FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
[x] Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
-------------------------
Commission File No. 1-1217
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
(Name of Registrant)
NEW YORK 13-5009340
(State of Incorporation) (IRS Employer Identification No.)
4 IRVING PLACE, NEW YORK, NEW YORK 10003 - (212) 460-4600
(Address and Telephone Number)
The Registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months and has
been subject to such filing requirements for the past 90 days.
Yes ___X___ No _______
As of the close of business on July 31, 1997, the Registrant had outstanding
235,031,192 shares of Common Stock ($2.50 par value).
- 2 -
PART I. - FINANCIAL INFORMATION
CONTENTS PAGE NO.
ITEM 1. Financial Statements:
Consolidated Balance Sheet 3-4
Consolidated Income Statements 5-7
Consolidated Statements of Cash Flows 8-9
Note to Financial Statements 10-11
ITEM 2. Management's Discussion and Analysis 12-23
of Financial Condition and Results of
Operations
-------------------------
The following consolidated financial statements are unaudited but, in the
opinion of management, reflect all adjustments (which include only normal
recurring adjustments) necessary to a fair statement of the results for the
interim periods presented. These condensed unaudited interim financial
statements do not contain the detail, or footnote disclosure concerning
accounting policies and other matters, which would be included in full-year
financial statements and, accordingly, should be read in conjunction with the
Company's audited financial statements (including the notes thereto) included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996
(File No. 1-1217).
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 1997, DECEMBER 31, 1996 AND JUNE 30, 1996
As At
June 30, 1997 Dec. 31, 1996 June 30, 1996
(Thousands of Dollars)
ASSETS
Utility plant, at original cost
Electric $ 11,754,898 $ 11,588,344 $ 11,444,742
Gas 1,686,174 1,642,231 1,581,682
Steam 546,949 536,672 520,536
General 1,159,098 1,152,001 1,119,112
------------ ------------ -------------
Total 15,147,119 14,919,248 14,666,072
Less: Accumulated depreciation 4,447,539 4,285,732 4,205,894
------------ ------------ -------------
Net 10,699,580 10,633,516 10,460,178
Construction work in progress 324,400 332,333 356,915
Nuclear fuel assemblies and components,
less accumulated amortization 102,101 101,461 69,652
------------ ------------ -------------
Net utility plant 11,126,081 11,067,310 10,886,745
------------ ------------ ------------
Current assets
Cash and temporary cash investments 12,231 106,882 57,369
Accounts receivable - customers, less
allowance for uncollectible accounts
of $20,804, $21,600 and $22,514 472,773 544,004 499,516
Other receivables 51,763 42,056 46,102
Regulatory accounts receivable (866) 45,397 4,938
Fuel, at average cost 34,940 64,709 41,415
Gas in storage, at average cost 37,746 44,979 23,373
Materials and supplies, at average cost 199,795 204,801 215,169
Prepayments 293,592 64,492 62,634
Other current assets 15,732 15,167 14,732
------------ ------------ ------------
Total current assets 1,117,706 1,132,487 965,248
------------ ------------ ------------
Investments and nonutility property 217,745 177,224 164,358
------------ ------------ ------------
Deferred charges
Enlightened Energy program costs 120,837 133,718 129,739
Unamortized debt expense 125,770 130,786 135,934
Recoverable fuel costs 43,170 101,462 21,968
Power contract termination costs 35,136 58,560 81,984
Other deferred charges 280,602 271,356 267,877
------------ ------------ ------------
Total deferred charges 605,515 695,882 637,502
------------ ------------ ------------
Regulatory asset-future federal
income taxes 948,410 984,282 1,016,829
------------- ------------ ------------
Total $ 14,015,457 $ 14,057,185 $ 13,670,682
============ ============ ============
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 1997, DECEMBER 31, 1996 AND JUNE 30, 1996
As At
June 30, 1997 Dec. 31, 1996 June 30, 1996
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock, authorized 340,000,000
shares; outstanding 235,023,795
shares, 234,993,596 shares and
234,978,113 shares $ 1,478,768 $ 1,478,536 $ 1,478,416
Capital stock expense (34,754) (34,903) (35,052)
Retained earnings 4,242,133 4,283,935 4,089,399
------------ ------------ ------------
Total common shareholders' equity 5,686,147 5,727,568 5,532,763
------------ ------------ ------------
Preferred stock
Subject to mandatory redemption
7.20% Series I 47,500 47,500 47,500
6-1/8% Series J 37,050 37,050 37,050
------------ ------------ ------------
Total subject to mandatory
redemption 84,550 84,550 84,550
------------ ------------ ------------
Other preferred stock
$ 5 Cumulative Preferred 175,000 175,000 175,000
5-3/4% Series A 7,061 7,061 7,061
5-1/4% Series B 13,844 13,844 13,844
4.65% Series C 15,330 15,330 15,329
4.65% Series D 22,233 22,233 22,233
6% Convertible Series B 4,398 4,630 4,750
------------ ------------ ------------
Total other preferred stock 237,866 238,098 238,217
------------ ------------- ------------
Total preferred stock 322,416 322,648 322,767
------------ ------------ ------------
Long-term debt 4,288,383 4,238,622 4,190,366
------------ ------------ ------------
Total capitalization 10,296,946 10,288,838 10,045,896
------------ ------------ ------------
Noncurrent liabilities
Obligations under capital leases 41,265 42,661 43,969
Other noncurrent liabilities 82,125 80,499 80,701
------------ ------------ ------------
Total noncurrent liabilities 123,390 123,160 124,670
------------ ------------ ------------
Current liabilities
Long-term debt due within one year 202,630 106,256 82,095
Accounts payable 375,438 431,115 341,235
Notes payable 15,000 - -
Customer deposits 159,749 159,616 158,312
Accrued taxes (56,676) 27,342 38,163
Accrued interest 83,310 83,090 83,625
Accrued wages 78,312 80,225 75,815
Other current liabilities 142,895 147,968 148,073
------------ ------------ ------------
Total current liabilities 1,000,658 1,035,612 927,318
------------ ------------ ------------
Provisions related to future federal income
taxes and other deferred credits
Accumulated deferred federal income tax 2,333,097 2,289,092 2,270,151
Accumulated deferred investment tax credits 168,070 172,510 176,860
Other deferred credits 93,296 147,973 125,787
------------ ------------ ------------
Total deferred credits 2,594,463 2,609,575 2,572,798
------------ ------------ ------------
Total $ 14,015,457 $ 14,057,185 $ 13,670,682
============ ============ ============
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
---- ----
(Thousands of Dollars)
Operating revenues
Electric $ 1,228,366 $ 1,244,306
Gas 213,376 223,428
Steam 62,272 72,001
----------- -----------
Total operating revenues 1,504,014 1,539,735
Operating expenses
Purchased power 314,221 321,588
Fuel 122,426 120,389
Gas purchased for resale 85,408 96,554
Other operations 283,338 286,676
Maintenance 146,859 123,915
Depreciation and amortization 124,932 119,981
Taxes, other than federal income tax 270,802 277,474
Federal income tax 25,990 40,880
----------- -----------
Total operating expenses 1,373,976 1,387,457
Operating income 130,038 152,278
Other income (deductions)
Investment income 2,849 2,283
Allowance for equity funds used during construction 1,520 745
Other income less miscellaneous deductions (5,764) (1,996)
Federal income tax 650 (510)
----------- -----------
Total other income (745) 522
----------- -----------
Income before interest charges 129,293 152,800
Interest on long-term debt 79,192 78,106
Other interest 3,287 3,629
Allowance for borrowed funds used during construction (745) (350)
----------- -----------
Net interest charges 81,734 81,385
Net income 47,559 71,415
Preferred stock dividend requirements (4,603) (4,608)
----------- -----------
Net income for common stock $ 42,956 $ 66,807
=========== ===========
Common shares outstanding - average (000) 235,016 234,974
Earnings per share $ 0.18 $ 0.28
========= =========
Dividends declared per share of common stock $ 0.525 $ 0.52
========= =========
Sales
Electric (Thousands of kilowatthours)
Con Edison customers 8,281,386 8,461,823
Delivery service to NYPA and others 2,028,973 2,072,831
Service for municipal agencies 296,530 176,772
----------- -----------
Total sales in service territory 10,606,889 10,711,426
Off-system sales (A) 701,070 1,108,443
Gas (dekatherms)
Firm 19,685,630 20,290,373
Off-peak firm/interruptible 5,215,550 4,271,271
----------- -----------
Total sales to Con Edison customers 24,901,180 24,561,644
Transportation of customer-owned gas
NYPA 4,668,422 15,207
Others 1,798,581 1,422,041
Off-system sales 1,255,168 3,287,507
Total sales and transportation 32,623,351 29,286,399
Steam (Thousands of pounds) 4,796,828 5,458,166
(A) Includes 424,223 and 537,445 thousands of kWh, respectively, subsequently
purchased by the Company for sale to its customers.
