-----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, QFNOkmo2Qqg0T6HuLTbYSh9Ic4zMzB6E8HuPKNEXByCAM6vT8JQ478FLOUqllh9y eExH8bHIAAAdN/XsCDnvvQ== 0000787250-99-000011.txt : 19991117 0000787250-99-000011.hdr.sgml : 19991117 ACCESSION NUMBER: 0000787250-99-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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-Q SEC ACT: SEC FILE NUMBER: 001-09052 FILM NUMBER: 99755411 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-Q 1 DPL INC. 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 1-9052 ------ DPL INC. (Exact name of registrant as specified in its charter) OHIO 31-1163136 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Courthouse Plaza Southwest Dayton, Ohio 45402 ---------------------------------------- (Address of principal executive offices) (937) 224-6000 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate the number of shares of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value and Preferred Share Purchase Rights 158,630,704 Shares - ----------------------------------- ----------------------------------- (Title of each class) (Outstanding at September 30, 1999) DPL INC. INDEX Page No. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Statement of Results of Operations 1 Consolidated Statement of Cash Flows 2 Consolidated Balance Sheet 3 Consolidated Statement of Shareholders' Equity 5 Notes to Consolidated Financial Statements 6 Operating Statistics 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 12 Part II. Other Information 14 Signatures 16 i CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS DPL INC. Three Months Nine Months Ended Ended September 30 September 30 ------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- --millions-- --millions-- Revenues - -------- Utility service revenues $319.2 $318.6 $ 958.2 $ 963.5 Other revenues 12.1 11.5 47.0 52.0 ------ ------ -------- -------- Total Revenues 331.3 330.1 1,005.2 1,015.5 Expenses - -------- Fuel and purchased power 77.7 71.1 199.8 198.9 Gas purchased for resale 13.9 18.2 122.5 127.5 Operation and maintenance 52.4 69.3 140.7 165.1 Depreciation and amortization 33.1 31.6 98.8 95.0 Amortization of regulatory assets, net 7.4 6.4 19.7 17.2 General taxes 34.8 33.9 103.3 102.2 Interest expense 27.0 24.3 82.1 69.6 ------ ------ -------- -------- Total Expenses 246.3 254.8 766.9 775.5 ------ ------ -------- -------- Income - ------ Operating Income 85.0 75.3 238.3 240.0 Investment income 5.4 7.6 35.8 20.2 Other income and deductions 0.4 (2.5) (6.5) (8.4) ------- ------ -------- -------- Income Before Income Taxes 90.8 80.4 267.6 251.8 Income taxes 37.2 32.9 104.0 98.8 ------ ------ -------- -------- Net Income $ 53.6 $ 47.5 $ 163.6 $ 153.0 ====== ====== ======== ======== Average Number of Common Shares Outstanding (millions) 151.1 153.0 151.7 152.7 Earnings Per Share of Common Stock - Basic and Diluted $ 0.36 $ 0.31 $ 1.08 $ 1.00 Dividends Paid Per Share of Common Stock $0.235 $0.235 $ 0.705 $ 0.705 See Notes to Consolidated Financial Statements. These interim statements are unaudited. -1- CONSOLIDATED STATEMENT OF CASH FLOWS DPL INC. Nine Months Ended September 30 ----------------- 1999 1998 ---- ---- --millions-- Operating Activities - -------------------- Cash received from utility customers $984.3 $964.5 Other operating cash receipts 75.8 61.7 Cash paid for: Fuel and purchased power (208.2) (204.1) Purchased gas (146.2) (152.2) Operation and maintenance labor (59.6) (61.9) Nonlabor operating expenditures (96.4) (122.2) Interest (74.9) (72.6) Income taxes (62.1) (80.6) Property, excise and payroll taxes (115.5) (112.8) ------ ------ Net cash provided by operating activities 297.2 219.8 Investing Activities - -------------------- Capital expenditures (89.4) (72.5) Purchases of available-for-sale financial assets (315.2) (295.4) Sales of available-for-sale financial assets 112.4 75.4 ------ ------ Net cash used for investing activities (292.2) (292.5) Financing Activities - -------------------- Dividends paid on common stock (107.1) (107.6) Retirement of long-term debt (241.6) (3.4) Issuance of long-term debt 497.4 98.5 Issuance (retirement) of short-term debt (95.1) 50.6 Purchase of treasury