-----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, Q1SwUFE3lBI5crv5+Xs+bdzxAUisazQkEYbjRuK0NjSeVSF7ogfGa21nB5d/TKZu Li1lH/OUPzgKtTBlWjrbAA== 0000899652-98-000092.txt : 19980518 0000899652-98-000092.hdr.sgml : 19980518 ACCESSION NUMBER: 0000899652-98-000092 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: SEC FILE NUMBER: 001-11377 FILM NUMBER: 98622280 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 1ST QUARTER 10-Q CINERGY CORP. 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, 1998 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, 1998, shares of Common Stock outstanding for each registrant were as listed: Company Shares Cinergy Corp., par value $.01 per share 157,764,020 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 . . . . . . . . . . . . . 6 Consolidated Statements of Income . . . . . . . . . . 8 Consolidated Statements of Changes in Common Stock Equity. . . . . . . . . . . . . . . . . . . . 9 Consolidated Statements of Cash Flows . . . . . . . . 11 Results of Operations . . . . . . . . . . . . . . . . 12 The Cincinnati Gas & Electric Company Consolidated Balance Sheets . . . . . . . . . . . . . 20 Consolidated Statements of Income and Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . 22 Consolidated Statements of Cash Flows . . . . . . . . 23 Results of Operations . . . . . . . . . . . . . . . . 24 PSI Energy, Inc. Consolidated Balance Sheets . . . . . . . . . . . . . 28 Consolidated Statements of Income and Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . 30 Consolidated Statements of Cash Flows . . . . . . . . 31 Results of Operations . . . . . . . . . . . . . . . . 32 The Union Light, Heat and Power Company Balance Sheets. . . . . . . . . . . . . . . . . . . . 35 Statements of Income. . . . . . . . . . . . . . . . . 37 Statements of Cash Flows. . . . . . . . . . . . . . . 38 Results of Operations . . . . . . . . . . . . . . . . 39 Notes to Financial Statements . . . . . . . . . . . . . 41 2 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 46 3 Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . 49 PART II. OTHER INFORMATION 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . 49 4 Submission of Matters to a Vote of Security Holders . . 49 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 50 Signature . . . . . . . . . . . . . . . . . . . . . . . 52 GLOSSARY OF TERMS The following abbreviations or acronyms used in the text of this combined Form 10-Q are defined below: TERM DEFINITION 1997 Form Combined 1997 Annual Report on Form 10-K filed separately by 10-K Cinergy, CG&E, PSI, and ULH&P Avon Energy Avon Energy Partners Holdings, an Unlimited Liability Company and its wholly-owned subsidiary Avon Energy Partners PLC, a Limited Liability Company CERCLA Comprehensive Environmental Response, Compensation and Liability Act CFC National Rural Utilities Cooperative Finance Corporation CG&E The Cincinnati Gas & Electric Company (a subsidiary of Cinergy) Cinergy or Cinergy Corp. Company Cinergy UK Cinergy UK, Inc., formerly M.E. Holdings, Inc., (a subsidiary of Cinergy Investments, Inc.) which holds Cinergy's 50% investment in Avon Energy Committed Lines Unsecured lines of credit December 1996 A PUCO order issued in December 1996 on CG&E's gas rate Order proceeding December 1996 An Indiana Utility Regulatory Commission order issued in DSM Order December 1996 on PSI's DSM proceeding DSM Demand-side management Enertech Enertech Associates, Inc., formerly named Power International, Inc. (a subsidiary of Cinergy Investments, Inc.) EPA United States Environmental Protection Agency EPS Earnings per share February 1995 An Indiana Utility Regulatory Commission order issued in Order February 1995 HB 443 Customer choice bill introduced by the House Chairman of the Tourism, Development and Energy Committee in Kentucky HJR House Joint Resolution, which calls for an executive task force to study electricity restructuring in Kentucky kwh Kilowatt-hour GLOSSARY OF TERMS (Continued) TERM DEFINITION IDEM Indiana Department of Environmental Management IGC Indiana Gas Company, Inc., formerly Indiana Gas and Water Company, Inc. Investments Cinergy Investments, Inc. (a subsidiary of Cinergy) IRS Internal Revenue Service Mcf Thousand cubic feet MGP Manufactured gas plant Midlands Midlands Electricity plc NIPSCO Northern Indiana Public Service Company PSI PSI Energy, Inc. (a subsidiary of Cinergy) PUCO Public Utilities Commission of Ohio RUS Rural Utilities Service September 1996 An Indiana Utility Regulatory Commission order issued in Order September 1996 on PSI's retail rate proceeding Statement 130 Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ULH&P The Union Light, Heat and Power Company (a wholly-owned subsidiary of CG&E) Uncommitted Short-term borrowings with various banks arranged on an Lines "as offered" basis WVPA Wabash Valley Power Association, Inc. Zimmer CG&E's William H. Zimmer Generating Station CINERGY CORP. AND SUBSIDIARY COMPANIES CINERGY CORP. CONSOLIDATED BALANCE SHEETS ASSETS March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Utility Plant - Original Cost In service Electric $9,014,797 $8,981,182 Gas 753,311 746,903 Common 186,631 186,078 ---------- ---------- 9,954,739 9,914,163 Accumulated depreciation 3,860,682 3,800,322 ---------- ---------- 6,094,057 6,113,841 Construction work in progress 194,042 183,262 ---------- ---------- Total utility plant 6,288,099 6,297,103 Current Assets Cash and temporary cash investments 58,731 53,310 Restricted deposits 2,348 2,319 Accounts receivable less accumulated provision for doubtful accounts of $10,349 at March 31, 1998, and $10,382 at December 31, 1997 519,396 413,626 Materials, supplies, and fuel - at average cost Fuel for use in electric production 68,292 57,916 Gas stored for current use 12,232 29,174 Other materials and supplies 77,972 76,066 Prepayments and other 47,291 38,171 ---------- ---------- 786,262 670,582 Other Assets Regulatory assets Amounts due from customers - income taxes 383,314 374,456 Post-in-service carrying costs and deferred operating expenses 176,531 178,504 Coal contract buyout costs 117,964 122,485 Deferred demand-side management costs 101,958 109,596 Deferred merger costs 89,015 90,346 Phase-in deferred return and depreciation 85,960 89,689 Unamortized costs of reacquiring debt 65,941 66,242 Other 46,592 45,533 Investments in unconsolidated subsidiaries 580,269 537,720 Other 274,092 275,897 ---------- ---------- 1,921,636 1,890,468 $8,995,997 $8,858,153 The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements. CINERGY CORP. CAPITALIZATION AND LIABILITIES March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Common Stock Equity Common stock - $.01 par value; authorized shares - 600,000,000; outstanding shares - 157,764,020 at March 31, 1998, and 157,744,658 at December 31, 1997 $ 1,578 $ 1,577 Paid-in capital 1,574,080 1,573,064 Retained earnings 1,002,495 967,420 Accumulated other comprehensive income (3,279) (2,861) ---------- ---------- Total common stock equity 2,574,874 2,539,200 Cumulative Preferred Stock of Subsidiaries Not subject to mandatory redemption 92,752 177,989 Long-term Debt 2,032,156 2,150,902 ---------- ---------- Total capitalization 4,699,782 4,868,091 Current Liabilities Long-term debt due within one year 145,000 85,000 Notes payable and other short-term obligations 1,222,795 1,114,028 Accounts payable 558,021 488,716 Accrued taxes 218,251 187,033 Accrued interest 40,342 46,622 Other 98,740 79,193 ---------- ---------- 2,283,149 2,000,592 Other Liabilities Deferred income taxes 1,233,505 1,248,543 Unamortized investment tax credits 163,850 166,262 Accrued pension and other postretirement benefit costs 307,373 297,142 Other 308,338 277,523 ---------- ---------- 2,013,066 1,989,470 $8,995,997 $8,858,153
CINERGY CORP. CONSOLIDATED STATEMENTS OF INCOME (unaudited) Quarter Ended Twelve Months Ended March 31 March 31 1998 1997 1998 1997 (in thousands, except per share amounts) Operating Revenues Electric $1,158,724 $ 817,914 $4,202,508 $2,901,780 Gas 173,061 212,266 451,940 487,145 ---------- ---------- ---------- ---------- 1,331,785 1,030,180 4,654,448 3,388,925 Operating Expenses Fuel used in electric production 180,519 175,746 698,208 697,544 Gas purchased 96,611 123,968 238,801 279,859 Purchased and exchanged power 471,885 160,592 1,530,651 291,809 Other operation 163,028 163,412 637,561 615,712 Maintenance 39,066 45,854 169,683 196,120 Depreciation 73,305 71,556 290,826 284,124 Amortization of phase-in deferrals 5,539 3,371 15,651 13,569 Amortization of post-in-service deferred operating expenses - net 1,091 1,091 4,362 425 Income taxes 70,791 63,919 255,809 208,205 Taxes other than income taxes 69,649 68,372 266,301 260,450 ---------- ---------- ---------- ---------- 1,171,484 877,881 4,107,853 2,847,817 Operating Income 160,301 152,299 546,595 541,108 Other Income and Expenses - Net Allowance for equity funds used during construction 21 191 (72) 1,065 Post-in-service carrying costs - - - 880 Phase-in deferred return 1,811 2,002 7,817 8,281 Equity in earnings of unconsolidated subsidiaries 11,854 26,500 45,746 51,930 Income taxes 13,342 791 48,488 17,109 Other - net (19,031) (2,627) (47,906) (35,415) ---------- ---------- ---------- ---------- 7,997 26,857 54,073 43,850 Income Before Interest and Other Charges 168,298 179,156 600,668 584,958 Interest and Other Charges Interest on long-term debt 43,758 49,275 176,255 190,757 Other interest 17,994 13,867 64,074 42,165 Allowance for borrowed funds used during construction (1,947) (1,342) (6,005) (6,387) Preferred dividend requirements of subsidiaries 2,422 3,239 11,752 19,650 ---------- ---------- ---------- ---------- 62,227 65,039 246,076 246,185 Net Income Before Extraordinary Item $ 106,071 $ 114,117 $ 354,592 $ 338,773 Extraordinary Item - Equity Share of Windfall Profits Tax (Less Applicable Income Taxes of $0) - - (109,400) - ---------- ---------- ---------- ---------- Net Income $ 106,071 $ 114,117 $ 245,192 $ 338,773 Average Common Shares Outstanding 157,764 157,679 157,706 157,679 Earnings Per Common Share (Note 9) Net income before extraordinary item $.67 $.72 $2.24 $2.02 Net income $.67 $.72 $1.55 $2.02 Earnings Per Common Share - Assuming Dilution (Note 9) Net income before extraordinary item $.67 $.72 $2.23 $2.01 Net income $.67 $.72 $1.54 $2.01 Dividends Declared Per Common Share $.45 $.45 $1.80 $1.76 The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
CINERGY CORP. CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (dollars in thousands) (unaudited) Accumulated Other Total Total Common Paid-in Retained Comprehensive Comprehensive Common Stock Stock Capital Earnings Income Income Equity Quarter Ended March 31, 1998 Balance January 1, 1998 $1,577 $1,573,064 $ 967,420 $(2,861) $2,539,200 Comprehensive income Net income 106,071 $106,071 106,071 Other comprehensive income, net of tax Foreign currency translation adjustment (367) (367) Minimum pension liability adjustment (51) (51) -------- Other comprehensive income total (418) (418) -------- Comprehensive income total $105,653 Issuance of 19,362 shares of common stock - net 1 289 290 Treasury shares purchased (1) (1,430) (1,431) Treasury shares reissued 1 2,149 2,150 Dividends on common stock (see page 8 for per share amounts) (70,994) (70,994) Other 8 (2) 6 ------ ---------- ---------- ------- ---------- Balance March 31, 1998 $1,578 $1,574,080 $1,002,495 $(3,279) $2,574,874 Quarter Ended March 31, 1997 Balance at January 1, 1997 $1,577 $1,590,735 $ 993,526 $(1,384) $2,584,454 Comprehensive income Net income 114,117 $114,117 114,117 Other comprehensive income, net of tax Foreign currency translation adjustment (1,035) (1,035) -------- Other comprehensive income total (1,035) (1,035) -------- Comprehensive income total $113,082 ======== Treasury shares purchased (7) (31,947) (31,954) Treasury shares reissued 7 21,134 21,141 Dividends on common stock (see page 8 for per share amounts) (71,000) (71,000) Other 12 12 ------ ---------- ---------- ------- ---------- Balance March 31, 1997 $1,577 $1,579,934 $1,036,643 $(2,419) $2,615,735