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
-----------------------------------------------
1997 1996
---- ----
(Thousands of Dollars)
Operating revenues
Electric $ 2,497,316 $ 2,530,574
Gas 668,396 630,292
Steam 224,450 246,234
----------- -----------
Total operating revenues 3,390,162 3,407,100
Operating expenses
Purchased power 666,929 625,587
Fuel 273,780 304,277
Gas purchased for resale 308,120 277,394
Other operations 560,177 563,977
Maintenance 261,022 248,950
Depreciation and amortization 248,684 252,546(A)
Taxes, other than federal income tax 575,764 583,510
Federal income tax 118,130 145,920
----------- -----------
Total operating expenses 3,012,606 3,002,161
Operating income 377,556 404,939
Other income (deductions)
Investment income 3,693 3,721
Allowance for equity funds used during construction 3,320 1,258
Other income less miscellaneous deductions (6,984) (2,673)
Federal income tax 600 (930)
----------- -----------
Total other income 629 1,376
----------- -----------
Income before interest charges 378,185 406,315
Interest on long-term debt 157,944 152,475
Other interest 7,701 8,481
Allowance for borrowed funds used during construction (1,627) (591)
----------- -----------
Net interest charges 164,018 160,365
Net income 214,167 245,950
Preferred stock dividend requirements (9,207) (10,643)
Gain on refunding of preferred stock - 13,943(A)
----------- -----------
Net income for common stock $ 204,960 $ 249,250
=========== ===========
Common shares outstanding - average (000) 235,009 234,968
Earnings per share $ 0.87 $ 1.06
========= =========
Dividends declared per share of common stock $ 1.05 $ 1.04
========= =========
Sales
Electric (Thousands of kilowatthours)
Con Edison customers 17,213,254 17,635,244
Delivery service to NYPA and others 4,250,306 4,392,665
Service for municipal agencies 510,591 284,227
----------- -----------
Total sales in service territory 21,974,151 22,312,136
Off-system sales (B) 1,012,848 1,269,146
Gas (dekatherms)
Firm 58,928,092 65,132,812
Off-peak firm/interruptible 13,419,753 11,125,581
----------- -----------
Total sales to Con Edison customers 72,347,845 76,258,393
Transportation of customer-owned gas
NYPA 7,368,630 194,555
Others 3,547,403 1,881,683
Off-system sales 4,760,561 7,136,458
----------- -----------
Total sales and transportation 88,024,439 85,471,089
Steam (Thousands of pounds) 14,937,516 17,322,853
(A) The gain from the preferred stock refunding was offset by an additional
provision for depreciation.
(B) Includes 488,023 and 537,445 thousands of kWh, respectively, subsequently
purchased by the Company for sale to its customers.
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED JUNE 30, 1997 AND 1996
--------------------------------------------------
1997 1996
---- ----
(Thousands of Dollars)
Operating revenues
Electric $ 5,507,860 $ 5,466,102
Gas 1,053,175 952,617
Steam 381,763 396,640
----------- -----------
Total operating revenues 6,942,798 6,815,359
Operating expenses
Purchased power 1,314,196 1,175,350
Fuel 542,779 581,342
Gas purchased for resale 448,997 373,720
Other operations 1,159,359 1,137,245
Maintenance 470,887 489,127
Depreciation and amortization 492,549 485,153(A)
Taxes, other than federal income tax 1,158,453 1,175,673
Federal income tax 369,370 387,470
----------- -----------
Total operating expenses 5,956,590 5,805,080
Operating income 986,208 1,010,279
Other income (deductions)
Investment income 8,299 16,389
Allowance for equity funds used during construction 5,530 2,145
Other income less miscellaneous deductions (13,060) (7,392)
Federal income tax 2,500 (1,680)
----------- -----------
Total other income 3,269 9,462
----------- -----------
Income before interest charges 989,477 1,019,741
Interest on long-term debt 313,289 305,351
Other interest 16,551 23,039
Allowance for borrowed funds used during construction (2,665) (1,019)
----------- -----------
Net interest charges 327,175 327,371
Net income 662,302 692,370
Preferred stock dividend requirements (18,424) (28,422)
Gain on refunding of preferred stock - 13,943(A)
Net income for common stock $ 643,878 $ 677,891
=========== ===========
Common shares outstanding - average (000) 234,997 234,956
Earnings per share $ 2.74 $ 2.89
========= =========
Dividends declared per share of common stock $ 2.09 $ 2.06
========= =========
Sales
Electric (Thousands of kilowatthours)
Con Edison customers 36,781,964 37,557,246
Delivery service to NYPA and others 8,674,514 8,951,651
Service for municipal agencies 843,657 531,578
----------- ------------
Total sales in service territory 46,300,135 47,040,475
Off-system sales (B) 3,661,056 3,987,450
Gas (dekatherms)
Firm 92,575,389 98,896,627
Off-peak firm/interruptible 22,600,610 18,118,759
----------- ------------
Total sales to Con Edison customers 115,175,999 117,015,386
Transportation of customer-owned gas
NYPA 12,141,175 12,338,432
Others 6,676,727 4,880,492
Off-system sales 8,917,528 10,190,997
----------- ------------
Total sales and transportation 142,911,429 144,425,307
Steam (Thousands of pounds) 27,610,425 31,279,809
(A) The gain from the preferred stock refunding was offset by an additional
provision for depreciation.
(B) Includes 1,504,342 and 1,882,652 thousands of kWh, respectively,
subsequently purchased by the Company for sale to its customers.
