ML19354C300

Annual Financial Rept 1979

ML19354C300
Person / Time
Site:	Zimmer
Issue date:	02/07/1980
From:	DAYTON POWER & LIGHT CO.
To:
Shared Package
ML19322E930	List: ML19322E929 ML19322E933 ML19322E937 ML19354C300
References
NUDOCS 8004040350
Download: ML19354C300 (25)

Text

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DP&L's chmbmg knemen are often called upon to brave adverse weather whde restonng scrwce to customers On the cover.

Dayton artust. Paul Meha, captures the drama of the hneman's work in an on-gmal sius,rown Table of Contents

,a j The Dayton Power and Light Company, an ,

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's and President's investor-owned utility, serves residential, com-mercial, industrial and governmental customers Letter . . 2 i:N

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in a 6,000 square-mile area in West Central 1979 Summary of Operations .

Management Report and 4

Ohio. The Company employs 3,742 people.

a  ? Electric energy is produced and distributed to Financial Review . . 11 3- 416,546 retail customers in 24 adjacent coun-ties in the service area. On a wholesale basis, Effects of Changing Prices .

Summary of Operations and

. 13 (lectric energy is supplied to 14 municipalities. Natural gas service is Financial Statistics . . 14 provided to 262,596 customers in 16 counties. The Company also Financial Statements . . . . 15 provides steam service to 394 custon ers in downtown Dayton for Auditors' Review . 21 heating and industrial processing. Executive Staff. . . 22 Non-Management Directors . . 23 The Company's general offices are located at Courthouse Plaza Directors and Officers . . 24 Southwest, Dayton, Ohio 45401 - telephone (513) 224-6000. Transfer Agents and Registrars 25 4 D

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i Highlights Percent Financial Statistics 1979 1978 Change  !

Earnings per share of common stock $ 2.01 $ 1.73 16 i Dividends paid per share $ 1.72 $ 1.66 4 l Federal, state and local taxes per share .$ 2.48 $ 2.41 3  :

Book value per share . $ 18.60 $ 18.39 1 '

Return on average common equity . 10.8 % 9.3% 16 Dividend yield 12.0 % 11.4 % 5  !

Net property and plant in service (000) $767,541 $716,434 7 Construction costs (000) $217,946 $170,417 28 i

Operating Statistics i

Electric:

Customers-year end 416,546 410,583 1 i Total sales (000)-megawatt-hours 10,230 10,177 1 l System peak load (net)-megawatts 2,105 2,078 1 l Average use per residential customer, kilowatt-hours . . 9,794 9,859 (1) j Gas:

Customers-year end 262,596 262,641 -

Total sales (000)-thousand cubic (

feet (mcf) . . . . 63,355 65,766 (4)

System peak-day load-mcf . 488,024 504,170 (3)

Average use per residential customer-mcf 142.2 148.8 (4)

DP&L's 1979 Revenue Dollar (Electric, Gas and Steam)

Where it came from: How it was used:

This annual report and the tb 7, . financial statements it con-I %4 4-

! t .28 Fuel used in production tains are submitted for gen-l eral information and not in Ii '.i' inM

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" - connection with any sale or

.46 Residential offer for sale of, or solicita-88We"* m w e .03 Electricity purchased for resale

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tion of any offer to buy. any D g;' securities

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'18 Commercial sensam

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.10 Wages and bene 6ts fs s;' = d '""

.06 Taxes and other income and deductions (net)

.06 Interest (net) D m*

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'" etal earnings *W O ,

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, The end of fiscal 1979 marks an op- During 1979, DP&L invested $218 portunity to review The Dayton Power million in new plant facilities. Major ex-  !

l and Light Company's progress during temal financing for the support of this  !

i the past year and look ahead to both the program included $45 million in pre-  ;

! opportunities and challenges of the ferred stock, $102 million in first '

1980's. mortgage bands and $26 million in pol- l The Company has adopted a strat- lution contre' bcnds.  :

egy f r the 1980's which pledges it "to Major con,truction and maintenance i

To Our provide and market electric, gas, steam, programs resulted in exceeding goals j

ther compatible energies, and serv- for equipment availability and effi-4 Shareholders ices. These products and services will be ciency. The sum of these efforts re-l supplied at a reasonable profit, in a duced the aversge cost for generating i cost-effective manner, in response to electricity. This translates into a savings j the needs and wants of people and bus- of $ 14 million in generating costs during t iness, primarily in West Central Ohio." the year and helped offset the rise in fuel

. As a regulated business, DP&L de- costs.

pends, to a large degree, upon the deci- The Board of Directors continued to ,

i sions of the Public Utilities Commission give effective direction to the affairs of i of Ohio (PUCO) to eam a rate of return the Company. This was the first year of 3 on investment to support the financing operation under the Board's new or-  ;

necessary for providing its products and ganization of six standing committees F services. In recent rate decisions the made up of non-management di- (

PUCO has not given recognition to this rectors. Management is extremely ap- '

! basic requirement of an economically preciative of the extra time and effort [

l sound company, which by law it is re- contributed by your directors through j quired to do. As a result, your Company the committee organization. The com- i has sought relief from the Ohio Su- mittee process, which continues to ex-  ;

preme Court. pose management at several levels to j Despite inadequate rate relief, the the expertise and experience of the out- (

cost-effective manner of operations at side directors, proves to be a very effec- ,

which your Company works diligently tive management development tool.

enabled DP&L to show a slight increase Also, in 1979, DP&L was pleased to ,

in eamings during fiscal 1979. add Mrs. Charity Edna Earley to the i Earnings per share for 1979 were Board of Directors. Mrs. Earley has  :

$2.01 compared to $1.731n 1978. This served as Chairman of the Dayton Met-  !

is a retum on equity of only 10.8%, ropolitan Housing Authority, Chairman  !

which is substantially below the 13.3% of the Dayton area chapter of The the PUCO publicly acknowledged as American Red Cross, and as a member j necessary for the Company to continue of The National Board of Govemors of -  !

providing quality service. The American Red Cross. l Sales of electricity and gas during the Recognition should also be given to t I

year were essentially the same as the the quality of the management team previous year, reflecting mild weather now directing all aspects of the affairs of [

conditions, slowdown in business The Dayton Power and Light Com-  ;

growth in our service territory and em pany. They are young, but experienced l tinued conservation by all customers. !n the utility industry, as well as trained l in the most modem management prin- '

ciples and skills. [

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• Looking to the decade ahead, the

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mcst serious challenge to the Com-

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} l pany's ability to perform effectively lies '. .

in the government regulatory chmate. "

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DP&L, like other regulated industnes. .

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1. J is faced with the question of whether it

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will be able to provide service to its cus- . - e

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tomers and earn a fair return for its * ; 1,.

investors ., ~

The lack of a clear, well defined en- <- .

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.- e ergy policy and goals f or America is - . .

3 1-causing regulatory delays and govern-ment indecision that contnbute to the

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difficulties of doing business if utility companies are to accomplish their as- - * .-

1 g signed task of helping solve Amenca's  ? , .

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energy crisis. this trend must be t. , .

7, f reversed 6 Everyone has a stake in seeing that -

government permits pnvate enterprise ,

z to be as cost-effective. as innovative.

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and as efhcient as possible This cannot

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be accomplished when bureaucratic e

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procedures add to construction costs ,

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and also delay bringing new electric -

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generating f acilities, including low-cost j^ , .,

1 nuclear power. into the total energy . , . .*

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supply picture >

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The Dayton Power and Light Com- 7 .

pany will contmue to emphasize cost ,

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reductions and efhciencies of manage- i

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ment to minimize the impact of inflation I %.

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• and hold rate increases to the absolute

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x minimum. Providing service to custom- y '.- . .

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ers and return to shareholders will con- '.