CINERGY CORP. CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (CONTINUED) (dollars in thousands) (unaudited) Accumulated Other Total Total Common Paid-in Retained Comprehensive Comprehensive Common Stock Stock Capital Earnings Income Income Equity Twelve Months Ended March 31, 1998 Balance April 1, 1997 $1,577 $1,579,934 $1,036,643 $(2,419) $2,615,735 Comprehensive income Net income 245,192 $245,192 245,192 Other comprehensive income, net of tax Foreign currency translation adjustment 273 273 Minimum pension liability adjustment (1,133) (1,133) -------- Other comprehensive income total (860) (860) -------- Comprehensive income total $244,332 Issuance of 84,891 shares of common stock - net 1 2,355 2,356 Treasury shares purchased (5) (15,682) (15,687) Treasury shares reissued 5 7,744 7,749 Dividends on common stock (see page 8 for per share amounts) (283,860) (283,860) Other (271) 4,520 4,249 ------ ---------- ---------- ------- ---------- Balance March 31, 1998 $1,578 $1,574,080 $1,002,495 $(3,279) $2,574,874 Twelve Months Ended March 31, 1997 Balance at April 1, 1996 $1,577 $1,595,435 $ 993,632 $(1,074) $2,589,570 Comprehensive income Net income 338,773 $338,773 338,773 Other comprehensive income, net of tax Foreign currency translation adjustment (1,166) (1,166) Minimum pension liability adjustment (179) (179) -------- Other comprehensive income total (1,345) (1,345) -------- Comprehensive income total $337,428 ======== Treasury shares purchased (10) (40,717) (40,727) Treasury shares reissued 10 25,548 25,558 Costs of reacquisition of preferred stock of subsidiary (18,391) (18,391) Dividends on common stock (see page 8 for per share amounts) (277,559) (277,559) Other (332) 188 (144) ------ ---------- ---------- ------- ---------- Balance March 31, 1997 $1,577 $1,579,934 $1,036,643 $(2,419) $2,615,735 The accompanying notes as they relate to Cinergy Corp. 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 1998 1997 1998 1997 (in thousands) Operating Activities Net income $106,071 $114,117 $245,192 $338,773 Items providing or (using) cash: Depreciation 73,305 71,556 290,826 284,124 Deferred income taxes and investment tax credits - net (12,955) (6,889) 61,572 24,045 Equity in earnings of unconsolidated subsidiaries (11,854) (26,500) (20,593) (51,930) Extraordinary item - equity share of windfall profits tax - - 109,400 - Allowance for equity funds used during construction (21) (191) 72 (1,065) Regulatory assets - net 20,915 21,599 70,626 41,922 Changes in current assets and current liabilities Restricted deposits (29) (2) (625) (336) Accounts receivable, net of reserves on receivables sold (106,525) (8,498) (315,184) (19,527) Materials, supplies, and fuel 4,660 30,699 (4,222) 45,535 Accounts payable 69,305 (60,734) 313,335 (36,128) Litigation settlement - - - (80,000) Accrued taxes and interest 24,938 52,412 (48,888) 29,121 Other items - net 25,596 (21,239) 79,010 68,573 -------- -------- -------- -------- Net cash provided by operating activities 193,406 166,330 780,521 643,107 Financing Activities Issuance of common stock 290 - 2,356 - Issuance of long-term debt 98,901 - 198,963 150,217 Retirement of preferred stock of subsidiaries (85,229) (25) (101,473) (212,507) Redemption of long-term debt (160,291) (61,880) (434,723) (148,774) Change in short-term debt 108,767 26,560 274,018 668,477 Dividends on common stock (70,802) (71,000) (283,668) (277,559) -------- -------- -------- -------- Net cash (used in) or provided by financing activities (108,364) (106,345) (344,527) 179,854 Investing Activities Construction expenditures (less allowance for equity funds used during construction) (66,348) (58,909) (335,494) (332,162) Deferred demand-side management costs (3,615) (5,109) (18,373) (39,718) Investments in unconsolidated subsidiaries (9,658) - (38,690) (503,349) -------- -------- -------- -------- Net cash used in investing activities (79,621) (64,018) (392,557) (875,229) Net increase (decrease) in cash and temporary cash investments 5,421 (4,033) 43,437 (52,268) Cash and temporary cash investments at beginning of period 53,310 19,327 15,294 67,562 -------- -------- -------- -------- Cash and temporary cash investments at end of period $ 58,731 $ 15,294 $ 58,731 $ 15,294 The accompanying notes as they relate to Cinergy Corp. 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, 1998. For information concerning the results of operations for each of the other registrants for the same quarter, see the discussion under the heading "Results of Operations" following the financial statements of each such registrant. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 Kwh Sales Increased activity in Cinergy's power marketing and trading operations, for the quarter ended March 31, 1998, led to higher non-firm power sales for resale and significantly contributed to the increase in total kwh sales of 72%, as compared to the same period of 1997. An increase in retail sales, which reflects higher industrial sales and an increased average number of residential and commercial customers, was partially offset by a decline in residential sales as a result of milder weather during the first quarter of 1998 as compared to the first quarter of 1997. Increased industrial sales primarily reflected growth in the primary metals sector. Mcf Sales and Transportation Mcf gas sales and transportation volumes for the first quarter of 1998 decreased 7.3%, as compared to the same period in 1997. Decreased residential and commercial sales, reflecting the milder weather during the first quarter of 1998, were slightly offset by an increase in the average number of customers. Higher gas transportation volumes reflect the continued trend of customers purchasing gas directly from suppliers, using transportation services provided by CG&E. Operating Revenues Electric Operating Revenues Electric operating revenues for the quarter ended March 31, 1998, increased $341 million (42%), as compared to the same period last year, primarily as a result of the increased kwh sales as previously discussed. The operation of CG&E's fuel adjustment clauses, reflecting a higher average cost of fuel used in electric production, also contributed to the increase. An analysis of electric operating revenues is shown below: Quarter Ended March 31 (in millions) Electric operating revenues - March 31, 1997 $818 Increase (Decrease) due to change in: Price per kwh Retail 15 Sales for resale Firm power obligations (1) Non-firm power transactions (26) Total change in price per kwh (12) Kwh sales Retail 7 Sales for resale Non-firm power transactions 343 Total change in kwh sales 350 Other 3 Electric operating revenues - March 31, 1998 $1 159 Gas Operating Revenues The increasing trend of industrial customers purchasing gas directly from producers and utilizing CG&E facilities to transport the gas continues to put downward pressure on gas operating revenues. (See the "Mcf Sales and Transportation" section.) Since providing transportation services does not necessitate recovery of the cost of gas purchased, the revenue per Mcf transported is less than the revenue per Mcf sold. As a result, a higher relative volume of gas transported to gas sold translates into lower gas operating revenues. Gas operating revenues decreased $39 million (18%) in the first quarter of 1998, when compared to the same period last year. The decrease in gas operating revenues is primarily attributable to lower residential and commercial sales due to the milder weather during the first quarter of 1998. An increase in the relative volume of gas transported to gas sold, as previously discussed, also contributed to the decrease. Operating Expenses Fuel Used in Electric Production Electric fuel costs increased $5 million (3%) for the quarter ended March 31, 1998, as compared to the same period last year. An analysis of these fuel costs is shown below: Quarter Ended March 31 (in millions) Fuel expense - March 31, 1997 $176 Increase (Decrease) due to change in: Price of fuel (6) Deferred fuel cost 9 Kwh generation 2 ---- Fuel expense - March 31, 1998 $181 Gas Purchased Gas purchased for the quarter ended March 31, 1998, decreased $27 million (22%), when compared to the same period last year, reflecting a lower average cost per Mcf purchased and a decline in the volumes of gas purchased primarily due to the milder weather during the first quarter of 1998. Purchased and Exchanged Power Purchased and exchanged power increased $311 million for the quarter ended March 31, 1998, when compared to the same period last year, primarily reflecting increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing and trading operations. Maintenance For the three months ended March 31, 1998, maintenance costs decreased $7 million (15%), when compared to the three months ended March 31, 1997. This decrease is partially due to a decline in maintenance activities associated with postponed outages at certain of CG&E's electric production facilities. Decreased maintenance costs, associated with CG&E's electric distribution facilities, also contributed to the lower level of expenses for the current quarter. Amortization of Phase-in Deferrals Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for Zimmer. Other Income and Expenses - Net Equity in Earnings of Unconsolidated Subsidiaries The $15 million decrease in equity in earnings of unconsolidated subsidiaries for the first three months of 1998, as compared to the same period of 1997, is primarily attributable to the decrease in earnings of Midlands, which is due to milder weather conditions and a penalty imposed on each electric distribution company due to the delay in opening up the electricity supply business to competition. Other - net The change in other - net of $16 million for the three months ended March 31, 1998, from the same period of 1997, is primarily due to a litigation settlement (see Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information"), an increase in expenses related to Cinergy Global Power, Inc., which was acquired in September 1997, and an adjustment recorded in the first quarter of 1997 related to a 1996 sale of a foreign subsidiary. Interest and Other Charges Interest on Long-term Debt Interest on long-term debt decreased $6 million (11%) for the quarter ended March 31, 1998, as compared to the same period last year, primarily due to the net redemption of approximately $250 million of long-term debt by CG&E and PSI during the period from February 1997 through March 1998. Other Interest Other interest increased $4 million (30%) for the first quarter of 1998, as compared to the same period last year, primarily due to higher levels of short-term borrowings, the recognition of a full quarter of interest on the currency swap program, which was initiated in mid-February 1997, and an increase in short-term interest rates during 1998 over 1997. The remainder of the increase is attributable to interest resulting from an IRS audit of the 1989 and 1990 tax years. RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED MARCH 31, 1998 Kwh Sales Increased activity in Cinergy's power marketing and trading operations led to higher non-firm power sales for resale and significantly contributed to the increase in total kwh sales of 86% for the twelve months ended March 31, 1998, as compared to the same period for 1997. An increase in retail sales, which reflects higher industrial sales and an increase in the average number of residential and commercial customers, was partially offset by a decline in residential sales as a result of the milder weather experienced for the twelve months ended March 31, 1998, as compared to the same period last year. Increased industrial sales primarily reflected growth in the primary metals sector. Mcf Sales and Transportation Mcf gas sales for the twelve months ended March 31, 1998, decreased 9.5% while transportation volumes increased 12.4%, as compared to the same period in 1997. The decrease in Mcf sales is due, in part, to the milder weather during the twelve month period ended March 31, 1998, and was partially offset by increases in the average number of customers. Higher gas transportation volumes reflect the continued trend of customers purchasing gas directly from suppliers, using transportation services provided by CG&E. Operating Revenues Electric Operating Revenues Increased kwh sales, as previously discussed, the effects of PSI's retail rate increases approved in the September 1996 Order, as amended in August 1997, and the December 1996 DSM Order significantly contributed to the $1.3 billion (45%) increase in electric operating revenues for the twelve months ended March 31, 1998, when compared to the same period of 1997. Also contributing to the increase was the return of approximately $5 million to customers in 1996 in accordance with an order issued by the IURC in February 1995. The February 1995 Order required all retail operating income above a certain rate of return to be refunded to customers. The operation of PSI's and CG&E's fuel adjustment clauses, reflecting a lower average cost of fuel used in electric production, 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, 1997 $2 902 Increase (Decrease) due to change in: Price per kwh Retail 22 Sales for resale Firm power obligations (13) Non-firm power transactions 31 Total change in price per kwh 40 Kwh sales Retail 20 Sales for resale Firm power obligations 14 Non-firm power transactions 1 220 ------ Total change in kwh sales 1 254 Other 7 Electric operating revenues - March 31, 1998 $4 203 Gas Operating Revenues For a discussion of the continued trend of downward pressure on gas operating revenues from increased transportation services, refer to the discussion under the caption "Gas Operating Revenues" for Cinergy in "Results of Operations for the Quarter Ended March 31, 1998." Gas operating revenues decreased $35 million (7%) for the twelve months ended March 31, 1998, when compared to the same period last year. This decrease is primarily attributable to the decline in Mcf sales due to the milder weather. An increase in the relative volume of gas transported to gas sold, as previously discussed, also contributed to the decrease. Operating Expenses Fuel Used in Electric Production Electric fuel costs for the twelve months ended March 31, 1998, were relatively constant, as compared to the same period last year. An analysis of these fuel costs is shown below: Twelve Months Ended March 31 (in millions) Fuel expense - March 31, 1997 $698 Increase (Decrease) due to change in: Price of fuel 6 Deferred fuel cost (37) Kwh generation 31 ---- Fuel expense - March 31, 1998 $698 Gas Purchased Gas purchased for the twelve months ended March 31, 1998, decreased $41 million (15%) when compared to the same period last year. This decrease reflects a lower average cost per Mcf of gas purchased and a decline in the volumes purchased as previously discussed. Purchased and Exchanged Power Purchased and exchanged power increased $1.2 billion for the twelve months ended March 31, 1998, when compared to the same period of last year, primarily reflecting increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing and trading