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
(Thousands of Dollars)
Operating activities
Net income $ 214,167 $ 245,950
Principal non-cash charges (credits) to income
Depreciation and amortization 248,684 252,546
Deferred recoverable fuel costs 58,292 37,486
Federal income tax deferred 74,360 (5,840)
Common equity component of allowance
for funds used during construction (3,225) (1,188)
Other non-cash charges (credits) 13,680 (10,433)
Changes in assets and liabilities
Accounts receivable - customers, less
allowance for uncollectibles 71,231 (2,301)
Regulatory accounts receivable 46,263 (11,419)
Materials and supplies, including fuel
and gas in storage 42,008 8,027
Prepayments, other receivables and
other current assets (239,372) 3,364
Enlightened Energy program costs 12,881 14,543
Accounts payable (55,677) (79,617)
Accrued income taxes (81,412) 22,658
Other - net (88,162) (20,799)
--------- ---------
Net cash flows from operating activities 313,718 452,977
--------- ---------
Investing activities including construction
Construction expenditures (292,308) (313,280)
Nuclear fuel expenditures (7,230) 182
Contributions to nuclear decommissioning trust (17,047) (17,047)
Common equity component of allowance
for funds used during construction 3,225 1,188
--------- ---------
Net cash flows from investing activities
including construction (313,360) (328,957)
--------- ---------
Financing activities including dividends
Net proceeds from short-term debt 15,000 -
Issuance of long-term debt 150,000 375,000
Retirement of long-term debt (3,626) (105,055)
Advance refunding of long-term debt - (95,329)
Advance refunding of preferred stock - (316,982)
Issuance and refunding costs (410) (8,711)
Common stock dividends (246,763) (244,369)
Preferred stock dividends (9,210) (13,497)
--------- ---------
Net cash flows from financing activities
including dividends (95,009) (408,943)
--------- ---------
Net decrease in cash and temporary
cash investments (94,651) (284,923)
Cash and temporary cash investments
at January 1 106,882 342,292
--------- ---------
Cash and temporary cash investments
at June 30 $ 12,231 $ 57,369
========= =========
Supplemental disclosure of cash flow information Cash paid during the period
for:
Interest $ 151,686 $ 156,017
Income taxes 126,133 131,000
The accompanying note is an integral part of these financial statements.
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
---- ----
(Thousands of Dollars)
Operating activities
Net income $ 662,302 $ 692,370
Principal non-cash charges (credits) to income
Depreciation and amortization 492,550 485,153
Deferred recoverable fuel costs (21,202) (18,234)
Federal income tax deferred 120,800 3,400
Common equity component of allowance
for funds used during construction (5,311) (2,024)
Other non-cash charges 33,715 17,157
Changes in assets and liabilities
Accounts receivable - customers, less
allowance for uncollectibles 26,743 (79,307)
Regulatory accounts receivable 5,804 31,537
Materials and supplies, including fuel
and gas in storage 7,476 23,236
Prepayments, other receivables and
other current assets (237,619) 110,123
Enlightened Energy program costs 8,902 16,681
Accounts payable 34,203 62,843
Accrued income taxes (94,251) (22,377)
Other - net (66,034) 28,431
--------- ---------
Net cash flows from operating activities 968,078 1,348,989
--------- ---------
Investing activities including construction
Construction expenditures (654,261) (703,352)
Nuclear fuel expenditures (56,117) (5,889)
Contributions to nuclear decommissioning trust (21,301) (27,697)
Common equity component of allowance
for funds used during construction 5,311 2,024
--------- ---------
Net cash flows from investing activities
including construction (726,368) (734,914)
--------- ---------
Financing activities including dividends
Net proceeds from short-term debt 15,000 -
Issuance of long-term debt 300,000 603,285
Retirement of long-term debt (82,095) (111,324)
Advance refunding of long-term debt - (251,028)
Advance refunding of preferred stock - (316,982)
Issuance and refunding costs (10,179) (13,851)
Common stock dividends (491,150) (484,014)
Preferred stock dividends (18,424) (31,277)
--------- ---------
Net cash flows from financing activities
including dividends (286,848) (605,191)
--------- ---------
Net increase (decrease) in cash and temporary
cash investments (45,138) 8,884
Cash and temporary cash investments
at beginning of period 57,369 48,485
Cash and temporary cash investments
at June 30 $ 12,231 $ 57,369
========= =========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 304,948 $ 316,872
Income taxes 341,888 409,907
The accompanying note is an integral part of these financial statements.
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Contingency Note
Indian Point. Nuclear generating units similar in design to the Company's Indian
Point 2 unit have experienced problems that have required steam generator
replacement. Inspections of the Indian Point 2 steam generators since 1976 have
revealed various problems, some of which appear to have been arrested, but the
remaining service life of the steam generators is uncertain and may be shorter
than the unit's life. The projected service life of the steam generators is
reassessed periodically in the light of the inspections made during scheduled
outages of the unit. Based on the latest available data and current Nuclear
Regulatory Commission criteria, the Company estimates that steam generator
replacement will not be required before 1999, and possibly not until some years
later. To avoid procurement delays in the event replacement is necessary, the
Company purchased replacement steam generators, which are stored at the site. If
replacement of the steam generators is required, such replacement is presently
estimated (in 1996 dollars) to require additional expenditures of approximately
$110 million (exclusive of replacement power costs) and an outage of
approximately four months. However, securing necessary permits and approvals or
other factors could require a substantially longer outage if steam generator
replacement is required on short notice.
Nuclear Insurance. The insurance policies covering the Company's nuclear
facilities for property damage, excess property damage, and outage costs permit
assessments under certain conditions to cover insurers' losses. As of June 30,
1997, the highest amount which could be assessed for losses during the current
policy year under all of the policies was $28.1 million. While assessments may
also be made for losses in certain prior years, the Company is not aware of any
losses in such years which it believes are likely to result in an assessment.
Under certain circumstances, in the event of nuclear incidents at facilities
covered by the federal government's third-party liability indemnification
program, the Company could be assessed up to $79.3 million per incident of which
not more than $10 million may be assessed in any one year. The per-incident
limit is to be adjusted for inflation not later than 1998 and not less than once
every five years thereafter.
The Company participates in an insurance program covering liabilities for
injuries to certain workers in the nuclear power industry. In the event of such
injuries, the Company is subject to assessment up to an estimated maximum of
approximately $3.1 million.
Environmental Matters. The normal course of the Company's operations necessarily
involves activities and substances that expose the Company to potential
liabilities under federal, state and local laws protecting the environment. Such
liabilities can be material and in some instances may be imposed without regard
to fault, or may be imposed for past acts, even though such past acts may have
been lawful at the time they occurred. Sources of such potential liabilities
include (but are not limited to) the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("Superfund"), a 1994
settlement with the New York State Department of Environmental Conservation
(DEC), asbestos, and electric and magnetic fields (EMF).
