement") among DP&L and various consumer groups, the third and final phase of an electric rate increase of 6.4% took effect in January 1994. Deferrals (including carrying charges) during the phase-in period are being recovered in current rates. b. As part of the Agreement, DP&L undertook cost-effective demand-side management ("DSM") programs with an average annual cost of $15 million for 1992-1995. These costs are deferred and are being recovered at approximately $9 million per year. The Agreement, as updated by a subsequent stipulation approved by the PUCO in 1995, allowed accelerated recovery of DSM costs and, thereafter, production plant costs in the event that DP&L return on equity exceeds a baseline 13% (subject to upward adjustment). If the return exceeds the baseline return by one to two percent, one- half of the excess will be used to accelerate recovery of these costs. If the return is greater than two percent over the baseline, the entire excess will be used for such purpose. c. Interest charges related to Zimmer which were previously deferred pursuant to PUCO approval are being amortized at $2.8 million per year over the projected life of the asset. - ------------------------------------------------------------------------------ 3. INCOME TAXES For the years ended December 31, $ in millions 1995 1994 1993 - ------------------------------------------------------- Computation of Tax Expense Statutory income tax rate 35% 35% 35% Federal income tax (a) $ 93.8 $ 91.3 $ 79.1 Increases (decreases) in tax from -- Regulatory assets 3.3 2.2 (6.1) Depreciation 10.8 10.4 10.2 Investment tax credit amortized (3.0) (3.7) (3.0) Other, net (2.5) 1.0 (1.8) ------ ------ ------ Total tax expense $102.4 $101.2 $ 78.4 ====== ====== ====== Components of Tax Expense Taxes currently payable $ 93.0 $107.9 $ 61.2 Deferred taxes-- Regulatory assets (1.7) 1.6 7.1 Liberalized depreciation and amortization 14.1 17.2 17.6 Property taxes - (6.1) (6.1) Fuel and gas costs (3.1) (12.7) 5.8 Other 1.9 (3.1) (4.6) Deferred investment tax credit, net (1.8) (3.6) (2.6) ------ ------ ------ Total tax expense $102.4 $101.2 $ 78.4 ====== ====== ====== (a) Statutory rates applied to pre-tax income before preferred dividends. Components of Deferred Tax Assets and Liabilities At December 31, $ in millions 1995 1994 - ----------------------------------------------- Non-Current Liabilities Depreciation/property basis $(450.9) $(437.4) Income taxes recoverable (82.9) (88.9) Regulatory assets (52.3) (57.0) Investment tax credit 27.8 28.4 Other 42.0 43.1 ------- ------- Net non-current liability $(516.3) $(511.8) ======= ======= Net Current Asset $ 6.1 $ 2.3 ======= ======= DPL 21 1995 - ------------------------------------------------------------------------------ 4. PENSIONS AND POSTRETIREMENT BENEFITS 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 1995 and 1994 and 6.0% in 1993. Actual returns on plan assets for 1995, 1994 and 1993 were 25.6%, 0.9% and 6.2%, 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 1995 1994 1993 - ------------------------------------------------------ Service cost--benefits earned $ 6.2 $ 6.1 $ 5.4 Interest cost 14.4 13.4 12.0 Expected return on plan assets of 7.5% in each year (17.8) (18.2) (16.9) Net amortization (0.9) (1.5) (2.0) ----- ----- ----- Net pension cost $ 1.9 $(0.2) $(1.5) ===== ===== ===== 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 1995 1994 - ------------------------------------------------------ Plan assets at fair value (a) $298.3 $247.6 Actuarial present value of projected benefit obligation 245.5 229.9 ------ ------ Plan assets in excess of projected benefit obligation 52.8 17.7 Unamortized transition obligation (19.6) (23.8) Prior service cost 18.1 20.2 Changes in plan assumptions and actuarial gains and losses (5.0) 32.8 ------ ------ Net pension assets $ 46.3 $ 46.9 ====== ====== Vested benefit obligation $190.1 $179.7 Accumulated benefit obligation without projected wage increases $227.7 $211.1 (a) Invested in fixed income investments, equities including $27.0 million and $22.4 million of DPL Inc. common stock in 1995 and 1994, respectively, and guaranteed investment contracts. 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. In 1995, DP&L funded $12.0 million of the union-eligible health benefit using a Voluntary Employee Beneficiary Association Trust. The following table presents the components of postretirement benefit cost: $ in millions 1995 1994 1993 - ------------------------------------- Interest cost $3.6 $3.7 $3.7 Net amortization 2.9 3.0 3.0 ---- ---- ---- Postretirement benefit cost $6.5 $6.7 $6.7 ==== ==== ==== The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation is 10% for 1995 and decreases to 5% by 2005. A one percentage point increase in each future year's assumed health care trend rate would increase postretirement benefit cost by $0.3 million annually and would increase the accumulated postretirement benefit obligation by $3.4 million. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 6.25% in 1995 and 1994 and 6.0% in 1993. The following table sets forth the accumulated postretirement benefit amounts at December 31: $ in millions 1995 1994 - --------------------------------------------------- Accumulated postretirement benefit obligation: -- retirees and dependents $43.2 $61.4 -- active employees 1.0 1.1 ----- ----- Total 44.2 62.5 Plan assets at fair value (a) 12.0 - ----- ----- Projected benefit obligation in excess of plan assets 32.2 62.5 Unamortized transition obligation (21.8) (24.8) Actuarial gains and losses 22.1 3.0 Accrued postretirement benefit ----- ----- liability $32.5 $40.7 ===== ===== (a) Invested in money market securities. DPL 22 1995 - ------------------------------------------------------------------------------ 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, 1995, DP&L had $4.3 million of commonly owned facilities under construction. DP&L's share of expenses is included in the Consolidated Statement of Results of Operations. The following table presents DP&L's share of the commonly owned facilities at December 31, 1995: DP&L DP&L Share Investment ---------------- ----------- Owner- Prod. Gross Plant ship Capacity in Service (%) (MW) ($ in mil.) - ----------------------------------------------------- Production Units: Beckjord Unit 6 50.0 210 54 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 36.0 360 116 Stuart Station 35.0 820 242 Zimmer Station 28.1 365 985 Transmission (at varying percentages) 67 - ------------------------------------------------------------------------------ 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 $250,000 per year, depending upon the aggregate unused balance of the loan. At December 31, 1995, DPL Inc. had no outstanding borrowings under this credit agreement. DP&L also has $96.6 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 $94,000 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 1995 1994 - -------------------------------------------------------- First mortgage bonds maturing: 1997 5-5/8% $ 40.0 $ 40.0 1998 6.75% and 6.87% (a) 25.0 26.4 1999-2003 8.00% and 8.16% (a) 40.0 43.0 2022-2026 8.14% 671.0 671.0 Pollution control series maturing through 2027 - 6.43% and 7.97% (a) 107.9 218.4 -------- -------- 883.9 998.8 Unamortized debt discount and premium (net) (2.4) (2.5) -------- -------- 881.5 996.3 Guarantee of Air Quality Development Obligations 6.10% Series Due 2030 110.0 - Notes due 2007 - 7.83% 90.0 90.0 Mortgage note - 10% - 7.4 -------- -------- Total $1,081.5 $1,093.7 ======== ======== (a) Weighted average interest rates for 1995 and 1994, respectively. The amounts of maturities and mandatory redemptions for first mortgage bonds and notes are (in millions) $0.5 in 1996, $42.4 in 1997, $28.4 in 1998, $4.4 in 1999 and $5.4 in 2000. Substantially all property of DP&L is subject to the mortgage lien securing the first mortgage bonds. During 1995, $110 million of a new series of Air Quality Development Revenue Refunding Bonds was issued due 2030, with an interest rate of 6.10%. Proceeds of the financing were used to redeem a similar principal amount of first mortgage bonds that secured a series of pollution control bonds with an interest rate of 9.5%. DPL 23 1995
- ---------------------------------------------------------------------------------------------------- 8. COMMON SHAREHOLDERS' EQUITY Common Stock Common Stock (a) Held By Earnings ---------------------------- Other Paid- Employee Reinvested in $ in millions Outstanding Shares Amount in Capital Plans the Business Total - ---------------------------------------------------------------------------------------------------- 1993: Beginning balance 103,509,998 $1.0 $708.0 $(103.0) $394.0 $1,000.0 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 1995: Net income 164.7 164.7 Common Stock dividends (124.9) (124.9) Treasury stock (254,700) - (6.1) (6.1) Employee stock plans 0.7 1.5 2.2 Other 0.2 0.4 0.6 ----------- ---- ------ ------- ------ -------- Ending balance 106,696,923 $1.1 $771.4 $(107.2) $499.5 $1,164.8 =========== ==== ====== ======= ====== ======== (a) $0.01 par value, 250,000,000 shares authorized.