stock (45.3) - Issuance of common stock - 14.9 ------ ------ Net cash provided by financing activities 8.3 53.0 Cash and temporary cash investments-- - ----------------------------------- Net change 13.3 (19.7) Balance at beginning of period 13.7 26.1 ------ ------ Balance at end of period $ 27.0 $ 6.4 ====== ====== See Notes to Consolidated Financial Statements. These interim statements are unaudited. -2- CONSOLIDATED BALANCE SHEET DPL INC. At At September 30, December 31, 1999 1998 ------------ ----------- --millions-- ASSETS - ------ Property - -------- Electric property $3,443.7 $3,398.6 Gas property 302.3 296.9 Other property 71.1 47.8 -------- -------- Total property 3,817.1 3,743.3 Less-- Accumulated depreciation and amortization (1,597.0) (1,504.6) -------- -------- Net property 2,220.1 2,238.7 -------- -------- Current Assets - -------------- Cash and temporary cash investments 27.0 13.7 Accounts receivable, less provision for uncollectible accounts of $2.8 and $4.7, respectively 192.6 227.7 Inventories, at average cost 100.6 112.4 Deferred property and excise taxes 50.8 93.4 Other 45.6 46.2 -------- -------- Total current assets 416.6 493.4 -------- -------- Other Assets - ------------ Financial assets 931.1 698.5 Income taxes recoverable through future revenues 178.4 195.5 Other regulatory assets 60.3 82.2 Other 165.3 147.6 -------- -------- Total other assets 1,335.1 1,123.8 -------- -------- Total Assets $3,971.8 $3,855.9 ======== ======== See Notes to Consolidated Financial Statements. These interim statements are unaudited. -3- CONSOLIDATED BALANCE SHEET (continued) DPL INC. At At September 30, December 31, 1999 1998 ------------ ----------- --millions-- CAPITALIZATION AND LIABILITIES - ------------------------------ Capitalization - -------------- Common shareholders' equity-- Common stock $ 1.6 $ 1.6 Other paid-in capital 753.7 799.0 Common stock held by employee plans (91.9) (94.4) Accumulated other comprehensive income 60.7 47.2 Earnings reinvested in the business 651.3 630.3 -------- -------- Total common shareholders' equity 1,375.4 1,383.7 Preferred stock 22.9 22.9 Long-term debt 1,336.5 1,065.9 -------- -------- Total capitalization 2,734.8 2,472.5 -------- -------- Current Liabilities - ------------------- Short-term debt 99.9 194.9 Dividends payable 36.1 - Accounts payable 71.1 109.0 Accrued taxes 109.6 165.2 Accrued interest 29.6 24.8 Other 60.1 54.9 -------- -------- Total current liabilities 406.4 548.8 -------- -------- Deferred Credits and Other - -------------------------- Deferred taxes 457.0 460.6 Unamortized investment tax credit 67.1 69.4 Insurance and claims costs 159.1 150.7 Other 147.4 153.9 -------- -------- Total deferred credits and other 830.6 834.6 -------- -------- Total Capitalization and Liabilities $3,971.8 $3,855.9 ======== ======== See Notes to Consolidated Financial Statements. These interim statements are unaudited. -4-
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY DPL INC. Nine Months Ended September 30, 1999 and 1998 Common Common Stock Stock Accum. Earnings ------------------- Other Held by Other Reinvested Outstanding Paid-In Employee Comp. in the $ in millions Shares Amount Capital Plans Income Business Total - ------------------------------------------------------------------------------------------- 1999: Beginning balance 161,264,604 $1.6 $799.0 $(94.4) $47.2 $630.3 $1,383.7 Net income 163.6 Unrealized gains, net of reclassification adjustments, after tax 13.5 Total comprehensive income 177.1 Common stock dividends (142.6) (142.6) Treasury stock (2,633,900) - (46.2) (46.2) Employee stock plans 0.9 2.5 3.4 --------------------------------------------------------------- Ending balance 158,630,704 $1.6 $753.7 $(91.9) $60.7 $651.3 $1,375.4 =============================================================== 1998: Beginning balance 160,202,949 $1.6 $777.3 $(98.0) $19.9 $585.2 $1,286.0 Net income 153.0 Unrealized gains, net of reclassification adjustments, after tax 15.6 Total comprehensive income 168.6 Common stock dividends (143.6) (143.6) Dividend reinvestment plan 832,214 - 15.0 15.0 Employee stock plans 1.1 2.3 3.4 Other (8,775) - (0.1) (0.3) (0.4) --------------------------------------------------------------- Ending balance 161,026,388 $1.6 $793.3 $(95.7) $35.5 $594.3 $1,329.0 ===============================================================