- 11 -
Superfund. By its terms Superfund imposes joint and several strict liability,
regardless of fault, upon generators of hazardous substances for resulting
removal and remedial costs and environmental damages. The Company has received
process or notice concerning possible claims under Superfund or similar state
statutes relating to a number of sites at which it is alleged that hazardous
substances generated by the Company (and, in most instances, a large number of
other potentially responsible parties) were deposited. Estimates of the
investigative, removal, remedial and environmental damage costs (if any) the
Company will be obligated to pay with respect to each of these sites range from
extremely preliminary to highly refined. Based on these estimates, the Company
had accrued a liability at June 30, 1997 of approximately $22.1 million. There
will be additional costs with respect to these and possibly other sites, the
materiality of which is not presently determinable.
DEC Settlement. In 1994 the Company agreed to a consent order settling a civil
administrative proceeding instituted by the DEC alleging environmental
violations by the Company. Pursuant to the consent order, the Company has
conducted an environmental management systems evaluation and is conducting an
environmental compliance audit. The Company also must implement "best management
practices" plans for certain facilities and undertake a remediation program at
certain sites. At June 30, 1997, the Company had an accrued liability of $17.2
million for these sites. Expenditures for environment-related projects in the
five years 1997-2001, including expenditures to comply with the consent order,
are currently estimated at $147 million. There will be additional costs,
including costs arising out of the compliance audit, the materiality of which is
not presently determinable.
Asbestos Claims. Suits have been brought in New York State and federal courts
against the Company and many other defendants, wherein several hundred
plaintiffs sought large amounts of compensatory and punitive damages for deaths
and injuries allegedly caused by exposure to asbestos at various premises of the
Company. Many of these suits have been disposed of without any payment by the
Company, or for immaterial amounts. The amounts specified in all the remaining
suits total billions of dollars but the Company believes that these amounts are
greatly exaggerated, as were the claims already disposed of. Based on the
information and relevant circumstances known to the Company at this time, it is
the opinion of the Company that these suits will not have a material adverse
effect on the Company's financial position.
EMF. Electric and magnetic fields are found wherever electricity is used. The
Company is the defendant in several suits claiming property damage resulting
from EMF. In the event that a causal relationship between EMF and adverse health
effects is established, or independently of any such causal determination, in
the event of adverse developments in related legal or public policy doctrines,
there could be a material adverse effect on the electric utility industry,
including the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis relates to the interim financial
statements appearing in this report and should be read in conjunction with
Management's Discussion and Analysis in Item 7 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 (File No. 1-1217). Reference is
made to the note to the financial statements in Item 1 of this report, which
note is incorporated herein by reference.
This report includes forward-looking statements, which are statements of
future expectation and not facts. Words such as "estimates," "expects,"
"anticipates," "plans," and similar expressions identify forward-looking
statements. Actual results or developments might differ materially from those
included in the forward-looking statements because of factors such as
competition and industry restructuring, changes in economic conditions, changes
in historical weather patterns, changes in laws, regulations or regulatory
policies, developments in legal or public policy doctrines, technological
developments and other presently unknown or unforeseen factors.
LIQUIDITY AND CAPITAL RESOURCES
Cash and temporary cash investments were $12.2 million at June 30, 1997
compared with $106.9 million at December 31, 1996 and $57.4 million at June 30,
1996. Net cash flows from operating activities was negatively affected by the
prepayment in June 1997 of $226 million of New York City property taxes. The
Company's cash balances also reflect, among other things, the timing and amounts
of external financing.
In June 1997 the Company issued $150 million of five-year floating rate
debentures, the interest rate on which is reset quarterly. The proceeds of this
issue were used for the June 1997 prepayment of New York City property taxes and
for working capital purposes.
The Company borrowed from banks at various times during the first six
months of 1997 at prevailing market rates. The highest amount outstanding was
$165 million and $15 million was outstanding at June 30, 1997. These borrowings
have been repaid.
Customer accounts receivable, less allowance for uncollectible accounts,
amounted to $472.8 million at June 30, 1997 compared with $544.0 million at
December 31, 1996 and $499.5 million at June 30, 1996. In terms of equivalent
number of days of revenue outstanding, these amounts represented 27.8, 28.6 and
27.7 days, respectively.
- 13 -
The regulatory accounts receivable negative balance of $0.9 million at
June 30, 1997 is comprised of $3.2 million to be refunded to customers pursuant
to the partial pass-through fuel adjustment clause, offset by $2.3 million to be
recovered from customers under the incentive mechanisms of the 1994 gas rate
agreement. The regulatory accounts receivable balances of $45.4 million at
December 31, 1996 and $4.9 million at June 30, 1996 represented amounts to be
recovered from customers. Pursuant to the Settlement Agreement (discussed
below), the balances at March 31, 1997 relating to the electric revenue
adjustment and revenue per customer mechanisms (Modified ERAM) and Enlightened
Energy and customer service incentives have been eliminated. See "PSC Settlement
Agreement," below.
The balance in accrued taxes of ($56.7 million) at June 30, 1997 reflects
the effect on the Company's current federal income tax liability of the property
tax prepayment. The Company has accrued a related deferred tax liability.
Interest coverage under the SEC formula for the 12 months ended June 30,
1997 was 3.96 times compared with 4.18 times for the year 1996 and 4.11 times
for the 12 months ended June 30, 1996. The decline in interest coverage reflects
a lower level of pre-tax earnings and higher interest charges.
1995 Electric Rate Agreement
In April 1995 the New York Public Service Commission (PSC) approved a
three-year electric rate agreement effective April 1, 1995. See, however, "PSC
Settlement Agreement," below.
For details of the 1995 electric rate agreement, including the Modified
ERAM, see "Liquidity and Capital Resources - 1995 Electric Rate Agreement" in
Management's Discussion and Analysis in Item 7 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
For the second rate year of the 1995 electric rate agreement, the 12
months ended March 31, 1997, the Company's actual rate of return on electric
common equity, excluding incentives, exceeded the sharing threshold of 10.81
percent, principally due to increased productivity and earnings under the
revenue per customer provisions of the Modified ERAM. Pursuant to the Settlement
Agreement, the balance at March 31, 1997 that was set aside for the future
benefit of customers has been eliminated. See "PSC Settlement Agreement," below.
PSC Settlement Agreement
In March 1997, the Company and the PSC staff entered into a settlement
agreement (the "Settlement Agreement") with respect to the PSC's Competitive
Opportunities proceeding. For details concerning the Settlement Agreement, see
"Liquidity and Capital Resources - PSC Settlement Agreement" in Management's
Discussion and Analysis in Item 7 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
- 14 -
The Settlement Agreement is subject to PSC approval. The Company is unable
to predict whether the PSC will approve the Settlement Agreement or whether
there will be changes to the Settlement Agreement. The Chairman of the PSC has
indicated that it is anticipated that the Settlement Agreement will come to the
PSC for consideration in August or September.
The Settlement Agreement includes a rate plan for the five-year period
beginning April 1, 1997 which supersedes the provisions of the 1995 electric
rate agreement applicable to the 12-month period beginning April 1, l997.
Consistent with a PSC order, the material provisions of the Settlement
Agreement's rate plan (including the rate reductions) have been given effect for
financial statement purposes, effective April 1, 1997, subject to PSC approval
of the Settlement Agreement. The Settlement Agreement provides for the
elimination of the Modified ERAM, Enlightened Energy and customer service
incentives, earnings sharing and reconciliation provisions of the 1995 electric
rate agreement and reversal of related, accumulated debit and credit balances in
the Company's financial statements. There was no material effect on net income
from the reversal of these balances.
