-----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, HKXPAejS23qURgbJRI7rM8SX4UUQRpUKh6AMttKklKEnG6Hoq9PIe0Ldl42LjP77 mXI2v01IfiaTo0JKe3ZsHQ== 0000899652-96-000111.txt : 19960517 0000899652-96-000111.hdr.sgml : 19960517 ACCESSION NUMBER: 0000899652-96-000111 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINERGY CORP CENTRAL INDEX KEY: 0000899652 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 311385023 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11377 FILM NUMBER: 96564594 BUSINESS ADDRESS: STREET 1: 139 E FOURTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5133812000 MAIL ADDRESS: STREET 1: 139 E FOURTH STREET CITY: CINCINATI STATE: OH ZIP: 45202 10-Q 1 CINERGY 10-Q FOR 03/31/96 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address, and Telephone Number Identification No. 1-11377 CINERGY CORP. 31-1385023 (A Delaware Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 381-2000 1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030 (An Ohio Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 381-2000 1-3543 PSI ENERGY, INC. 35-0594457 (An Indiana Corporation) 1000 East Main Street Plainfield, Indiana 46168 (317) 839-9611 2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080 (A Kentucky Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 381-2000 Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants. The Union Light, Heat and Power Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its company specific information with the reduced disclosure format. As of April 30, 1996, shares of Common Stock outstanding for each company were as listed: Company Shares Cinergy Corp., par value $.01 per share 157,679,129 The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086 PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701 The Union Light, Heat and Power Company, par value $15.00 per share 585,333 TABLE OF CONTENTS Item Page Number Number Glossary of Terms . . . . . . . . . . . . . . . . . . . 3 PART I. FINANCIAL INFORMATION 1 Financial Statements Cinergy Corp. Consolidated Balance Sheets . . . . . . . . . . . . . Consolidated Statements of Income . . . . . . . . . . Consolidated Statements of Changes in Common Stock Equity. . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . Results of Operations . . . . . . . . . . . . . . . . The Cincinnati Gas & Electric Company Consolidated Balance Sheets . . . . . . . . . . . . . Consolidated Statements of Income . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . Results of Operations . . . . . . . . . . . . . . . . PSI Energy, Inc. Consolidated Balance Sheets . . . . . . . . . . . . . Consolidated Statements of Income . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . Results of Operations . . . . . . . . . . . . . . . . The Union Light, Heat and Power Company Balance Sheets. . . . . . . . . . . . . . . . . . . . Statements of Income. . . . . . . . . . . . . . . . . Statements of Cash Flows. . . . . . . . . . . . . . . Results of Operations . . . . . . . . . . . . . . . . Notes to Financial Statements . . . . . . . . . . . . . 2 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . PART II. OTHER INFORMATION 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . 4 Submission of Matters to a Vote of Security Holders . . 5 Other Information . . . . . . . . . . . . . . . . . . . 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . Signatures. . . . . . . . . . . . . . . . . . . . . . . GLOSSARY OF TERMS The following abbreviations or acronyms used in the text of this combined Form 10-Q are defined below: TERM DEFINITION 1995 Form Combined 1995 Annual Report on Form 10-K filed by Cinergy as 10-K amended, CG&E, PSI, and ULH&P AFUDC Allowance for funds used during construction Avon Energy Avon Energy Partners PLC, a Limited Liability Company and a subsidiary of Avon Holdings Avon Holdings Avon Energy Partners Holdings, a joint venture between Cinergy and GPU, organized in the United Kingdom as an Unlimited Liability Company CG&E The Cincinnati Gas & Electric Company (a subsidiary of Cinergy) Cinergy or Cinergy Corp. Company Clean Coal A joint arrangement by PSI and Destec Energy, Inc. for a Project 262-mw clean coal power generating facility located at Wabash River Generating Station, which was placed in service in November 1995 CWIP Construction work in progress DSM Demand-side management FASB Financial Accounting Standards Board February 1995 An IURC order issued in February 1995 Order FERC Federal Energy Regulatory Commission GPU General Public Utilities Corporation IBEW International Brotherhood of Electrical Workers Investments Cinergy Investments, Inc. (a subsidiary of Cinergy) IURC Indiana Utility Regulatory Commission kwh Kilowatt-hour May 1992 Order A PUCO order issued in May 1992 Mcf Thousand cubic feet M.E. Holdings M.E. Holdings, Inc. (a subsidiary of Investments) Mega-NOPR FERC's Notice of Proposed Rulemaking Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities Merger Costs Merger transaction costs and costs to achieve merger savings GLOSSARY OF TERMS (Continued) TERM DEFINITION Midlands Midlands Electricity plc Money Pool Participants with surplus short-term funds, whether from internal or external sources, provide short-term loans to other system companies at rates that approximate the costs of the funds in the money pool Moody's Moody's Investors Service mw Megawatt NOPR FERC's Notice of Proposed Rulemaking PSI PSI Energy, Inc. (a subsidiary of Cinergy) PUCO Public Utilities Commission of Ohio PUHCA Public Utility Holding Company Act of 1935 RUS Rural Utilities Service, previously called the Rural Electrification Administration Statement 121 Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", issued in March 1995 by the FASB, is a new accounting standard requiring impairment losses on long-lived assets be recognized when an asset's book value exceeds its expected future cash flows the Plan The Cinergy 1996 Long-Term Incentive Compensation Plan ULH&P The Union Light, Heat and Power Company (a wholly-owned subsidiary of CG&E) WVPA Wabash Valley Power Association Zimmer William H. Zimmer Generating Station CINERGY CORP. AND SUBSIDIARY COMPANIES CINERGY CORP. CONSOLIDATED BALANCE SHEETS (unaudited) ASSETS March 31 December 31 1996 1995 (dollars in thousands) Utility Plant - Original Cost In service Electric $8 645 996 $8 617 695 Gas 684 822 680 339 Common 184 142 184 694 9 514 960 9 482 728 Accumulated depreciation 3 417 926 3 367 432 6 097 034 6 115 296 CWIP 135 045 135 852 Total utility plant 6 232 079 6 251 148 Current Assets Cash and temporary cash investments 67 562 35 052 Restricted deposits 1 387 2 336 Accounts receivable less accumulated provision of $10,967 at March 31, 1996, and $10,360 at December 31, 1995, for doubtful accounts 191 775 371 150 Materials, supplies, and fuel - at average cost Fuel for use in electric production 101 280 122 409 Gas stored for current use 8 556 21 493 Other materials and supplies 89 973 85 076 Property taxes applicable to subsequent year 87 617 116 822 Prepayments and other 37 632 32 347 585 782 786 685 Other Assets Regulatory assets Amounts due from customers - income taxes 423 611 423 493 Post-in-service carrying costs and deferred operating expenses 188 113 187 190 Phase-in deferred return and depreciation 99 082 100 388 Deferred DSM costs 130 137 129 400 Deferred merger costs 55 309 56 824 Unamortized costs of reacquiring debt 74 532 73 904 Other 66 585 74 911 Other 185 784 136 121 1 223 153 1 182 231 $8 041 014 $8 220 064 The accompanying notes as they relate to Cinergy are an integral part of these consolidated financial statements. CINERGY CORP. CAPITALIZATION AND LIABILITIES March 31 December 31 1996 1995 (dollars in thousands) Common Stock Equity Common stock - $.01 par value; authorized shares - 600,000,000; outstanding shares - 157,679,129 at March 31, 1996, and 157,670,141 at December 31, 1995 $ 1 577 $ 1 577 Paid-in capital 1 595 435 1 597 050 Retained earnings 992 558 950 216 Total common stock equity 2 589 570 2 548 843 Cumulative Preferred Stock of Subsidiaries Not subject to mandatory redemption 227 885 227 897 Subject to mandatory redemption 160 000 160 000 Long-term Debt 2 522 784 2 530 766 Total capitalization 5 500 239 5 467 506 Current Liabilities Long-term debt due within one year 60 400 201 900 Notes payable 96 300 165 800 Accounts payable 280 814 268 139 Litigation settlement 80 000 80 000 Accrued taxes 324 170 317 185 Accrued interest 41 807 55 995 Other 53 053 57 202 936 544 1 146 221 Other Liabilities Deferred income taxes 1 141 769 1 120 900 Unamortized investment tax credits 182 815 185 726 Accrued pension and other postretirement benefit costs 183 272 171 771 Other 96 375 127 940 1 604 231 1 606 337 $8 041 014 $8 220 064