See Notes to Consolidated Financial Statements. These interim statements are unaudited. -5- Notes to Consolidated Financial Statements 1. DPL Inc. has prepared the consolidated financial statements in this report without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in DPL Inc.'s 1998 Annual Report on Form 10-K. Reclassifications have been made in certain prior years' amounts to conform to the current reporting presentation of DPL Inc. 2. Other revenues include sales by DPL Inc.'s natural gas supply management subsidiary. These revenues are recorded in the period when the gas is sold. 3. DPL Inc. accounts for its investments in debt and equity securities by classifying the securities into different categories (held-to-maturity and available-for-sale); available-for-sale securities are carried at fair market value and unrealized gains and losses, net of deferred income taxes, are presented as a separate component of shareholders' equity for those investments. Investments classified as held-to-maturity are carried at amortized cost. The value of equity security investments and fixed maturity investments is based upon market quotations or investment cost to approximate market. The cost basis for equity security and fixed maturity investments is cost and amortized cost, respectively. At September 30, At December 31, 1999 1998 ----------------------------- --------------------------- Gross Unrealized Gross Unrealized ----------------------------- --------------------------- Fair Fair $ in millions Value Gains Losses Cost Value Gains Losses Cost - ------------------------------------------------------------------------------ $ $ $ $ $ $ $ $ Assets (a) - ---------- Available-for-sale equity securities 919.0 101.9 (8.5) 825.6 685.5 78.3 (5.8) 613.0 Held-to-maturity securities: Debt securities 45.2 - (1.2) 46.4 51.1 1.2 - 49.9 Temporary cash investments 13.0 - - 13.0 12.0 - - 12.0 ----- ----- ---- ------- ------- --- ---- ------- Total 58.2 - (1.2) 59.4 63.1 1.2 - 61.9 Liabilities (b) - --------------- Debt 1,444.1 1,441.8 1,366.6 1,265.2 Capitalization - -------------- Unallocated stock in ESOP 91.9 66.5 117.1 69.0 (a) Maturities range from 1999 to 2011. (b) Includes current maturities. -6- Notes to Consolidated Financial Statements Continued 4. For the three months ended September 30, 1999 and 1998, gross realized gains were $2.0 million and $2.7 million, respectively. There were no gross realized losses in either three-month period. Gross realized gains and losses were $22.0 million and $0.8 million, respectively, for the nine months ended September 30, 1999; for the nine months ended September 30, 1998, gross realized gains were $11.0 million and there were no losses. 5. A wholly-owned captive subsidiary of DPL Inc. provides certain property and liability insurance coverage to DPL Inc. and its other subsidiaries and business interruption and specific risk coverage for DPL Inc.'s principal subsidiary, The Dayton Power and Light Company ("DP&L"). Insurance and claims costs on the balance sheet represent insurance reserves of the captive subsidiary. These reserves are provided based on a consultant's actuarial methods and loss experience data. Management has relied on the actuarial methods employed by the consultant to determine the adequacy of the reserves. Such liabilities are determined, in the aggregate, based on a reasonable estimation of probable insured events occurring throughout each period. There is uncertainty associated with the loss estimates, and actual results could differ from the estimates. Modification of these loss estimates based on experience and changed circumstances are then reflected in the period in which the estimate is reevaluated. 