ML20126H218

Annual Financial Rept 1980

ML20126H218
Person / Time
Site:	Zimmer
Issue date:	02/16/1981
From:	Frazer R, Killen R DAYTON POWER & LIGHT CO.
To:
Shared Package
ML20126H208	List: ML20126H203 ML20126H209 ML20126H214 ML20126H218
References
NUDOCS 8104070351
Download: ML20126H218 (28)

Text

. _ _ _ _ _ _ - _ _

O DP&L'S 1980 REVENUE DOLLAR WHERE rr HOWIT

- WAS USED:

CAME FROM:

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ou RESIDENTIAL 47- p2g f 23 PURCHASEDGAS 11 gOPER TION INDUSTRIAL 23 7 MAINTENANCE S 0;.PRECIATION m s TAXES ANDUTHER COMMERCIAL 19- M

@Qygg N7 JNTEREST(NET) omER 11- -lo DIVIDENDS TUTAL 100% 100% TUTAL j

i 1980 ~1979 Percent Highlights Change Financial Statistics Return on shareholders' investment . . . . . . . % 10.1 10.8 (6)

Eamings per share of common stock . . . . . . $ 1.85 2.01 (8)

Dividends declared per share . . . . . . . . . . . . . $ 1.74 1.72 1 Federal, state and local taxes per share . . . . $ 2.47 2.48 --

Book value per share . . . . . . . . . . . . . . . . . . . $ 18.06 18.60 (3)

Net property and plant in service (000). . . . $ 801.850 707.541 4 Capital expenditures (000) . . . . . . . . . . . $ 222.345 217.946 2 Operating Statistics Electric:

Customers-year end . . . . . . . . . . . . . . . . . 419.018 416.546 1 Total sales (000)-megawatt hours . . . . . . . . 10.171 10.230 (1)

System peak load (net)-megawatts . . . . . . . 2.045 2.105 (3)

Average use per residential customer-kilowatt hours ................. .... 10.042 9.794 3 Gas:

Customers-year end . . . . . . . . . . . . . . . .. . 263.835 262.596 -

Total sales (000)-thousand cubic feet ( mcf) . . . . . . . . . . . . . . . . . . . . . . . . . 58.024 63.355 (8)

System peak-day load-mcf. . . . . . . . . . . . . . . 452.218 488.024 (7)

Average use per residential customer-hundreds of cubic feet ..................... ......... 1.339 1.422 (6)

This annual report and the financial statements it contains are submitted for general information and not in con-nection with any sale or offer for sale of, or solicitation of any offer to buy, any securities.

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or enorts to reduce the costs of the first East Bend coal-fired generating To Our Shareholders: producing electricity have saved mill. ions unit is scheduled for full operation in We were pleased to announce on Jan- of dollars annually. Preventive mainte- March 1981, followed by the Zimmer i uary 28,1981, that annual dividends on nance programs and employee training nuclear unit and the Killen coal unit, f your cornmon stock were increased 8C have contributed to a significant both scheduled for start-up in 1982.

per share, raising the dividend rate to increase in the number of kilowatt hours With these units operating, the Com-

$1.82 per share for 1981. It is the produced by our generating plants. pany will have sufficient generating desire of the Board of Directors to be These improvements reduced purchased capacity until late in the decade.To able to authorize dividend increases each power a second straight year and complete the construction of these year. However, dividend increases will resulted in savings of about $20 million three generating units on the current depend, in part, on favorable rate deci' over 1978. schedule will result in the largest. two-sions from regulatory commissions in Ninety-eight percent of the Com- year capital expenditures budget ever the future. Currently, the Company has pany's electricity is generated from coal, incurred by the Company-$273 million three rate increase requests pending, and fortunately our nation has an in 1981 and $248 million in 1982. Cap-totaling $121 million in additional annual abundant supply. However, the Com- ital expenditures last year were $222 revenues. We anticipate favorable deci- pany's system generating reserve capac- million.