operations. Maintenance Maintenance costs decreased $26 million (13%) for the twelve months ended March 31, 1998, as compared to the same period last year, partially due to a decline in maintenance activities associated with postponed outages at certain of CG&E's and PSI's electric production facilities. Decreased maintenance costs, associated with electric distribution facilities, also contributed to the lower level of expenses for the current twelve month period. Amortization of Phase-in Deferrals Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for Zimmer. Amortization of Post-in-Service Deferred Operating Expenses - Net Amortization of post-in-service deferred operating expenses - net reflects the amortization and related recovery in rates of various deferrals of depreciation, operation and maintenance expenses (exclusive of fuel costs), and property taxes on certain generating units and other utility plant from the in-service date until the related plant was reflected in retail rates. Other Income and Expenses - Net Equity in Earnings of Unconsolidated Subsidiaries The $6 million (12%) decrease in equity in earnings of unconsolidated subsidiaries for the twelve months ended March 31, 1998, as compared to the same period of 1997, is primarily attributable to the decrease in earnings of Midlands, which is due to milder weather conditions and a penalty imposed on each electric distribution company due to the delay in opening up the electricity supply business to competition. Other - net The change in other - net of $12 million for the twelve months ended March 31, 1998, as compared to the same period last year is primarily due to a litigation settlement (see Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information"), a gain in 1996 related to the sale of certain CG&E assets, and expenses incurred relative to non-regulated entities. These amounts are partially offset by charges in 1996 associated with the December 1996 Order. Interest and Other Charges Interest on Long-term Debt Interest on long-term debt decreased $15 million (8%) for the twelve months ended March 31, 1998, from the same period of 1997 primarily due to the net redemption of approximately $170 million of long-term debt by CG&E, PSI, and ULH&P during the period from May 1996 through March 1998. Other Interest Other interest increased $22 million (52%) for the twelve months ended March 31, 1998, as compared to the same period last year, primarily reflecting the recognition of a full twelve months of interest on the currency swap program, which was initiated in mid-February 1997, an increase in short-term interest rates during 1998 over 1997, higher levels of short-term borrowing, a full twelve months of interest on the borrowings used to fund the purchase of Midlands, and increased borrowings to fund CG&E's and PSI's redemption of first mortgage bonds and PSI's redemption of preferred stock. Preferred Dividend Requirements of Subsidiaries The decrease in preferred dividend requirements of subsidiaries of $8 million (40%) for the twelve months ended March 31, 1998, from the same period of 1997 is primarily attributable to the September 1996 reacquisition and retirement of approximately 90% of the outstanding preferred stock of CG&E. Additionally, PSI redeemed all outstanding shares of its 7.15% Cumulative Preferred Stock and 7.44% Series Cumulative Preferred Stock on September 1, 1997, and March 1, 1998, respectively. THE CINCINNATI GAS & ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS ASSETS March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Utility Plant - Original Cost In service Electric $4,716,835 $4,700,631 Gas 753,311 746,903 Common 186,631 186,078 ---------- ---------- 5,656,777 5,633,612 Accumulated depreciation 2,047,211 2,008,005 ---------- ---------- 3,609,566 3,625,607 Construction work in progress 126,145 118,133 ---------- ---------- Total utility plant 3,735,711 3,743,740 Current Assets Cash and temporary cash investments 5,384 2,349 Restricted deposits 1,173 1,173 Notes receivable from affiliated companies 14,235 27,193 Accounts receivable less accumulated provision for doubtful accounts of $9,816 at March 31, 1998, and $9,199 at December 31, 1997 223,784 193,549 Accounts receivable from affiliated companies 17,523 35,507 Materials, supplies, and fuel - at average cost Fuel for use in electric production 31,647 29,682 Gas stored for current use 12,232 29,174 Other materials and supplies 50,015 49,111 Prepayments and other 39,982 31,827 ---------- ---------- 395,975 399,565 Other Assets Regulatory assets Amounts due from customers - income taxes 358,286 350,515 Post-in-service carrying costs and deferred operating expenses 132,967 134,672 Deferred merger costs 16,323 16,557 Deferred demand-side management costs 39,058 38,318 Phase-in deferred return and depreciation 85,960 89,689 Unamortized costs of reacquiring debt 36,912 36,575 Other 4,704 1,439 Other 92,642 103,368 ---------- ---------- 766,852 771,133 $4,898,538 $4,914,438 The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated financial statements.
THE CINCINNATI GAS & ELECTRIC COMPANY CAPITALIZATION AND LIABILITIES March 31 December 31 1998 1997 (unaudited) (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, 1998, and December 31, 1997 $ 762,136 $ 762,136 Paid-in capital 534,654 534,649 Retained earnings 342,929 314,553 Accumulated other comprehensive income (905) (750) ---------- ---------- Total common stock equity 1,638,814 1,610,588 Cumulative Preferred Stock Not subject to mandatory redemption 20,779 20,793 Long-term Debt 1,105,476 1,324,432 ---------- ---------- Total capitalization 2,765,069 2,955,813 Current Liabilities Long-term debt due within one year 60,000 - Notes payable and other short-term obligations 327,000 289,000 Notes payable to affiliated companies 23,410 12,253 Accounts payable 277,923 249,538 Accounts payable to affiliated companies 34,407 10,821 Accrued taxes 144,572 149,129 Accrued interest 25,548 25,430 Other 27,947 29,950 ---------- ---------- 920,807 766,121 Other Liabilities Deferred income taxes 814,080 794,396 Unamortized investment tax credits 115,420 116,966 Accrued pension and other postretirement benefit costs 154,208 180,566 Other 128,954 100,576 ---------- ---------- 1,212,662 1,192,504 $4,898,538 $4,914,438
THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited) Quarter Ended March 31 1998 1997 (in thousands) Operating Revenues Electric Non-affiliated companies $574,841 $395,625 Affiliated companies 18,464 6,075 Gas Non-affiliated companies 173,060 212,266 Affiliated companies 402 1 -------- -------- 766,767 613,967 Operating Expenses Fuel used in electric production 88,063 70,239 Gas purchased 96,588 123,968 Purchased and exchanged power Non-affiliated companies 229,494 70,862 Affiliated companies 7,614 1,572 Other operation 81,647 79,275 Maintenance 19,758 27,336 Depreciation 41,298 40,404 Amortization of phase-in deferrals 5,539 3,371 Amortization of post-in-service deferred operating expenses 823 823 Income taxes 44,613 43,800 Taxes other than income taxes 54,683 53,514 -------- -------- 670,120 515,164 Operating Income 96,647 98,803 Other Income and Expenses - Net Allowance for equity funds used during construction 10 119 Phase-in deferred return 1,811 2,002 Income taxes 3,828 3,006 Other - net (4,315) (4,775) -------- -------- 1,334 352 Income Before Interest 97,981 99,155 Interest Interest on long-term debt 26,052 30,045 Other interest 2,101 1,696 Allowance for borrowed funds used during construction (1,364) (909) -------- -------- 26,789 30,832 Net Income $ 71,192 $ 68,323 Preferred Dividend Requirement 215 219 -------- -------- Net Income Applicable to Common Stock $ 70,977 $ 68,104 Other Comprehensive Income, Net of Tax (155) - _ -------- -------- Comprehensive Income $ 70,822 $ 68,104 The accompanying notes as they relate to The Cincinnati Gas & Electric Company 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 1998 1997 (in thousands) Operating Activities Net income $ 71,192 $68,323 Items providing or (using) cash: Depreciation 41,298 40,404 Deferred income taxes and investment tax credits - net (27) 2,929 Allowance for equity funds used during construction (10) (119) Regulatory assets - net 11,214 9,787 Changes in current assets and current liabilities Accounts and notes receivable, net of reserves on receivables sold 391 (44,863) Materials, supplies, and fuel 14,073 27,887 Accounts payable 51,971 (18,922) Accrued taxes and interest (4,439) (8,207) Other items - net 9,753 (13,945) Net cash provided by operating activities 195,416 63,274 Financing Activities Retirement of preferred stock (9) (24) Redemption of long-term debt (160,291) (16,180) Change in short-term debt 49,157 25,982 Dividends on preferred stock (215) (219) Dividends on common stock (42,600) (42,600) -------- ------- Net cash used in financing activities (153,958) (33,041) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (36,483) (31,021) Deferred demand-side management costs (1,940) (1,968) -------- ------- Net cash used in investing activities (38,423) (32,989) Net increase (decrease) in cash and temporary cash investments 3,035 (2,756) Cash and temporary cash investments at beginning of period 2,349 5,120 -------- ------- Cash and temporary cash investments at end of period $ 5,384 $ 2,364 The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated financial statements. THE CINCINNATI GAS & ELECTRIC COMPANY RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 Kwh Sales Increased activity in Cinergy's power marketing and trading operations led to higher non-firm power sales for resale and significantly contributed to the increase in total kwh sales of 80% for the first quarter of 1998, as compared to the same period of 1997. Milder weather during the first quarter of 1998, as compared to the same period last year, resulted in decreased residential and commercial sales. These decreases were partially offset by increased industrial sales, reflecting, in part, growth in the primary metals sector. Nonsystem kwh sales (and related revenues and expenses) resulting from Cinergy's power marketing and trading operations are allocated 50%/50% between CG&E and PSI pursuant to the operating agreements filed with the companies' regulators. Mcf Sales and Transportation Mcf gas sales and transportation volumes for the first quarter of 1998 decreased 7.3%, as compared to the same period in 1997. Decreased residential and commercial sales, reflecting the milder weather during the first quarter of 1998, were slightly offset by an increase in the average number of customers. Higher gas transportation volumes reflect the continued trend of customers purchasing gas directly from suppliers, using transportation services provided by CG&E. Operating Revenues Electric Operating Revenues Electric operating revenues increased $191 million (48%) for the quarter ended March 31, 1998, from the comparable period of 1997. This increase primarily reflects the increased kwh sales as previously discussed. The operation of fuel adjustment clauses reflecting a higher average cost of fuel used in electric production also contributed to the increase. An analysis of electric operating revenues is shown below: Quarter Ended March 31 (in millions) Electric operating revenues - March 31, 1997 $402 Increase (Decrease) due to change in: Price per kwh Retail 21 Sales for resale Non-firm power transactions 5 Total change in price per kwh 26 Kwh sales Retail (2) Sales for resale Firm power obligations (1) Non-firm power transactions 167 Total change in kwh sales 164 Other 1 ---- Electric operating revenues - March 31, 1998 $593 Gas Operating Revenues The increasing trend of industrial customers purchasing gas directly from producers and utilizing CG&E facilities to transport the gas continues to put downward pressure on gas operating revenues. (See the "Mcf Sales and Transportation" section.) Since providing transportation services does not necessitate recovery of the cost of gas purchased, the revenue per Mcf transported is less than the revenue per Mcf sold. As a result, a higher relative volume of gas transported to gas sold translates into lower gas operating revenues. Gas operating revenues decreased $39 million (18%) in the first quarter of 1998, when compared to the same period last year. The decrease in gas operating revenues is primarily attributable to lower residential and commercial sales due to the milder weather during the first quarter of 1998. An increase in the relative volume of gas transported to gas sold, as previously discussed, also contributed to the decrease. Operating Expenses Fuel Used in Electric Production Electric fuel costs increased $18 million (25%) for the quarter ended March 31, 1998, as compared to the same period last year. An analysis of these fuel costs is shown below: Quarter Ended March 31 (in millions) Fuel expense - March 31, 1997 $70 Increase (Decrease) due to change in: Price of fuel (1) Deferred fuel cost 21 Kwh generation (2) --- Fuel expense - March 31, 1998 $88 Gas Purchased Gas purchased for the quarter ended March 31, 1998, decreased $27 million (22%), when compared to the same period last year, reflecting a lower average cost per Mcf purchased and a decline in the volumes of gas purchased primarily due to the milder weather during the first quarter of 1998. Purchased and Exchanged Power Purchased and exchanged power for the quarter ended March 31, 1998, increased $165 million over the comparable period of 1997, reflecting increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing and trading operations. Maintenance The $8 million (28%) decrease in maintenance costs for the first quarter of 1998, as compared to the same period of 1997, is partially due to a decline in maintenance activities associated with postponed outages at certain electric production facilities. Decreased maintenance costs, associated with electric distribution facilities, also contributed to the lower level of expenses for the current quarter. Amortization of Phase-in Deferrals Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for Zimmer. Interest Interest on Long-term Debt Interest on long-term debt decreased approximately $4 million (13%) for the quarter ended March 31, 1998, as compared to the same period of 1997, primarily due to the net redemption of $350 million of long-term debt during the period from March 1997 through March 1998. PSI ENERGY, INC. AND SUBSIDIARY COMPANIES