6. DP&L and other Ohio utilities have undivided ownership interests in seven electric generating facilities and numerous transmission facilities. Certain expenses, primarily fuel costs for the generating units, are allocated to the owners based on their energy usage. The remaining expenses, as well as the investments in fuel inventory, plant materials and operating supplies and capital additions, are allocated to the owners in accordance with their respective ownership interests. In the opinion of management, the information included in this Form 10-Q reflects all adjustments which are necessary for a fair statement of the results of operations for the periods presented. Any adjustments are of a normal recurring nature. -7- OPERATING STATISTICS The Dayton Power and Light Company Three Months Nine Months Ended Ended September 30 September 30 ------------- ------------- 1999 1998 1999 1998 ---- ---- ---- ---- Electric - -------- Sales (millions of kWh)-- Residential 1,309 1,361 3,666 3,689 Commercial 927 982 2,577 2,688 Industrial 1,273 1,202 3,712 3,500 Other 1,083 1,130 2,927 3,466 ------- ------- ------- ------- Total 4,592 4,675 12,882 13,343 Revenues (thousands of dollars)-- Residential 116,756 121,273 318,817 323,317 Commercial 61,460 64,264 176,188 182,444 Industrial 68,208 60,253 185,919 172,171 Other 57,684 50,490 131,808 143,922 ------- ------- ------- ------- Total 304,108 296,280 812,732 821,854 Other Electric Statistics-- Average price per kWh--retail and wholesale customers (cents) 6.54 6.23 6.22 6.05 Fuel cost per net kWh generated (cents) 1.29 1.25 1.27 1.27 Electric customers at end of period 491,941 488,110 491,941 488,110 Average kWh use per residential customer 2,982 3,127 8,356 8,481 Peak demand-maximum one hour use (MW), (net) 3,130 3,007 3,130 3,007 -8- OPERATING STATISTICS (continued) The Dayton Power and Light Company Three Months Nine Months Ended Ended September 30 September 30 ------------- ------------- 1999 1998 1999 1998 ---- ---- ---- ---- Gas - --- Sales (millions of MCF)-- Residential 1,029 2,056 16,691 16,119 Commercial 525 798 5,390 4,894 Industrial 235 159 1,705 1,329 Other 36 2 852 1,140 Transportation gas delivered 3,549 3,195 13,868 13,461 ------- ------- ------- ------- Total 5,374 6,210 38,506 36,943 Revenues (thousands of dollars)-- Residential 8,163 15,132 94,059 92,610 Commercial 2,932 4,498 27,607 25,516 Industrial 1,142 797 8,187 6,525 Other 3,448 2,498 17,363 18,763 ------- ------- ------- ------- Total 15,685 22,925 147,216 143,414 Other Gas Statistics-- Average price per MCF--retail customers (dollars) 6.81 6.80 5.44 5.55 Gas customers at end of period 304,818 302,628 304,818 302,628 Degree Days (based on calendar month)-- Heating 83 29 3,381 2,905 Cooling 738 724 1,051 1,070 -9- Item 2. Management's Discussion and Analysis of Financial Condition ----------------------------------------------------------- and Results of Operations. -------------------------- This report contains certain forward-looking statements regarding plans and expectations for the future. Investors are cautioned that actual outcomes and results may vary materially from those projected due to various factors beyond DPL Inc.'s control, including abnormal weather, unusual maintenance or repair requirements, changes in fuel costs, increased competition, regulatory changes and decisions, changes in accounting rules and adverse economic conditions. DPL Inc.'s earnings for the third quarter of 1999 were $0.36 per share, up five cents over 1998 third quarter earnings of $0.31 per share representing a 16% increase. Earnings were $1.08 per share to date, up 8% from $1.00 per share in 1998. The quarterly earnings increase is primarily attributable to the completion of DP&L's Phase One expansion of its combustion turbine program and a decrease in operation and maintenance expense. The expansion provided additional peaking capacity to meet the demands of DP&L's customers and other utility companies resulting from the high heat and humidity experienced in July. See Item 5, Other Information, for a discussion of government legislation and the restructuring of Ohio utilities. Financial Condition - ------------------- As of September 30, 1999, DPL Inc. continued its previously authorized stock buyback program under which 2.6 million shares, or $46.2 million, have been acquired during 1999 and authorization remains for an additional 3.7 million shares. On August 30, 1999, DPL Inc. announced Phase Two of its combustion turbine expansion program. At an investment