sions on these cases which will permit ity is lower than desired. This past win- Last fall we announced a $400 million us to eam a higher level of return. ter the Company operated with a cutback in the Company's five-year con-in 1980 eamings per share of com- generating reserve of only 15%. This struction program. This was made pos-mon stock declined to $1.85 per share reserve percentage will improve since sible by anticipated energy conservation from $2.01 in 1979. The return on on the part of our customers and a sbareholders' investment was 10.1 %, CAPITAL EXPENDITURES 1980-1985 lower forecasted level of economic activ-still below the 14.58% return deter. (MILuoNs of DOLLARS) mined by the state utility commission 2ac construction expenditures was accom-m as the appropriate level for the 2co plished by the cancellation of the second s248 Company. Killen generating unit and a change in 2*

We find these results disappointing szzz ownership shares of coal generating because your management and 220 -

units owned with The Cincinnati Gas &

employees instituted measures that zo Electric Company. The cutback in capital sies improved operations and cut costs in all 'e outlays will become significant begin-areas of the Company in 1980. How- mo-- ning in 1983 and also will reduce the ever, rising costs of coal and natural gas, S'43 8'43

, need for sa!es of securities.

higher interest rates, inflation at 10%

tzo-to 13% and the burden of more govemment regulation continue to '*

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i Financial Review The charts on these pages are designed to provide, at a glance, an understanding costs, part of which are recovered through cost adjustment clauses. Iri of the changes in results of operations March 1979, the Public Utilities Com-for the years 1978,1979 and 1980. mission of Ohio (PUCO) authorized an ELECTRIC REVENUES & SALES annual increase in electric revenues of

. aux. .m n . 5 man . HWM ,MR Energy Sales approximately $40 million, which Electric and gas energy sales are 5* included a $30 million interim increase

,o , impacted by a variety of factors .includ' in effect since June 1978. In July 1980, ing the level of business activity, the 5"

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the PUC0 authorized a $32 million co- . number of new households. customer .

increase in annual electric revenues, g ST* f. conservation and general weather condi-which included a $29 million interim 4 . , tions. Total electric sales for the three increase in effect since March 1980, d, .

pg years have been stable, while natural gas Effective December 1980, the PUC0 i

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[d s les have declined.

During this three-year period. volumes granted an interim electric increase of

$48 million. In June 1980, the PUC0 g of energy sales reflected the recessionary also authorized an increase in annual gas o Ko- businms conditions that began in 1979 revenues of $7 million. As discussed in

j and steadily grew worse through 1980. the Energy 1980 section, which follows.

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The economy of the greater Dayton other pending electric and gas rate metropolitan area is very dependent increase requests will be acted upon wn upon automotive and related industries. during 1981.

Consequently, the area was more adversely affected by the current reces. Operating Expenses

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sion than other portions of our service Total operating expenses have increased territory end the country as a whole. As in each of the last three years with an 5

m o o a result. industrial electric sales dropped 7% in 1980, while industrial gas sales increase of 13% in 1980. One of the principal reasons for these increases is i g c fell 17%. the higher expense for coal used to y s-he Il W %d" Residential electric sales in 1980 produce electricity. Coal burned in 1980 o increased 3W% due principally to a cost $38 per ton, a 31% irvrease over 3 warmer summer than in 1979. Residen. the cost of $29 per ton in 1978. This 5 o- " " " tial g is sales fell nearly 6%. mostly due increase in coal expense is due in part to to customer conservation. The down. the purchase of more expensive. Iow sul-turn in nationwide home construction fur coal to meet the more stringent was also experienced within the Com. government environmentai requirements.

GAS REVENUES & SALES pany's service area, as evidenced by the The Company's efforts to increase the

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addition of only 2.200 residential elec- output of electricity from its genarating aso tric customers in 1980, down from the plants and, in particular, from its more

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prior 10-year annual average of 6.700. efficient units at Stuart Station, have

"" si been very successful and, as a result, evenues 5'87 snz have helped to hold down expenditures Total operating revenues have increased for coal and purchased power. Purchased N- s=a in each of the last three years, with an power expenditures in 1980 were $13 i$ y' 9 (7 1 increase of 13% in 1980. The higher million, compared with $33 million O 4 hi go- revenues resulted from base rate in 1978.