In June 1997, a PSC administrative law judge (ALJ) issued her recommended
decision on the Settlement Agreement. The ALJ concluded that the Settlement
Agreement "represents an extraordinary step toward resolution of complicated and
contentious issues involving rates and competition ... however, it does not
allow competition for generation and energy services to commence in a way that
is fair to competitors or in the best interests of Con Edison's customers." The
recommended decision identified certain concerns, as to which "parties would be
well advised to attempt to devise a resolution... since the alternative is for
the Commission to impose its determination." Among the concerns are: (1) the
differences in rate reductions among industrial, commercial and residential
customers should be reduced (but the ALJ supported the total amount of the rate
reductions, the implied rate of return on equity and the stranded cost recovery
provisions); (2) Con Edison's delivery rates for retail access customers
appeared to be excessive because the amount to be deducted from the rate
applicable to full-service customers may be too low; (3) the period within which
Con Edison must submit a detailed divestiture plan to the PSC should be
shortened to three months, following the PSC's approval of the Settlement
Agreement; and (4) there has not been the opportunity to address the impact on
the settlement agreement of a recent PSC decision promoting competition at a
future date in the provision of metering services and future PSC decisions with
respect to billing and information services.
- 15 -
In July 1997, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus that utilities subject to plans
that, like the Settlement Agreement, use a transition period to recover stranded
costs must discontinue the use of Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," for
the separable portion of their businesses that are being deregulated and apply
the standards in SFAS No. 101, "Regulated Enterprises-Accounting for the
Discontinuation of Application of FASB Statement No. 71." The consensus was
published on August 12, 1997 and is still being reviewed by the Company.
Accordingly, the Company is unable to determine the extent to which the
Settlement Agreement will adversely affect its eligibility to continue to apply
SFAS No. 71. However, assuming the PSC approves the Settlement Agreement, the
Company does not expect that discontinuation of SFAS No. 71 for the separable
portion of its business that is being deregulated will have a material adverse
effect on the Company's financial position.
The Company understands that the Office of the Chief Accountant of the
Securities and Exchange Commission has also been considering the need for
utilities to discontinue use of SFAS No. 71 for portions of their businesses.
Gas and Steam Rate Agreements
For details of the Company's gas rate agreements and the Company's 1994
steam rate agreement, see "Liquidity and Capital Resources - Gas and Steam Rate
Agreements" in Management's Discussion and Analysis in Item 7 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
In June 1997, the Company and the PSC staff signed a steam rate agreement.
The three-year agreement provides for a $16 million base rate increase,
effective October 1, 1997, and that rates for the remainder of the term of the
agreement will not be increased or decreased except in certain limited and
extraordinary circumstances. With respect to $10.8 million eligible for future
recovery under the 1994 steam rate agreement, $4.6 million will continue to be
deferred until amortized against earnings in excess of a rate of return on steam
common equity of 11.1 percent over the three-year period. Any earnings in excess
of a 12.6 percent rate of return over the three-year period will be shared: 50
percent to be retained by shareholders and 50 percent to be set aside for future
refund to customers.
Competition and Industry Restructuring
In recent years federal and New York State initiatives have promoted the
development of competition in the sale of electricity and gas. For information
about these initiatives, see "Liquidity and Capital Resources - Competition and
Industry Restructuring" in Management's Discussion and Analysis in Item 7 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
- 16 -
New Air Quality Standards
In July 1997, the United States Environmental Protection Agency (EPA)
adopted new ambient air quality standards for ozone and particulate matter. The
New York State Department of Environmental Conservation will be required to
develop an implementation plan acceptable to the EPA to attain and maintain
these standards. The Company does not expect that compliance with the new ozone
standard will require additional capital expenditures in excess of the
approximately $150 million of capital expenditures estimated to be required for
compliance with the Clean Air Act amendments of 1990. (See "Liquidity and
Capital Resources - Clean Air Act Amendments " in Management's Discussion and
Analysis in Item 7 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.) With respect to the new particulate matter standard,
the Company expects that compliance could require a material amount of
additional capital expenditures.
Environmental Claims and Other Contingencies
Reference is made to the note to the financial statements included in this
report for information concerning potential liabilities of the Company arising
from the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (Superfund), from claims relating to alleged exposure to
asbestos, and from certain other contingencies to which the Company is subject.
- 17 -
RESULTS OF OPERATIONS
Net income for common stock for the second quarter, six months and 12
months ended June 30, 1997 was lower than in the corresponding 1996 periods by
$23.9 million ($.10 a share), $44.3 million ($.19 a share), and $34.0 million
($.15 a share), respectively, due primarily to weather-related sales variations
and the agreements covering the Company's electric rates.
The impact of weather on the Company's earnings depends on the Company's
rate agreements. The Modified ERAM under the 1995 electric rate agreement
removed from the Company's earnings the impact of variations in forecasted
electric sales due to weather. The Modified ERAM was eliminated for financial
statement purposes effective April 1, 1997. See "PSC Settlement Agreement,"
above. Most weather-related variations in gas sales do not affect earnings,
while weather-related variations in steam sales do affect earnings.
Increases (Decreases)
Three Months Ended Six Months Ended Twelve Months Ended
June 30, 1997 June 30, 1997 June 30, 1997
Compared With Compared With Compared with
Three Months Ended Six Months Ended Twelve Months Ended
June 30, 1996 June 30, 1996 June 30, 1996
Amount Percent Amount Percent Amount Percent
(Amounts in Millions)
Operating revenues $ (35.7) (2.3)% $ (16.9) (0.5)% $ 127.4 1.9 %
Purchased power ( electric & steam) (7.4) (2.3) 41.4 6.6 138.8 11.8
Fuel - electric and steam 2.0 1.7 (30.5) (10.0) (38.6) (6.6)
Gas purchased for resale (11.1) (11.5) 30.7 11.1 75.3 20.1
Operating revenues less
purchased power and fuel
and gas purchased for resale
(Net revenues) (19.2) (1.9) (58.5) (2.7) (48.1) (1.0)
Other operations and maintenance 19.6 4.8 8.3 1.0 3.9 0.2
Depreciation and amortization 5.0 4.1 (3.9) (1.5) 7.4 1.5
Taxes, other than federal
income tax (6.7) (2.4) (7.7) (1.3) (17.2) (1.5)
Federal income tax (14.9) (36.4) (27.8) (19.0) (18.1) (4.7)
Operating income (22.2) (14.6) (27.4) (6.8) (24.1) (2.4)
Other income less deductions
and related federal income tax (1.3) Large (0.7) (54.3) (6.2) (65.5)
Interest charges 0.4 0.4 3.7 2.3 (0.2) (0.1)
Net income (23.9) (33.4) (31.8) (12.9) (30.1) (4.3)
Preferred stock dividend
requirements -- -- 1.4 13.5 10.0 35.2
Gain on refunding of preferred stock -- -- (13.9) Large (13.9) Large
Net income for common stock $ (23.9) (35.7)% $ (44.3) (17.8)% $ (34.0) (5.0)%
- 18 -
Second Quarter 1997
Compared with
Second Quarter 1996
Net revenues (operating revenues less purchased power, fuel and gas
purchased for resale) decreased $19.2 million in the second quarter of 1997
compared with the 1996 period. Electric and steam net revenues decreased $14.4
million and $5.8 million, respectively. Gas net revenues increased $1.0 million.