PSI ENERGY, INC. CONSOLIDATED BALANCE SHEETS ASSETS March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Electric Utility Plant - Original Cost In service $4,297,962 $4,280,551 Accumulated depreciation 1,813,471 1,792,317 ---------- ---------- 2,484,491 2,488,234 Construction work in progress 67,897 65,129 ---------- ---------- Total electric utility plant 2,552,388 2,553,363 Current Assets Cash and temporary cash investments 25,816 18,169 Restricted deposits 1,175 1,146 Notes receivable 92 110 Notes receivable from affiliated companies 37,461 21,998 Accounts receivable less accumulated provision for doubtful accounts of $527 at March 31, 1998, and $1,183 at December 31, 1997 257,843 197,898 Accounts receivable from affiliated companies 6,018 6,384 Materials, supplies, and fuel - at average cost Fuel 36,645 28,234 Other materials and supplies 27,957 26,955 Prepayments and other 5,177 4,438 ---------- ---------- 398,184 305,332 Other Assets Regulatory assets Amounts due from customers - income taxes 24,805 23,941 Post-in-service carrying costs and deferred operating expenses 43,564 43,832 Coal contract buyout costs 117,964 122,485 Deferred merger costs 72,692 73,789 Deferred demand-side management costs 62,900 71,278 Unamortized costs of reacquiring debt 29,029 29,667 Other 41,888 44,094 Other 145,058 138,650 ---------- ---------- 537,900 547,736 $3,488,472 $3,406,431 The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
PSI ENERGY, INC. CAPITALIZATION AND LIABILITIES March 31 December 31 1998 1997 (unaudited) (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, 1998, and December 31, 1997 $ 539 $ 539 Paid-in capital 400,895 400,893 Retained earnings 650,064 637,814 Accumulated other comprehensive income (642) (1,586) ---------- ---------- Total common stock equity 1,050,856 1,037,660 Cumulative Preferred Stock Not subject to mandatory redemption 71,973 157,196 Long-term Debt 926,680 826,470 ---------- ---------- Total capitalization 2,049,509 2,021,326 Current Liabilities Long-term debt due within one year 85,000 85,000 Notes payable and other short-term obligations 215,495 190,600 Notes payable to affiliated companies 21 16,435 Accounts payable 249,681 212,833 Accounts payable to affiliated companies 38,077 41,326 Accrued taxes 101,326 69,304 Accrued interest 15,414 21,369 Other 2,527 2,560 ---------- ---------- 707,541 639,427 Other Liabilities Deferred income taxes 411,992 403,535 Unamortized investment tax credits 48,430 49,296 Accrued pension and other postretirement benefit costs 106,374 116,576 Other 164,626 176,271 ---------- ---------- 731,422 745,678 $3,488,472 $3,406,431
PSI ENERGY, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited) Quarter Ended March 31 1998 1997 (in thousands) Operating Revenues Non-affiliated companies $583,884 $422,289 Affiliated companies 8,241 1,566 -------- -------- 592,125 423,855 Operating Expenses Fuel 92,456 105,507 Purchased and exchanged power Non-affiliated companies 242,390 89,730 Affiliated companies 17,900 6,069 Other operation 82,377 83,709 Maintenance 19,308 18,518 Depreciation 32,007 31,152 Amortization of post-in-service deferred operating expenses - net 268 268 Income taxes 26,261 20,225 Taxes other than income taxes 14,967 14,857 -------- -------- 527,934 370,035 Operating Income 64,191 53,820 Other Income and Expenses - Net Allowance for equity funds used during construction 11 72 Income taxes 282 (603) Other - net 1,799 3,263 -------- -------- 2,092 2,732 Income Before Interest 66,283 56,552 Interest Interest on long-term debt 17,706 19,230 Other interest 5,775 4,457 Allowance for borrowed funds used during construction (583) (433) -------- -------- 22,898 23,254 Net Income $ 43,385 $ 33,298 Preferred Dividend Requirement 2,208 3,020 -------- -------- Net Income Applicable to Common Stock $ 41,177 $ 30,278 Other Comprehensive Income, Net of Tax 944 - -------- ----- Comprehensive Income $ 42,121 $ 30,278 The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements. PSI ENERGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1998 1997 (in thousands) Operating Activities Net income $43,385 $33,298 Items providing or (using) cash: Depreciation 32,007 31,152 Deferred income taxes and investment tax credits - net (473) (9,820) Allowance for equity funds used during construction (11) (72) Regulatory assets - net 9,701 11,812 Changes in current assets and current liabilities Restricted deposits (29) (1) Accounts and notes receivable, net of reserves on receivables sold (75,463) (51,892) Materials, supplies, and fuel (9,413) 2,812 Accounts payable 33,599 (19,821) Accrued taxes and interest 26,067 39,197 Other items - net (14,271) (104) Net cash provided by operating activities 45,099 36,561 Financing Activities Issuance of long-term debt 98,901 - Retirement of preferred stock (85,220) (1) Redemption of long-term debt - (45,700) Change in short-term debt 8,481 65,205 Dividends on preferred stock (2,736) (3,020) Dividends on common stock (28,400) (28,400) ------- ------- Net cash used in financing activities (8,974) (11,916) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (26,803) (22,040) Deferred demand-side management costs (1,675) (3,141) Net cash used in investing activities (28,478) (25,181) Net increase (decrease) in cash and temporary cash investments 7,647 (536) Cash and temporary cash investments at beginning of period 18,169 2,911 ------- ------- Cash and temporary cash investments at end of period $25,816 $ 2,375 The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements. PSI ENERGY, INC. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 Kwh Sales Increased activity in Cinergy's power marketing and trading operations led to higher non-firm power sales for resale and significantly contributed to the increase in total kwh sales of 67% for the first quarter of 1998, as compared to the same period last year. An increase in retail sales reflects higher industrial sales and a higher average number of customers in all retail customer classes. These increases were partially offset by a decline in residential sales as a result of milder weather during the first quarter of 1998, as compared to the first quarter of 1997. The increased industrial sales primarily reflect growth in the primary metals sector. Nonsystem kwh sales (and related revenues and expenses) resulting from Cinergy's power marketing and trading operations are allocated 50%/50% between CG&E and PSI pursuant to the operating agreements filed with the companies' regulators. Operating Revenues Operating revenues increased $168 million (40%) for the quarter ended March 31, 1998, when compared to the same period last year, primarily reflecting, the increased kwh sales as previously discussed. This increase was partially offset by 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, 1997 $424 Increase (Decrease) due to change in: Price per kwh Retail (5) Sales for resale Firm power obligations (1) Non-firm power transactions (15) Total change in price per kwh (21) Kwh sales Retail 8 Sales for resale Firm power obligations 1 Non-firm power transactions 177 Total change in kwh sales 186 Other 3 Operating revenues - March 31, 1998 $592 Operating Expenses Fuel Electric fuel costs decreased $13 million (12%) for the first quarter of 1998, as compared to the same period last year. An analysis of fuel costs is shown below: Quarter Ended March 31 (in millions) Fuel expense - March 31, 1997 $105 Increase (Decrease) due to change in: Price of fuel (5) Deferred fuel cost (12) Kwh generation 4 ---- Fuel expense - March 31, 1998 $ 92 Purchased and Exchanged Power For the quarter ended March 31, 1998, purchased and exchanged power increased $164 million, as compared to the same period last year, due primarily to increased purchases of non-firm power for resale to others as a result of increased activity in Cinergy's power marketing and trading operations. Interest Interest on Long-term Debt The decrease in interest on long-term debt of $2 million (8%) for the first quarter of 1998, as compared to the first quarter of 1997, is primarily due to the recognition of interest income on interest rate swap activity. This was partially offset by increased interest expense related to the net issuance of approximately $100 million of long-term debt from February 1997 through March 1998. Other Interest The increase of $1 million (30%) in other interest for the quarter ended March 31, 1998, as compared to the same period of 1997, is attributable to interest resulting from an IRS audit of the 1989 and 1990 tax years. THE UNION LIGHT, HEAT AND POWER COMPANY THE UNION LIGHT, HEAT AND POWER COMPANY BALANCE SHEETS ASSETS March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Utility Plant - Original Cost In service Electric $205,839 $204,111 Gas 157,517 155,167 Common 19,069 19,073 -------- -------- 382,425 378,351 Accumulated depreciation 136,032 133,213 -------- -------- 246,393 245,138 Construction work in progress 15,795 14,346 -------- -------- Total utility plant 262,188 259,484 Current Assets Cash and temporary cash investments 4 546 Accounts receivable less accumulated provision for doubtful accounts of $1,101 at March 31, 1998, and $996 at December 31, 1997 7,547 7,308 Accounts receivable from affiliated companies 276 446 Materials, supplies, and fuel - at average cost Gas stored for current use 2,181 5,401 Other materials and supplies 802 693 Prepayments and other 243 385 -------- -------- Total current assets 11,053 14,779 Other Assets Regulatory assets Deferred merger costs 5,213 5,213 Unamortized costs of reacquiring debt 3,544 3,590 Other 2,303 2,262 Other 5,830 6,262 -------- -------- 16,890 17,327 $290,131 $291,590 The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements. THE UNION LIGHT, HEAT AND POWER COMPANY CAPITALIZATION AND LIABILITIES March 31 December 31 1998 1997 (unaudited) (dollars in thousands) Common Stock Equity Common stock - $15.00 par value; authorized shares - 1,000,000; outstanding shares - 585,333 at March 31, 1998, and December 31, 1997 $ 8,780 $ 8,780 Paid-in capital 18,683 18,683 Retained earnings 101,219 95,450 -------- -------- Total common stock equity 128,682 122,913 Long-term Debt 34,684 44,671 -------- -------- Total capitalization 163,366 167,584 Current Liabilities Long-term debt due within one year 10,000 - Notes payable to affiliated companies 21,457 23,487 Accounts payable 8,695 11,097 Accounts payable to affiliated companies 16,363 19,712 Accrued taxes 5,714 6,332 Accrued interest 904 1,286 Other 4,223 4,364 -------- -------- 67,356 66,278 Other Liabilities Deferred income taxes 27,096 26,211 Unamortized investment tax credits 4,447 4,516 Accrued pension and other postretirement benefit costs 12,213 14,044 Income taxes refundable through rates 6,964 6,566 Other 8,689 6,391 -------- -------- 59,409 57,728 $290,131 $291,590 THE UNION LIGHT, HEAT AND POWER COMPANY STATEMENTS OF INCOME (unaudited) Quarter Ended March 31 1998 1997 (in thousands) Operating Revenues Electric Non-affiliated companies $ 46,999 $ 48,580 Gas Non-affiliated companies 28,375 33,963 Affiliated companies 105 121 -------- -------- 75,479 82,664 Operating Expenses Electricity purchased from parent company for resale 34,090 35,129 Gas purchased 16,353 20,449 Other operation 8,135 8,534 Maintenance 1,295 1,563 Depreciation 3,232 3,070 Income taxes 4,217 4,742 Taxes other than income taxes 1,005 1,099 -------- -------- 68,327 74,586 Operating Income 7,152 8,078 Other Income and Expenses - Net Allowance for equity funds used during construction (14) (4) Income taxes 228 92 Other - net (482) (447) -------- -------- (268) (359) Income Before Interest 6,884 7,719 Interest Interest on long-term debt 883 881 Other interest 351 301 Allowance for borrowed funds used during construction (119) (30) -------- -------- 1,115 1,152 Net Income $ 5,769 $ 6,567 The accompanying notes as they relate to The Union Light, Heat and Power Company 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 1998 1997 (in thousands) Operating Activities Net income $ 5,769 $ 6,567 Items providing or (using) cash: Depreciation 3,232 3,070 Deferred income taxes and investment tax credits - net 462 (338) Allowance for equity funds used during construction 14 4 Regulatory assets (41) (9) Changes in current assets and current liabilities Accounts and notes receivable, net of reserves on receivables sold 240 6,016 Materials, supplies, and fuel 3,111 3,727 Accounts payable (5,751) (10,139) Accrued taxes and interest (1,000) 5,871 Other items - net 1,627 1,810 ------- ------- Net cash provided by operating activities 7,663 16,579 Financing Activities Change in short-term debt (2,030) (11,723) Net cash used in financing activities (2,030) (11,723) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (6,175) (3,986) Net cash used in investing