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tinue to be our goal through the years .,

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ahead

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^-- . . . . . . . .

l Robert B Killen Robert E Frazer. President and Chief Executwe Ofhcer. left.

Chairman and Chairman of the Board Robert B Killen Robert E Frazer President and Chief Executwe Of6cer I

Februarv 6.1980 ) ,

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2004040 a 3

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i While the nation at large is struggling economic well-being of over one mil- J with the problem of reducing depen- tion people we serve.  ;

cency on foreign oil, The Dayton Power The Company is responsive to the  !

and Light Company looks confidently changing nature of the economy in .

at a system in which 98% of its electric- West Central Ohio. Planning. with the 1979 ity is produced by American-mined aid of econometric models is one of the coal. As a resu t, DP&L customers have ways the Company keeps the design of Summary of greater assurance of an adequate sup- its supply systemsin step with the area s 1 ply of electricity. Sanging business needs in the most )

Operatioris Over the next few years, the annual efficient manner for the 80's.

growth in the demand for electricity for Energy Development Programs the DP&L service area is projected to be 4.5%. The Company believes it impera. Throughout 1979, DP&L continued to tive that it be permitted to earn the concentrate on improving the avail-funds necessary to build and maintain ability of its electric generating units facilities that will meet our customers- and. accordingly, produced greater needs. This is essential to sustain the quantities of low-cost electric energy growth necessary for the physical and Particular emphasis in 1979 was placed

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Intematonal cuisine and unique bounques wiD attract shoppers to historic Arcade Square, part of a continuing revitalization prograrn in Downtown Dayton. .

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I on the larger and more efficient units f that have been built in recent years. 1 These generating units bear little re- ,

j semblance to the electrical power gen- C l crators of earlier years. They also re-quire talented management who pos-  !

sess foresight to anticipate and prevent I equipment failures. It has been a pri- 1 mary goal of DP&L to develop and promote a core of managers capable of dealing with this new technology.

As an example of what was ac- ,

complished in 1979, the power avail- g ability of the J. M. Stuart generating plant was improved by 24% over 1978.

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It is estimated that this saved $14 million. These economies were ac-complished primarily through desig-g -

nated management accountability for s ,_ m ._ . ;

unit performance, preventive main- Women are encouraged to enter non. traditional jobs such as mechanical mainte-tenance programs, and in-depth train- nance or operations at power plants.

Ing for operating and maintenance personnel. contract 75% of its 7 million ton annual c al needs. Coal supplies come primar-Coal Fired Generation ily from Eastern Kentucky and West Four additional 600 MW coal-fired Virginia and meet current applicable generating units are currently being environmental compliance require-constructed under a joint ownership ar- **"

rangement with The Cincinnati Gas & The Company's efforts, which re-Electric Company. The two East Bend suited in a 1979 Ohio Supreme Court units being constructed by CG&E will ruling declaring a tax based on the sul. Power plant be in service in 1981 and 1985 while fur content of coal to be unconstitu-the two Killen units being constructed tional, saved our customers an esti- Operati ons by DP&L will be in service in 1982 and mated $2 million. DP&L had worked .

1985. for more than a year to win this victory Improved in a step toward reducing construc- for its customers.

tion expenditures in 1980, DP&L and l CG&E reached an agreement on the Nuclear Power I above schedule. The second East Bend To meet America's goal of energy unit was delayed by twelve months independence, all economicalls viable while the second Killen unit was accel- energy sources must be developed,in-erated by a few months. Under the cluding nuclear power. Nuclear gen-terms of the new agreement, the own- erating units are producing electricity at ership shares of the operating company substantially less cost than fossil-fueled will increase. DP&L will own 67% of plants.

each Killen unit and 31% of each East DP&L, in conjunction with The Cin-Bend unit. cinnati Gas & Electric Company and Long-range stability for the Com- Columbus and Southern Ohio Electric pany's fuel supply is assured by the fact Company, presently has under con-that it presently has under long-term struction the William H. Zimmer nuclear 5

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power station. This station, located near Natural Gas Moscow, Ohio,is 95% complete. DP&L DP&L is once again able to supply holds a 31.5% interest in this plant. natural gas to new customers. Addi-Hearings have started on the applica- tional gas supplies became available as tion for Zimmer's operating license. It is a result of more realistic pricing policies anticipated that these will come to a by the Federal government, which in

, successful conclusion with fuel loading turn stimulated exploration and produc-

! scheduled for mid-1980. The investiga- tion activities.

( tion of the Three-%le Island accident As a result, DP&L petitioned the

! Natural gas has been thoroughly studied and re- Public Utilities Commission of Ohio

quired changes are being implemented. (PUCO) for the right to resume adding available If the Zimmer plant becomes opera- new customers to the natural gas sys-tional without Mditional delays from tem. A seven-year ban on additional

tOnew eve,-chaeging necieer aegeieterv neterai gas custemers eeded ee De.

i Commission regulations, our customers cember 12,1979. New customers will i CustOrners will receive the benefits of this low-cost, have to comply with insulation and en- 1 j efficient energy in early 19.81. ergy conservation requirements.

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During 1979 DP&L was forced to go s .

to the PUCO with requests for electric, 1. - -

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I I gas and steam rates necessary not only 1[. .4 ' j.,

to provide adequate revenues for grow-  % l- f y,*

l ing operating costs, but also to support .f v% J.g -

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the fmancing necessary for energy de-velopment programs.

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In March, the PUCO allowed DP&L 3' - 7 7, , ._'

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- C ' -s only $40 million of the $59 million elec- *c ' "

c' tric rate increase requested. Although

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g .a DP&L's need to cam a return of 13.3% . . '

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on shareholders' investment, the order did not provide the revenues necessary  : 14 C g 'n " /P' r 9'

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to support this conclusion. Had the full amount been granted in the March - '

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PUCO order, DP&L's return on share- F' > , A" ,

--. g. l holders' investment would have been .~

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12.6% in 1979.

Ohio Assodation of Utility Investors supports revenue increase in a PUCO hearing. l DP&L appealed this ruling to the l

Ohio Supreme Court contending that

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the PUCO has not fulfilled its legal obli-gation. In support of the Company's in October, DP&L filed an applica- l position, a number of industrial cus- tion seeking $98 million in additional tomers filed a friend-of the-court brief electric revenues and asked that $70 l in which they said, "the return to DP&L million of that amount be granted as should be sufficient to assure the con- soon as possible to avert a financial tinued confidence of the business emergency.  ;

community in the financial security of In August, the Company filed an ap- i DP&L, which is necessary to foster out- plication with the PUCO for an $11 mil- l side investment . " Local 175, Utility lion increase in gas revenues and in the l Workers Union of America, which rep- same month was granted a $1.8 million resents some of our employees, and the increase in steam revenues.

Ohio Association of Utility investors The Company is currently awaiting I also filed briefs objecting to the PUCO's an order from the PUCO which may DP&I-. a99eals i decision. permit it to proceed with the implemen-tation of time-of-use rates. The concept to Ohio of these rates is to charge less for elec-tricity during off-peak times, when it bu9reme Court costs less to produce, and more when production costs are higher due to greater demands on the system. ,

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1 Management ity Executive Seminar. Edison Electric A corporate goal is to develop a pro- Institute Executive School and other i mjr business school executive fessional management team, trained in modern management skills and aggres- programs.

sively applying those skills for the bene- Management is provided with ad-Computers fit of the Company and the customers it vanced computerized information sys-l tems The benefits to management in serves. Today the average age of the provide top 15 members of management is 44 having rapid access to organized infor-rnad n about materials and manpower years Although young in age, it is a management ,,,m or m,n,ge,, commit,,a ,c ,s, o,,i_

can be seen in improved decision mak.

itv i"d"'t'v - ^"*'a9'"2 20 years of ins resultin9 in substantiai annuai sev-th experience in the utility business. The ings. Among systems completed to date are Corporate Model for long-range group holds 21 degrees, including six modern TOOLS graduate degrees.

and short-term financial forecasting and a Customer Information System which Management is strengthened through the use of specialized training en bles our employees to respond rn re quickly to mstone inquines I such as the University of Michigan Util_

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pany is the Relationships by Objectives (RBO) program which provides for 4

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Company meet monthly with groups of .