O increases and higher coal and natural gas 5 so-B 5 - e e so PURCHASED & GENERATED POWER

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In each of the past three years, the The amounts of financing costs (Al-OTHER OPERATION &

Company has purchased reduced towance for Funds Used During Con-volumes of natural gas. However, the struction) transferred to construction in h AEEy S cost of gas has nsen so rapidly that the 1980 rose because of the increase in = rumc meumoa = ==nve mocem Construction Work in Progress during overall expense increased. The cost per i40 thousand cubic feet (MCF)in 1980 was the year and the higher interest rates izo- site

$2.53, compared with $1.90 in 1978. and cost of equity financing, an increase of 33% We expect this cost $99 Construction Program and e im- s9i l to continue to rise as the Federal Capital Resources 3 govemment permits natural gas prices to rise to their true value in the world in 1980 the Company invested $222 ii d},

market which is currently approximately million principally for electric generating C co- yg Q,

SS per MCF, plants to provide energy for our custo- o d Other operatior and maintenance mers. Funds for this investment were obtained through sales of securities. The g*- .

expenses include wages and benefits for , a 20-Company currently estimates that its =!  ;

employees, material and supplies used . o_

capital expenditures program will total to maintain facilities and outside con-tract services including tree trimming.

ely $273 mi ion n 981 nd .. . . .o m,m j legal, accounting and other services. The

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in addition, $69 million of securities 1e most significant increase resulted from come due m 1981 and $121 million ,,,,

additional maintenance costs of electric 2-come due in the 1981-198S period.

generating units to improve operating

• pe)j efficiency and productivity. In 1980 two The Company anticipates that it will im- ,,, p of the 600-megawatt (MW) Stuart Sta- finance a significant portion of these y M tion units, as well as two smaller units, requirements from extemal sources in by . Q~

i underwent scheduled five-year generator the form of debt and equity securities. 8 ,o_

overhauls. In addition, there were sev- The amounts and types of these addi- pg eral major unscheduled maintenance tional securities will be affected by the g 40-projects which included the repair of a timing and amount of rate increases, 8 large generator rotor at the Conesville conditions of the capital markets, res- 3 20 -

Station, and repairs of the main trans- trictions on the issuance of additional 5 ,_ .

19M 978 1979 former and cooling tower at the Miami first mortgage bonds under the Com.

Fort Station. These commonly-owned pany's Indenture and other factors.

units are operated by other companies. At Decomber 31,1980, the Company We have also hired additional employees had $96 million in informal bank lines of credit and a $75 million bank loan PURCHASED GAS to perform maintenance at generating plants, to design and program new agreement of which $46 million and computer systems and to handle the $20 million. respectively, were out- i6 burgeoning govemment demands. All standing.The Company from time to iso _ sie other items of expense have increased time issues commercial paper as a 135 -

stas si2s due to the impact of inflation. means of raising short term funds instead of bank borrowings and had $9 Fincncing Costs million outstanding at year end. @

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Interest charges and preferred dividends o 90-increased primarily due to the issuance @73_

of securities required to finance the con- O ,3 struction program. l3ao-COAL CONSUMED Ec4 , -, - ,

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($ l SD/MCF) 18212/MCF) ($15VMCF) g EMME V0WME VoWME ifD- 4D- 90-iBo- 48- So-

$172 17o - 4.7- 70 it0- 4.6- 60-E 45 o iso- sic 4s_ g30_

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' MTSq Operations at DP&L's coal-fired power Work continued in 1980 on the con-Enerav

~ 1980 plants continued to improve and con- struction of the East Bend and Killen tributed substantially to the 1980 level coal-fired stations and the William H.

of eamings. For example, improve- Zimmer nuclear station. Both the East ments at the 2,400 MW J.M. Stuart Bend and Killtn units are located on the Station, one of the nation's largest Ohio River for access to economical.

generating plants, helped to signifi- barged coal. DP&L has invested $119 cantly offset rising fuel costs and saved million in the 600-MW East Bend unit customers approximately $20 million which will be operated by The Cincin-over the last two years. Each of the four nati Gas & Electric Company. Our cus-Stuart units operates under the direc- tomers will receive 31% of the electric-tion of a unit manager and a manage- ity generated when the first unit at ment team trained specifically for this East Bend goes into comn ercial opera-operation. Extensive equipment modifi- tion this March.