CINERGY CORP. CONSOLIDATED STATEMENTS OF INCOME (unaudited) Quarter Ended Twelve Months Ended March 31 March 31 1996 1995 1996 1995 (in thousands, except per share amounts) Operating Revenues Electric $684 840 $632 466 $2 664 953 $2 458 673 Gas 199 155 175 211 434 796 388 458 883 995 807 677 3 099 749 2 847 131 Operating Expenses Fuel used in electric production 191 452 185 909 722 297 722 116 Gas purchased 93 225 94 493 204 982 200 761 Purchased and exchanged power 27 621 5 666 69 587 34 957 Other operation 146 134 116 739 549 985 550 760 Maintenance 43 642 44 322 181 500 199 279 Depreciation 70 195 73 456 276 498 295 650 Amortization of phase-in deferrals 3 400 - 12 491 - Post-in-service deferred operating expenses - net (843) (2 004) (1 339) (6 545) Phase-in deferred depreciation - - - (848) Income taxes 73 983 62 519 232 893 154 215 Taxes other than income taxes 65 737 63 948 257 322 244 949 714 546 645 048 2 506 216 2 395 294 Operating Income 169 449 162 629 593 533 451 837 Other Income and Expenses - Net Allowance for equity funds used during construction 351 954 1 361 3 625 Post-in-service carrying costs 343 2 568 961 10 147 Phase-in deferred return 2 093 2 134 8 496 9 864 Income taxes 3 218 1 094 9 482 10 847 Other - net (7 676) (1 051) (9 676) (29 261) (1 671) 5 699 10 624 5 222 Income Before Interest and Other Charges 167 778 168 328 604 157 457 059 Interest and Other Charges Interest on long-term debt 49 135 55 061 207 985 218 162 Other interest 2 871 5 311 18 386 22 321 Allowance for borrowed funds used during construction (1 138) (2 311) (6 892) (11 452) Preferred dividend requirements of subsidiaries 6 769 8 657 28 965 34 630 57 637 66 718 248 444 263 661 Net Income $110 141 $101 610 $ 355 713 $ 193 398 Average Common Shares Outstanding 157 675 155 682 157 113 149 873 Earnings Per Common Share $.70 $.65 $2.27 $1.27 Dividends Declared Per Common Share $.43 $.43 $1.72 $1.55 The accompanying notes as they relate to Cinergy are an integral part of these consolidated financial statements.
CINERGY CORP. CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (unaudited) Common Paid-in Retained Total Common Stock Capital Earnings Stock Equity (dollars in thousands) Quarter Ended March 31, 1996 Balance January 1, 1996 $1 577 $1 597 050 $ 950 216 $2 548 843 Net income 110 141 110 141 Issuance of 8,988 shares of common stock - net 311 311 Dividends on common stock (see page 8 for per share amounts) (67 799) (67 799) Other (1 926) (1 926) Balance March 31, 1996 $1 577 $1 595 435 $ 992 558 $2 589 570 Quarter Ended March 31, 1995 Balance January 1, 1995 $1 552 $1 535 658 $ 877 061 $2 414 271 Net income 101 610 101 610 Issuance of 722,439 shares of common stock - net 7 18 004 18 011 Common stock issuance expenses (184) (184) Dividends on common stock (see page 8 for per share amounts) (66 814) (66 814) Balance March 31, 1995 $1 559 $1 553 478 $ 911 857 $2 466 894 Twelve Months Ended March 31, 1996 Balance April 1, 1995 $1 559 $1 553 478 $ 911 857 $2 466 894 Net income 355 713 355 713 Issuance of 1,758,652 shares of common stock - net 18 42 650 42 668 Common stock issuance expenses (45) (45) Dividends on common stock (see page 8 for per share amounts) (269 836) (269 836) Other (648) (5 176) (5 824) Balance March 31, 1996 $1 577 $1 595 435 $ 992 558 $2 589 570 Twelve Months Ended March 31, 1995 Balance April 1, 1994 $1 460 $1 329 588 $ 951 553 $2 282 601 Net income 193 398 193 398 Issuance of 8,829,293 shares of common stock - net 99 228 695 228 794 Common stock issuance expenses (5 386) (5 386) Dividends on common stock (see page 8 for per share amounts) (232 573) (232 573) Other 581 (521) 60 Balance March 31, 1995 $1 559 $1 553 478 $ 911 857 $2 466 894 The accompanying notes as they relate to Cinergy are an integral part of these consolidated financial statements.
CINERGY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Year to Date Twelve Months Ended March 31 March 31 1996 1995 1996 1995 (in thousands) Operating Activities Net income $ 110 141 $ 101 610 $ 355 713 $ 193 398 Items providing (using) cash currently Depreciation 70 195 73 456 276 498 295 650 Deferred income taxes and investment tax credits - net 16 978 1 769 43 620 24 104 Allowance for equity funds used during construction (351) (954) (1 361) (3 625) Regulatory assets - net 9 961 (946) 11 933 (38 537) Changes in current assets and current liabilities Restricted deposits (24) 15 (1 074) 10 105 Accounts receivable, net of reserves on receivables sold 143 778 20 251 51 886 84 990 Materials, supplies, and fuel 29 169 16 830 63 553 (48 944) Accounts payable 12 675 (80 462) 94 809 (25 056) Accrued taxes and interest (7 203) 37 224 12 208 7 998 Other items - net (16 003) 13 343 (17 210) 62 404 Net cash provided by (used in) operating activities 369 316 182 136 890 575 562 487 Financing Activities Issuance of common stock 311 17 827 42 623 223 408 Issuance of long-term debt - - 344 280 59 910 Funds on deposit from issuance of long- term debt 973 5 729 5 231 24 449 Retirement of preferred stock of subsidiaries (5) - (93 471) (40 422) Redemption of long-term debt (150 289) (87 517) (461 605) (87 952) Change in short-term debt (69 500) 1 201 (133 801) (16 668) Dividends on common stock (67 799) (66 814) (269 836) (232 573) Net cash provided by (used in) financing activities (286 309) (129 574) (566 579) (69 848) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (49 760) (78 214) (296 451) (468 903) Deferred DSM costs - net (737) (8 949) (17 061) (48 375) Equity investment in Argentine utility - - 19 799 -___ Net cash provided by (used in) investing activities (50 497) (87 163) (293 713) (517 278) Net increase (decrease) in cash and temporary cash investments 32 510 (34 601) 30 283 (24 639) Cash and temporary cash investments at beginning of period 35 052 71 880 37 279 61 918 Cash and temporary cash investments at end of period $ 67 562 $ 37 279 $ 67 562 $ 37 279 The accompanying notes as they relate to Cinergy are an integral part of these consolidated financial statements.
CINERGY CORP. Below is information concerning the consolidated results of operations for Cinergy for the quarter and twelve months ended March 31, 1996. For information concerning the results of operations for each of the other registrants for the same quarter ended, see the discussion under the heading RESULTS OF OPERATIONS following the financial statements of each company. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1996 Kwh Sales Kwh sales for the quarter ended March 31, 1996, increased 12.7% as compared to the same period last year. This increase was due to higher kwh sales to all customer classes. Increased residential and commercial sales reflected colder weather during the first quarter of 1996 and an increase in the average number of customers. Sales to industrial customers increased due to growth in the food products, primary metals, and chemicals sectors. Increased activity in Cinergy's power marketing operations led to higher non-firm power sales for resale. Mcf Sales and Transportation Mcf gas sales and transportation volumes for the first quarter of 1996 increased 12.7% as compared to the first quarter of 1995. Colder weather during the winter heating season and increases in the average number of customers led to higher gas sales to residential and commercial customers. Industrial sales decreased as customers continued to purchase gas directly from suppliers, using transportation services provided by CG&E. The increase in transportation volumes mainly reflects demand for gas transportation services in the primary metals and transportation equipment sectors and in both the non-electrical and electrical machinery sectors. Operating Revenues Electric Operating Revenues Electric operating revenues for the quarter ended March 31, 1996, increased $53 million (8.3%) as compared to the same period last year. This increase primarily resulted from increased kwh sales, as previously discussed. In addition, PSI's 4.3% retail rate increase approved in the February 1995 Order and a 1.9% rate increase for carrying costs on CWIP property which was approved by the IURC in March 1995 contributed to the increase. These increases were partially offset by the operation of fuel adjustment clauses reflecting a lower average cost of fuel used in electric production. An analysis of electric operating revenues is shown below: Quarter Ended March 31 (in millions) Electric operating revenues - March 31, 1995 $632 Increase (Decrease) due to change in: Price per kwh Retail (6) Sales for resale Firm power obligations (5) Non-firm power transactions 4 Total change in price per kwh (7) Kwh sales Retail 41 Sales for resale Firm power obligations 5 Non-firm power transactions 14 Total change in kwh sales 60 Electric operating revenues - March 31, 1996 $685 Gas Operating Revenues Gas operating revenues increased $24 million (13.7%) in the first quarter of 1996 when compared to the same period last year. This increase was primarily a result of the previously discussed changes in gas sales volumes. Operating Expenses Purchased and Exchanged Power Purchased and exchanged power increased $22 million for the quarter ended March 31, 1996, when compared to the same period last year, primarily reflecting increased power purchases utilized in connection with increased non-firm power sales for resale during the period. Other Operation Other operation expenses for the quarter ended March 31, 1996, increased $29 million (25.2%), as compared to the same period last year. This increase reflects the amortization of deferred DSM costs, an increase in the ongoing level of DSM expenses and higher administrative and general expenses as a result of a number of items including the recognition by PSI of postretirement benefit costs on an accrual basis and the amortization of deferred postretirement benefit costs and deferred Merger Costs, both of which are being recovered in revenues pursuant to the February 1995 Order. Phase-in Deferred Return and Amortization of Phase-in Deferrals Phase-in deferred return and amortization of phase-in deferrals reflect a PUCO-ordered phase-in plan for Zimmer included in the May 1992 Order. In the first three years of the rate phase-in plan, rates charged to customers did not fully recover depreciation expense and return on investment. This deficiency has been deferred and is being recovered over a seven-year period that began in May 1995. Other Income and Expenses - Net Post-in-service Carrying Costs Post-in-service carrying costs decreased $2 million (86.6%) for the first quarter of 1996, from the comparable period of 1995 as a result of PSI's discontinuing the accrual of post-in-service carrying costs on qualified environmental projects upon the inclusion in rates of the costs of the projects pursuant to the February 1995 Order. Interest and Other Charges Interest on Long-term Debt and Other Interest Interest charges decreased $8 million (13.9%) for the three months ended March 31, 1996, from the same period of 1995 primarily due to the refinancing of over $330 million of long-term debt by CG&E and ULH&P during the period from March 1995 through November 1995 and the redemption of $151.5 million in the first quarter of 1996. Additionally, interest on short-term debt decreased as PSI and ULH&P borrowed funds through an internally funded Money Pool, reducing outside borrowings at higher interest rates. Preferred Dividend Requirements of Subsidiaries The decrease in preferred dividend requirements of subsidiaries of $2 million (21.8%) for the quarter ended March 31, 1996, from the same period of 1995 was due to the early redemption in July 1995 of all 400,000 shares and 500,000 shares of CG&E's 7.44% Series and 9.15% Series $100 par value cumulative preferred stock, respectively. RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED MARCH 31, 1996 Kwh Sales Kwh sales increased 8.4% for the twelve months ended March 31, 1996, from the comparable period of last year reflecting higher kwh sales to all customer classes. Significantly contributing to the higher kwh sales were increased sales to residential and commercial customers as a result of warmer weather during the 1995 summer cooling season and colder weather during the fourth quarter of 1995 and the first quarter of 1996. Additionally, the increase reflects a higher average number of residential and commercial customers, while industrial sales increased primarily due to growth in the primary metals, chemicals, and food products sectors. Increased activity in Cinergy's power marketing operations led to higher non-firm power sales for resale. Mcf Sales and Transportation Mcf gas sales and transportation volumes for the twelve months ended March 31, 1996, increased 16.0% when compared to the twelve months ended March 31, 1995. Colder weather during the 1995 winter heating season led to increases in gas sales to residential and commercial customers. Industrial sales decreased as customers continued the previously mentioned shift in demand toward transportation services. This increase in Mcf transported of 17.3% was mainly reflective of continued growth in demand for gas transportation services in the primary metals, transportation equipment, and food products sectors. Operating Revenues Electric Operating Revenues Compared to the same period last year, electric operating revenues for the twelve months ended March 31, 1996, increased $206 million (8.4%), reflecting increased kwh sales and PSI's rate increases, as previously discussed and CG&E's electric rate increase which became effective in May 1994. The aforementioned operation of fuel adjustment clauses partially offset these increases. An analysis of electric operating revenues is shown below: Twelve Months Ended March 31 (in millions) Electric operating revenues - March 31, 1995 $2 459 Increase (Decrease) due to change in: Price per kwh Retail 23 Sales for resale Firm power obligations (10) Non-firm power transactions 11 Total change in price per kwh 24 Kwh sales Retail 153 Sales for resale Firm power obligations 10 Non-firm power transactions 20 Total change in kwh sales 183 Other (1) Electric operating revenues - March 31, 1996 $2 665 Gas Operating Revenues Gas operating revenues increased $46 million (11.9%) for the twelve months ended March 31, 1996, when compared to the same period last year. This increase was primarily a result of the previously discussed changes in gas sales volumes and was partially offset by the operation of fuel adjustment clauses reflecting a decline in the average cost of gas purchased for the period. An increase in the relative volume of gas transported to gas sold, as previously discussed, also served to partially offset this increase. Providing transportation services does not necessitate the recovery of gas purchased costs by CG&E. Consequently, the revenue per Mcf transported is below the revenue per Mcf sold. Operating Expenses Purchased and Exchanged Power Purchased and exchanged power increased $35 million (99.1%) for the twelve months ended March 31, 1996, when compared to the same period of last year, reflecting increased power purchases utilized in connection with increased non-firm power sales for resale during the period. Maintenance The decrease in maintenance expense of $18 million (8.9%) for the twelve months ended March 31, 1996, as compared to the same period of last year, was primarily due to reduced maintenance on electric production and electric and gas distribution facilities. Depreciation Depreciation expense decreased $19 million (6.5%) for the twelve months ended March 31, 1996, as compared to the same period of last year. This decrease primarily reflects the adoption of lower depreciation rates by PSI effective in March 1995 pursuant to the February 1995 Order. Phase-in Deferred Return and Amortization of Phase-in Deferrals As previously discussed, phase-in deferred return and amortization of phase-in deferrals reflect the PUCO-ordered phase-in plan for Zimmer included in the May 1992 Order. Post-in-service Deferred Operating Expenses-Net Post-in-service deferred operating expenses decreased $5 million (79.5%) for the twelve months ended March 31, 1996, from the comparable period of last year as a result of PSI's ceasing deferral of depreciation on qualified environmental projects upon the inclusion in rates of the costs of the projects pursuant to the February 1995 Order. Taxes Other than Income Taxes Taxes other than income taxes increased $12 million (5.1%) over the same period of 1995 primarily due to increased property taxes resulting from a greater investment in taxable property and higher property tax rates. Other Income and Expenses - Net Post-in-service Carrying Costs Post-in-service carrying costs decreased $9 million (90.5%) for the twelve months ended March 31, 1996, from the comparable period of last year. This decrease is a result of PSI's discontinuing the accrual of post-in-service carrying costs on qualified environmental projects upon the inclusion in rates of the costs of the projects pursuant to the February 1995 Order. Other - net Other - net increased $20 million (66.9%) for the twelve months ended March 31, 1996, reflecting $4 million of interest on an income tax refund related to prior years, a $10 million gain on the sale of Cinergy's