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agree to a new labor contract with Local

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on August 31.1979. two months prior .

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i and benehts were within the Presiden-tial guidelines Management and Union employees continue unique monthly RBO meetings to Formal training in operations and improve the quahty of work life.

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ployees was emphasized during the 1 *

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year More than 450 employees at the . r -

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ing and. as a result, many employees k .

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operatng and maintenance problems

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Load Research Serving Our Customers j In the summer of 1979, DP&L began in early 1979, DP&L employees  !

AdVOIb6 to implement a load research project in worked heroically when a severe ice  !

i an effort to leam more about how and and wind storm caused power outages i i

Weather w hen ou ,cus,o m e,s use eiectricity. A p. ,hroughout west central Ohio. DP&L l proximately 500 residential and com- crews responded to this emergency and l again tests mercial customers are participating in worked long hours to restore service.

l ,1 -

this program. Information on the elec- Our crews were tested once again on

! Uedlcated ,,icity usage of inese custome,, is ob. August is when one of the worst light-tained through magnetic tape recorders ning storms in Dayton history lashed the

, empIoyeeS andspeciai mete,sinsioiied ,,e,c3 ore,.tinec,,wsnad13,,,suof,estor.

l location. Ing power to more than 100,000 resi-j dences and businesses which suffered power outages because of the storm.

Responding to our customers' needs under adverse circumstances is only one aspect of our commitment to cus-l . m. tomer service. We also are determined ,

l that our customers should not have to l l bear the cost of fraudulent energy us- '

age.

In 1979, several programs were ini-tiated to reduce the amount of uncollec- l tible revenues including the creation of  !

a new Fraud and Theft investigation I Department. Action by this department, l

, along with stringent. new customer l D

identification requirements now in ef- l fect, have substantially reduced the i If' , -' , ' , p fraudulent use of gar and electricity.  !

Looking back, the year 1979 has  !

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been a successbl one in plotting a j

, course for the future. The foundation l l . has been laid for a team of professional  !

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managers and dedicated employees to work together to provide effective serv-I 4 " #

ice to our customers and increased divi-l ,, ,

dends to our shareholders.

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l

e. . winter's worst threat struck in February, downing lines and testing employees. d 10

Financial Review Mcnagement Report and Management Analysis Company management is responsible for the accuracy and Earnings Summary integrity of the financial statements included in this report and Eamings for 1979 increased 16% to $2.01 per share from h .s prepared them in accordance with generally accepted $1.73 per share in 1978; however, the 1979 retum on aver-accounting principles. age common equity of 10.8% remains substantially below An accounting system is used which incorporates control the return authorized by The Public Utilities Commission of t:chniques to insure these financial statements properly re- Ohio (PUCO).

flect the results of the transactions of the Company, and Higher electric revenues and improved intemal electric generation are the principal factors of the 1979 eamings provides reasonable assurance that the assets are safe- increase. The availability and operating efficiency of Com-gurrded against loss. These control techniques are aug- pany operated generating plants were improved by the con-minted by a comprehensive intemal audit program which tinuation of an intensive maintenance program resulting in a eviluates these procedures and compliance with them. significant decrease in electricity purchases. Gas sales were The Board of Directors, through its Audit Review Commit- down slightly in 1979, compared to 1978,due to weather.

tee, oversees the functioning of the accounting system and inflation continued to push costs up and erode what would ths related controls. It also is responsible for insuring that the otherwise be the benefits obtained from the Company's train-int: mal auditors and the independent auditors are carrying ing, maintenance and facilities improvement programs. The out their duties with respect to adequate controls and to the Company's discussion of the impact of inflation on certain of performance of audits. The intemal auditors and the inde. Its costs is given in the Supplementary Information on Report-pendent auditors have full and free access to the committee ing the Effects of Changing Prices.

cnd meet with them periodically.

Operating Revenues The independent auditors, Arthur Andersen & Co., ex.

pr:ss their opinion on the Company's financial statements. The major factors causing the changes in electric and gas revenues during 1979 and 1978 are set forth below-This opinion is based upon their procedures which include miintaining an understanding of the Company's systems and " " "' " #

procedures and performing tests and other auditing proce- 8 8 * " 77 dures which they believe are necessary. - - - millions - - -

increase (decrease) in revenues Electric Revenues Sales vdume . $ 1.9 $ 7.0 Average base rate . 24.8 14 6 Fuel charge rate . 9.0 28.5 Other . 0.7 0.8 36.4 10% 50.9 16%

Gas Revenues Sales vdume . . . . (6.1) 18.2 Purchased gas adjustment rate 11.6 18.7 Other . (0.6) 0.6 4.9 3% 37.5 29 %

Steam Revenues . 0.1 2% 0.9 16%

Net Change in Operating Revenues . $ 41.4 8% $893 20 %

In March 1979, the PUCO authorized an annualincrease in electric revenues of approximately $40.5 million which included $30 million of emergency surcharge revenue in-ciuded in rates since June 1978.

As a result of milder weather conditions, gas sales de-creased 4% during 1979 compared to 1978. The 14% in-crease in 1978 over 1977 was primarily due to increased industrial customer usage.

I1

Operation and Maintenance tImpenses Polides.) The amount of gas purchased for resale increased in Changes in the major operating expense items are presented 1978 as compared to 1977 when availability of gas was in the following table: limited by the Company's principal supplier.

g p,n g Other operation costs (wages, benefits, materials and o e eased 8% in 1979 and 13% in 1978, primarily due 1979 vs.1978 1978 vs.1977 to generalinflationary pressures and an increased number of

']]",," "* { employees needed to improve operations and respond to 7

in costs growing regulatory requirements.

i Fuel Used in Producnon Maintenance costs (wages, materials and other) increased Dectoc utary 12% for 1979 and 51% for 1978. The increases for 1979 are Generanon vdume . $ 10.7 $ 1.8 primarily due to the increased level of maintenance of the n rovenIntsgencating Company's electric and gas distribution systems, and the units' ef6ciency (1.7) (5.7) continuation of an intensive maintenance program begun in Steam utihty . (02) 0.5 1978 designed to improve the operation of the Company's

$ 22.1 16 % $28.8 26% generating stations.

Dutncity Purchased for Resale 7 ,,,,

Rrm purchases Vdume. $(11.4) $ 0.1 While total income tax expense increased 9% during 1979, Unit cost . (1.0) 3.9 primarily due to increased pre-tax income, the overall effec-Economy and emergency tive income tax rate decreased slightly due to the reduction in purchases and dehvenes the maximum Federal corporate tax rate from 48% to 46%

Vdume. (2.0) 06 and to higher allowance for funds used during construction, Unit cost . (1.3) (0.2) partially offset by reduced flow-through of depreciation-

$(15.7) (48%) $ 44 16 % related timing differences.

Total 1978 income tax expense increased 133%, primarily Gas for Resale due to increased pre-tax income and the decline in flow-Vdume. $ (5.1) $14.4 through of depreciation >related timin;; differences.

Unit cost . 14.1 8.7 Taxes other than income taxes increased in 1979 and 1978 Other . (1.4) 0.1 primarily due to increases in the various tax bases, i.e., prop-

$ 7.6 6% $23 2 22 % erty, gross receipts and payroll.