of $80 million, DPL Inc. has contracted to purchase four natural gas-fired combustion peaking units. These units will provide an additional 225 MW of capacity to be available and online by the summer of 2000. This follows DP&L's completion, in December 1998, of its first phase of peaking capacity expansions in which three combustion turbine units were added totaling 250 MW additional peaking capacity at an investment of $75 million. On April 6, 1999, DPL Inc. completed a private placement issuance of $500 million of Senior Notes due 2004, with an interest rate of 6.32%. The proceeds were used for the redemption of DP&L's $225 million 8.40% Series of First Mortgage Bonds, the reduction of short-term debt and for general corporate purposes. -10- 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 and the availability of external funds at reasonable cost. At September 30, 1999, DPL Inc.'s cash and temporary cash investment balance was $27.0 million. DPL Inc. held financial assets valued as of September 30, 1999 at $931.1 million. Financial assets include direct and indirect managed debt and equity securities. DPL Inc. and its subsidiaries have $300 million available through Revolving Credit Agreements ("Credit Agreements"). At September 30, 1999, DPL Inc. had no borrowings outstanding under these Credit Agreements. DPL Inc. also has $15 million available in a short-term informal line of credit. At September 30, 1999, DPL Inc. had no borrowings outstanding from this line and $81.9 million in commercial paper outstanding. DP&L has $75 million available in short-term informal lines of credit. At September 30, 1999, there were no borrowings outstanding under these informal lines and $18 million in commercial paper outstanding. DP&L currently has sufficient capacity to issue First Mortgage Bonds to satisfy its requirements in connection with the financing of its construction and refinancing programs during the five-year period 1999-2003. Results of Operations - --------------------- Utility service revenues increased by $0.6 million for the third quarter. For the nine months ended September 30, 1999, utility service revenues decreased $5.3 million due to reduced electric sales to other utilities partially offset by increased gas sales. Fuel and purchased power increased $6.6 million and $0.9 million, respectively, from the third quarter and year-to-date last year. For the quarter, the increase was due to higher purchased power costs associated with sales to other utilities. Operation and maintenance expense decreased from last year by $16.9 million for the third quarter and $24.4 million year-to-date. Lower electric and gas distribution costs, software development costs, uncollectible reserves, insurance and claims costs and benefit costs caused the decreases. Interest expense increased $2.7 million and $12.5 million, respectively, from third quarter and year-to-date last year, because of increased long-term debt balances. Investment income increased by $15.6 million from year-to-date last year primarily due to realized gains. Income taxes increased $4.3 million and $5.2 million, respectively, from third quarter and year-to-date 1998 because of higher taxable income. -11- Issues and Financial Risks - -------------------------- The utility industry relies on computer applications to monitor and control interdependent power and utility systems. Some computer applications may not properly recognize dates beginning with the year 2000. This "Y2K" issue, if not corrected, could cause disruptions in information technology systems and operating control systems. The utility industry has organized work groups to identify and solve potential problems. DP&L has evaluated the possibility of Y2K disruptions in the industry and has adopted proper contingency plans. DP&L has implemented a plan to identify and correct Y2K issues in its computer applications and operations. This plan includes (1) evaluation of applications and systems, (2) assessment of Y2K errors, (3) correction of errors and (4) testing of applications and systems. The evaluation and assessment phases are complete. The correction and testing phases are substantially complete, with final