investment in an Argentine utility, and charges of $17 million in 1994 for merger-related and other expenditures which cannot be recovered from customers. These items were partially offset by a number of factors, including charges associated with winding down certain non-utility activities during 1995. Interest and Other Charges Interest on Long-term Debt and Other Interest Interest charges decreased $14 million (5.9%) for the twelve months ended March 31, 1996, from the same period of 1995 primarily due to the refinancing of over $330 million of long-term debt by CG&E and ULH&P during the period from March 1995 through November 1995 and the redemption of $151.5 million in the first quarter of 1996. Additionally, interest on short-term debt decreased as PSI and ULH&P borrowed funds through an internally funded Money Pool, reducing outside borrowings at higher interest rates. Preferred Dividend Requirements of Subsidiaries The decrease in the preferred dividend requirements of subsidiaries of $6 million (16.4%) for the twelve months ended March 31, 1996, from the same period of 1995 was primarily due to the early redemption in July 1995 of all 400,000 shares and 500,000 shares of CG&E's 7.44% Series and 9.15% Series $100 par value cumulative preferred stock, respectively. THE CINCINNATI GAS & ELECTRIC COMPANY AND SUBSIDIARY COMPANIES THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS (unaudited) ASSETS March 31 December 31 1996 1995 (dollars in thousands) Utility Plant - Original Cost In service Electric $4 584 216 $4 564 711 Gas 684 822 680 339 Common 182 871 183 422 5 451 909 5 428 472 Accumulated depreciation 1 766 273 1 730 232 3 685 636 3 698 240 CWIP 74 017 77 661 Total utility plant 3 759 653 3 775 901 Current Assets Cash and temporary cash investments 47 967 6 612 Restricted deposits 1 168 1 144 Notes receivable from affiliated companies 77 872 24 715 Accounts receivable less accumulated provision of $10,481 at March 31, 1996, and $9,615 at December 31, 1995, for doubtful accounts 104 842 292 493 Accounts receivable from affiliated companies 16 717 17 162 Materials, supplies, and fuel - at average cost Fuel for use in electric production 30 145 40 395 Gas stored for current use 8 556 21 493 Other materials and supplies 57 610 55 388 Property taxes applicable to subsequent year 87 617 116 822 Prepayments and other 34 828 30 572 467 322 606 796 Other Assets Regulatory assets Amounts due from customers - income taxes 390 783 397 155 Post-in-service carrying costs and deferred operating expenses 147 230 148 316 Phase-in deferred return and depreciation 99 082 100 388 Deferred DSM costs 23 426 19 158 Deferred merger costs 14 403 14 538 Unamortized costs of reacquiring debt 40 687 39 428 Other 36 124 41 025 Other 79 381 54 691 831 116 814 699 $5 058 091 $5 197 396 The accompanying notes as they relate to CG&E are an integral part of these consolidated financial statements. THE CINCINNATI GAS & ELECTRIC COMPANY CAPITALIZATION AND LIABILITIES March 31 December 31 1996 1995 (dollars in thousands) Common Stock Equity Common stock - $8.50 par value; authorized shares - 120,000,000; outstanding shares - 89,663,086 at March 31, 1996, and December 31, 1995 $ 762 136 $ 762 136 Paid-in capital 339 101 339 101 Retained earnings 473 512 427 226 Total common stock equity 1 574 749 1 528 463 Cumulative Preferred Stock Not subject to mandatory redemption 40 000 40 000 Subject to mandatory redemption 160 000 160 000 Long-term Debt 1 694 391 1 702 650 Total capitalization 3 469 140 3 431 113 Current Liabilities Long-term debt due within one year 10 000 151 500 Accounts payable 161 840 138 735 Accounts payable to affiliated companies 4 160 20 468 Accrued taxes 226 206 250 189 Accrued interest 30 149 31 299 Other 36 898 40 409 469 253 632 600 Other Liabilities Deferred income taxes 810 257 795 385 Unamortized investment tax credits 127 361 129 372 Accrued pension and other postretirement benefit costs 122 863 117 641 Other 59 217 91 285 1 119 698 1 133 683 $5 058 091 $5 197 396 THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF INCOME (unaudited) Quarter Ended March 31 1996 1995 (in thousands) Operating Revenues Electric (including $12,348 and $6,949 from affiliated companies for 1996 and 1995, respectively) $375 629 $349 956 Gas 199 155 175 211 574 784 525 167 Operating Expenses Fuel used in electric production 97 107 84 073 Gas purchased 93 225 94 493 Purchased and exchanged power Non-affiliated companies 6 433 916 Affiliated companies 6 736 9 589 Other operation 79 580 68 922 Maintenance 20 979 23 533 Depreciation 39 987 39 537 Amortization of phase-in deferrals 3 400 - Amortization of post-in-service deferred operating expenses 823 823 Income taxes 54 890 43 346 Taxes other than income taxes 51 569 50 656 454 729 415 888 Operating Income 120 055 109 279 Other Income and Expenses - Net Allowance for equity funds used during construction 351 596 Phase-in deferred return 2 093 2 134 Income taxes 1 681 1 207 Other - net (686) 965 3 439 4 902 Income Before Interest 123 494 114 181 Interest Interest on long-term debt 32 100 37 111 Other interest 462 826 Allowance for borrowed funds used during construction (823) (980) 31 739 36 957 Net Income 91 755 77 224 Preferred Dividend Requirement 3 474 5 362 Net Income Applicable to Common Stock $ 88 281 $ 71 862 The accompanying notes as they relate to CG&E are an integral part of these consolidated financial statements. THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1996 1995 (in thousands) Operating Activities Net income $ 91 755 $ 77 224 Items providing (using) cash currently Depreciation 39 987 39 537 Deferred income taxes and investment tax credits - net 19 368 (2 056) Allowance for equity funds used during construction (351) (596) Regulatory assets - net 7 165 3 007 Changes in current assets and current liabilities Restricted deposits (24) (1) Accounts and notes receivable, net of reserves on receivables sold 111 135 16 428 Materials, supplies, and fuel 20 965 18 867 Accounts payable 6 797 (30 544) Accrued taxes and interest (25 133) 27 362 Other items - net (6 590) 10 159 Net cash provided by (used in) operating activities 265 074 159 387 Financing Activities Redemption of long-term debt (150 289) (87 462) Change in short-term debt - (13 500) Dividends on preferred stock (3 474) (5 362) Dividends on common stock (41 995) (51 650) Net cash provided by (used in) financing activities (195 758) (157 974) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (23 693) (35 727) Deferred DSM costs - net (4 268) (2 139) Net cash provided by (used in) investing activities (27 961) (37 866) Net increase (decrease) in cash and temporary cash investments 41 355 (36 453) Cash and temporary cash investments at beginning of period 6 612 52 516 Cash and temporary cash investments at end of period $ 47 967 $ 16 063 The accompanying notes as they relate to CG&E are an integral part of these consolidated financial statements. THE CINCINNATI GAS & ELECTRIC COMPANY RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1996 Kwh Sales Kwh sales for the quarter ended March 31, 1996, increased 13.7% over the same period of 1995, due in large part to higher non-firm power sales for resale to PSI. Also contributing to the total kwh sales levels were increased sales to all retail customer classes. Higher residential and commercial sales resulted from colder weather during the period and increases in the average number of customers. Increased industrial sales primarily reflect growth in the primary metals sector. Mcf Sales and Transportation Mcf gas sales and transportation volumes for the first quarter of 1996 increased 12.7% as compared to the first quarter of 1995. Colder weather during the winter heating season and increases in the average number of customers led to higher gas sales to residential and commercial customers. Industrial sales decreased as customers continued to purchase gas directly from suppliers, using transportation services provided by CG&E. The increase in transportation volumes mainly reflects demand for gas transportation services in the primary metals and transportation equipment sectors and in both the non-electrical and electrical machinery sectors. Operating Revenues Electric Operating Revenues Electric operating revenues increased $26 million (7.3%) for the quarter ended March 31, 1996, over the comparable period of 1995. This increase primarily reflects the higher kwh sales discussed above. An analysis of electric operating revenues is shown below: Quarter Ended March 31 (in millions) Electric operating revenues - March 31, 1995 $350 Increase (Decrease) due to change in: Price per kwh Retail (1) Sales for