Fuel used in production increased in both periods largely Allowance for Funds Used During Construction due to higher fuel costs and increased generation. Fuel costs The allowance for funds used during construction (AFC) for 1979 were reduced by about $2 million as a result of the (borrowed and equity funds) increased as a result of 9.ddi-reversal of a provision for a tax based on the sulfur content of tional funds invested in facilities under construction aad the coal. The tax was ruled unconstitutional by the Ohio Su- 1979 increases in the AFC rate.

preme Court as a result of the Company's efforts. The re-maining increase for 1979 was also partially offset by cost Interest Charges and Preferred Dividends savings because of improved operating efficiencies at the Totalinterest charges and preferred dividends increased 21%

Company's generating stations. for 1979 and 12% for 1978. This increase reflects the is-The significant decrease in electridty purchased for resale suance of additional securities needed to finance the Com-dur;ng 1979 was a result of increased intemal generation and pany's construction program.

more efficient operations which permitted the Company to allow the expiration of a contract for 200 MW of firm pur-chased power in May 1979.

Gas for resale costs increased in 1979 due to the rising price of natural gas partially offset by a 4% decrease in volume from 1978 and the effect of deferring some purchased gas costs until they are recovered in revenues through the opera-tion of a new uniform Purchased Gas Adjustment ordered by the PUCO. (See Summary of Significant Accounting 12

Supplementary information on Reporting the Effects of Changing Prices The supplementary information provided below is an esti- (3) The provisions for depreciation and amortuanon under constant dollar mate of the economic impact inflation had on the Company and current cost are calculated by applying current deprectanon rates to during 1979 and is an attempt to report the magnitude of the the constant doBar and cu rent cost riant amounts. Income taxes are not common shareholder's economic loss resulting from infla- *diusted.

tion. In inflationary periods, with rate making and tax laws (4) On a current cost basis, the 1979 economic loss from holding property based upon the recovery of original (historical) cost only, and plant is $121 million.

inflationaryincreases in the value of the Company's p'roperty create an economic loss because the Company is recovering The following schedule, a comparison of reported histori-its cost of investments in dollars of lesser purchasing value. cal data with data adjusted for generalinflation, shows that a Conventional accounting, which is based upon historical dgnificant part of the reported Company five-year growth has cost, does not recognize this economic loss nor does it recog- resulted from inflation. For example, the increase in revenues nize the partially offsetting economic gain that arises through between the years 1975 and 1979 was only $94 million after financing facilities with fixed money obligations such as first adjustment for the effects ofinflation, rather than the reported mortgage bonds. $219 million increase. Inflation has actually caused a de-crease in the economic value of the Company's dividends.

Current Constant Conventional Cost (1) Dollar (2) Increase (Decrease)

Hstorical Average Average Year Ended Between Cost 1979 Dollars 1979 Dollars December 31. 1975 and 1979

- - - - (milhons) - - - - 1975 1979 $ Annual Percentage PROPERTY AND Pl. ANT - - - (mnons) - - - Rate ADJUSTED FOR CHANGING Operaung revenues PRICES - - as reported 5 358 $ 577 219 13 At December 31,1979. $1.269 $2.415 $2.073 - in average 19'7' 9 51a's r . $ 483 $ 577 94 5 NET INCOME FOR 1979 Net assets at year-end at ADJUSTED FOR CHANGING net recoverable cost PRICES - - as reported . . . . . . . . . . $ 280 $ 443 163 12 As reported in the - in average 1979 dollan 5 366 5 418 52 3 conventonal 6nancial Cash dividends-declared statements (p.15) . $ 62 5 62 $ 62 per common share Add nonal provision for - as reported . . . . . . . . . . $ 1.66 $ 1.72 .06 1 deprecianon and - in average 1979 dollars . $ 2.24 $ 1.72 (.52) (6) smoruzation (3) . - 47 33 Market price per common Net income, as adjusted share at year-end (cxcludmg net econorruc - as reported . . . . . _ . . $17.75 $14.50 (3.25) (5) loss from hdding property -in average 1979 dollars. $23.21 $13.68 (9.53) (12) and plant) . $ 62 $ 15 $ 29 Average consumer

$ .03 $ .62 pnce index 161.2 217.4 56.2 8 Eamings per common share $ 2.01 ADJUSTMENT TO COMMON SHAREHOLDERS' EQUITY FOR CHANGING PRICES -

Addinonal provtsion for deprecianon and amortuation . $ 33 Economic loss from holding property and plant (4) . 117 Economic gain from holding 6xed money obligations. (94)

Net economic loss . $ 56 (1) Current cost measures changes in specific prices of property and plant primarily through the use of the Handy-Whitman Index of Public Unlity Construccon Costs Dunng 1979, the current cost of property and plant increased $315 milton of which $297 milhon is due to generalinflanon.

i (2) Constant dollar, computed by using the Consumer Price Index for all Urban Consumers (CPI-U), is a measure of generalinflanon.

13

Summary of Operations and Financial Statistics The Dayton Power and Light Company and Subsidiaries For the years ended December 31 1979 1978 1977 1976 1975 Summary of Operations (000)

Operating Revenues . . .$ 577,232 535,813 446,524 397,862 357,575 Operating Expenses . . . . . .$ 511,973 477,999 391,908 338,758 299,875

.$ 13,443 12,287 5,276 13,574 12,978 income Taxes .. ..

33,733 23,602 17,636 15,640 11,599 Other Income and Deductions .$

Interest Charges . 37,456 33,865 32,027 31,315 28,131 Net income . ... . .$ 61,536 47,551 40,225 43,429 41,168 Eamings on Common Stock. .. .$ 47,239 36,774 31,728 34,932 32,774 Eamings Per Share of Common Stock . . .$ 2.01 1.73 1.70 2.05 2.24 Average Number of Common Shares 23,556 21,253 18,638 17,070 14,633 Outstanding . . .

Financial Results from Lines of Business Percent of operating revenues Electric .% 69 68 70 69 72 Gas . . .% 30 31 29 30 27 1

Steam . . .% 1 1 1 1 Percent of operating income (before income tax)

Electric .% 94 85 103 88 96

.% 7 16 (1) 13 5 Gas Steam . .% (1) (1) (2) (1) (1)

Ccmmon Stock Data Dividend payout ratio . .% 85.7 95.8 96.1 80.8 73.8 Dividend yield . ..% 12.0 11.4 9.2 8.4 9.4 Book value per share. . . .$ 18.60 18.39 18.60 18.39 18.15 Market to book ratio . .% 78.0 79.5 97.4 108.1 97.8 Price-camings ratio (times) 7.2 8.5 10.7 9.7 7.9 Return on average common equity .% 10.8 9.3 9.1 11.2 12.3 C pitalization Common equity . .% 34.1 38.5 39.2 36.3 $5.1 Preferred stock . .% 14.6 13.2 11.1 12.1 13.5 Long-term debt . . .% 51.3 48.3 49.7 51.6 51.4 Coverage Ratios (times)

Indenture method (before-tax) . 2.06 2.38 2.12 2.55 2.79 SEC rnethod (before. tax) . . .. 2.58 2.49 2.22 2.78 2.88 SEC plus preferred dividend method 1.89 1.86 1.76 2.07 2.08 The following table indicates the dividends paid and the high, low and year-end sale pdces of the Common Stock of the Company on the New York Stock Exchange during the periods indicated:

Market Price Market Price

Dividends Year Dividends l Paid High Low End Paid High Low 18% 12 17 % 1978 First Quarter . .415 18 % 17 %

1975. . .. 1.66 Second Quarter . . .415 18 % 16 %

Third Quarter . .415 18 % 16%

1976... 1.66 20 17 19 %

Fourth Quarter. . . .415 17% 14 %

1977. . . . 1.66 22 % 18 18 %

1979 First Quarter . .415 16% 14 %

1.66 14 % 14 % Second Quarter . . .435 16 % 15 1978 . 18 %

Third Quarter. . .435 17 % 15%

1979... 17 % 13 % 14 % Fourth Quarter. . .435 16% 13 %

... .. 1.72(a)

(1) The Company estimates that 69.8% of the 1979 dividends paid on Common Stock is non-taxable for Federalincome tax purposes.