modifications and testing for a few components to be completed in the fourth quarter of 1999. The estimated cost of this corrective action is $20 million and includes modification and replacement of hardware and software. Responding to new Ohio legislation regarding energy companies, DP&L is separating into various business units. As part of this separation process, each business unit is being evaluated on a stand-alone basis. Those units which do not complement DP&L's going-forward strategy may be divested. As a result of this evaluation process, DP&L is exploring the sale of its natural gas retail business unit. At September 30, 1999, year-to-date gas revenues were $147.2 million and $61.7 million net of gas purchased for resale. DP&L's natural gas retail distribution has 305,000 residential, commercial and government customers and 5,000 miles of pipeline in 16 counties in West Central Ohio. Item 3. Quantitative and Qualitative Disclosures about Market Risk. ----------------------------------------------------------- The carrying value of DPL Inc.'s debt was $1,265.2 million at December 31, 1998, which consisted of first mortgage bonds, guaranteed air quality development obligations, notes, commercial paper and lines of credit. The fair value of this debt was $1,366.6 million, based on current market prices or discounted cash flows using current rates for similar issues with similar terms and remaining maturities. The following table presents the principal cash repayments and related weighted average interest rates by maturity date for long-term fixed- rate debt at December 31, 1998. Extended Maturity Date ------------------------------------------------------------- $ in millions 1999 2000 2001 2002 2003 Thereafter Total Fair Value - ------------------------------------------------------------------------------ Long-term Debt - -------------- Fixed rate $4.4 $5.4 $6.4 $7.4 $8.4 $1,038.3 $1,070.3 $1,171.7 Average rate 7.7% 7.7% 7.7% 7.8% 7.8% 7.6% 7.6% -12- The primary market risk to DPL Inc. is related to a short-term interest rate risk. The carrying value and fair value of short-term debt was $194.9 million with a weighted average interest rate of 5.6% at December 31, 1998. The interest expense risk related to this debt was estimated to be approximately an increase/decrease of $0.7 million if the weighted average cost increased/decreased 10%. DPL Inc. closed on a private placement issuance of $500 million of Senior Notes Due 2004, with an interest rate of 6.32% in early April. The proceeds were used to redeem DP&L's $225 million 8.4% Series First Mortgage Bonds and for general corporate purposes including redemption of short-term debt. The following table presents the principal cash repayments and related weighted average interest rates by maturity date for long-term fixed-rate debt after the retirement of the $225 million 8.4% Series First Mortgage Bonds and issuance of $500 million of Senior Notes Due 2004. Extended Maturity Date (Including $500 Senior Notes Due 2004) ------------------------------------------------------------- $ in millions 1999 2000 2001 2002 2003 Thereafter Total Fair Value - ------------------------------------------------------------------------------ Long-term Debt - -------------- Fixed rate $229.4 $5.4 $6.4 $7.4 $8.4 $1,313.3 $1,345.3 $1,446.7 Average rate 8.4% 7.7% 7.7% 7.8% 7.8% 6.9% 7.0% The fair value of available-for-sale securities was $919.0 million and $685.5 million at September 30, 1999 and December 31, 1998, respectively. The equity price risk related to these securities was estimated as the potential increase/decrease in fair value of $91.9 million and $68.6 million at September 30, 1999 and December 31, 1998, respectively, that resulted from a hypothetical 10% increase/decrease in the market prices. As of September 30, 1999, there have been no other material changes in the above information since the end of the preceding fiscal year. -13- Part II. Other Information Item 5. Other Information. ------------------ Rate Regulation and Government Legislation - ------------------------------------------ On July 6, 1999, Ohio Governor Taft signed an Ohio electric industry restructuring bill which became