cation, the acceleration of computer- DP&L is responsible for construction ized preventive maintenance programs and operation of Killen Station, sched-and continued training for manage- uled for completion in October 1982.

ment, operrtions and maintenance per- Helping make this project successful are sonnel contributed to increased gener- EBASCO Sen/ ices incorporated, which is ating equipment availability. providing engineering and procurement This on-going improvement program support, and Daniel Construction Com-has a great impact on the Company's pany, which is providing construction overall system performance since our management for the project. Two share of the large, modern units at innovative approaches make this pro-Stuart represents almost a third of our ject an example of the Company's total system generating capacity. commitment to efficiency and cost con-DP&L's system heat rate has also trol. A master project schedule provides improved over the last two years. Heat management control over 20,000 engi-rate is a measure of the energy needed neering procurement, construction and to produce one kilowatt hour of elec- start-up activities. Th's master schedule tricity. The less energy required. the ensures coordination of this $500 mil-lower the cost to our customers. How- tion project. As a result, the 50% com-ever, improving existing generating sta- pletion benchmark was achieved on tions is only one part of DP&L's Energy December 31,1980, exactly as planned.

Development Program. A computerized cost-control system tracks more than 2,600 construction tasks. This system enables productivity 6

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M/ r-and cost information to be maintained jects which will he!p reduce eneroy cost and upd ited weekly Mon:tonng actual increases to our customers in the J V hrt stats. c ne d Fe cor.tr, s larg Mt 1980s. ca + rej gererem vts. represents rero and p%ected costs on a timely basis hn poved the 'ntormation needed to present cost overruns DP8L's semce strategy was modified in December 1979 to once again offer

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($1N[t)+Icn sen..e pre.aes ma,qvt controi cuer eg t r rhcI DPSI rewgnaed trut the Kmen project natural gas in our semce area. More neug. prmreme t.r corst uctan an t start up da " C "St'u'ter timennes rz.e teen me wuld inuease pb opportunities in the than 3.000 new natural gas semces wt no wt overruns Tr.e ert is scheued f r area around b,,ngrtsvine. Ohio, whKh were instaUed in 1980, reversing the gy. . m n octae 1982 m omne 1979 has one of the highest unemployment downward trend caused by the 1972 nauri gn was once av s re ed to custcmes lewis in the state DPSL and Daniel ban on new connections. Conversions our se we awa Lr: yer nu, nature gas ser-from other heating fuels, such as od. <es ren 156 moes a pasta gas -a n exten initiated pre employment tra:ning pro " Ed* 9"; d a ma s wn sa.q grams in weang. bodermaking. pipe- accounted for many of DP&L's new gas meare beca se :t d3es not cormde wtr wn htting and iron wmking and encour- customers. In coming years. increasing t.na eesarc to mccsture w an aaenate aged local men and women to seek numbers of new homes wdl use this sum, ef natare gas ae tne antiona' capaat) emph yment at the construction site. clean, efficient fuel Because of conser- 'e e de e>ec~ n DM ge m a pu The development of basic construction vation programs. consumers wdl use P"t 'n to *t " (2" ^"9) *M" me ris t* vo;t the ammg decue Mis eruN. ed 950 local people tojcin less natural gas. thereby helping to the hdien construction force. stretch avadable supphes. Columbia Gas Nuclear power is an economical and safe Transmission Corporation, our major nes of requests for electnc rate energy source and is vita lly needed in suppher, projects tnat natural gas will increases to begin to recover costs of reaching Amenca s goal of' energy inde be avadable to meet our customers' our energy deselopment program as energy requirements throughout the new units start producing electncity.