14

Statement of Results of Operations and Ecrnings Reinvested in the Business The Dayton Power and Light Company and Subsidiaries Change Change From From For the years ended December 31 1979 1978 1978 1977

-thousands-  % -thousands-  %

Operating Revenues (Note 1)

Electric . . . . .. . . . . . $398,552 10 $362,145 16 Gas . . . . . . . 171,819 3 166,922 29 Steam . . 6.861 2 6.746 16 Total operating revenues . . . 577.232 8 535.813 20 Operating Expenses (Note 1)

Operation Fuel used in production . . . . 162,559 16 140,461 26 Electricity purchased for resale . .. 16,874 (48) 32,549 16 Gas for resale . . . 135,648 6 127,999 22 Wages .

36,957 12 32,972 13 Benefits . . . . . .. 8,420 28 6,588 2 Materials and other 19,246 (5) 20,290 16 Maintenance Wages . . 14,619 19 12,314 21 Materials and other 21,497 7 20,063 77 Provision for depreciation and amortization . 30,183 6 28,580 8 Taxes other than income taxes Property . . 21,435 8 19,827 3 State public utility excise and other. 20,474 24 16,489 10 Payroll . 3,176 26 2,515 23 Income taxes . 17,239 95 8,846 A Deferred investment tax credits (net! 3.646 (57) 8.506 (15)

Total operating expenses . _511.973 7 477.999 22 Operating Income .

65,259 13 57,814 6 Other Income and Deductions Allowance for equity funds used during construction . 24,908 55 16,058 31 income taxes-credits . . 7,442 47 5,065 4 Other (net) 1.383 (44) 2.479 357 Total other income and deductions . . . 33.733 43 23.602 34 income Before Interest Charges . . .. .. 98,992 22 81,416 13 Interest Charges First mortgage bonds . , .

42,995 16 37,036 6 Notes payable (Note 2) . .. . . 590 86 318 (4)

Other. .. . .. 2,758 28 2,148 65 Allowance for borrowed funds used during construction-credit . . (8.887) 58 (5.637) 25 Net interest charges . . 37.456 11 33.865 6 Net income . . .. 61,536 29 47,551 18 Preferred dividends .. . .. 14.297 33 10.777 27 E rnings on Common Stock . . . . .. .. 47,239 28 36,774 16 Earnings Reinvested in the Business Balance at beginning of year . . .. 116.153 114.595 Total .. .. .

163,392 151,369 Deduct-cash dividends on common stock-at $1.72 and $1.66 per share, respectively 40.485 15 35.216 15 Balance at end of year .. . . . $122.907 $116.153 Ecrnings Per Share of Common Stock . . .. $ 2.01 16 $ 1.73 2 Average Number of Common Shares Outstanding

, (Based on daily number of shares outstanding). . . . . . 23,555,547 11 21,252,870 14 l

APercentage in excess of 1000%

The accompanying notes are an integral part of the above statement.

Statement of Sources of Funds Invested in Plant and Facilities The Dayton Power and Light Company and Subsidiaries For the years ended December 31 1979 1978

- - - thousands - - -

SOURCES OF FUNDS Internally Generated Funds from operations:

$ 61,536 $ 47,551 Net income . .. . .... . ... .

Principal non-cash provisions-Depreciation and amortization . . . ... .. . . .. . 32,448 30,594 5,865 3,226 Deferred Federalincome taxes (net) . . .

3,621 8,547 Deferred investment tax credits (net) . . . . .

Allowance for equity funds used during construction . .. . (24.908) (16.058)

Funds from operations .. . .

78,562 73,860 Dividends paid on common stock . . .. . . . .

(40,485) (35,216)

Dividends paid on preferred stock . .. .. . . (14.297) (10.777) 23,780 27,867 Funds retained in the business . .. . .

Funds from other sources-net:

Decrease (increase) in working capital-Accounts receivable . .. . .

(2,349) (4,754) 1,470 10,989 Federalincome tax refund receivable .

(17,323) 2,106 Fuei stock . . .

Prepayments . .. (700) (8,373)

(2,308) (3,058)

Other current assets . .

Accounts payable . . . . .. 6,146 6,646 12,713 12,964 Other current liabilities .

Other . . . . . . . (4,451) (3.911)

Funds from other sources . . (6.802) 12.609 Internally generated funds . . . 16.978 40.476 External Financing-net proceeds:

Long-term debt . . . . . . .

129,886 59,841 44.727 39,759 Preferred stock . ... . .. . . .. ..

7.351 48,317 Common stock . . .. . .. .. .

- (4,500)

Shott term debt (net). . . . .. . . . ...

3,891 Construction funds-disbursed by trustee .. . . ... .. 5,564 (8,038) (8,786)

Temporary cash investments (net) . . .. . . . ..

Reduction in long-term debt and preferred stock .. . (3.430) (24.639)

Funds from financing ... ... . . . .. . . .. .. 176.060 113.883 Invested in plant and facilities, excluding allowance 193,038 154,359 for equity funds used during construction . ... . ....

Allowance for equity funds used during construction . .. 24.908 16.058 TOTAL INVESTED IN PLANT AND FACILI11ES . . .. $217.946 $170.417 The accompanying notes are an integral part of the above statement.

16

Belance Sheet The Dayton Power and Light Company and Subsidiaries, December 31 Assets Capitalization and Liabilities 1979 1978 1979 1978

- - - thousands - - - - - - thousands - - -

Property and Plant, at original Capitalization (see Statement cost (Notes 1,4 and 5) of Capitalization)

Electric . $ 970,292 $ 900,360 Common shareholders' 105,854 104,393 equity . . . . .. . . . $ 443,266 $ 429.434 Gas . ..

Steam . . . .. . 11.902 10.205 Preferred stock Total property and plant Without mandatory 1,014,958 redemption provisions 82,851 82,851 in service .. . 1,088,048 .

Less-Accumulated provision With mandatory redemption provisions 107,500 63,750 for depreciation and 320,507 298,524 Long-term debt . . .. 667.403 538.418 amortization . .

-Accumulated deferred Total capitalization .. . 1,301,020 1,114,453 income taxes related to Current Liabilities liberalized depreciation Preferred stock sinking and amortization . . 9,189 5,176 fund requirements . 1,250 1,250 Construction work in progress 506,916 370,756 Notes payabh . . .. 2,420 1,928 Acquisition adjustments. Accounts payable .. . 46,251 40,105 being amortized 3.991 4.237 Accrued taxes . . . 47,187 46,121 Total property and plant 1,269.259 1,086,251 Accrued interest . 10,636 7,754 Refunds due customers 11,304 3,909 Unexpended Construction 8,699 Funds Held by Trustee . . . . . 5,230 9,852 Other . . .. . . 7.329 Total current liabilities . . . 127,747 108,396 Current Assets Cash (Note 2) . .. . . 5,462 5,323 Deferred Credits and Other Temporary cash investments, Federalincome tax effect of at cost . ... ... . 16.824 8,786 state and local taxes appli-Accounts receivable, less cable to subsequent provision for uncollectible years . .. ... .. .. 14,778 14,320 accounts of $2,457,000 Income taxes other than and $1,828,000, those related to liberalized respectively . 47,866 45 517 depreciation and amor-Fuel stock, at average cost . 49,653 32,330 tization . ..... 4,049 3,603 Materials and supplies, at Investment tax credits ... 31,610 27,989 average cost .. 11,596 9,908 Other ... . .. .... 1.604 1,692 Prepayments . .

19,612 18,912 Total deferred credits Other . . .