resale Non-firm power transactions (7) Total change in price per kwh (8) Kwh sales Retail 21 Sales for resale Non-firm power transactions 13 Total change in kwh sales 34 Electric operating revenues - March 31, 1996 $376 Gas Operating Revenues Gas operating revenues increased $24 million (13.7%) in the first quarter of 1996 when compared to the same period last year. This increase was primarily a result of the previously discussed changes in gas sales volumes. Operating Expenses Fuel Used in Electric Production Electric fuel costs increased $13 million (15.5%) for the quarter as compared to last year. An analysis of these fuel costs is shown below: Quarter Ended March 31 (in millions) Fuel expense - March 31, 1995 $84 Increase due to change in: Price of fuel 5 Kwh generation 8 Fuel expense - March 31, 1996 $97 Purchased and Exchanged Power Purchased and exchanged power for the quarter ended March 31, 1996, increased $3 million (25.4%) over the comparable period of 1995. This increase primarily reflects increased power purchases utilized in connection with increased non-firm power sales for resale. Other Operation For the three months ended March 31, 1996, other operation expenses increased $11 million (15.5%) due to a number of factors, including higher administrative and general expenses and increased gas distribution expenses. Decreased electric distribution expenses partially offset these increases. Maintenance The $3 million (10.9%) decrease in maintenance expense for the first quarter of 1996 as compared to the same period of 1995 is due to reduced maintenance on electric production and distribution facilities. Phase-in Deferred Return and Amortization of Phase-in Deferrals Phase-in deferred return and amortization of phase-in deferrals reflect a PUCO-ordered phase-in plan for Zimmer included in the May 1992 Order. In the first three years of the rate phase-in plan, rates charged to customers did not fully recover depreciation expense and return on investment. This deficiency has been deferred and is being recovered over a seven-year period that began in May 1995. Interest Interest charges decreased $5 million (14.1%) for the three months ended March 31, 1996, from the same period of 1995 primarily due to the refinancing of over $330 million of long-term debt during the period from March 1995 through November 1995 and the redemption of $151.5 million in the first quarter of 1996. Preferred Dividend Requirement The decrease in the preferred dividend requirement of $2 million (35.2%) for the quarter ended March 31, 1996, from the same period of 1995 was due to the early redemption in July 1995 of all 400,000 shares and 500,000 shares of CG&E's 7.44% Series and 9.15% Series $100 par value cumulative preferred stock, respectively. PSI ENERGY, INC. AND SUBSIDIARY COMPANIES PSI ENERGY, INC. CONSOLIDATED BALANCE SHEETS (unaudited) ASSETS March 31 December 31 1996 1995 (dollars in thousands) Electric Utility Plant - Original Cost In service $4 061 780 $4 052 984 Accumulated depreciation 1 651 591 1 637 169 2 410 189 2 415 815 CWIP 60 924 58 191 Total electric utility plant 2 471 113 2 474 006 Current Assets Cash and temporary cash investments 8 592 15 522 Restricted deposits 214 1 187 Accounts receivable less accumulated provision of $231 at March 31, 1996, and $468 at December 31, 1995, for doubtful accounts 79 841 73 419 Accounts receivable from affiliated companies 10 027 20 568 Materials, supplies, and fuel - at average cost Fuel 71 135 82 014 Other materials and supplies 32 165 29 462 Prepayments and other 2 291 1 234 204 265 223 406 Other Assets Regulatory assets Amounts due from customers - income taxes 32 828 26 338 Post-in-service carrying costs and deferred operating expenses 40 883 38 874 Deferred DSM costs 106 711 110 242 Deferred merger costs 40 906 42 286 Unamortized costs of reacquiring debt 33 845 34 476 Other 30 461 33 886 Other 110 103 92 056 395 737 378 158 $3 071 115 $3 075 570 The accompanying notes as they relate to PSI are an integral part of these consolidated financial statements. PSI ENERGY, INC. CAPITALIZATION AND LIABILITIES March 31 December 31 1996 1995 (dollars in thousands) Common Stock Equity Common stock - without par value; $.01 stated value; authorized shares - 60,000,000; outstanding shares - 53,913,701 at March 31, 1996, and December 31, 1995 $ 539 $ 539 Paid-in capital 403 259 403 253 Accumulated earnings subsequent to November 30, 1986, quasi-reorganization 622 958 625 275 Total common stock equity 1 026 756 1 029 067 Cumulative Preferred Stock Not subject to mandatory redemption 187 885 187 897 Long-term Debt 828 393 828 116 Total capitalization 2 043 034 2 045 080 Current Liabilities Long-term debt due within one year 50 400 50 400 Notes payable 92 900 165 800 Notes payable to affiliated companies 73 865 32 731 Accounts payable 110 424 116 817 Accounts payable to affiliated companies 4 701 - Litigation settlement 80 000 80 000 Accrued taxes 97 489 65 851 Accrued interest 11 652 24 696 Other 16 155 16 000 537 586 552 295 Other Liabilities Deferred income taxes 338 334 331 876 Unamortized investment tax credits 55 454 56 354 Accrued pension and other postretirement benefit costs 60 409 54 130 Other 36 298 35 835 490 495 478 195 $3 071 115 $3 075 570 PSI ENERGY, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited) Quarter Ended March 31 1996 1995 (in thousands) Operating Revenues Revenues (including $6,736 and $9,589 from affiliated companies for 1996 and 1995, respectively) $328 295 $299 048 Operating Expenses Fuel 94 345 101 836 Purchased and exchanged power Non-affiliated companies 21 188 4 750 Affiliated companies 12 348 6 949 Other operation 66 551 47 815 Maintenance 22 663 20 789 Depreciation 30 208 33 919 Post-in-service deferred operating expenses - net (1 666) (2 827) Income taxes 18 883 19 173 Taxes other than income taxes 14 168 13 292 278 688 245 696 Operating Income 49 607 53 352 Other Income and Expenses - Net Allowance for equity funds used during construction - 358 Post-in-service carrying costs 343 2 568 Income taxes 760 (303) Other - net (3 658) (1 912) (2 555) 711 Income Before Interest 47 052 54 063 Interest Interest on long-term debt 17 035 17 950 Other interest 3 468 3 977 Allowance for borrowed funds used during construction (315) (1 331) 20 188 20 596 Net Income 26 864 33 467 Preferred Dividend Requirement 3 295 3 295 Net Income Applicable to Common Stock $ 23 569 $ 30 172 The accompanying notes as they relate to PSI are an integral part of these consolidated financial statements. PSI ENERGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1996 1995 (in thousands) Operating Activities Net income $ 26 864 $ 33 467 Items providing (using) cash currently Depreciation 30 208 33 919 Deferred income taxes and investment tax credits - net (1 926) 5 510 Allowance for equity funds used during construction - (358) Regulatory assets - net 2 796 (3 954) Changes in current assets and current liabilities Restricted deposits - 16 Accounts receivable, net of reserves on receivables sold (7 674) 2 227 Materials, supplies, and fuel 8 176 (2 244) Accounts payable (1 692) (43 113) Accrued taxes and interest 18 594 10 730 Other items - net 239 650 Net cash provided by (used in) operating activities 75 585 36 850 Financing Activities Funds on deposit from issuance of long- term debt 973 5 729 Retirement of preferred stock (5) - Redemption of long-term debt - (55) Change in short-term debt (31 766) 14 528 Dividends on preferred stock (3 294) (3 295) Dividends on common stock (25 887) -___ Net cash provided by (used in) financing activities (59 979) 16 907 Investing Activities Construction expenditures (less allowance for equity funds used during construction) (26 067) (42 487) Deferred DSM costs - net 3 531 (6 810) Net cash provided by (used in) investing activities (22 536) (49 297) Net increase (decrease) in cash and temporary cash investments (6 930) 4 460 Cash and temporary cash investments at beginning of period 15 522 6 341 Cash and temporary cash investments at end of period $ 8 592 $ 10 801 The accompanying notes as they relate to PSI are an integral part of these consolidated financial statements. PSI ENERGY, INC. RESULT OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1996 Kwh Sales Kwh sales for the first quarter of 1996 increased 18.2% when compared to the same period last year. Increased activity in Cinergy's power marketing operations led to higher non-firm power sales for resale. This increase also reflects higher kwh sales to residential and commercial customers as a result of colder weather in the first quarter of 1996 and an increase in the number of residential and commercial customers. Growth