Electric net revenues in the 1997 period were lower than in the 1996
period primarily because of weather-related sales decreases and the
implementation of the Settlement Agreement for financial statement purposes
effective April 1, 1997. See "PSC Settlement Agreement," above. Electric net
revenues for the second quarter of 1996 included $13.4 million under the revenue
per customer provisions of the Modified ERAM. Electric net revenues for the
second quarter of 1997 include $.1 million, compared with $14.6 million for the
1996 period, for the net impact of regulatory incentive provisions.
Electric net revenues for the second quarter of 1997 included $22.5
million, compared with a reduction in revenues of $6.8 million in the 1996
period, relating to the refueling and maintenance outage at the Company's Indian
Point 2 nuclear generating station (Indian Point 2) that was completed in July
1997. This increase did not affect net income because, under the accounting
provisions of the agreements covering the Company's electric rates (PSC
Refueling Accounting), amounts collected from customers for the estimated
expenses of such outages are deferred and are recognized during the outage when
the actual expenses for the outage are incurred.
Gas net revenues in the 1997 period reflect increased retention of net
revenues from interruptible sales in accordance with the gas rate agreement.s
Steam net revenues in the 1997 period reflect weather-related sales decreases,
offset in part by a rate increase effective October 1996.
Electric sales, excluding off-system sales, in the second quarter of 1997
compared with the 1996 period were:
Millions of Kwhrs
2nd Quarter 2nd Quarter Percent
Description 1997 1996 Variation Variation
Residential/Religious 2,308 2,379 (71) (3.0)%
Commercial/Industrial 5,833 5,941 (108) (1.8)%
Other 140 142 (2) (1.4)%
Total Con Edison Customers 8,281 8,462 (181) (2.1)%
NYPA, Municipal Agency
and Other Sales 2,326 2,249 77 3.4 %
Total Service Area 10,607 10,711 (104) (1.0)%
- 19 -
For the second quarter of 1997, firm gas sales volume decreased 3.0
percent and steam sales volume decreased 12.1 percent compared with the 1996
period.
The decreases in electric, gas and steam sales volumes for the 1997 period
were due primarily to cooler than normal 1997 spring weather. The second quarter
of 1997 was approximately 22 percent cooler than normal on a cooling degree
basis. After adjusting for variations, primarily in weather and billing days in
each period, electric sales volume in the Company's service territory increased
1.7 percent in the second quarter of 1997, firm gas sales volume decreased 0.1
percent and steam sales volume decreased 0.6 percent.
Electric fuel costs increased $11.6 million in the 1997 period due to an
increase in the unit cost of fuel, partially offset by lower sendout. Electric
purchased power costs decreased in the second quarter of 1997 by $13.1 million
from the 1996 period due to lower purchased volumes and unit costs. The
variations in fuel and purchased power costs also reflect the availability of
Indian Point 2, which was out of service for a refueling and maintenance outage
for part of the 1997 period but was operating during the 1996 period. Steam fuel
costs decreased $9.6 million due to decreased generation of steam by the
Company. Steam purchased power costs were $5.7 million in the 1997 period; the
Company did not purchase steam in the 1996 period. Gas purchased for resale
decreased $11.1 million reflecting a lower unit cost of purchased gas, partially
offset by higher sendout.
Other operations and maintenance expenses increased $19.6 million for the
second quarter of 1997 compared with the 1996 period, due primarily to expenses
related to the Indian Point refueling and maintenance outage (a like amount of
deferred revenues were recognized under PSC Refueling Accounting), partially
offset by lower administrative and general expenses.
Depreciation and amortization increased $5.0 million in the second quarter
of 1997 due principally to higher plant balances.
Taxes, other than federal income tax, decreased $6.7 million due
principally to lower revenue taxes.
Federal income tax decreased $14.9 million for the quarter reflecting
lower pre-tax income.
Other income less miscellaneous deductions for the 1997 period reflects the
start-up and business development expenses of the Company's ProMark Energy, Inc.
and Gramercy Development, Inc. subsidiaries (the "Subsidiaries").
- 20 -
Six Months Ended June 30, 1997
Compared with
Six Months Ended June 30, 1996
Net revenues decreased $58.5 million in the first six months of 1997
compared with the first six months of 1996. Electric and steam net revenues
decreased $49.2 million and $16.7 million, respectively, and gas net revenues
increased $7.4 million.
Electric net revenues in the 1997 period were lower than in the
corresponding 1996 period due primarily to weather-related sales decreases, a
lower allowed return on common equity and a lower level of incentive
opportunities under the 1995 electric rate agreement and the implementation of
the Settlement Agreement for financial statement purposes effective April 1,
1997. See "PSC Settlement Agreement," above. Electric net revenues for the first
six months of 1997 included $14.0 million under the Modified ERAM compared with
$20.3 million for the 1996 period. Electric net revenues for the first six
months of 1997 also include $1.0 million compared with $24.9 million for the
1996 period for the net impact of regulatory incentive provisions.
Electric net revenues for the 1997 period included $20.6 million, compared
with a reduction in revenues of $6.8 million in the 1996 period, because of the
recognition of deferred revenues relating to the Indian Point 2 refueling and
maintenance outage. This increase did not affect net income because of PSC
Refueling Accounting.
Gas net revenues in the 1997 period reflect increased retention of net
revenues from interruptible sales in accordance with the gas rate agreements.
Steam net revenues in the 1997 period reflect weather-related sales decreases,
offset in part by a rate increase effective October 1996.
Electric sales, excluding off-system sales, in the first six months of
1997 compared with the 1996 period were:
Millions of Kwhrs
Six Months Six Months
Ended Ended Percent
Description June 30, 1997 June 30, 1996 Variation Variation
Residential/Religious 4,949 5,088 (139) (2.7)%
Commercial/Industrial 11,976 12,252 (276) (2.3)%
Other 288 295 (7) (2.4)%
Total Con Edison Customers 17,213 17,635 (422) (2.4)%
NYPA Municipal Agency
and Other Sales 4,761 4,677 84 1.8 %
Total Service Area 21,974 22,312 (338) (1.5)%
- 21 -
For the first six months of 1997 firm gas sales volume decreased 9.5
percent and steam sales volume decreased 13.8 percent from the 1996 period.
The decreases in electric, gas and steam sales volumes for the 1997 period
were due primarily to milder than normal 1997 winter weather compared with the
colder than normal 1996 winter weather, and to cooler than normal 1997 spring
weather. After adjusting for variations, primarily weather and billing days in
each period, electric sales volume in the Company's service territory in the
first six months of 1997 increased 1.2 percent. Similarly adjusted, firm gas
sales volume decreased 0.3 percent and steam sales volume increased 0.1 percent.
Electric fuel costs decreased $8.0 million in the 1997 period due to
decreased generation of electricity by the Company partially offset by higher
unit cost of fuel. Electric purchased power costs increased $23.9 million over
the 1996 period due to a higher volume of purchases. The variations in fuel and
purchased power costs also reflect the availability of Indian Point 2, which was
out of service for parts of the 1997 period but was operating during most of the
1996 period. Steam fuel costs decreased $22.5 million due to lower sendout.