activities (6,175) (3,986) Net increase (decrease) in cash and temporary cash investments (542) 870 Cash and temporary cash investments at beginning of period 546 1,197 ------- ------- Cash and temporary cash investments at end of period $ 4 $ 2,067 The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements. THE UNION LIGHT, HEAT AND POWER COMPANY RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 Kwh Sales Kwh sales for the quarter ended March 31, 1998, decreased 1.9% from the comparable period of 1997. The milder weather in the first quarter of 1998, as compared to the same period last year, resulted in a decline in residential sales. This decrease was partially offset by an increase in industrial sales, primarily reflecting growth in the primary metals sector, and an increase in the average number of customers in all major retail customer classes. Mcf Sales and Transportation For the first quarter of 1998, Mcf gas sales volumes decreased 12.3%, while Mcf transportation volumes increased 17.9%, when compared to the same period in 1997. Decreased residential and commercial sales reflecting the milder weather during the first quarter of 1998 were slightly offset by an increase in the average number of customers. The higher level of gas transportation volumes reflects the continued trend of customers purchasing gas directly from suppliers, using transportation services provided by ULH&P. Operating Revenues Electric Operating Revenues Electric operating revenues decreased $2 million (3%) for the quarter ended March 31, 1998, from the comparable period of 1997. This decrease primarily reflects the previously discussed decline in kwh sales and a reduction in the cost of electricity purchased from CG&E. Gas Operating Revenues The increasing trend of industrial customers purchasing gas directly from producers and utilizing ULH&P facilities to transport the gas continues to put downward pressure on gas operating revenues. (See the "Mcf Sales and Transportation" section.) Since providing transportation services does not necessitate recovery of the cost of gas purchased, the revenue per Mcf transported is less than the revenue per Mcf sold. As a result, a higher relative volume of gas transported to gas sold translates into lower gas operating revenues. Gas operating revenues decreased $6 million (16%) for the quarter ended March 31, 1998, as compared to the same period of last year. The decrease in gas operating revenues is primarily attributable to lower residential and commercial sales due to the milder weather during the first quarter of 1998. An increase in the relative volume of gas transported to gas sold, as previously discussed, also contributed to the decrease. Operating Expenses Electricity Purchased from Parent Company for Resale Electricity purchased decreased $1 million (3%) for the quarter ended March 31, 1998, as compared to the same period last year. This decrease reflects the aforementioned lower volumes purchased from CG&E and the reduction in the cost of electricity purchased from CG&E. Gas Purchased Gas purchased for the quarter decreased $4 million (20%) from the first quarter of last year, reflecting a lower average cost per Mcf purchased and a decline in the volumes of gas purchased. Maintenance The $.3 million (17%) decrease in maintenance costs for the first quarter of 1998, as compared to the same period of 1997, is primarily attributable to a decline in maintenance activities associated with electric distribution facilities due to the milder weather in the first quarter of 1998. Depreciation Depreciation expense increased $.2 million (5%) for the quarter ended March 31, 1998, over the comparable period of last year. This increase primarily reflects additions to gas and electric utility plant. Taxes Other Than Income Taxes The $.1 million (9%) decrease in taxes other than income taxes for the first quarter of 1998, as compared to the same period of 1997, is primarily due to a reduction in property taxes. Interest Other Interest Other interest charges increased $.1 million (17%) for the quarter ended March 31, 1998, as compared to the same period of 1997, primarily due to payments to the Kentucky State Treasurer resulting from a sales tax audit and underpayment of tax year 1996 income taxes. Allowance for Borrowed Funds Used During Construction The increase in allowance for borrowed funds used during construction of $.1 million is primarily due to an increase in construction expenditures subject to allowance during the quarter ended March 31, 1998, as compared to the same period of 1997. 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 1997 Form 10-K of the registrants. Certain amounts in the 1997 Financial Statements have been reclassified to conform to the 1998 presentation. Cinergy and CG&E 2. On April 7, 1998, CG&E issued and sold $100 million principal amount of its 6.40% Debentures due April 1, 2008. Proceeds from the sale were used to repay short-term indebtedness incurred in connection with CG&E's March 1998 redemptions of $100 million principal amount of its First Mortgage Bonds, 8 1/2% Series due 2022 and $60 million principal of its First Mortgage Bonds, 7 3/8% Series due 2001. 3. On May 1, 1998, CG&E redeemed the entire $50 million principal amount of its 7 3/8% Series First Mortgage Bonds due 1999, at the regular redemption price of 100.00%. This redemption effectively eliminates the maintenance and replacement fund provisions of CG&E's First Mortgage Bond indenture, which provisions required CG&E to make cash payments, deposit bonds, or pledge unfunded property additions to the trustee each year based on an amount related to net revenues. Cinergy, CG&E, and ULH&P 4. On April 30, 1998, ULH&P issued and sold $20 million principal amount of its 6.50% Debentures due April 30, 2008. Proceeds from the sale were used by ULH&P to repay short-term indebtedness incurred in connection with the redemption, on April 24, 1998, of $10 million principal amount of its First Mortgage Bonds, 8% Series due 2003, and in connection with its construction program. The redemption of said First Mortgage Bonds effectively eliminates the maintenance and replacement fund provisions of ULH&P's First Mortgage Bond indenture, which provisions required ULH&P to make cash payments, deposit bonds, or pledge unfunded property additions to the trustee each year based on an amount related to net revenues. Cinergy, CG&E, and PSI 5. Cinergy'spower marketing and trading function actively markets and trades over-the-counter forward and option contracts for the purchase and sale of electricity. The majority of these contracts are settled via physical delivery of electricity or netted out in accordance with industry trading standards. Option premiums are deferred and included in the Consolidated Balance Sheets and amortized to "Operating Revenues - Electric" or "Purchased and exchanged power" in the Consolidated Statements of Income over the term of the option contract. Cinergy values its portfolio of over-the-counter forward and option contracts using the aggregate lower of cost or market method. To the extent there are net aggregate losses in the portfolio, Cinergy reserves for such losses. Net gains are recognized when realized. Due to the lack of liquidity and the volatility currently experienced in the power markets, significant assumptions must be made by the Company when estimating current market values for purposes of the aggregate lower of cost or market comparison. It is possible that the actual gains and losses from the Company's power marketing and trading activities could differ substantially from the gains and losses estimated currently. Cinergy and its subsidiaries use derivative financial instruments to hedge exposures to foreign currency exchange rates, lower funding costs, and manage exposures to fluctuations in interest rates. Instruments used as hedges must be designated as a hedge at the inception of the contract and must be effective at reducing the risk associated with the exposure being hedged. Accordingly, changes in market values of designated hedge instruments must be highly correlated with changes in market values of the underlying hedged items at inception of the hedge and over the life of the hedge contract. Cinergy utilizes a currency swap to hedge its pound sterling denominated net investment in Avon Energy. Accordingly, any translation gains or losses related to the principal exchange on the currency swap are recorded in accumulated other comprehensive income, which is a separate component of common stock equity. Aggregate translation losses related to the principal exchange of the currency swap are reflected in "Current Liabilities - Other" in the Consolidated Balance Sheets. Interest rate swaps are accounted for under the accrual method. Accordingly, gains and losses based on any interest differential between fixed-rate and floating-rate interest amounts, calculated on agreed upon notional principal amounts, are recognized in the Consolidated Statements of Income as a component of interest expense as realized over the life of the agreement. Cinergy, CG&E, and PSI 6. As discussed in the 1997 Form 10-K, in October 1995, a suit was filed in the Federal District Court for the Southern District of Ohio by three former employees of Enertech naming as defendants Enertech, Cinergy, Investments, CG&E, PSI, James E. Rogers, and William J. Grealis. (Mr. Rogers and/or Mr. Grealis are officers and/or directors of the foregoing companies.) The lawsuit, which stemmed from the termination of employment of the three former employees, alleged that they entered into employment contracts with Enertech based on the opportunity to participate in potential profits from future investments in energy projects in central and eastern Europe. The suit alleged causes of action based upon, among other theories, breach of contract related to the events surrounding the termination of their employment and fraud and misrepresentation related to the level of financial support for future projects. The suit alleged compensatory damages of $154 million based upon assumed future success of potential future investments and punitive damages of three times that amount. In April 1998, the parties reached a comprehensive settlement and all claims were dismissed by the Court. The obligations of the Company arising out of the settlement are not material to its financial condition or its results of operations. Cinergy and PSI 7. As discussed in the 1997 Form 10-K, PSI and IGC submitted a proposed agreed order to the IDEM in 1997 related to the Shelbyville MGP site. On April 15, 1998, the IDEM signed the proposed agreed order, which will result in a determination by the IDEM of whether the activities previously undertaken at the site are sufficient to adequately protect human health and the environment. Based upon environmental investigations and remediation completed to date, PSI believes that any further investigation and remediation required for the Shelbyville site will not have a material adverse effect on its financial condition or results of operations. In August 1997, NIPSCO filed suit against PSI in the United States District Court for the Northern District of Indiana, South Bend Division, claiming, pursuant to the CERCLA, recovery from PSI of NIPSCO's past and future costs of investigating and remediating MGP related contamination at the Goshen MGP site. Recently, NIPSCO increased its estimate of the cost of remediating the Goshen site from $2.7 million to about $3.0 million. As also discussed in the 1997 Form 10-K, PSI previously placed its insurance carriers on notice of IGC's, NIPSCO's and the IDEM's claims related to MGP sites. In April 1998, PSI filed suit in Hendricks County Circuit Court against its general liability insurance carriers, seeking, among other matters, a declaratory judgment that its insurance carriers are obligated to defend MGP claims against PSI or pay PSI's costs of defense and to indemnify PSI for its costs of investigating, preventing, mitigating and remediating damage to property and paying claims associated with MGP sites. PSI cannot predict the outcome of this litigation. Cinergy, CG&E, PSI, and ULH&P 8. Effective with the first quarter of 1998, Cinergy and its subsidiaries adopted Statement 130. Statement 130 establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. Cinergy 9. Presented below is a reconciliation of earnings per common share (basic EPS) and earnings per common share assuming dilution (diluted EPS).
Income Shares Earnings (Numerator) (Denominator) Per Share (In thousands, except per share amounts) Quarter ended March 31, 1998 Earnings per common share: Net income $106,071 157,764 $.67 Effect of dilutive securities: Common stock options 787 Contingently issuable common stock 123 EPS--assuming dilution: Net income item plus assumed conversions $106,071 158,674 $.67 Quarter ended March 31, 1997 Earnings per common share: Net income $114,117 157,679 $.72 Effect of dilutive securities: Common stock options 983 Contingently issuable common stock 204 EPS--assuming dilution: Net income plus assumed conversions $114,117 158,866 $.72
Options to purchase shares of common stock that were excluded from the calculation of EPS--assuming dilution because the exercise prices of these options were greater than the average market price of the common shares during the period are summarized below: Quarter Average Ended Exercise March 31 Shares Price 1998 914,800 $37.61 1997 10,400 34.50 Presented below is a reconciliation of earnings per common share (basic EPS) and earnings per common share assuming dilution (diluted EPS).