in the food products, primary metals, and chemicals sectors of industrial sales also contributed to the increased kwh sales level. Operating Revenues Total operating revenues increased $29 million (9.8%) for the quarter ended March 31, 1996, over the same period last year, reflecting the increased kwh sales previously discussed. Also contributing to the increase was a 4.3% retail rate increase approved in the February 1995 Order and a 1.9% rate increase for carrying costs on CWIP property which was approved by the IURC in March 1995. Partially offsetting these increases were the operation of fuel adjustment clauses reflecting a lower average cost of fuel used in electric production. An analysis of operating revenues is shown below: Quarter Ended March 31 (in millions) Operating revenues - March 31, 1995 $299 Increase (Decrease) due to change in: Price per kwh Retail (4) Sales for resale Firm power obligations (5) Non-firm power transactions (2) Total change in price per kwh (11) Kwh sales Retail 20 Sales for resale Firm power obligations 4 Non-firm power transactions 17 Total change in kwh sales 41 Other (1) Operating revenues - March 31, 1996 $328 Operating Expenses Fuel Fuel costs, PSI's largest operating expense, decreased $7 million (7.4%) for the first quarter of 1996 as compared to the same period last year, due to a decrease in the price of fuel. Kwh generation remained relatively unchanged during the period. Purchased and Exchanged Power For the quarter ended March 31, 1996, purchased and exchanged power increased $22 million, as compared to the same period last year, primarily reflecting increased purchases of non-firm power for resale to other utilities and increased purchases from CG&E as a result of the coordination of PSI's and CG&E's electric dispatch systems. Other Operation Other operation expenses for the quarter ended March 31, 1996, increased $19 million (39.2%), as compared to the same period last year. This increase was due to a number of factors, including the recognition of postretirement benefit costs on an accrual basis, an increase in the ongoing level of DSM expenses, and the amortization of deferred postretirement benefit costs, deferred Merger Costs, and deferred DSM costs, all of which are being recovered in revenues pursuant to the February 1995 Order. Maintenance Maintenance expenses for the first quarter of 1996, as compared to the same period last year increased $2 million (9.0%) as a result of higher costs on distribution facilities. Depreciation Depreciation expense decreased $4 million (10.9%) for the quarter ended March 31, 1996, as compared to the first quarter of last year. This decrease primarily reflects the adoption of lower depreciation rates effective in March 1995 pursuant to the February 1995 Order. Post-in-service Deferred Operating Expenses - Net The change of $1 million (41.1%) in post-in-service deferred operating expenses - net for the quarter ended March 31, 1996, when compared to the same period last year as a result of ceasing deferral of depreciation on qualified environmental projects upon the inclusion in rates of the costs of the projects pursuant to the February 1995 Order. Other Income and Expenses - Net Post-in-service Carrying Costs Post-in-service carrying costs decreased $2 million (86.6%) for the first quarter of 1996, from the comparable period of 1995 as a result of discontinuing the accrual of post-in-service carrying costs on qualified environmental projects upon the inclusion in rates of the costs of the projects pursuant to the February 1995 Order. Interest Allowance for Borrowed Funds Used During Construction Allowance for borrowed funds used during construction decreased $1 million (76.3%) for the first quarter of 1996, over the comparable period of 1995, primarily as a result of the decrease in the average balance of CWIP due to the Clean Coal Project being placed in-service. Partially offsetting this decrease was an increase in the debt component of the AFUDC rate. THE UNION LIGHT, HEAT AND POWER COMPANY THE UNION LIGHT, HEAT AND POWER COMPANY BALANCE SHEETS (unaudited) ASSETS March 31 December 31 1996 1995 (dollars in thousands) Utility Plant - Original Cost In service Electric $190 238 $188 508 Gas 141 930 140 604 Common 19 067 19 068 351 235 348 180 Accumulated depreciation 115 405 112 812 235 830 235 368 CWIP 7 848 7 863 Total utility plant 243 678 243 231 Current Assets Cash and temporary cash investments 8 989 1 750 Accounts receivable less accumulated provision of $1,180 at March 31, 1996, and $1,035 at December 31, 1995, for doubtful accounts 18 850 37 895 Accounts receivable from affiliated companies 30 - Materials, supplies, and fuel - at average cost Gas stored for current use 2 253 4 513 Other materials and supplies 1 316 1 215 Property taxes applicable to subsequent year 1 763 2 350 Prepayments and other 306 485 33 507 48 208 Other Assets Regulatory assets Deferred merger costs 1 785 1 785 Unamortized costs of reacquiring debt 3 417 2 526 Other 2 569 2 548 Other 4 338 1 499 12 109 8 358 $289 294 $299 797 The accompanying notes as they relate to ULH&P are an integral part of these financial statements. THE UNION LIGHT, HEAT AND POWER COMPANY CAPITALIZATION AND LIABILITIES March 31 December 31 1996 1995 (dollars in thousands) Common Stock Equity Common stock - $15.00 par value; authorized shares - 1,000,000; outstanding shares - 585,333 at March 31, 1996, and December 31, 1995 $ 8 780 $ 8 780 Paid-in capital 18 839 18 839 Retained earnings 91 119 82 863 Total common stock equity 118 738 110 482 Long-term Debt 44 582 54 377 Total capitalization 163 320 164 859 Current Liabilities Long-term debt due within one year 10 000 15 000 Accounts payable 15 556 11 057 Accounts payable to affiliated companies 32 834 44 708 Accrued taxes 5 434 1 993 Accrued interest 1 207 1 549 Other 4 537 5 505 69 568 79 812 Other Liabilities Deferred income taxes 26 330 23 728 Unamortized investment tax credits 5 009 5 079 Accrued pension and other postretirement benefit costs 12 622 12 202 Amounts due to customers - income taxes 4 867 4 717 Other 7 578 9 400 56 406 55 126 $289 294 $299 797 THE UNION LIGHT, HEAT AND POWER COMPANY STATEMENTS OF INCOME (unaudited) Quarter Ended March 31 1996 1995 (in thousands) Operating Revenues Electric $52 333 $39 559 Gas 34 058 30 503 86 391 70 062 Operating Expenses Electricity purchased from parent company for resale 37 600 30 039 Gas purchased 18 998 17 560 Other operation 9 247 7 795 Maintenance 1 166 1 153 Depreciation 2 907 2 775 Income taxes 5 511 3 088 Taxes other than income taxes 1 071 1 008 76 500 63 418 Operating Income 9 891 6 644 Other Income and Expenses - Net Allowance for equity funds used during construction (21) (11) Income taxes (4) (4) Other - net (219) (4) (244) (19) Income Before Interest 9 647 6 625 Interest Interest on long-term debt 1 294 2 039 Other interest 107 165 Allowance for borrowed funds used during construction (10) (65) 1 391 2 139 Net Income $ 8 256 $ 4 486 The accompanying notes as they relate to ULH&P are an integral part of these financial statements. THE UNION LIGHT, HEAT AND POWER COMPANY STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1996 1995 (in thousands) Operating Activities Net income $ 8 256 $ 4 486 Items providing (using) cash currently Depreciation 2 907 2 775 Deferred income taxes and investment tax credits - net 2 682 (848) Allowance for equity funds used during construction 21 11 Regulatory assets - net (21) (1 615) Changes in current assets and current liabilities Accounts receivable, net of reserves on receivables sold 15 823 5 095 Materials, supplies, and fuel 2 159 3 475 Accounts payable (7 375) (4 008) Accrued taxes and interest 3 099 3 793 Other items - net (643) 6 039 Net cash provided by (used in) operating activities 26 908 19 203 Financing Activities Redemption of long-term debt (16 032) - Change in short-term debt - (13 500) Net cash provided by (used in) financing activities (16 032) (13 500) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (3 637) (5 233) Net cash provided by (used in) investing activities (3 637) (5 233) Net increase (decrease) in cash and temporary cash investments 7 239 470 Cash and temporary cash investments at beginning of period 1 750 1 071 Cash and temporary cash investments at end of period $ 8 989 $ 1 541 The accompanying notes as they relate to ULH&P are an integral part of these financial statements. THE UNION LIGHT, HEAT AND POWER COMPANY RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1996 Kwh Sales Kwh sales for the quarter ended March 31, 1996, increased 28.7% from the same period of 1995, reflecting increased sales to all retail customer