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pendence. The accident at Three Mde Island 'n March 1979 stdl impacts the next decade and beyond. We asked that part of the revenue from industry A 14 month moratonum in In May the PltCO granted DP&L a 4% tne July request be granted on an increase in natural gas revenues. Mean. accelerated basis due to the Company's igensmg. rettofits on eMsting stations and mod:fications to those under con whde, costs for operating and maintain. strained financial condition. The PUCO structton have delayed nuclear progress ing our 3.700 mde natural gas distnbu. agreed that the circumstances confront-nationwide. Znnmer nudear station. tion system continued to nse. As a ing the Company required immediate althou@ 9% complete, has expe- result in Nosember DPSL announced action. In November the Commission nenced delays as newly requ: red the need for an additional 5% increase granted DPSL the accelerated $48 rnd-changes archmt;emented Because in natural gas rates. The new rates are lion increase. the fun amount DP&L owns 31.5+ of this 807 YW expected to take effect in late 1981. requested. We view this as a positive statMn. t;mely completion is vital to first step toward a decision on the Last March a 124 mtenm increase in t9 Com;any's Ene gy r Development electnc revenues wds granted. In JJ!y "9P Program Operatm ; ncerse heanngs 'or " * '

DP&L also submitted the nrst of a se Zimmer are expected to res me in 1981.t mmer is one o' the majcr pro 7

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./' " d With the start up of the first East Bend unit, a second efectric rate increase Service 1980 A new feature to our Budget Payment request of 9% was announced in early January. Electricity from East Bend is Plan for customers, major renovation needed now to meet the changing, but projects and stronger emphasis on cus-tomer relations were among our 1980 still growing energy needs of the citi.

zens of West Central Ohio, service programs. Despite the past year's spiraling inflation, DP&L found it is evident that the financial and oper-pp tugities to hold down costs and ating challenges of the past year will rehne exisung pmg ams.

continue. DP&L's efforts to increase Better use of existing facilities was a productivity in order to combat infla.

tion and offset rising costs of fuel, labor priority throughout 1980. For example, and money will continue. Our commit. DP&L began a major renovation of the ment to improving existing programs 25-year-old Dayton service building to will help ensure adequate future sup_

better utilize existing space. By central-plies of energy to the people in West  ! zing senace, repair and system operat-Central Ohio at the lowest possible cost ing functions, customer requests will be during the coming decade, processed more efficiently and field crews will be directed to trouble spots more quickly. These changes saved $2 million compared with new construction.

An innovative, radar-equipped weather center was introduced in 1980. Advance waming of 26 severe thunderstorms between June and August drastically reduced the time and costs required to mobilize repair crews.

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. t .. ,~,.mm.,, cw- 25.000 5tudents in ser. ice area 5d 'C IF,5 d;3 D]Ce 15 3n impON3nt f a'i C+ C ;" e'"Mg) deveiOpment e4n";

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Non-Management I, ,, .

Directors

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Daniel C. Boone Stephen T. Bow Robert G. Chollar Charity E. Earley

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Jane G. Haley Robert J. Kegerrels Robert A. Kerr Robert B. Nilen pv l James W. McSwiney David B. Meeker James R. Thomas John F.Torley 10

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Directors Robert A. Kerr (A.E)

President Officers Winters National Corporation Robert E. Frazer Daniil C. Boone (A.C)

President and Chief Operating Officer Dayton, Ohio President and Chief Executive Officer Armco inc. Robert B. Killen ( A.D.F) Peter H. Forster Middletown. Ohio Chairman of the Board Executive Vice Presider.t St:phin T. Bow (A.B) The Dayton Power and Light Company Carl R. Morey Senior Vice President Dayton Oh,o i Vice President-Energy Production Metropohtan Life insurance Co. James W. McSwiney (C.E*.F) John R. Newlin Dayton. Ohio Chairman of the Board V cc President and General Counsel Mead Corporation 2 Robert G. Chollar (B'.E)

Chairman of the Board Dayton. 0hio p Charles F. Kettering Foundation David B. Meeker (C*.F) Management Dayton, Ohio President and Chief Executive Officer Hobart Corporation RMe Charity E. Earley (B.D) Treasurer Troy. Ohio Member. Trustee or Director 1 U ' '

Various community organizations James R. Thomas Comptroller Dayton. Ohio President The Dayton Tire and Pauline M. Easter P:t:r H. Forster Secretary Executive Vice President Rubber Company The Dayton Power and Light Company Dayton, Ohio James E. Clark Dayton, Ohio John F. Torley (A*.C.F) Assistant Vice President-Chairman. Executive Committee Computer Services Robert E. Frazer (F')**