594 1583 and other . . . ... . 52,041 47,604 Total current assets . .. 151,607 122,359 Commitments (Notes 4,5 and 6)

Other Assets $1.480.808 $1.270.453 State and local taxes appli-cable to subsequent years . 32,308 29,915 Unamortized loss on reacquired debt . .

6,843 7,104 Unamortized debt expense .

5,061 3,542 Leased construction equipment .... 1,952 2,400 Unrecovered gas costs (Note 1) .. 1,401 -

Deferred charges and other . 7.147 9.030 Total other assets . . . 54.712 51.991

$1.480.808 $1.270.453 Tlw accompanying notes are an integral pan of the above statement.

l 17 l

Statement of Capitalization The Dayton Power and Light Company and Subsidiaries, December 31 1979 1978

- - - thousands - - -

Common Shareholders' Equity (Note 3)

Common Stock Authorized 50,000,000 shares of $7 Par Value, outstanding 23,835,462 and 23,356,046 shares, respectively $ 166,848 $ 163,492 153,511 149,789 Other paid.in capital .... . .

Earnings reinvested in the business . . . 122.907 116.153 443,266 429,434 Preferred Stock - Cumulative (Note 3)

Authorized 4,000,000 shares of $100 Par Value and 4,000,000 shares of $25 Par Value -

Outstanding $25 Par Value . . . .. . ....

Outstanding $100 Par Value without mandatory redemption provisions 3.75% Series A,93,280 shares, callable at $102.50 9,328 9,328 3.75% Series B,69,398 shares, callable at $103.00 6,940 6,940 3.90% Series C,65,830 shares, callable at $101.00 . .

6,583 6,583 7.48% Series D, 150,000 shares, callable at $105.095 prior to May 1,1984 and reduced amounts thereafter 15,000 15,000 7.70% Series E, 200,000 shares, callable at $106.00 prior to April 1,1981 and reduced amounts thereafter .

20,000 20,000 7.375% Series F, 250,000 shares callable at $105.00 prior to June 2,1983 and reduced amounts thereafter . 25.000 25.000 82,851 82,851 Outstanding $100 Par Value with mandatory redemption provisions (Exclusive of sinking fund payment due within one year) 12.50% Series G,225,000 and 237,500 shares, respectively, callable at

$112.00 prior to November 1,1984 and reduced amounts thereafter 22,500 23,750 8%% Series H,400,000 shares, callable at $110.00 prior to April 1,1983 and reduced amounts thereafter 40,000 40,000 9%% Series 1,450,000 shares, callable at $110.00 prior to May 1,1984 and reduced amounts thereafter 45.000 -

107,500 63,750 Long-Term Debt First mortgage bonds (Notes 4 and 8) 45,000 45,000 10%% Series Due 1981 15,000 15,000 3%% Series Due 1982 .

15,000 15,000 3% Series Due 1984. . . .

50,000 50,000 4.45% Series Due 1993 40,000 40,000 5%% Series Due 1997 . .

25,000 25,000 6%% Series Due 1998. .

20,000 20,000 8.95% Series Due 1998. 30,000 8%% Series Due 1999. .

30,000 10%% Series Due 1999. . .

30,000 -

35,000 35,000 9%% Series Due 2000 .

45,000 45,000 8%% Series Due 2001. . .

40,000 40,000 8% Series Due 2003. . 35,000 9%% Series Due 2003 . . . . .

50,000 3,175 3,175 10.70% Series Due 2005. ..

50,000 8%% Series Due 2006 . . . . . . ... .. . .. 50,000 14,200 14,200 6.35% Series Due 2007 (Pollution Control) . ..

60,000 8%% Series Due 2007 . . . . . 60,000 12%% Series Due 2009. . . .... 57.000 -

624,375 522,375 Unamortized debt discount and premium (net) . . (176) 295 624,199 522,670 Guarantee of pollution control obligations-7%% and 7%% Series A due 1999 through 2009 (Note 8) . . 26,390 -

Notes payable--due through 1984, average rate 7.0% and 95 130 6.9%, respectively ..... .. . . ..... . ..

8,871 8,911 10% Mortgage note payable-due in installments through 2012. . .

Capitallease obligations . . . . . . .... 7,848 6.707 667.403 538.418

$1,301.020 $1.114.453 f 18 'Dw ampanying notes are an integral part of the above statement.

Notes to Financial Statements

1. Summary of Significant Accounting Policies PUCO, the Federalincome tax effect resulting from the dif-Principles of Consolidation - The financial statements in. ference between liberalized tax depreciation and straight-line clude the accounts of the Company and its wholly-owned (guideline lives) tax depreciation for 1976 and subsequent subsidiary which owns the Company's corporate head- property additions has been normalized.

quarters facility. The unconsolidated subsidiaries, which are Deferred Federal income taxes are also provided for timing recounted for on the equity basis, are not significant. differences related to current State property and excise taxes, unrecovered gas costs, bond reacquisition costs, accelerated Revenues - The Company records revenues as billed to its customers and does not recognize any unbilled portion which amortization of environmental control facilities and several insignificant items.

exists at the end of an accounting period. Changes in levels of The income taxes - credits classified under Other Income fuel and gas costs are reflected in revenues through cost and Deductions result principally from the Federalincome tax adjustment clauses. deductions related to interest expense arising from invest-Purchased Gas and Fuel Costs - Prior to December men s in c nstruct,on woA in progress.

1979, gas for resale included the cost of deliveries from The Company follows flow-through accounting for all principal suppliers through the 19th of each month: the cost pn fr h 2 h to the end of the month was not n en t x ts a e e$e ciand amortized over the c e t o lives of the related property. The Company has unused in-As a result of an order by The Public Utilities Commis- vestment tax credits of approximately $24,100,000 which sion of Ohio (PUCO), the Company, effective in December will be used to the extent permitted by tax regulations to 1979, implemented a revised purchased gas adjustment reduce future tax liability.

clause and began expensing gas costs as recovered through Income tax expense was computed as follows:

revenue. The portion of gas costs recoverable in future 1979 1978 periods is deferred.

(000)  % (000)  %

The cost of fuel used to produce electricity and steam at Federal inc e tax at o generating stations is expensed as consumed on a calendar Decreases in tax from -

P nsions - Trusteed non-contributory retirement plans Allowance for funds used during provide for monthly retirement income to employees, with a construccon which does not normal retirement age of 65. Contributions, which were consatute taxable tncome . . . 15.545 20 to.4t4 17 Excess of tax depreciacon and

$ 5,509,000 in 1979 and $5,134,000 in 1978, provide for the normal cost and the amortization of unfunded prior service **$$e'

,p s " 5,689 costs over twenty years. amortzation (flow-through) 4,341 6 9 At January 1,1979 (the most recent actuarial valuation Investment tax credits . 418 1 351 1 date), the ac*uarially determined unfunded prior service costs Other (net) . 743 1 (19) -

were $30,196,000 and the actuarially determined liability for Total tax expense s13.443 18 $12.287 21 vested benefits was $72,557,000. The estimated market components of income tax expense are-value of the assets of the trust fund was $70,862,000 at Total tax cunently payable December 31,1979. (refundable) . $ 2.646 $ (719)

Mrintenance - All expenditures for maintenance and Defened taxe5 -

645 -

r: pairs of units of property, including renewals of minor it:ms, are charged to the appropriate maintenance expense {"yee

• k'.' O M ged amortizanon 4.023 2,922 recounts. Other . ...... ._ 1,197 304 Defened investment tax credits (net) 3,621 8,547 Depreciation - The Company provides for depreciation for Other defened items . 1.311 1.233 financial reporting purposes on the straight-line method using Total tax expense $13.443 $12.287 ret:s based on periodic studies. The annual composite de.

preciation rates by utility are as follows: Included in the Results of Operanons as:

Operaung Expenses 1979 1978 $ 8,846 Income taxes . .... $17.239 Electnc Plant 3.2% 3.1% Detened investment tax credits Gas Plant . 2.2 2.2 (net) . ........ 3,646 8,506 Steam Plant . 2.2 2.1 Other income and Deductions income taxes - credits (7.442) (5.065)

Inc:me Taxes - Under various provisions of the income tax liws, the Company has elected the use of liberalized depre-ciation, which currently is greater than depreciation provided Allowance for Funds Used During Construction - Allow-t ior financial statement purposes. The Company also deducts ance for funds used during construction (AFC) represents the l for income tax purposes all costs incurred in removing prop- estimated portion of interest and equity costs of capital funds crty from service. Pursuant to rate orders issued by the 19

(

applicable to construction. These costs are transferred from Changes in Other paid-in capital for 1979 and 1978 are the income statement to construction work in progress and detailed below:

are capitalized in the same manner as labor and material 3979 3973 costs, because under established regulatory rate practices a - - -thousands- - -

utility is permitted to include a fair retum on, and the recovery Balance at beginning of year . .