classes. Contributing significantly to this increase were higher residential and commercial sales due to colder weather during the winter heating season and increases in the average number of customers. Higher industrial sales reflect growth in the food products and printing and publishing sectors. Mcf Sales and Transportation Mcf gas sales and transportation volumes for the first quarter of 1996 increased 15.3% as compared to the first quarter of 1995. Colder weather during the winter heating season led to increases in gas sales to residential and commercial customers. Industrial sales decreased as customers continued to purchase gas directly from suppliers, using transportation services provided by ULH&P. The increase in transportation volumes was primarily a result of growth in the primary metals and food products sectors. Operating Revenues Electric Operating Revenues Electric operating revenues increased $12.8 million (32.3%) for the quarter ended March 31, 1996, over the comparable period of 1995. This increase primarily reflects the previously discussed increase in kwh sales. An analysis of electric operating revenues is shown below: Quarter Ended March 31 (in thousands) Electric operating revenues - March 31, 1995 $39 559 Increase (Decrease) due to change in: Price per kwh Retail 1 439 Firm power sales for resale 3 Total change in price per kwh 1 442 Kwh sales Retail 11 256 Firm power sales for resale 41 Total change in kwh sales 11 297 Other 35 Electric operating revenues - March 31, 1996 $52 333 Gas Operating Revenues Gas operating revenues increased $3.6 million (11.7%) in the first quarter of 1996 when compared to the same period of last year. This increase was primarily a result of the previously discussed changes in gas sales volumes. Operating Expenses Electricity Purchased from Parent Company for Resale Electricity purchased expense, ULH&P's largest operating expense, increased $7.6 million (25.2%) for the quarter as compared to last year. An analysis of electricity purchased expense is shown below: Quarter Ended March 31 (in thousands) Electricity purchased expense - March 31, 1995 $30 039 Increase (Decrease) due to change in: Price of electricity 423 Kwh purchased 7 138 Electricity purchased expense - March 31, 1996 $37 600 Gas Purchased Gas purchased for the quarter increased $1.4 million (8.2%) from the first quarter of last year reflecting a 13.6% increase in volumes purchased which was partially offset by a 4.8% decline in the average cost per Mcf purchased. Other Operation For the three months ended March 31, 1996, other operation expenses increased $1.5 million (18.6%) due to a number of factors, including higher administrative and general expenses and increased gas distribution expenses. Depreciation Depreciation expense increased $.1 million (4.8%) for the quarter ended March 31, 1996, over the comparable period of last year. The increase primarily reflects additions to gas and electric utility plant. Interest Interest charges decreased $.7 million (35.0%) for the three months ended March 31, 1996, from the same period of 1995 primarily due to the refinancing of $15 million and $20 million of long-term debt in June 1995 and September 1995, respectively, and the redemption of $15 million in the first quarter of 1996. NOTES TO FINANCIAL STATEMENTS Cinergy, CG&E, PSI, and ULH&P 1. These Financial Statements reflect all adjustments (which include only normal, recurring adjustments) necessary in the opinion of the registrants for a fair presentation of the interim results. These statements should be read in conjunction with the Financial Statements and the notes thereto included in the combined 1995 Form 10-K of the registrants. Certain amounts in the 1995 Financial Statements have been reclassified to conform to the 1996 presentation. Cinergy, CG&E, and ULH&P 2. On May 1, 1996, ULH&P redeemed the entire $10 million principal amount of its 9 1/2% Series First Mortgage Bonds due December 1, 2008, at the redemption price of 104.35%. Cinergy and PSI 3. As discussed in Cinergy's and PSI's 1995 Form 10-K, RUS requested a rehearing on the affirmation by the Seventh Circuit Court of Appeals of WVPA's plan of reorganization which has been approved by the United States Bankruptcy Court for the Southern District of Indiana and upheld by the United States District Court for the Southern District of Indiana. In April 1996, the Seventh Circuit Court of Appeals denied RUS' request for rehearing. RUS' remaining option is to appeal this decision to the U.S. Supreme Court within 90 days from the date of the Seventh Circuit Court of Appeal's latest decision. PSI cannot predict whether RUS will appeal this decision to the U.S. Supreme Court, and if appealed, the outcome of such appeal. Cinergy, CG&E, PSI, and ULH&P 4. In March 1995, the FASB issued Statement 121, which became effective in January 1996 for Cinergy and its subsidiaries. Statement 121, which addresses the identification and measurement of asset impairments for all enterprises, is particularly relevant for electric utilities as a result of the potential for deregulation of the generation segment of the business. Statement 121 requires recognition of impairment losses on long-lived assets when book values exceed expected future cash flows. Based on the regulatory environment in which Cinergy's utility subsidiaries currently operate, compliance with the provisions of Statement 121 has not had nor is it expected to have an adverse effect on their financial condition or results of operations. However, this conclusion may change in the future as competitive pressures and potential restructuring influence the electric utility industry. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Recent Developments Cinergy Joint Venture On May 7, 1996, Cinergy, GPU, and Midlands announced the terms of a recommended cash offer for Midlands to be made by Avon Energy. Cinergy and GPU each indirectly own 50% of Avon Energy. On May 13, 1996, Avon Energy commenced the offer to acquire all of the shares of Midlands on the terms and subject to conditions set out in an offering documents. As of May 14, 1996, Avon Energy owns or has agreed to acquire 114.9 million of Midlands shares, representing approximately 29% of the issued share capital of Midlands. The total acquisition cost of Midlands is expected to be approximately (Pound Sterling) 1.7 billion (or approximately $2.6 billion - U.S.)1 . It is currently anticipated that the offer transaction could be completed in the third quarter of 1996. Midlands, one of 12 regional electric companies in he United Kingdom, is headquartered in Birmingham, England. Midlands' principal business is the distribution of electricity to approximately 2.2 million customers. For further information, reference is made to Cinergy's Current Report on Form 8-K dated May 7, 1996. Following the announcement of the potential acquisition of Midlands, three major credit rating agencies, Duff & Phelps Credit Rating Co., Fitch Investors Service, Inc., and Standard & Poor's, affirmed the current ratings of Cinergy's operating subsidiaries, after their consideration of the effects of the potential acquisition. The other major credit rating agency, Moody's placed the credit ratings of Cinergy's operating subsidiaries, CG&E, PSI, and ULH&P, under review for possible downgrade. Moody's indicated that its review will focus on the likelihood of the transaction being completed and will assess the operating strategies of the combined companies and the anticipated benefits of the transaction. It will also focus on the financial impact the transaction will have on Cinergy and its operating subsidiaries, including the credit implications. Cinergy cannot predict the outcome of this review. Cinergy and PSI Contract Negotiations The Labor Agreement between PSI and IBEW Local 1393 was scheduled to expire May 1, 1996. Union members voted to reject PSI's initial offer on May 3, 1996. Although this vote authorized a strike, the union agreed to continue working under terms of the existing contract pending the outcome of negotiations. PSI made a revised contract offer to the union on May 9, 1996, and the contract was extended to May 24, 1996, pending the result of the vote of union members on the revised offer. Neither Cinergy nor PSI can predict whether a work stoppage will occur if the revised offer is rejected, nor the duration of such stoppage if it occurs. ________________ 1Assumes an average exchange ratio of 1.51 U.S. dollars to 1.00 British Pound Sterling for the shares purchased. 