Income Shares Earnings (Numerator) (Denominator) Per Share (In thousands, except per share amounts) Twelve months ended March 31, 1998 Earnings per common share: Net income before extraordinary item $354,592 157,706 $2.24 Effect of dilutive securities: Common stock options 886 Contingently issuable common stock 184 EPS--assuming dilution: Net income before extraordinary item plus assumed conversions $354,592 158,776 $2.23 Twelve months ended March 31, 1997 Net income $338,773 Less: costs of reacquisition of preferred stock of subsidiary 18,391 Earnings per common share: Net income applicable to common stock 320,382 157,679 $2.02 Effect of dilutive securities: Common stock options 913 Contingently issuable common stock 287 EPS--assuming dilution: Net income applicable to common stock plus assumed conversions $320,382 158,879 $2.01
Options to purchase shares of common stock that were excluded from the calculation of EPS--assuming dilution because the exercise prices of these options were greater than the average market price of the common shares during the period are summarized below: Twelve Months Average Ended Exercise March 31 Shares Price 1998 925,200 $37.58 1997 375,700 33.53 The after-tax impact of the extraordinary item - equity share of windfall profits tax in the twelve months ended March 31, 1998, was $.69 for both basic and diluted earnings per share. Cinergy and PSI 10. In February 1989, PSI and WVPA entered into a settlement agreement to resolve all claims related to Marble Hill, a nuclear project canceled in 1984. Implementation of the settlement was contingent upon a number of events, including the conclusion of WVPA's bankruptcy proceeding, negotiation of certain terms and conditions with WVPA, the RUS, and the CFC, and certain regulatory approvals. In December 1996, following the resolution of issues associated with WVPA's bankruptcy proceeding, PSI, on behalf of itself and its officers, paid $80 million on behalf of WVPA to the RUS and the CFC. The $80 million obligation, net of insurance proceeds, other credits, and applicable income tax effects, was charged to income in 1988. In January 1997, an order dismissing the WVPA litigation against PSI and its officers with prejudice was entered by the United States District Court for the Southern District of Indiana. Negotiations among PSI, WVPA, the RUS, and the CFC continue regarding certain additional terms and conditions of the settlement agreement. Based on the current status of negotiations, the Company believes it has adequately reserved for any loss that would be material to its financial condition or results of operations. However, the Company cannot currently predict the outcome of these negotiations. Depending on the form of the final negotiated terms and conditions and the form of any regulatory approvals, the Company could be required to recognize additional losses of up to $90 million for accounting purposes. The recognition of this loss is not expected to have an immediate impact on Cinergy's cash flow. The Company believes that negotiations could be concluded and the final terms and conditions determined during 1998. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Recent Developments Cinergy, CG&E, and PSI Air Toxics As discussed in the 1997 Form 10-K, the EPA was to announce, by April 15, 1998, its conclusions regarding the need for additional air toxics regulations. In April 1998, the EPA announced that it would make its regulatory determination on the need for additional air toxics regulation by November 15, 1998. If more air toxics regulations are issued, the compliance cost could be significant. Cinergy cannot predict the outcome or effects of the EPA's determination. Cinergy, CG&E and ULH&P Competitive Pressures - State Developments As discussed in the 1997 Form 10-K, competition legislation was to be introduced into the Ohio legislature during 1998. This legislation was introduced into the Ohio legislature during 1998 and it is uncertain whether this legislation will be passed in Ohio in 1998. As also discussed in the 1997 Form 10-K, HB 443 was introduced into the Kentucky General Assembly in January 1998. HB 443 was not brought to a vote during the 1998 legislative session, rather, HJR 95, which calls for the formation of an executive task force comprised of members from the governor's office and the General Assembly to further study electricity restructuring, was passed by the General Assembly. HJR 95 was signed by the governor during April 1998. Kentucky's General Assembly does not reconvene until the year 2000. Market Risk Sensitive Instruments and Positions Cinergy, CG&E, and PSI Energy Commodities Sensitivity The Company markets and trades over-the-counter forward and option contracts for the purchase and sale of electricity. See Note 5 of the "Notes to Financial Statements" in "Part I. Financial Information" for the Company's accounting policies for certain derivative instruments. The Company's market risks have not changed materially from the market risks reported in the 1997 Form 10-K. Cinergy Exchange Rate Sensitivity Cinergy utilizes a currency swap to hedge the exchange rate exposure related to its pound sterling denominated net investment in Avon Energy. See Note 5 of the "Notes to Financial Statements" in "Part I. Financial Information" for Cinergy's accounting policies for certain derivative instruments. Cinergy's market risks have not changed materially from the market risks reported in the 1997 Form 10-K. Cinergy, CG&E, PSI, and ULH&P Interest Rate Sensitivity The Company's net exposure to changes in interest rates primarily consists of short-term debt instruments with floating interest rates that are benchmarked to U.S. short-term money market indices. To manage the Company's exposure to fluctuations in interest rates and to lower funding costs, the Company constantly evaluates the use of, and has entered into, interest rate swaps. See Note 5 of the "Notes to Financial Statements" in "Part I. Financial Information" for the Company's accounting policies for certain derivative instruments. The Company's market risks have not changed materially from the market risks reported in the 1997 Form 10-K. Accounting Issues Cinergy, CG&E, PSI, and ULH&P New Accounting Standards See Note 8 of the "Notes to Financial Statements" in "Part I. Financial Information." Other Commitments Cinergy, CG&E, and PSI Enertech See Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information." Cinergy, CG&E, and PSI MGP Sites See Note 7 of the "Notes to Financial Statements" in "Part I. Financial Information." Cinergy and PSI WVPA See Note 10 of the "Notes to Financial Statements" in "Part I. Financial Information." CAPITAL RESOURCES AND REQUIREMENTS Cinergy, CG&E, and ULH&P Long-term Debt For information regarding recent issuances and redemptions of long-term debt securities, see Notes 2, 3, and 4 of the "Notes to Financial Statements" in "Part I. Financial Information." Cinergy, CG&E, PSI, and ULH&P Short-term Debt Obligations representing notes payable and other short-term obligations (excluding notes payable to affiliated companies) at March 31, 1998, were as follows: Cinergy Established Lines Outstanding (in millions) Cinergy Committed lines Acquisition line $ 350 $ 350 Revolving line 400 91 Commercial paper - 183 Utility subsidiaries Committed lines 300 88 Uncommitted lines 360 211 Pollution control notes 244 244 Cinergy UK, Inc. 115 56 ------ ------ Total $1 769 $1 223 CG&E Established Lines Outstanding (in millions) Committed lines $100 $ 30 Uncommitted lines 190 113 Pollution control notes 184 184 ---- ---- Total $474 $327 PSI Established Lines Outstanding (in millions) Committed lines $200 $ 58 Uncommitted lines 170 98 Pollution control notes 60 60 ---- ---- Total $430 $216 Cinergy, CG&E, and PSI Cinergy's committed lines are comprised of an acquisition line and a revolving line. The established revolving line (as shown in the above table) also provides credit support for Cinergy's commercial paper program. Such program is limited to a maximum outstanding principal amount of $200 million. The majority of the proceeds from the commercial paper sales were used to reduce the acquisition line to the year-end level of $350 million. CG&E and PSI also have the capacity to issue commercial paper that must be supported by committed lines (unsecured lines of credit) of the respective company. Neither CG&E nor PSI issued commercial paper in first quarter of 1998. Cinergy, CG&E, PSI, and ULH&P Cinergy's utility subsidiaries had regulatory authority to borrow up to $853 million ($453 million for CG&E and its subsidiaries, including $50 million for ULH&P, and $400 million for PSI) as of March 31, 1998. In connection with this authority, committed lines, as well as, uncommitted lines (short-term borrowings with various banks on an "as offered" basis) have been arranged. The established committed lines (as shown in the above table) include $100 million designated as backup for certain of the uncommitted lines at March 31, 1998. Further, the committed lines are maintained by commitment fees. RESULTS OF OPERATIONS Cinergy, CG&E, PSI, and ULH&P Reference is made to "Item 1. Financial Statements" in "Part I. Financial Information." ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Cinergy, CG&E, PSI, and ULH&P Reference is made to the "Market Risk Sensitive Instruments and Positions" section in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations." PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Cinergy, CG&E, and PSI See Notes 6, 7, and 10 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 22, 1998, in Cincinnati, Ohio. (c) At the meeting, five Class I directors were elected to the board of Cinergy to serve three-year terms, expiring in 2001, as set forth below: Votes Votes Class I For Withheld Neil A. Armstrong 132,494,599 2,094,057 James K. Baker 132,545,127 2,043,529 Cheryl M. Foley 132,482,049 2,106,607 John A. Hillenbrand II 132,546,546 2,042,110 George C. Juilfs 132,649,550 1,939,106 CG&E (a) In lieu of the annual meeting of shareholders of CG&E, a resolution was duly adopted via unanimous written consent of CG&E's sole shareholder, effective April 21, 1998. (b)-(c) The following members of the Board of Directors were elected via unanimous written consent of the sole shareholder of CG&E, in lieu of its annual meeting, for one-year terms expiring in 1999: Jackson H. Randolph James E. Rogers E. Renae Conley PSI (a) The annual meeting of shareholders of PSI was held in Cincinnati, Ohio on April 22, 1998. (b) Proxies were not solicited for the annual meeting, at which the Board of Directors 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 for one-year terms expiring in 1999: 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 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits identified with a pound sign (#) are being filed herewith by the registrant identified in the exhibit discussion below and are incorporated herein by reference with respect to any other designated registrant. Exhibits not so identified are filed herewith: Exhibit Designation Nature of Exhibit Cinergy 3-a By-laws of Cinergy, as amended on April 22, 1998. Cinergy and CG&E 4-a #Fourth Supplemental Indenture between CG&E and The Fifth Third Bank, dated as of April 1, 1998. (Exhibit to CG&E's March 31, 1998, Form 10-Q in File No. 1-1232.) Cinergy, CG&E, and ULH&P 4-b #Second Supplemental Indenture between ULH&P and The Fifth Third Bank, dated as of April 30, 1998. (Exhibit to ULH&P's March 31, 1998, Form 10-Q in File No. 2-7793.) Cinergy, CG&E, PSI, and ULH&P 27 Financial Data Schedules (included in electronic submission only). Cinergy, CG&E, PSI, and ULH&P (b) No reports on Form 8-K were filed during the quarter. 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 15, 1998 /s/ John P. Steffen -------------------------------------- John P. Steffen Duly Authorized Officer and Chief Accounting Officer EX-3 2 BYLAWS OF CINERGY CORP. BY-LAWS OF CINERGY CORP. Adopted: October 24, 1994 Amended: January 25, 1996 Amended: December 18, 1997 Amended: April 22, 1998 TABLE OF CONTENTS Page ARTICLE I Offices and Headquarters Section 1.1 Offices............................................ 1 1.2 Headquarters....................................... 1 ARTICLE II Stockholders Section 2.1 Annual Meeting..................................... 2 2.2 Special Meetings................................... 3 2.3 Notice of Meetings................................. 3 2.4 Quorum............................................. 4 2.5 Voting............................................. 4 2.6 Presiding Officer and Secretary.................... 5 2.7 Proxies............................................ 6 2.8 List of Stockholders............................... 6 ARTICLE III Directors Section 3.1 Number of Directors................................ 7 3.2 Election and Term of Directors..................... 7 3.3 Vacancies and Newly Created Directorships........... 9 3.4 Resignation........................................ 10 3.5 Meetings........................................... 10 3.6 Quorum and Voting.................................. 11 3.7 Written Consent of Directors in Lieu of a Meeting.. 11 3.8 Compensation....................................... 11 3.9 Contracts and Transactions Involving Directors..... 12 ARTICLE IV Committees of the Board of Directors Section 4.1 Appointment and Powers.............................. 13 ARTICLE V Officers, Agents and Employees Section 5.1 Appointment and Term of Office..................... 14 5.2 The Chairman of the Board.......................... 15 5.3 Vice-Chairman...................................... 15 5.4 Chief Executive Officer............................ 16 5.5 The President...................................... 16 5.6 The Vice-Presidents................................ 16 5.7 The Secretary...................................... 17 5.8 The Treasurer...................................... 17 5.9 The Comptroller.................................... 19 5.10 Compensation and Bond.............................. 19 ARTICLE VI Indemnification Section 6.1 Indemnification of Directors, Officers, Employees and Agents....................................... 20 6.2 Advances for Litigation Expenses................... 22 6.3 Indemnification Nonexclusive....................... 22 6.4 Indemnity Insurance................................ 23 6.5 Definitions........................................ 23 ARTICLE VII Common Stock Section 7.1 Certificates....................................... 24 7.2 Transfers of Stock................................. 25 7.3 Lost, Stolen or Destroyed Certificates............. 25 7.4 Stockholder Record Date............................ 25 7.5 Beneficial Owners.................................. 26 ARTICLE VIII Seal Section 8.1 Seal............................................... 27 ARTICLE IX Waiver of Notice Section 9.1 Waiver of Notice................................... 27 ARTICLE X Fiscal Year Section 10.1 Fiscal Year........................................ 28 ARTICLE XI Contracts, Checks, etc. Section 11.1 Contracts, Checks, etc............................. 28 ARTICLE XII Amendments Section 12.1 Amendments......................................... 28 ARTICLE XIII Dividends Section 13.1 Dividends.......................................... 30 BY-LAWS OF CINERGY CORP. (THE "CORPORATION") ARTICLE I Offices and Headquarters Section 1.1 Offices. The location of the Corporation's principal office shall be in the City of Cincinnati, County of Hamilton, State of Ohio. The Corporation may, in addition to the aforesaid principal office, establish and maintain an office or offices elsewhere in Delaware, Ohio or Indiana or in such other states and places as the Board of Directors may from time to time find necessary or desirable, at which office or offices the books, documents, and papers of the Corporation may be kept. Section 1.2 Headquarters. Subject to the sentence next following, the Corporation's headquarters and executive offices, shall be located in the City of Cincinnati, County of Hamilton, State of Ohio. The location of the Corporation's headquarters and executive offices may be changed from the City of Cincinnati, County of Hamilton, State of Ohio only by the affirmative vote of 80% of the full Board of Directors of the Corporation and not by the vote of any committee of the Board of Directors. As used in these By-Laws, the term "the full Board of Directors" shall mean all directors then in office together with any vacancies, however created. For the avoidance of doubt and as an example only, if the Board of Directors consists of 17 members and two vacancies exist, the affirmative vote of 14 of the 15 members of the Corporation's Board of Directors then in office would be required to authorize a change in location of the Corporation's headquarters and executive offices. The headquarters and executive offices of the Corporation's subsidiary, PSI Energy, Inc., shall be located in the City of Plainfield, Indiana and the headquarters and executive offices of the Corporation's subsidiary, The Cincinnati Gas & Electric Company, shall be located in the City of Cincinnati, Ohio. ARTICLE II Stockholders Section 2.1 Annual Meeting. An annual meeting of stockholders of the Corporation for the election of directors and for the transaction of any other proper business shall be held at such time and date in each year as the Board of Directors may from time to time determine. The annual meeting in each year shall be held at such hour on said day and at such place within or without the State of Delaware as may be fixed by the Board of Directors, or if not so fixed, at the principal business office of the Corporation in the City of Cincinnati, County of Hamilton, State of Ohio. In addition to all other applicable requirements for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 60 days nor more than 90 days prior to the annual meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholders to be timely must be so received not later than the close of business on the fifteenth day following the date on which such notice of the date of annual meeting was mailed or such public disclosure was made whichever first occurs. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and record address of the stockholder proposing such business; (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder; and (v) any material interest of the stockholder in the business. Notwithstanding anything to the contrary in the By-Laws, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2.1; provided, however, that nothing in this Section 2.1 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting. Section 2.2 Special Meetings. A special meeting of the stockholders of the Corporation entitled to vote on any business to be considered at any such meeting may be called by the Chairman of the Board or the President or by a majority of the members of the Board of Directors then in office, acting with or without a meeting, or by the persons who hold 50% of all shares outstanding and entitled to vote thereat upon notice in writing, stating the time, place and purpose of the special meeting. The business transacted at the special meeting shall be confined to the purposes and objects stated in the call. Section 2.3 Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, unless notice is waived in writing by all stockholders entitled to vote at the meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, and except as to any stockholder duly waiving notice, the written notice of any meeting shall be given personally or by mail, not less than 10 days nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice shall be deemed given when deposited in the mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If, however, the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 2.4 Quorum. Except as otherwise provided by law or by the Certificate of Incorporation or by these By-Laws in respect of the vote required for a specified action, at any meeting of stockholders the holders of a majority of the outstanding stock entitled to vote thereat, either present, in person or represented by proxy, shall constitute a quorum for the transaction of any business, but the stockholders present, although less than a quorum, may adjourn the meeting to another time or place and, except as provided in the last paragraph of Section 2.3 of these By-Laws, notice need not be given of the adjourned meeting. Section 2.5 Voting. Whenever directors are to be elected at a meeting, they shall be elected by a plurality of the votes cast at the meeting by the holders of stock entitled to vote. Whenever any corporate action, other than the election of directors, is to be taken by vote of stockholders at a meeting, it shall, except as otherwise required by law or by the Certificate of Incorporation or by these By-Laws, be authorized by a majority of the votes cast at the meeting by the holders of stock entitled to vote thereon. Except as otherwise provided by law, or by the Certificate of Incorporation, each holder of record of stock of the Corporation entitled to vote on any matter at any meeting of stockholders shall be entitled to one (1) vote for each share of such stock standing in the name of such holder on the stock ledger of the Corporation on the record date for the determination of the stockholders entitled to vote at the meeting. Upon the demand of any stockholder entitled to vote, the vote for directors or the vote on any other matter at a meeting shall be by written ballot, but otherwise the method of voting and the manner in which votes are counted shall be discretionary with the presiding officer at the meeting. Section 2.6 Presiding Officer and Secretary. At every meeting of stockholders the Chairman of the Board, or, in his or her absence, the President, or, in his or her absence, the appointee of the meeting, shall preside. The Secretary, or, in his or her absence an Assistant Secretary, or if none be present, the appointee of the presiding officer of the meeting, shall act as secretary of the meeting. Section 2.7 Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Every proxy shall be signed by the stockholder or by his duly authorized attorney. A stockholder may authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission if such transmission is submitted with information from which it may be determined that the transmission was authorized by the stockholder. Section 2.8 List of Stockholders. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this Section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. ARTICLE III Directors Section 3.1 Number of Directors. The Board of Directors shall consist of 17 directors. This number may be changed to an odd number not less than 15 and not more than 23 by a vote of not less than 75% of the full Board of Directors ("Supermajority Vote"). Any such determination made by the Board of Directors shall continue in effect unless and until changed by the Board of Directors by Supermajority Vote, but no such change shall affect the term of any director then in office. Section 3.2 Election and Term of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Except as may be required by applicable law, no person who is, at the time of nomination, 70 years of age or older shall be eligible for election as a director. Nominations of persons as candidates for election as directors of the Corporation may be made at a meeting of stockholders (i) by or at the direction of the Board of Directors acting by Supermajority Vote (or by a unanimous vote of the remaining directors if a Supermajority Vote is not obtainable because the number of vacancies on the Board of Directors); or (ii) by any stockholder of the Corporation entitled to vote for the election of directors at such meeting who complies with the notice procedures set forth herein. Any nomination other than those governed by clause (i) of the preceding sentence shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal office of the Corporation in the State of Ohio not less than 50 days prior to the meeting; provided, however, that if less than 60 days' notice or prior public disclosure of the date of the meeting is given to stockholders or made public, to be timely notice by a stockholder must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice to the Secretary shall set forth: (a) as to each person whom the stockholder proposes to nominate for election as director: (i) the name, age, business address, and residence address of such person; (ii) the principal occupation or employment of such person; (iii) the class and number of any shares of capital stock of the Corporation that are beneficially owned by such person; and (iv) any other information relating to such person that is required to be disclosed in solicitations for proxies for the election of directors pursuant to any then existing rules or regulations promulgated under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving notice: (i) the name and record address of such stockholder; (ii) the class and number of shares of capital stock of the Corporation that are beneficially owned by such stockholder, and (iii) the period of time such stockholder has held such shares. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director. No person otherwise eligible for election as a director shall be eligible for election as a director unless nominated as set forth herein. Commencing on October 24, 1994 (the "Classification Date") of the Board of Directors of the Corporation, the terms of office of the Board of Directors shall be divided into three (3) classes, Class I, Class II and Class III, as determined by the Board of Directors. All classes shall be as nearly equal in number as possible. The terms of office of directors classified shall be as follows: (1) that of Class I shall expire at the annual meeting of stockholders that occurs within the first year after the Classification Date, (2) that of Class II shall expire at the annual meeting of stockholders that occurs within the second year after the Classification Date, and (3) that of Class III shall expire at the annual meeting of stockholders that occurs within the third year after the Classification Date. At each annual meeting of stockholders after the Classification Date, the successors to directors whose terms shall expire shall be elected to serve from the time of election and qualification until the third annual meeting following election and until a successor shall have been elected and qualified or until his earlier resignation, removal from office or death. As being under 70 years of age constitutes a continuing qualification for service on the Board of Directors, any director who reaches the age of 70 years while in office shall, except as limited by applicable law, promptly resign from the Corporation's Board of Directors. Section 3.3 Vacancies and Newly Created Directorships. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by election at a meeting of stockholders. Except as otherwise provided by law, and notwithstanding the provision of Section 3.6, the remaining directors, whether or not constituting a majority of the whole authorized number of directors, may, by not less than a Supermajority Vote (or by a unanimous vote of the remaining directors if a Supermajority Vote is not obtainable because of the number of vacancies on the Board of Directors) fill any vacancy in the Board, however arising, for the unexpired term thereof. Any person elected to fill a vacancy in the Board shall hold office until the expiration of the term of office for the class to which he or she is elected and until a successor is elected and qualified or until his or her earlier resignation, removal from office or death. Section 3.4 Resignation. Any director may resign at any time upon written notice to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof, and the acceptance of such resignation, unless required by the terms thereof, shall not be necessary to make such resignation effective. Section 3.5 Meetings. Meetings of the Board of Directors, regular or special, may be held at any place within or without the State of Delaware. Members of the Board of Directors, or of any committee designated by the Board, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. An annual meeting of the Board of Directors shall be held after each annual election of directors. If such election occurs at an annual meeting of stockholders, the annual meeting of the Board of Directors shall be held at the same place and immediately following such meeting of stockholders, and no notice thereof need be given. The Board of Directors may fix times and places for regular meetings of the Board and no notice of such meetings need be given. A special meeting of the Board of Directors shall be held whenever called by the Chairman of the Board, the President or by the written request of at least two (2) members of the Board of Directors, at such time and place as shall be specified in the notice or waiver thereof. Notice of each special meeting shall be given by the Secretary or by a person calling the meeting to each director in writing, through the mail, not later than the second day before the meeting, or personally served or by telephone, telecopy, telegram, cablegram or radiogram, in each such cases, not later than the day before the meeting, and such notice shall be deemed to be given at the time when the same shall be transmitted. Section 3.6 Quorum and Voting. A majority of the full Board of Directors shall constitute a quorum for the transaction of business, but, if there be less than a quorum at any meeting of the Board of Directors, a majority of the directors present may adjourn the meeting from time to time, and no further notice thereof need be given other than announcement at the meeting which shall be so adjourned. Except as otherwise provided by law, by the Certificate of Incorporation, or by these By-Laws (including, without limitation, where any Supermajority Vote or any other vote in excess of a majority is required), the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 3.7 Written Consent of Directors in Lieu of a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 3.8 Compensation. Each director of the Corporation (other than directors who are salaried officers of the Corporation or any of its subsidiaries) shall be entitled to receive as compensation for services such reasonable compensation, which may include pension, disability and death benefits, as may be determined from time to time by the Board of Directors. Reasonable compensation may also be paid to any person other than a director officially called to attend any such meeting. Section 3.9 Contracts and Transactions Involving Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV Committees of the Board of Directors Section 4.1 Appointment and Powers. The Board of Directors may, by resolution adopted by a majority of the Board, designate from time to time (subject to Article V hereof) no less than three (3) and no more than six (6) of their number to constitute an Executive Committee, and may delegate to such committee power to authorize the seal of the Corporation to be affixed to all papers which may require it and to exercise in the intervals between the meetings of the Board of Directors the powers of the Board in the management of the business and affairs of the Corporation to the fullest extent permitted by Section 141(c)(1) of the Delaware General Corporation Law; provided, however, that the Executive Committee shall not have the power or authority to take any action for which a Supermajority Vote or other vote in excess of a majority of the Board of Directors is required. Each member of the Executive Committee shall continue to be a member thereof only during the pleasure of a majority of the full Board of Directors. The Executive Committee may act by a majority of its members at a meeting or by a writing signed by all of its members. All action by the Executive Committee shall be reported to the Board of Directors at its meeting next succeeding such action. Non-employee members of such Executive Committee shall be entitled to receive such fees and compensation as the Board of Directors may determine. The Board of Directors may also appoint a Finance Committee, a Committee on Directors, an Audit Committee, a Public Policy Committee and a Compensation Committee and may also appoint such other standing or temporary committees from time to time as they may see fit, delegating to such committees all or any part of their own powers (subject to the provisions of these By-Laws); provided, however, that any compensation or benefits to be paid to an executive officer who is also a director must be approved by the Board of Directors. The members of such committees shall be entitled to receive such fees as the Board may determine. The Board of Directors shall not amend, modify, vary or waive any of the terms of the Amended and Restated Agreement and Plan of Reorganization by and among The Cincinnati Gas & Electric Company, PSI Resources, Inc., PSI Energy, Inc., the Corporation, Cinergy Corp., an Ohio corporation, and Cinergy Sub, Inc. dated as of December 11, 1992, as amended and restated as of July 2, 1993 and as of September 10, 1993 and as further amended as of June 20, 1994, as of July 26, 1994 and as of September 30, 1994 (the "Merger Agreement") other than by a Supermajority Vote of the Board of Directors. ARTICLE V Officers, Agents and Employees Section 5.1 Appointment and Term of Office. The executive officers of the Corporation, shall consist of a Chairman of the Board, a Vice-Chairman, a Chief Executive Officer, a President, one or more Vice-Presidents, a Secretary, a Treasurer and a Comptroller, all of whom shall be elected by the Board of Directors by a Supermajority Vote, and shall hold office for one (1) year and until their successors are chosen and qualified. Any number of such offices may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity. Any vacancy occurring in the office of the Chairman, Chief Executive Officer or President shall be filed by Supermajority Vote of the Board of Directors. The Chairman, Chief Executive Officer or President shall be subject to removal without cause only by Supermajority Vote of the Board of Directors at a special meeting of the Board of Directors called for that purpose. The Board of Directors may appoint, and may delegate power to appoint, such other non-executive officers, agents and employees as it may deem necessary or proper, who shall hold their offices or positions for such terms, have such authority and perform such duties as may from time to time be determined by or pursuant to authorization of the Board of Directors. Section 5.2 The Chairman of the Board. The Chairman of the Board shall be a director and shall preside at all meetings of the Board of Directors and, in the absence or inability to act of the Chief Executive Officer, meetings of stockholders and shall, subject to the Board's direction and control, be the Board's representative and medium of communication, and shall perform such other duties as may from time-to-time be assigned to the Chairman of the Board by Supermajority Vote of the Board of Directors. The Chairman of the Board shall direct the long-term strategic planning process of the Corporation and shall also lend his or her expertise to the President, as may be requested from time-to-time by the President. The Chairman shall be a member of the Executive Committee. Section 5.3 Vice-Chairman. The Vice-Chairman of the Board shall be a director and shall preside at meetings of the Board of Directors in the absence or inability to act of the Chairman of the Board or