$149,789 $122,293 of, these capital costs through their inclusion in the rate base Premium, net of expense, received from sales of common stock . 3,995 27,737 and the provision for depreciation. The AFC rate in 1979 was Expenses of preferred stock sale . (273) (24U 7%% through June and 8% thereafter, and in 1978 was Balance at end of year . $153,511 $149,789 7%%. These rates are net of income tax effect and are compounded semi-annually.

No redernotions may be made through refunding of the Property and Plant - Construction costs include overheads 12.50% Senes G preferred stock prior to November 1,1984, for payroll-related costs and administrative and general ex- ithe 8%% Series H prior to April 1,1988 and of the 9%%

penses as well as the estimated cost of funds used during Series I prior to May 1,1989 at effective interest rates or construction. The replacement of a unit of property is ac- dividend yields less than the respective series par value ytelds.

counted for as an addition and retirement. At the time of Sinking funds for the Series G, Series H and Series I require retirement of a unit of property, the accumulated provision that 5% of the original amount of each issue must be re-for depreciation is charged with the book value thereof to- deemed at par in each year commencing in 1979,1983, and gether with the cost of removal and credited with the salvage 1985, respectively.

value.

Accumulated deferred income taxes related to liberalized 4. Indenture Requirements depreciation and amortization have been deducted from The Company's Indenture dated October 1,1935, as property and plant investment since, for ratemaking pur- amended and supplemented, securing the first mortgage poses, these deferred taxes reduce the rate base on which the bonds issued by the Company, constitutes a direct first Company is entitled to cam a retum.

mortgage lien on substantially all property and plant, other Reclassifications - Certain reclassifications have been than expressly excepted property and plant owned by the made in the prior year's amounts to make them comparable Company.

to the classifications of such items in 1979. 5. Commonly Owned Facilities

2. Compensating Balances and Commercial Paper The Company, Columbus and Southem Ohio Electric Com-At December 31,1979, the Company had informal bank pany and/or The Cincinnati Gas & Electric Company own as lines of credit of $90 million. In support of such lines, the tenants in common certain electric generating and transmis-Company is required to maintain average daily compensat- sion facilities and have made commitments for additional ing balances of approximately $4,550,000. construction of such facilities. The agreements among the During 1979 the Company entered into a revolving bank companies obligate each company, severally and not jointly, credit agreement to provide for loans of up to $75 million. to pay the cost of constructing and operating its ownership No borrowings were made under either of these arrange- share of the facilities. The Company's share of direct ex-ments in 1979 or 1978. penses are included in fuel used in production and other Information relating to commercial paper borrowings is set operation and maintenance expenses (benefits, wages and forth below- materials and other) in the Statement of Results of Operations and Eamings Reinvested in the Business.

1979 1978 The following is certain information relating to the com-

-- ands- - -

monly owned facilities:

Average commercial paper during penod (based on Companv Portion daily balances) . $ 5.216 $ 4.591 Accumulated Plant Average cost. . 11.3 % 6.9% Company Plant in Provision for Under nn en ce Depeaton Comtmetion p pU ng p od $28,500 $36.525 percent - - - milhons - - - -

At December 31,1979-

3. Capital Stock PRODUCTION During 1979 and 1978, the following common shares were issued:

W. C. Beckjord Unit 6 50 $ 38 $ 10 $-

Conesvile Unit 4 . . . . . 16.5 22 5 -

1979 1978 J. M. Stuart Units 1-4 . 35 161 26 4 Pubbe offering . - 2,500,000 Miami Fort Units 7&8. 36 93 10 -

360,732 261,651 East Bend Units 1&2 49 - - 134 DMdend reinvestment .

Employee plans . 118.684 178,404 Killen Units 1&2. . . . 49 - - 88 2,940,055 Wm. H. Zimmer Unit 1. 31 5 - - 226 479.416 TRANSMISSION At December 31,1979 the Company had 866,293 and (at varying ownership 517,536 shares of authorized but unissued stock reserved for percentages) . 49 8 13 the dividend reinvestment and employee plans, respectively. TOTALS . 1363 $_5_9 $4M 7

6. Construction Program 8. Additional Long-Term Debt Th2 Company estimates that its construction program will Under agreements made in 1979, additional First Mortgage cmount to $245 millic.,n in 1980 and $221 million in 1981. Bonds ($15 million of 10% % Series due 1999 and $8 million Such amounts include the Company's share of construction of 12%% Series due 2009) were issued in January 1980.

costs associated with its commonly owned facilities. The con- In October 1979, the Company entered into a loan agree-tinuance of the Company's planned construction program is ment related to the sale of $48 million of County of Boone contingent, among other things, on obtaining adequate and Kentucky Pollution Control Revenue Bonds ($7.3 million timely rate increases. 7%% Series A due 1999 and $40.7 million 7%% Series A Air and water pollution control regulations could require due 2009). Proceeds from the sale are released to the substantial increases in the Company's capital expenditures, Company as expenditures are made for pollution control operating costs and financing costs. The Ohio Power Siting equipment.

Commission's rules and regulations could result in significant delays and extra costs for needed facilities. 9. Selected Quarterly Information (Unaudited)

The following is a summary of unaudited operations data for

7. Financial Information by Business Segments each 1979 and 1978 quarter:

The Company engages primarily in the generation, distribu- Eanu '

tion and sale of electric energy and the purchase, distribution n S "fo tnd sale of natural gas. The following is certain information Quarter Operating Operaung Net Common Common r:lating to the Company s business segments: Ended Revenues Income income Stock Stock 1979 1978 1977 - - - - - -thousands- - - - -

- - housands - - - h 31 $185,296 $21,057 $19,417 $16,430 $0.70 For the year ended December 31: 130,385 15,783 14.636 11,250 0.48 June 30 Opera 14,620 13,988 10,053 0.43 Sept 30 114.938 Ele $ 398.552 145 31 146,613 13,M 13, 6 9,506 M Gas . 171,819 $ 362',922 166 $ 311l306 129 390 Steam . 6,861 6.746 5.828 1978:

Total . $ 577,232 $ 535,813 $ 446,524 March 31 $175,813 $17,930 $15.051 $12,927 $0.63 June 30 118,(M3 14.733 11,822 9,143 0.45 Operaung income (a) Sept 30 107,840 12,508 10,029 7,042 0.34 Electnc $ 59,821 $ 49,439 $ 53,251 12,643 10,649 7,662 0.31 Dec. 31 134.117 Gas 5,597 8,589 1,810 Steam . (159) (214) (445)

Total $ 65,259 $ 57.814 $ 54.616 Income taxes (b)

Auditors' Report Electric $ 20,754 $ 14,335 $ 13,733 h,'am .