1 Regulatory Matters Cinergy, CG&E, PSI, and ULH&P Mega-NOPR On April 24, 1996, the FERC issued final orders relating to its previously issued mega-NOPR. The unanimously-passed final rules contain essentially the same provisions as the mega-NOPR. Additionally, the FERC concurrently issued a related NOPR which proposes to establish a new system for utilities to use in reserving capacity on their own and others' transmission lines. The final rules provide for mandatory filing of open access/comparability transmission tariffs, provide for functional unbundling of all services, require utilities to use the filed tariffs for their own bulk power transactions, establish an electronic bulletin board for transmission availability and pricing information, and establish a contract-based approach to recovering any potential stranded costs as a result of customer choice at the wholesale level. The FERC expects the rules to "accelerate competition and bring lower prices and more choices to energy customers". The final rules become effective in 60 days. Accounting Issues Cinergy, CG&E, PSI, and ULH&P New Accounting Standard See Note 4 of the "Notes to Financial Statements" in "Part I. Financial Information." Capital Resources Cinergy, CG&E, and ULH&P Long-term Debt For information regarding recent securities redemptions, see Note 2 of the "Notes to Financial Statements" in "Part I. Financial Information." Cinergy, CG&E, PSI, and ULH&P Short-term Debt The operating subsidiary companies of Cinergy have the following short-term debt authorizations and lines of credit: Committed Unused Authorized Lines__ Lines (in millions) Cinergy & Subsidiaries $838 $281 $215 CG&E 400 80 80 PSI 400 200 134 ULH&P 35 - - Additionally, in connection with the tender offer to purchase Midlands, Cinergy has established a $600 million credit facility, which expires in May 2001, of which $216 million remained unused as of May 14, 1996. This new credit facility was established, in part, to fund the acquisition of Midlands ($460 million will be used for this purpose) with the remaining portion available for general corporate purposes. The prior $100 million credit facility, which would have expired in September 1997, has been terminated. In addition, M.E. Holdings, Inc., a subsidiary of Investments, established to hold Cinergy's 50% investment in Avon Holdings, entered into a $40 million non-recourse credit agreement which will also be used to fund the acquisition of Midlands. Cinergy, CG&E, PSI, and ULH&P Sale of Accounts Receivable As discussed in each registrant's 1995 Form 10-K, in January 1996, CG&E, PSI, and ULH&P entered into an agreement to sell, on a revolving basis, undivided percentage interests in certain of their accounts receivable. Under the agreement, the companies have the authority to sell up to an aggregate maximum of $350 million of which $237 million has been sold as of March 31, 1996. Other Commitments Cinergy and PSI WVPA Litigation See Note 3 of the "Notes to Financial Statements" in "Part I. Financial Information." RESULTS OF OPERATIONS Cinergy, CG&E, PSI, and ULH&P Reference is made to "ITEM 1. FINANCIAL STATEMENTS" in "PART I. Financial Information." PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Cinergy and PSI WVPA Litigation See Note 3 of the "Notes to Financial Statements" in "Part I. Financial Information." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Cinergy (a) The annual meeting of shareholders of Cinergy was held April 26, 1996, in Cincinnati, Ohio. (c) At the meeting, six Class II directors were elected to serve three year terms, expiring in 1999, to the board of Cinergy, as set forth below: Votes Votes Class II For Withheld Melvin Perelman Ph.D. 134,013,381 3,681,371 Thomas E. Petry 134,120,798 3,573,954 Jackson H. Randolph 133,871,653 3,823,099 Philip R. Sharp Ph.D. 133,272,214 4,422,538 Van P. Smith 133,998,850 3,695,902 Dudley S. Taft 134,144,847 3,549,905 Additionally, the Plan was adopted. The Plan will provide Cinergy greater flexibility to design long-term compensation incentives for its officers and other key employees by rewarding long-term performance. Accordingly, certain key employees may be granted Stock Options, Stock Appreciation Rights, Restricted Stock, Cash Awards, Performance Shares, Performance Awards, Dividend Equivalents, and Other Stock-Based Awards as described in the Plan. There were 117,406,962 common shares voted for the proposal, 17,970,427 voted against the proposal, 2,316,163 abstentions, and 1,200 broker non-votes. Also at the meeting, an amendment to the Cinergy Annual Incentive Plan was approved. The amendment changes the maximum dollar amount of compensation that can be paid to a "covered employee" under the plan to $1 million. The amendment also adds "total shareholder return" as an example of objective performance criteria which can constitute corporate goals under the plan. There were 128,219,715 common shares voted for the amendment, 6,874,985 voted against the amendment, 2,598,852 abstentions, and 1,200 broker non- votes. CG&E (a) In lieu of the annual meeting of shareholders of CG&E, resolutions were adopted via unanimous written consent of shareholders effective April 25, 1996. (b) The Board of Directors as previously reported was re-elected in its entirety (see (c) below). (c) The following members of the Board of Directors were unanimously re- elected at the annual meeting: Jackson H. Randolph James E. Rogers William J. Grealis Additionally, four amendments to CG&E's Regulations were adopted as follows: 1. The date for the annual meeting of shareholders may be the business day next preceding Cinergy's annual meeting of shareholders. 2. A new section is added allowing a written consent of shareholders in lieu of an annual meeting. 3. A new section is added allowing actions of the Board of Directors to be by written consent. 4. The requirement of an operations report to be submitted to the shareholders at the annual meeting is deleted. PSI (a) The annual meeting of shareholders of PSI was held in Cincinnati, Ohio on April 26, 1996. (b) Proxies were not solicited for the annual meeting, at which the Board of Directors was re-elected in its entirety. (c) The following members of the Board of Directors were unanimously re- elected at the annual meeting: James K. Baker Michael G. Browning John A. Hillenbrand II John M. Mutz Jackson H. Randolph James E. Rogers Van P. Smith ULH&P Omitted pursuant to Instruction H(2)(b). ITEM 5. OTHER INFORMATION Refer to the "Recent Developments" section in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in "Part I. Financial Information" for information concerning contract negotiations between PSI and IBEW Local 1393 and the Cinergy Joint Venture. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed herewith: Exhibit Designation Nature of Exhibit CG&E 3-a Regulations of CG&E as amended, adopted April 25, 1996. Exhibit Designation Nature of Exhibit ULH&P 3-b By-laws of ULH&P as amended, adopted May 8, 1996. Cinergy, CG&E, PSI, and ULH&P 27 Financial Data Schedules (included in electronic submission only). Cinergy (b) The following report on Form 8-K was filed prior to the filing of this Form 10-Q for the quarter ended March 31, 1996: Date of Report Item Filed______________________ May 7, 1996 Item 5. Other Events SIGNATURES 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, although Cinergy, CG&E, PSI, and ULH&P believe that the disclosures are adequate to make the information presented not misleading. In the opinion of Cinergy, CG&E, PSI, and ULH&P, these statements reflect all adjustments (which include only normal, recurring adjustments) necessary to reflect the results of operations for the respective periods. The unaudited statements are subject to such adjustments as the annual audit by independent public accountants may disclose to be necessary. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed by an officer and the chief accounting officer on their behalf by the undersigned thereunto duly authorized. CINERGY CORP. THE CINCINNATI GAS & ELECTRIC COMPANY PSI ENERGY, INC. THE UNION LIGHT, HEAT AND POWER COMPANY Registrants Date: May 14, 1996 J. Wayne Leonard Duly Authorized Officer Date: May 14, 1996 Charles J. Winger Chief Accounting Officer EX-27 2 CINERGY 03/31/96 10-Q
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE "CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED " STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 DEC-31-1996 JAN-01-1996 MAR-31-1996 3-MOS PER-BOOK 6,232,079 0 585,782 1,037,369 185,784 8,041,014 1,577 1,595,435 992,558 2,589,570 160,000 227,885 2,522,784 96,300 0 0 60,400 0 0 0 2,384,075 8,041,014 883,995 73,983 640,563 714,546 169,449 (1,671) 167,778 57,637 110,141 6,769 103,372 67,799 49,135 369,316 0.70 0.70 -----END PRIVACY-ENHANCED MESSAGE-----