meetings of stockholders in the absence or inability to act of the Chief Executive Officer and the Chairman of the Board. The Vice-Chairman shall perform such other duties as may from time-to-time be assigned to him or her by Supermajority Vote of the Board of Directors. The Vice-Chairman shall be a member of the Executive Committee and the Corporate Governance Committee. Section 5.4 Chief Executive Officer. The Chief Executive Officer shall be a director and shall preside at all meetings of the stockholders, and, in the absence or inability to act of the Chairman of the Board and the Vice-Chairman, meetings of the Board of Directors, and shall submit a report of the operations of the Corporation for the fiscal year to the stockholders at their annual meeting and from time-to-time shall report to the Board of Directors all matters within his or her knowledge which the interests of the Corporation may require be brought to their notice. The Chief Executive Officer shall be the chairman of the Executive Committee and ex officio a member of all standing committees. Where the offices of President and Chief Executive Officer are held by different individuals, the President will report directly to the Chief Executive Officer. Section 5.5 The President. The President shall be the chief operating officer of the Corporation. The President shall have general and active management and direction of the affairs of the Corporation, shall have supervision of all departments and of all officers of the Corporation, shall see that the orders and resolutions of the Board of Directors and of the Executive Committee are carried into effect, and shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation. All corporate officers and functions except those reporting to the Chairman of the Board or the Chief Executive Officer shall report directly to the President. Section 5.6 The Vice-Presidents. The Vice-Presidents shall perform such duties as the Board of Directors shall, from time to time, require. In the absence or incapacity of the President, the Vice President designated by the President or Board of Directors or Executive Committee shall exercise the powers and duties of the President. Section 5.7 The Secretary. The Secretary shall attend all meetings of the Board of Directors, of the Executive Committee and any other committee of the Board of Directors and of the stockholders and act as clerk thereof and record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for the standing committees when required. The Secretary shall keep in safe custody the seal of the corporation and, whenever authorized by the Board of Directors or the Executive Committee, affix the seal to any instrument requiring the same. The Secretary shall see that proper notice is given of all the meetings of the stockholders of the Corporation and of the Board of Directors and shall perform such other duties as may be prescribed from time to time by the Board of Directors, the Chairman, the Chief Executive Officer, or the President. Assistant Secretaries. At the request of the Secretary, or in his or her absence or inability to act, the Assistant Secretary or, if there be more than one, the Assistant Secretary designated by the Secretary, shall perform the duties of the Secretary and when so acting shall have all the powers of and be subject to all the restrictions of the Secretary. The Assistant Secretaries shall perform such other duties as may from time to time be assigned to them by the President, the Secretary, or the Board of Directors. Section 5.8 The Treasurer. The Treasurer shall be the financial officer of the Corporation, shall keep full and accurate accounts of all collections, receipts and disbursements in books belonging to the corporation, shall deposit all moneys and other valuables in the name and to the credit of the Corporation, in such depositories as may be directed by the Board of Directors, shall disburse the funds of the Corporation as may be ordered by the Board of Directors, the Chairman, the Chief Executive Officer, or the President, taking proper vouchers therefor, and shall render to the President, the Chief Executive Officer, the Chairman, and/or directors at all regular meetings of the Board, or whenever they may require it, and to the annual meeting of the stockholders, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall also perform such other duties as the Board of Directors, the Chairman, the Chief Executive Officer, or the President may from time to time require. If required by the Board of Directors the Treasurer shall give the Corporation a bond in a form and in a sum with surety satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and the restoration to the Corporation in the case of his or her death, resignation or removal from office of all books, papers, vouchers, money and other property of whatever kind in his or her possession belonging to the Corporation. Assistant Treasurers. At the request of the Treasurer, or in his or her absence or inability to act, the Assistant Treasurer or, if there be more than one, the Assistant Treasurer designated by the Treasurer, shall perform the duties of the Treasurer and when so acting shall have all the powers of and be subject to all the restrictions of the Treasurer. The Assistant Treasurers shall perform such other duties as may from time to time be assigned to them by the President, the Treasurer, or the Board of Directors. Section 5.9 The Comptroller. The Comptroller shall have control over all accounts and records of the Corporation pertaining to moneys, properties, materials and supplies. He or she shall have executive direction over the bookkeeping and accounting departments and shall have general supervision over the records in all other departments pertaining to moneys, properties, materials and supplies. He or she shall have such other powers and duties as are incident to the office of Comptroller of a corporation and shall be subject at all times to the direction and control of the Board of Directors, the Chairman, the Chief Executive Officer, the President, or a Vice President. Assistant Comptrollers. At the request of the Comptroller, or in his or her absence or inability to act, the Assistant Comptroller or, if there be more than one, the Assistant Comptroller designated by the Comptroller, shall perform the duties of the Comoptroller and when so acting shall have all the powers of and be subject to all the restrictions of the Comptroller. The Assistant Comptrollers shall perform such other duties as may from time to time be assigned to them by the President, the Comptroller, or the Board of Directors. Section 5.10 Compensation and Bond. The compensation of the officers of the Corporation shall be fixed by the Compensation Committee of the Board of Directors, but this power may be delegated to any officer in respect of other officers under his or her control. The Corporation may secure the fidelity of any or all of its officers, agents or employees by bond or otherwise. ARTICLE VI Indemnification Section 6.1 Indemnification of Directors, Officers, Employees and Agents. (A) Any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than any action or suit by or in the right of the Corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (specifically including employee benefit plans), shall be indemnified by the Corporation, if, as and to the extent authorized by applicable law, against expenses (specifically including attorney's fees), judgments, fines (specifically including any excise taxes assessed on a person with respect to an employee benefit plan) and amounts paid in settlement actually and reasonably incurred by him or her in connection with the defense or settlement of such action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner he or she reasonably believed to be in and not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. (B) The Corporation shall, to the extent not prohibited by applicable law, indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action or suit by or in the right of the Corporation to procure a judgement in its favor by reason of the fact that he or she is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the Corporation as a director, trustee, officer, employee, or agent of another corporation, domestic or foreign, non-profit or for-profit, partnership, joint venture, trust or other enterprise (specifically including employee benefit plans), against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Corporation; provided that, no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (C) To the extent that a director, officer, employee, or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in the paragraphs (A) or (B) of this Section, or in defense of any claim, issue, or matter therein, he or she shall be indemnified against expenses, specifically including attorneys' fees, actually and reasonably incurred by him or her in connection therewith. (D) Any indemnification under Paragraphs (A) and (B) of this Section, unless ordered by a court, shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, trustee, officer, employee, or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in such Paragraphs (A) and (B). Such determination shall be made as follows: (1) the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding; (2) if the quorum described in (D)(1) of this Section is not obtainable or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion; or (3) by the stockholders. Section 6.2 Advances for Litigation Expenses. Expenses (including attorneys' fees) incurred by a director, officer, employee, or agent of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding, shall be paid by the Corporation as they are incurred in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director, officer, employee, or agent: (1) to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VI; and (2) to cooperate reasonably with the Corporation concerning the action, suit or proceeding. Section 6.3 Indemnification Nonexclusive. The indemnification provided by this Article shall not be exclusive of and shall be in addition to any other rights granted to those seeking indemnification under the Certificate of Incorporation, these By-Laws, any agreement, any vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office and shall continue as to a person who has ceased to be a director, trustee, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. Section 6.4 Indemnity Insurance. The Corporation may purchase and maintain insurance or furnish similar protection, including but not limited to trust funds, letters of credit, or self-insurance, on behalf of or for any person who is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, trustee, officer, employee or agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust, or other enterprise, against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under this Article. Insurance may be purchased from or maintained with a person in which the Corporation has a financial interest. Section 6.5 Definitions. For purposes of this Article: (1) a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall conclusively be deemed to have acted in a manner "not opposed to the best interests of the Corporation"; (2) a person shall be deemed to have acted in "good faith" and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise; (3) the term "another enterprise" as used in this Article VI shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent; and (4) references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger, which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, and agents. ARTICLE VII Common Stock Section 7.1 Certificates. Certificates for stock of the Corporation shall be in such form as shall be approved by the Board of Directors and shall be signed in the name of the Corporation by the Chairman or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. Such certificates may be sealed with the seal of the Corporation or a facsimile thereof. Any of or all the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. Section 7.2 Transfers of Stock. Transfers of stock shall be made only upon the books of the Corporation by the holder, in person or by duly authorized attorney, and on the surrender of the certificate or certificates for such stock properly endorsed. The Board of Directors shall have the power to make all such rules and regulations, not inconsistent with the Certificate of Incorporation and these By-Laws and the law, as the Board of Directors may deem appropriate concerning the issue, transfer and registration of certificates for stock of the Corporation. The Board of Directors or the Finance Committee may appoint one (1) or more transfer agents or registrars of transfers, or both, and may require all stock certificates to bear the signature of either or both. Section 7.3 Lost, Stolen or Destroyed Certificates. The Corporation may issue a new stock certificate in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate or his or her legal representative to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. The Board of Directors may require such owner to satisfy other reasonable requirements. Section 7.4 Stockholder Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than sixty days prior to any other action. Only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting and any adjournment thereof, or to give such consent, or to receive payment of such dividend or other distribution, or to exercise such rights in respect of any such change, conversion or exchange of stock, or to participate in such action, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any record date so fixed. If no record date is fixed by the Board of Directors, (l) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the date on which notice is given, or, if notice is waived by all stockholders entitled to vote at the meeting, at the close of business on the day next preceding the day on which the meeting is held and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 7.5 Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. ARTICLE VIII Seal Section 8.1 Seal. The seal of the Corporation shall be circular in form and shall bear, in addition to any other emblem or device approved by the Board of Directors, the name of the Corporation, the year of its incorporation and the words "Corporate Seal" and "Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. ARTICLE IX Waiver of Notice Section 9.1 Waiver of Notice. Whenever notice is required to be given by statute, or under any provision of the Certificate of Incorporation or these By-Laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. In the case of a stockholder, such waiver of notice may be signed by such stockholder's attorney or proxy duly appointed in writing. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice. ARTICLE X Fiscal Year Section 10.1 Fiscal Year. The Fiscal Year of the corporation shall begin on the first day of January and terminate on the thirty-first day of December each year. ARTICLE XI Contracts, Checks, etc. Section 11.1 Contracts, Checks, etc. The Board of Directors or the Finance Committee may by resolution adopted at any meeting designate officers of the Corporation who may in the name of the Corporation execute contracts, checks, drafts, and orders for the payment of money in its behalf and, in the discretion of the Board of Directors or the Finance Committee, such officers may be so authorized to sign such contracts or checks singly without the necessity of counter-signature. ARTICLE XII Amendments Section 12.1 Amendments. Except as set forth below, these By-Laws may be amended or repealed by the Board of Directors or by the affirmative vote of the holders of a majority of the issued and outstanding common stock of the Corporation, or by the unanimous written consent of the holders of the issued and outstanding common stock of the Corporation. Notwithstanding the foregoing paragraph, the affirmative vote of the holders of at least 80% of the issued and outstanding shares of common stock of the Corporation shall be required to amend, alter or repeal, or adopt any provision inconsistent with, the requirements of Section 2.2, Section 3.1, Section 3.2, Section 3.3 or this paragraph of Section 12.1 of these ByLaws, in addition to any requirements of law and any provisions of the Certificate of Incorporation, any By-law, or any resolution of the Board of Directors adopted pursuant to the Certificate of Incorporation (and notwithstanding that a lesser percentage may be specified by law, the Certificate of Incorporation, these By-Laws, such resolution, or otherwise). Notwithstanding any of the foregoing, the affirmative vote of a majority of the holders of the issued and outstanding common stock of the Corporation shall be required to amend, alter or repeal, or adopt any provision inconsistent with (i) any provision of these ByLaws requiring a Supermajority Vote of the Board of Directors (including this provision of Section 12.1) or (ii) the responsibilities of the Chief Executive Officer or President as set forth in Section 5.4 or Section 5.5, and the Board of Directors shall not recommend any such amendment to such provisions to the stockholders unless the proposed amendment is approved by the Board of Directors acting by Supermajority Vote. ARTICLE XIII Dividends Section 13.1 Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. EX-27 3 CINERGY FDS
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 YEAR DEC-31-1998 JAN-01-1998 MAR-31-1998 PER-BOOK 6,288,099 0 786,262 1,067,275 854,361 8,995,997 1,578 1,574,080 999,216 2,574,874 0 92,752 2,032,156 1,222,795 0 0 145,000 0 0 0 2,928,420 8,995,997 1,331,785 70,791 1,100,693 1,171,484 160,301 7,997 168,298 59,805 108,493 2,422 106,071 (70,802) 43,758 193,406 0.67 0.67
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