effective on October 5, 1999. Under the bill, beginning January 1, 2001, electric generation, aggregation, power marketing and power brokerage services supplied to retail customers in the State of Ohio will be deemed competitive and will not be subject to supervision and regulation by the Public Utilities Commission of Ohio ("PUCO"). Existing limitations on an electric public utility's ownership rights of a non-public utility were eliminated. All earnings obligations, restrictions or caps imposed on an electric utility in a PUCO order are void as of the effective date of the legislation. Within ninety days of the effective date of the legislation, DP&L is required to file with the PUCO a transition plan. As part of the transition plan, companies may file for the opportunity to receive transition revenues to be recovered through a transition charge during the market development period which ends December 31, 2005. The amount of transition revenues allowed will be determined by the PUCO based on criteria set forth in the statute. Regulatory assets that are part of the total allowable amount of transition costs will be separately identified as part of the transition charge, and the PUCO may set the revenue requirement for their recovery to end no later than December 31, 2010. A shopping incentive will be factored into the setting of the transition charge to induce 20% load switching by customer class by December 31, 2003, or halfway through the utility's market development period. The legislation contains a mandatory 5% rate cut for residential customers limited to the generation portion of their overall electric bill. The DP&L impact is approximately $11 million. No company is permitted to own or control transmission facilities in Ohio on or after the start date of competition unless that entity is a member of and turns over control of its transmission facilities to one or more qualifying transmission entities as outlined in the statute. The PUCO is required to issue a final order not later than 275 days after the plan is filed, or in no event later than October 31, 2000. DP&L is unable to predict the outcome of the regulatory process which could have an impact on DPL Inc.'s future results of operations. Until the outcome is known, DP&L will continue to account for its generation business according to Statement of Financial Accounting Standard No. 71, Accounting for the Effects of Certain Types of Regulation. -14- Environmental Considerations - ---------------------------- In early November, the United States Environmental Protection Agency ("EPA") filed civil complaints and Notices of Violations ("NOVs") against operators and owners of certain generation facilities for alleged violations of the Clean Air Act. Generation units operated by partners Cincinnati Gas & Electric (Beckjord 6) and Columbus Southern Power (Conesville 4) and co-owned by DP&L were referenced in these actions. DP&L was not identified in the NOVs or civil complaints. The partners will vigorously challenge the NOVs and complaints in court. At this time, it is not possible to determine the outcome of these claims or the impact, if any, on DP&L. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) The following exhibit is filed herewith: Exhibit No. Description ----------- ----------- 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed by DPL Inc. during the quarter ended September 30, 1999. -15- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DPL INC. ---------------------------------- (Registrant) Date: November 15, 1999 /s/ Jeanne S. Holihan ----------------- ---------------------------------- Jeanne S. Holihan Vice President and Treasurer Date: November 15, 1999 /s/ Stephen F. Koziar, Jr. ----------------- ---------------------------------- Stephen F. Koziar, Jr. Group Vice President and Secretary -16- EX-27 2 DPL INC. FINANCIAL DATA SCHEDULE
UT 1,000 9-MOS DEC-31-1999 SEP-30-1999 PER-BOOK 2149000 71100 416600 238700 1096400 3971800 1600 661800 712000 1375400 0 22900 1336500 18000 0 81900 0 0 0 0 1137100 3971800 958200 104000 684100 788100 170100 76300 246400 82100 164300 700 163600 107100 74900 297200 1.08 1.08
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