DPL Inc. has a leveraged Employee Stock Ownership Plan ("ESOP") to fund matching contributions to the Company's 401(k) retirement savings plan and certain other payments to full-time employees. Common shareholders' equity is reduced for the cost of 4,190,301 unallocated shares held by the trust and for 1,546,474 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. Cumulative shares allocated to employees and outstanding for the calculation of earnings per share were 516,249 in 1995 and 309,779 in 1994. Compensation expense, which is based on the fair value of the shares allocated, amounted to $4.2 million in 1995, $4.0 million in 1994 and $2.0 million in 1993. DPL Inc. had 2,107,323 authorized but unissued shares reserved for the dividend reinvestment plan at December 31, 1995. The plan provides that either original issue shares or shares purchased on the open market may be used to satisfy plan requirements. DPL Inc. has a Shareholder Rights Plan pursuant to which two-thirds of a Right is attached to and trades with each outstanding DPL Inc. Common Share. The Rights would separate from the Common Shares and become exercisable in the event of certain attempted business combinations. DPL 24 1995
- ------------------------------------------------------------------------------------------------------- 9. PREFERRED STOCK Current Current Par Value DPL Inc.: No par value, 8,000,000 Series/ Redemption Shares At December 31, 1995 and 1994 shares authorized, no Rate Price Outstanding ($ in millions) shares outstanding. ------- ---------- ----------- ----------------------------- DP&L: $25 par value, 4,000,000 shares authorized, no A 3.75% $102.50 93,280 $ 9.3 shares outstanding; and B 3.75% $103.00 69,398 7.0 $100 par value, 4,000,000 C 3.90% $101.00 65,830 6.6 shares authorized, 228,508 ------- ----- shares without mandatory redemption provisions Total 228,508 $22.9 outstanding. ======= ===== The shares may be redeemed at the option of DP&L at the per share prices indicated, plus cumulative accrued dividends.
- --------------------------------------------------------------------------------- 10. FAIR VALUE OF FINANCIAL INSTRUMENTS At December 31, 1995 1994 -------------------- ------------------- $ in millions Fair Value Cost Fair Value Cost - --------------------------------------------------------------------------------- $ $ $ $ Assets (a) Available for sale securities 11.5 10.8 6.6 7.6 Held to maturity securities, including short-term cash 188.0 186.6 124.8 125.3 investments of $141.3 in 1995 and $93.7 in 1994 Liabilities (b) Debt 1,174.9 1,082.0 1,043.3 1,098.5 Capitalization Unallocated stock in ESOP 103.7 80.1 90.1 84.1 (a) Maturities range from 1996 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. RECONCILITION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES For the years ended December 31, $ in millions 1995 1994 1993 - ------------------------------------------------------------------------------ Net income $164.7 $154.9 $139.0 Adjustments for noncash items: Depreciation and amortization 118.9 114.7 110.9 Deferred income taxes 9.2 (6.7) 17.2 Amortization (deferral) of regulatory assets, net 15.4 10.9 (25.8) Changes in working capital: Accounts receivable (44.6) 27.9 (2.5) Accounts payable 21.8 (40.0) 15.0 Deferred gas costs 1.7 28.7 (7.9) Accrued interest 1.0 (0.3) 11.8 Other - 3.5 10.2 DSM deferred costs (9.1) (14.4) (20.3) Other operating activities 26.3 7.7 (12.3) ------ ------ ------ Net cash provided by operating activities $305.3 $286.9 $235.3 ====== ====== ====== DPL 25 1995 - ------------------------------------------------------------------------------ 12. FINANCIAL INFORMATION BY BUSINESS SEGMENTS For the years ended December 31, $ in millions 1995 1994 1993 - ------------------------------------------------------------------------ Utility service revenues Electric $1,027.5 $ 943.5 $ 898.9 Gas 222.0 237.1 245.1 Other 5.6 7.3 7.3 -------- -------- -------- Total utility service revenues 1,255.1 1,187.9 1,151.3 Interest and other income 29.7 30.1 26.7 -------- -------- -------- Total income $1,284.8 $1,218.0 $1,178.0 ======== ======== ======== Operating profit before tax Electric $ 335.8 $ 325.2 $ 310.8 Gas 18.9 10.3 19.9 Other 3.8 6.5 5.4 -------- -------- -------- Total operating profit before tax 358.5 342.0 336.1 Other income, net (a) 3.8 12.0 (13.0) Interest expense (94.3) (93.2) (97.0) Preferred dividends (0.9) (4.7) (8.7) -------- -------- -------- Income before income taxes $ 267.1 $ 256.1 $ 217.4 ======== ======== ======== Depreciation and amortization Electric $ 108.1 $ 104.8 $ 102.4 Gas 6.4 6.2 5.7 Other 4.4 3.7 2.8 -------- -------- -------- Total depreciation and amortization $ 118.9 $ 114.7 $ 110.9 ======== ======== ======== Construction additions Electric $ 66.6 $ 82.1 $ 66.3 Gas 11.7 11.6 11.9 Other 9.0 7.4 10.7 -------- -------- -------- Total construction additions $ 87.3 $ 101.1 $ 88.9 ======== ======== ======== Assets Electric $2,763.1 $2,772.3 $2,822.5 Gas 223.7 201.7 236.0 Other (b) 336.0 258.7 243.5 -------- -------- -------- Total assets at year-end $3,322.8 $3,232.7 $3,302.0 ======== ======== ======== (a) Includes primarily interest income less bond redemption costs in 1995 and 1993. (b) Includes primarily cash, temporary cash investments and certain deferred items. DPL 26 1995 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, 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, 1996 SELECTED QUARTERLY INFORMATION
For the Three Months Ended March 31, June 30, September 30, December 31, $ in millions except 1995 1994 1995 1994 1995 1994 1995 1994 per share amounts $ $ $ $ $ $ $ $ - ------------------------------------------------------------------------------------ Utility service revenues 355.6 372.1 265.9 257.3 300.0 263.3 333.6 295.2 Income before income taxes 97.0 92.6 53.7 56.9 66.1 61.7 50.3 44.9 Net income 60.8 55.4 34.6 34.9 39.5 36.9 29.8 27.7 Earnings per share of common stock 0.60 0.57 0.34 0.34 0.39 0.36 0.30 0.27 Dividends paid per share 0.31 0.295 0.31 0.295 0.31 0.295 0.31 0.295 Common stock market price -- High 22 21-1/4 23 21-5/8 23-1/8 20-3/4 25-3/8 21 -- Low 20-1/8 19-3/8 20-7/8 18-7/8 21-7/8 18-5/8 23-1/8 19
DPL 27 1995 CORPORATE INFORMATION TRANSFER AGENT AND REGISTRAR -- COMMON STOCK AND DP&L PREFERRED STOCK Securities Transfer & Shareholder Inquires: The First National Bank of Boston c/o Boston EquiServe Mail Stop: 45-02-64 Box 644 Boston, MA 02102-0644 (617) 575-3100 (800) 736-3001 Dividend Reinvestment: The First National Bank of Boston c/o Boston EquiServe Mail Stop: 45-01-06 Box 1681 Boston, MA 02105-1681 Also dividend paying agent (617) 575-3100 (800) 736-3001 Trustee - DP&L First Mortgage Bonds The Bank of New York Corporate Trust Administration 101 Barclay Street New York, NY 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 1995 DIVIDEND PAYMENTS Dividends paid in 1995 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 16, 1996, at Twin Valley South School, West Alexandria, Ohio. Communications DPL Inc. staffs an Investor Relations Department to meet the information needs of shareholders and investors. Inquires 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 Boston EquiServe (617) 575-3100 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 inquires to the Investor Relations Department. OFFICERS--DPL INC. AND DP&L (Age/Years of Service) Peter H. Forster (53/22) Chairman and Chief Executive Officer--DPL Inc. Chairman--DP&L Allen M. Hill (50/28) President--DPL Inc. President and Chief Executive Officer--DP&L Paul R. Anderson (53/17) Controller--DP&L Stephen P. Bramlage (49/27) Assistant Vice President--DP&L Robert M. Combs (50/5) Vice President--DP&L Georgene H. Dawson (46/21) Assistant Vice President--DP&L Jeanne S. Holihan (39/15) Assistant Vice President--DP&L Thomas M. Jenkins (44/18) Group Vice President and Treasurer--DPL Inc. Group Vice President--DP&L Stephen F. Koziar, Jr. (51/28) Group Vice President and Secretary--DPL Inc. and DP&L Judy W. Lansaw (44/17) Group Vice President--DPL Inc. and DP&L Arthur G. Meyer (45/3) Treasurer--DP&L Bryce W. Nickel (39/15) Assistant Vice President--DP&L H. Ted Santo Group Vice President--DP&L DIRECTORS 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 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 and CEO, Gosiger, Inc., Dayton, Ohio Allen M. Hill (1) (4) President--DPL Inc., 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. 1995 Committee Assignments: DPL Inc.