Dayton Malleable Inc. Allen M. Hill President and Chief Executive Officer The Dayton Power and Light Company Dayton. Ohio Assistant Vice President-Planning Dayton. Ohio 1981 Committee Assignments Charles W. Shoup J ne G. Haley (D.E) A Energy Resources and Forecasts Assistant Vice President-Customer B Audit Review Business Operations President ^ " .*

C.H. Gosiger Machinery Company o EEunNa [E e tions Steven G. Smith Dayton. Ohio . E Finance Assistant Vice President-Engineering

1. # 9 Robert J. Kegerrels (D*.F) [ Noye committeechairman President "

Ex of0cio member of all committees Richard L Stump Wright State University 1 Resigned oct. 16,1980 Assistant Vice President-Customer Dayton. Ohio 2 Retired Feb.1.1981 Service Operations 11

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l Financial and Statistical Summary The Dayton Power and Light Cornpany 1980 1979 1978 1977 1976 1975 For the years ended December 31.

Retum on shareholders' investment. . . . . . % 10.1 10B 93 9.1 11 2 123 Earnings per share of common stock . . . . $ 125 2.01 1.73 1.70 2.05 224 Dividends declared per share. . . . . . . . . . . . $ 1.74 1.72 1.66 1.66 1.66 1.66 Dividend payout ratio . . . . . . . . . . . . . . . % 943 85.7 95B 96.1 80B 73B Ear"d93 on common stock (000) . . . . . . $ 47.166 47239 36.774 31.728 34S32 32.774

% rating revenus (000) . . ... ..... $ 650.000 577232 535B13 446524 397B62 357575 December 31.

Book value per share . . . . . . . . . . . . . . . . . $ 18.06 18.60 1839 18.60 1839 18.15 1.480B08 1 270.453 1.118.707 992.109 895.132 Total assets (000) . . . . . . . . . . . . . . . . . . $ 1.685.044 Long-term debt and preferred stock with mandatory redemption provisions (000) . . . . . . . . . . . . . . . . $ 807S91 774 S03 602.168 505.623 485S79 435966 Number of Shareholders Common . . . . . . ........ ... ... 74 S20 70.969 70357 65.173 56B69 51325 Preferred . .. .. ... ...... ..... 4.013 4.142 4205 4218 4231 4.012 Selected Quarterly Information The Dayton Power and Light Cornpany Earnings Earnings per on Share of Common Stock Operating Operating Net Common Common Dividends Market Price Revenues income income Stock Stock Paid High Low

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thousands ------

For the quarters endzd 1980:

March 31. .. $ 195.801 20.256 18.918 14.889 .62 .435 15% 12W June 30 . . . . . $ 145.763 16.871 14.774 10.772 .45 .435 15 12%

September 30. . $ 138.563 18.105 15.983 11.255 .42 .435 15 13 December 31. . . . $ 169.873 17.788 15.096 10.250 36 .435 13% 11%

For ths quarters anued 1979:

March 3 i . . . . . . . $ 185.296 21.057 19.417 16.430 .70 .415 16% 14%

June 30 . . . . . . . $ 130385 15.783 14.636 11.250 .48 .435 16% 15 September 30. . . $ 114.938 14.620 13.988 10.053 .43 .435 17% 15%

December 31. . . $ 146.613 13.799 13.495 9.506 .40 .435 16W 13 %

1 13 9 -

R l

% Change Statement of Resuits For the years ended oecember 31, 1980 from1979 1979 '1978

- tnousands -

Of. Operations Operating Revenues The Dayton Power and Light Company Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . $45 4.062 14 $398.552 $362.145 Gas............................... 188A66 10 171.819 166.922 S t ea m . . . . . . . . . . . . . . . . . . . . . . . . . . 7A72 9 6.861 6.74@

Total operating revenues . . . . . . . . . . . 650.000 13 S77.232 535.813 Operating Expenses Operation Fuel used in production . . . . . . . . . . . 191373 17 163.958 141.83@