4 (3b) i$) ( j$ To the shareholders of Total . $ 20 1 885 $ 17,352 $ 10.134 The Dayton Power and Light Company:

Provision for deprecianon We have examined the balance sheet and statement of tnd amoruzanon capitalization of THE DAYTON POWER AND LIGHT Electdc $ 2 $ 2 $ COMPANY (an Ohio corporation) and subsidiaries as of c, 2k 37 December 31,1979, and 1978, and the related statements of Stearn . 219 194 1%

Total $ 30,183 $ 28,580 $ 26.399 results of operations and eamings reinvested in the business Construccon costs and sources of funds invested in plant and facilities for the Electric $ 214,657 $ 167,101 $ 116,783 years then ended. Our examinations were made in accord-ance with generally accepted auditing standards and, accord-f er, pnmarity steam f,'24! I

$ 217,946 $ 118,714 ingly, included such tests of the accounting records and such Total . $ 170,417 other audi:ing procedures as we considered necessanj in the At December 31:

Idenefiable assets circumstances.

Electric $1,279,385 $1,081,236 $ 944,213 In our opinion, the financial statements referred to above present fairly the financial position of The Dayton Power and er, primartl'y steam Corporate assets (c) 85,745 74,524 71,304 Light Company and subsidiaries as of December 31,1979, Total . $1,480,808 $1,270,453 $1,118,707 and 1978, and the results of their operations and their sources of funds invested in plant and facilities for the years then (i) Excludes intersegment transactions which are not material ended, in conformity with generally accepted accounting (b) includes income taxes and defened investment tax credits (net) apph.-

l cable to operanng income only. principles applied on a consistent basis.

(c) Ircludesprimarilycash,accountsreceivable,andcertaindeferreditems.

l ARTHUR ANDERSEN & CO.

l Dayton, Ohio, January 31,1980.

21

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Stephen T. Bow Robert G. Chollar Charity E. Earley Jane G. Haley g:

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• Robert B. Killen, Chairman James W. McSwiney 1 .. .

David B. Meeker James R. Thomas John F. Torley j

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Directors Officers St; phen T. Bow (A, B) Robert E. Frazer Senior Vice President President and Chief Executive Officer Metropolitan Life insurance Co. Paul R. Anderson Dayton, Ohi Treasurer Robert G. Chollar (B*, E) J hn R. Dill Chairman of the Board and President Comptroller Charles F. Kettering Foundation Dayton, Ohio Pauline M. Easter Secretary Charity E. Earley (B, D)

Member, Trustee or Director Peter H. Forster Various community organizations Group Vice President-Energy Resources Dayton, Ohi Carl R. Morey Peter H. Forster Vice President-Energy Production Vice President-Energy Resources Groubayton The ,

Power and Light Company hh"e P Es de t and General Counsel Dayton, Ohio Howard R. Palmer Robert E. Frazer (F*).. Vice President-Environmental Management President and Chief Executive Officer The Dayton Power and Light Company James E. Clark Dayton, Ohio Assistant Vice President-Computer Services Jine G. Haley (D, E) Donald A. Nill President Assistant Secretary, Manager Investor Relations C.H. Gosiger Machinery Company Charles W. Shoup Dayton, Ohr Assistant Vice President-Customer Business Operations Robert J. Kegerrels (D*, F) Richard L. Stump Assistant Vice President-Customer Service Operations right tate University Dayton, Ohio Robert A. Kerr (A, E)

President Winters National Corporation Dayton, Ohio Robert A. Killen (A, D, F)

Chairman of the Board The Dayton Power and Light Company Dayton, Ohio J;mes W. McSwiney (C, E*, F)

Chairman of the Board and Chief Executive Officer Mead Corporation Dayton, Ohio David B. Meeker (C*, F) g President and Chief Executive Officer Hobart Corporation Troy, Ohio J:mes R. Thomas (A, B, C)

President The Dayton Tire & Rubber Company Dayton, Ohio John F. Torley (A*, C, F)

Chairman, Executive Committee Dayton Malleable Inc.

Dayton, Ohio 1980 Committee Assignments: E. F'mance A. Energy Resources and Forecasts F. Executive B Audit Review Denotes Committee Chairman C. Compensaton and Management Review " Ex of6cio member of al committees D Community and External Relations 24

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Transfer Agents and Hegistrars Common Stock Transfer Agents Citibank, N. A., Corporate Trust Department. The Annual Meenng of Stockholders will be held at 10 A M., Help Us Reduce Costs 111 Wall Street, New York, New York 10015 Thursday, Apnl 10,1980, at Memorial Hall,125 East First " ^"

"C8 V" *" 8" Winters National Bank and Trust Co., Street, Dayton, Ohio hW a Corporate Trust Department Winters Bank Tower, have no need for the extra copy, you Dayton, Ohio 45401 The hnancial statements in this Annual Report are prepared win help us economize by complenng Also dividend paying agent in substannal comphance with regulations of the Secunties and returrung this card to us.

and Exchange Commission and are made a part of the Form Your instructions will ehminate Registrare 10 K filed with the Commission. Addinonal exhitxts included duplicate mailings of only the Annual Manufacturers Hanover Trust Company, Corporate with the 10.K fihng win be supphed upon request. Please Report and wiu not affect dividend Trust Department,4 New York Plaza, New York, direct inquiries to the Investor Records Department. checks or proxies.

New York 10015 Your help is appreciated.

The Third National Bank and Trust Company of The New York Stock Excharge is the only national secunties Dayton, Ohio, Corporate Trust Department, exchange on which any of The Dayton Power and 1Jght 34 North Main Street, Dayton, Ohio 45401 Company's First Mortgage Bonds and Preferred and Com .

m n St eks are hsted. The trading symbol of the Company's Shareholders' Agent for Automatic Dtvidend Common Stock is DPL Reinvestment and Stock Purchase Plan Winters National Bank and Trust Co., Corporate Federal Income Tax Status of .

Trust Department, Winters Bank Tower Dayton, Common '

Ohio 45401 Stock Dividends Paid in 1979 Preferred Stock The Company estimates that 69 8% cif the total mmrmn --------------------~- ~ ---

stock dividends paid in 1979 is non-taxable to shareholders [------- '

• ^8'" for Federalincome tax purposss andis a retum of capital The i Irving Trust Company, Corporate Trust Department, shareholder *s cost or other basis of the shares on which the l 3:

One Wan Street, New York, New York 10015 dividends were paid should be reduced by this amount. l [,

Winters National Bank and Trust Co , Corporate Shareholders may want to consider the effect of the non- l J Trust Department, Winters Bank Tower, Dayton, taxable portuan of their dividends in preparing any state or j g ,

Ohio 45401 local tax returns. i 0 Also dividend paying agent l -k g l It is appr prtate f r shareholders to use this percentage for l g l Registrars Chemical Bank, Corporate Trust Department, Federal income tax purposes, although it is subject to final l g

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i 20 Pine Street, New York, New York 10015 "a' 2 i Shareholders wil be notified if such future deterrrunation i The Third National Bank and Trust Company of results in a significant change. l $ b 43 Dayton, Ohio, Corporate Trust Department, i gi 34 North Matn Street, Dayton, Ohio 45401 D vidends paid in 1979 on preferred stock are fully taxable as  ! 1 S 5

First Mortgage Bonds dividend income. l l

f8 g , l Trustee l 3 j, sl @ j f l 1 Irving Trust Company, Corporate Trust Department, One wad Street, New York, New York 10015 l 3 g8og Also interest paying agent j gg5g j Co-Paying Agent {

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PERMr NO 26 DAYTON OHIO -

POSTAGE Wil.L BE PAD BY ADDRESSEE The Dayton Power and Ught Company -

Investor Records Department -

Courthouse Plaza Southwest """""

P.O Box 1247 -

Dayton. Ohio 45401 - )

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