Steam purchased power costs were $17.5 million in the 1997 period; the Company
did not purchase steam in the 1996 period. Gas purchased for resale increased
$30.7 million reflecting a higher unit cost, partially offset by lower sendout.
Other operations and maintenance expenses increased $8.3 million in the
first six months of 1997 compared with the 1996 period due primarily to expenses
related to the Indian Point 2 refueling and maintenance outage (a like amount of
deferred revenues were recognized under PSC Refueling Accounting), partially
offset by lower administrative and general expenses.
Depreciation and amortization decreased $3.9 million in the 1997 period;
an additional provision for depreciation expense of $13.9 million was recorded
in the 1996 period to offset a gain on refunding of preferred stock.
Taxes, other than federal income tax, decreased $7.7 million in the first
six months of 1997 compared with the 1996 period due primarily to decreased
revenue taxes.
Federal income tax decreased $27.8 million in the 1997 period compared with
the 1996 period, reflecting lower pre-tax income.
Other income less miscellaneous deductions for the 1997 period reflects
the start-up and business development expenses of the Subsidiaries.
- 22 -
Twelve Months Ended June 30, 1997
Compared with
Twelve Months Ended June 30, 1996
Net revenues decreased $48.1 million in the 12 months ended June 30, 1997
compared with the 1996 period. Electric and steam net revenues decreased $53.7
million and $19.7 million, respectively. Gas net revenues increased $25.3
million.
Electric net revenues in the 1997 period were lower than in the
corresponding 1996 period due primarily to a lower allowed return on common
equity under the 1995 electric rate agreement, weather-related sales variations
and the implementation of the Settlement Agreement for financial statement
purposes effective April 1, l997. See "PSC Settlement Agreement," above.
Electric net revenues for the 12 months ended June 30, 1997 included $53.4
million under the Modified ERAM, compared with $33.5 million for the 1996
period. Electric net revenues for the 12 months ended June 30, 1997 include
$31.3 million for incentives, compared with $47.7 million for the 1996 period.
Gas net revenues in the 1997 period reflect the retention of net revenues
from interruptible sales in accordance with the gas rate agreements. Gas net
revenues for the 1997 and 1996 periods include $9.2 million and $2.7 million,
respectively, for incentives earned under the 1994 gas rate agreement, related
to the achievement of gas system improvement targets and to customer service
performance. Steam net revenues in the 1997 period reflect weather-related sales
decreases, offset in part by a rate increase in October 1996.
Electric sales, excluding off-system sales, for the 12 months ended June
30, 1997 compared with the 12 months ended June 30, 1996 were:
Millions of Kwhrs.
Twelve Months Twelve Months
Ended Ended Percent
Description June 30, 1997 June 30, 1996 Variation Variation
Residential/Religious 10,728 11,108 (380) (3.4)%
Commercial/Industrial 25,450 25,824 (374) (1.4)%
Other 604 625 (21) (3.4)%
Total Con Edison Customers 36,782 37,557 (775) (2.1)%
NYPA, Municipal Agency
and Other Sales 9,518 9,483 35 .4%
Total Service Area 46,300 47,040 (740) (1.6)%
For the 12 months ended June 30, 1997, firm gas sales volume decreased 6.4
percent and steam sales volume decreased 11.7 percent compared with the 1996
period.
- 23 -
The decreases in electric, gas and steam sales volumes for the 1997 period
were due primarily to milder than normal 1997 winter weather compared with
colder than normal 1996 winter weather and cooler than normal 1997 spring
weather. After adjustment for variations, primarily weather and billing days, in
each period, electric sales volume in the Company's service territory in the 12
months ended June 30, 1997 increased 0.8 percent. Similarly adjusted, firm gas
sales volume decreased 0.7 percent and steam sales volume decreased 1.1 percent.
Electric fuel costs decreased $22.0 million in the 1997 period due to
decreased generation of electricity by the Company partially offset by a higher
unit cost of fuel. Electric purchased power costs increased in the 1997 period
by $117.5 million over the 1996 period, reflecting increased purchased volumes
and unit costs. During the 1997 period, the Company purchased 62 percent of its
electric energy requirements compared with 56 percent for the 1996 period. The
variations in electric fuel and purchased power costs also reflect the higher
availability of Indian Point 2 in the 1996 period than in the 1997 period. Steam
fuel costs decreased $16.6 million due to decreased generation of steam by the
Company partially offset by a higher unit cost of fuel. Steam purchased power
costs were $21.3 million in the 1997 period; the Company did not purchase steam
in the 1996 period. Gas purchased for resale increased $75.3 million, reflecting
a higher unit cost of fuel partially offset by lower sendout.
Depreciation and amortization increased $7.4 million in the 1997 period
due principally to higher plant balances. The 1996 period included an additional
provision for depreciation expense of $13.9 million to offset a gain on
refunding of preferred stock.
Taxes, other than federal income tax, decreased $17.2 million in the 12
months ended June 30, 1997 compared with the 1996 period, reflecting primarily
decreased revenue taxes.
Federal income tax decreased $18.1 million in the 1997 period compared with
the 1996 period, reflecting lower pre-tax income.
Investment income decreased $8.1 million in the 1997 period due primarily
to lower investment balances.
Other income less miscellaneous deductions for the 1997 period reflects the
start-up and business development expenses of the Subsidiaries.
Interest on long-term debt for the 12-month period ended June 30, 1997
increased $7.9 million principally as a result of new debt issues, including the
issuance of subordinated debentures to refund preferred stock. Other interest
decreased $6.5 million, principally as a result of lower interest associated
with certain tax settlements.
- 24 -
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
TOXIC SUBSTANCES CONTROL ACT
Reference is made to the information under the caption "TOXIC SUBSTANCES
CONTROL ACT" in Part I, Item 3, Legal Proceedings in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.
In May 1997, the court denied the Company's motion to dismiss the remaining
claim in the suit entitled BCF Oil Refining, Inc. v. Consolidated Edison Company
of New York, Inc., et. al.
RATE PROCEEDINGS
Reference is made to (i) the information under the captions "REGULATION
AND RATES" in Part I, Item 1, Business, "RATE PROCEEDINGS" in Part I, Item 3,
Legal Proceedings and "LIQUIDITY AND CAPITAL RESOURCES - Competition and
Industry Restructuring, 1992 Electric Rate Agreement, 1995 Electric Rate
Agreement, PSC Settlement Agreement, and Gas and Steam Rate Agreements" in Part
I, Item 7, Management's Discussion and Analysis in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996; and (ii) the information
under the captions "LIQUIDITY AND CAPITAL RESOURCES - 1995 Electric Rate
Agreement, PSC Settlement Agreement, and Gas and Steam Rate Agreements" in Part
I, Item 2, Management's Discussion and Analysis in this Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1997.
In August 1997, the United States District Court for the Southern District
of New York dismissed the suit against the Company entitled Brownsville Baptist
Church, et. al. v. Consolidated Edison Company of New York, Inc.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) At the Annual Meeting of Stockholders of the Company held on May 19, 1997,
the stockholders of the Company voted to elect management's nominees for the
Board of Trustees, to ratify and approve the appointment of the Company's
independent accountants, and not to adopt two stockholder proposals.