--Finance and Audit Review (1) Compensation and Management Review (2) Executive (3) DP&L--Community and External Relations (4) DPL 28 1995 DPL INC. Courthouse Plaza Southwest Dayton, Ohio 45402 (see appendix for photograph description) [back cover] As required by Rule 304 of Regulation S-T, the following appendix lists the graphic material contained in the 1995 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. Photo: Picture of a young man working with computer equipment. Inside Cover: Artwork: Map of the State of Ohio, with DP&L service territory highlighted. Page 3: Photo: The directors of DPL Inc. are pictured with their names appearing above the photograph as follows: 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 Bar Chart: Earnings Per Share Dollars ----------- 1993 $1.42 1994 $1.54 1995 $1.63 Bar Chart: Dividends Per Share Dollars ----------- 1993 $1.12 1994 $1.18 1995 $1.24 Page 4: Artwork: " DP&L" logo and "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Logo contains the phrase, "Energy Smart Money Wise." along with a picture of the head of Lucky the Dog, the promotional mascot of the programs. Page 5: Photo: Emery Worldwide aircraft being loaded with cargo. Page 6: Artwork: "DP&L" logo and "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Logo contains the phrase, "West Central Ohio". Page 7: Photo: View of construction work at the site of Panasonic facility expansion. Page 8: Photo: Assembly work being performed at Spectra-Physics Laserplane. Page 9: Artwork: "DP&L" logo and "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Logo contains the phrase, "Partners in Business". Page10: Artwork: "DP&L" logo and "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Logo contains the phrase, "School Programs". Page 11: Photo: Women's high school soccer game. Page 12: Artwork: "DP&L" logo and "Way To Go" logo, the umbrella name for energy conservation programs of the Company. Logo contains the phrase, "Energy Leader". Page 13: Bar Charts: Electric Revenues $ in millions Year --------------- 1993 1994 1995 ---- ---- ---- Residential 374 390 422 Commercial 200 218 238 Industrial 206 229 224 Other 121 109 146 ---- ---- ---- Total 901 946 1030 Gas Revenues $ in millions Year -------------- 1993 1994 1995 ---- ---- ---- Residential 161 157 149 Commercial 44 42 39 Industrial 15 15 11 Transportation & Other 25 23 23 ---- ---- ---- Total 245 237 222 Total Taxes $ in millions Year ------------- 1993 190 1994 222 1995 228 Electric Sales Thousands of GWH Year --------------- 1993 1994 1995 ---- ---- ---- Residential 4.6 4.4 4.9 Commercial 3.0 3.1 3.4 Industrial 4.1 4.4 4.4 Other 3.0 2.3 4.1 ---- ---- ---- Total 14.7 14.2 16.8 Gas Sales Millions of MCF Year --------------- 1993 1994 1995 ---- ---- ---- Residential 29 28 29 Commercial 8 8 8 Industrial 3 3 3 Transportation & Other 17 18 20 -- -- -- Total 57 57 60 Operating Expenses $ in millions Year -------------- 1993 1994 1995 ---- ---- ---- Fuel Used In Production 227 221 258 Gas Purchased for Resale 156 151 133 Operating & Maintenance 275 245 272 ---- ---- ---- Total 658 617 663 Average Price-Electric Calendar Year cents/kWh ---------------------- 1993 6.07 1994 6.59 1995 6.07 Average Price-Gas Calendar Year $/MCF ----------------- 1993 5.42 1994 5.44 1995 4.90 Construction Costs $ in millions Year ------------------ 1993 89 1994 101 1995 87 Page 27: Artwork: Logo for Price Waterhouse LLP (Independent Auditors). Back Cover: Photo: Three high school soccer players. EX-21 3 1995 DPL INC. EX-21 Exhibit 21 SUBSIDIARIES OF DPL INC. DPL Inc. had the following wholly owned subsidiaries on March 21, 1996: State of Name Incorporation - ---- ------------- The Dayton Power and Light Company Ohio Miami Valley Insurance Company Vermont Miami Valley Leasing, Inc. Ohio Miami Valley Resources, Inc. Ohio Miami Valley Lighting, Inc. Ohio Miami Valley Development Company Ohio Miami Valley CTC, Inc. Ohio EX-23 4 1995 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, 1996 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 Schedule, which appears on page II-2 of this Form 10-K. Price Waterhouse LLP Price Waterhouse LLP Dayton, Ohio March 29, 1996 EX-27 5 1995 DPL INC. EX-27
UT 1,000 YEAR DEC-31-1995 DEC-31-1995 PER-BOOK 2226400 55400 503200 394300 143500 3322800 1100 664200 499500 1164800 0 22900 1081500 0 0 0 0 0 0 0 1053600 3322800 1255100 102400 922500 1024900 230200 29700 259900 94300 165600 900 164700 124900 91900 305300 1.63 1.63
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