- 25 -
(b) The name of each nominee for election and the number of shares voted for or
with respect to which authority to vote for was withheld are as follows:
For Withheld
E. Virgil Conway 179,050,318 3,220,764
Gordon J. Davis 179,108,047 3,163,035
Ruth M. Davis 177,602.087 4,668,995
Joan S. Freilich 179,189,657 3,081,425
Ellen V. Futter 179,112,509 3,158,573
Arthur Hauspurg 177,572,372 4,698,710
Sally Hernandez-Pinero 179,120,737 3,150,345
Peter W. Likins 179,207,379 3,063,703
Eugene R. McGrath 179,163,242 3,107,840
Donald K. Ross 178,785,176 3,485,906
Robert G. Schwartz 179,026,093 3,244,989
Richard A. Voell 179,248,546 3,022,536
Stephen R. Volk 179,177,580 3,093,502
(c) The results of the vote on the appointment of Price Waterhouse as
independent accountants for the Company for 1997 were as follows: 179,591,532
shares were voted for this proposal; 1,128,721 shares were voted against the
proposal; and 1,550,829 shares were abstentions.
(d) The following stockholder-proposed resolution was voted upon at the
Annual Meeting:
"RESOLVED: That the stockholders of Consolidated Edison Company of New
York, Inc., assembled in annual meeting in person and by proxy, hereby
request the Board of Directors to take the steps necessary to provide for
cumulative voting in the election of directors, which means each
stockholder shall be entitled to as many votes as shall equal the number
of shares he or she owns multiplied by the number of directors to be
elected, and he or she may cast all of such votes for a single candidate,
or any two or more of them as he or she may see fit."
The results of the vote on this proposal were as follows: 47,363,551 shares were
voted for this proposal; 95,886,584 shares were voted against the proposal;
6,058,700 shares were abstentions; and 32,962,247 shares were broker nonvotes.
- 26 -
(e) The following stockholder-proposed resolution was voted upon at the
Annual Meeting:
"RESOLVED: That the shareholders recommend that the Board take the
necessary step that Con Edison specifically identify by name and corporate
title in all future proxy statements those executive officers, not
otherwise so identified, who are contractually entitled to receive in
excess of $100,000 annually as base salary, together with whatever other
additional compensation bonuses and other cash payments were due them."
The results of the vote on this proposal were as follows: 17,330,744 shares were
voted for this proposal; 126,326,374 shares were voted against the proposal;
5,651,718 shares were abstentions; and 32,962,246 shares were broker nonvotes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 4 Form of the Company's Floating Rate Debentures, Series 1997 A.
(Incorporated by reference to Exhibit 4 to the Company's Current
Report on Form 8-K, dated June 17, 1997, in Commission File No.
1-1217.)
Exhibit 10 Amendment, dated July 22, 1997, to Employment Contract, dated May
22, 1990, between the Company and Eugene R. McGrath.
Exhibit 12 Statement of computation of ratio of earnings to fixed charges
for the twelve-month periods ended June 30, 1997 and 1996.
Exhibit 27 Financial Data Schedule. (To the extent provided in Rule 402 of
Regulation S-T, this exhibit shall not be deemed "filed", or
otherwise subject to liabilities, or be deemed part of a
registration statement.)
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated June 17, 1997,
reporting (under Item 5) certain information about the PSC Settlement Agreement
(discussed in Part I, Item 2 of this report) and the sale of $150 million
aggregate principal amount of its Floating Rate Debentures, Series 1997 A. The
Company filed no other Current Reports on Form 8-K during the quarter ended June
30, 1997.
- 27 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSOLIDATED EDISON COMPANY
OF NEW YORK, INC.
DATE: August 13, 1997 By: Joan S. Freilich
Joan S. Freilich
Senior Vice President,
Chief Financial Officer and
Duly Authorized Officer
DATE: August 13, 1997 By: John F. Cioffi
John F. Cioffi
Vice President, Controller and
Chief Accounting Officer
INDEX TO EXHIBITS
SEQUENTIAL PAGE
EXHIBIT NUMBER AT WHICH
NO. DESCRIPTION EXHIBIT BEGINS
4. Form of the Company's Floating Rate Debentures,
Series 1997 A. (Incorporated by reference
to Exhibit 4 to the Company's Current
Report on Form 8-K, dated June 17, 1997, in
Commission File No. 1-1217.)
10. Amendment, dated July 22, 1997, to Employment
Contract, dated May 22, 1990, between the
Company and Eugene R. McGrath.
12. Statement of computation of ratio of earnings to
fixed charges for the twelve-month periods ended
June 30, 1997 and 1996.
27. Financial Data Schedule. (To the extent provided
in Rule 402 of Regulation S-T, this exhibit shall
not be deemed "filed", or otherwise subject to
liabilities, or be deemed part of a registration statement.)
Amendment No. 8 to
Eugene R. McGrath Employment Agreement
WHEREAS, Eugene R. McGrath (the "Employee") and Consolidated Edison Company
of New York, Inc. (the "Company") entered into an Employment Agreement effective
September 1, 1990 (the "Agreement");
WHEREAS, the parties to the Agreement desire to amend the Agreement to
increase the basic salary payable to the Employee; and
WHEREAS, paragraph 12 of the Agreement provides that the Agreement may be
amended from time to time by a written instrument executed by the Company and
the Employee;
NOW, THEREFORE, in consideration of the foregoing the parties hereto agree
as follows:
1. The Agreement is amended, effective September 1, 1997, to increase the
Employee's basic salary set forth in clause (i) of paragraph 3(a) of the
Agreement from $740,000 per annum to $815,000 per annum, subject to all the
terms and conditions set forth in the Agreement relating to the basic salary.
2. In all other respects, the Agreement remains in full force and effect as
amended hereby.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its
duly authorized officer and its Corporate seal to be affixed hereto, and the
Employee has hereto set his hand the day and year set forth below.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
By: CHARLES F. SOUTAR
Executive Vice President
EUGENE R. MCGRATH
Dated: July 22, 1997
Attest:
Approved by the Board of Trustees the 22nd day of July 1997.
ARCHIE M. BANKSTON
Secretary
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
RATIO OF EARNINGS TO FIXED CHARGES
TWELVE MONTHS ENDED
(Thousands of Dollars)
JUNE JUNE
1997 1996
Earnings
Net Income $ 662,302 $ 692,370
Federal Income Tax 246,070 385,750
Federal Income Tax Deferred 129,590 12,610
Investment Tax Credits Deferred (8,790) (9,210)
Total Earnings Before
Federal Income Tax 1,029,172 1,081,520
Fixed Charges* 348,015 348,096
Total Earnings Before Federal
Income Tax and Fixed Charges $1,377,187 $1,429,616
*Fixed Charges
Interest on Long-Term Debt $ 301,853 $ 291,069
Amortization of Debt Discount,
Premium and Expenses 11,436 14,282
Interest Component of Rentals 18,175 19,706
Other Interest 16,551 23,039
Total Fixed Charges $ 348,015 $ 348,096
Ratio of Earnings to Fixed Charges 3.96 4.11
UT