Purchased power. . . . . . . . . . . . . . . . 13.258 (21) 16.874 32.541 Purchased gas . . . . . . . . . . . . . . . . . . . 149.675 10 135,687 128.037 Other...... .................... 70.243 11 63.185 58.443 Maintenance . . . . . . . . . . . . . . . . . . . . . . 46.139 28 36.116 32377 Provision for depreciation and amortization . . . . . . . . . . . . . . . . . . . . 32.34S 7 30.183 28.580 Taxes other than income taxes ...... 48.604 8 45.08S 38B31 Income taxes . . . . . . . . . . . . . . . . . . . . . . 20.672 20 17.239 8.846 Deferred investment tax credit (net) . . . 4A71 23 3.646 8.506 Total operating expenses . . . . . . . . . . . 576.980 13 511.973 477.999 Operating Income. . . . . . . . . . . . . . . . . . 73.020 12 65.259 57B14 Other income and Deductions Allowance for equity funds used during construction . . . . . . . . . . . . . . 27.947 12 24.908 16.058 income taxes-credits . . . . . . . . . . . . . . . 10.904 47 7.442 S.065 Other ( net) . . . . . . . . . . . . . . . . . . . . . . 857 (38) 1383 2.479 Total other income and deductions. . . 39.708 18 33.733 23.602 income Before Interest Charges . . . . . 112.728 14 98.992 81,41E Interest Charges First mortgage bonds. . . . . . . . . . . . . . . 53.761 25 42.995 37.03E l Other.. ............ . ......... 6.703 100 3.348 2.46E Allowance for borrowed funds used during construction-credit. . . . . . . . . (12307) 41 (8B87) -(5.637 Net interest charges . . . . . . . . . . . . . . 47.957 28 37AS6 33B65 N et i nc o me . . . . . . . . . . . . . . . . . . . . . . 64.771 5 61.536 47.551 Preferred dividends . . . . . . . . . . . . . . . . . . 17.606 23 14.297 10.77)

Earnings on Common Stock . . . . . . . $ 47.166 -

. $ 47.239 $ 36.774 Average Number of Common Shares O utsta nding . . . . . . . . . . . . . . . . . . . . 25,489 8- 23.556 21.252 Earnings Per Share of Common Stock........ .................. $ 1.85 (8) $ 2.01 $ 1.72 Return on Shareholders' investment. . . . . . . . . . . . . . . . . . . . 10.1 % (6). 10.8 % 939 The accompanying notes are an mtegral part of the above statement.

14

1 1

Statement Of SOurCOS For the years ended December 31, 1980 1979 1978

- tnousands -

of Funds Invested in INTERNALLY GENERATED FUNDS Plant and Pacilit.ies yono,n ,1,in,oinin,3o,in,s, The Dayton Power and Light Company Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,771 $ 61.536 $ 47.551 Add (deduct)

Depreciation and amortization . . . . . . . . . . . . . 34541 32A48 30.594 Deferred income taxes . . . . . . . . . . . . . . . . . . . 6.957 SB65 3226 investment tax cnydit (net) . . . . . . . . . . . . . 4A73 3.621 8.547 Allowance for ec;uity funds used during constnJction. . . . . . . . . . . . . . . .. . (27 S47) (24 S08) (16.058)

Funds provided from operations. . . . . . . . . 82.795 78.562 73B60 Dividends paid on common stock. . . . . . . . . . . . . (44501) (40A85) (35216)

Dividends paid on preferred stock . . . . . . . . . . . . (17.605) (14297) (10.777)  ;

Funds retained in the business . . . . . . . . 20.689 23.780 27B67 Other Funds Provided-net Changes in working capital (excluding short-term debt and temporary cash investments)

Accounts receivable . . . . . . .. . . . . . . . . . . . . . (6563) (2349) (4,754)

Fuel stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18.602) (17323) 2.106 Prepayments and other . . . . . . . . . . . . . . . . . (8403) 289 2.754 Accounts payable , . . . . . . . . . . . . . . . . . . . . 4A68 6,146 6.646 Other current assets and liabilities . . . . . . . . (1,018) 10.886 9.768 Othe r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.161) (4.451) (3.911)

Other funds provided-net . . . . . . . . . . . . (32279) (6B02) 12.609 Intemally generated funds . . . . . . . . . (11590) 16,978 40A76 FUNDS PROVIDED BY INVESTORS-net issuance of common stock . . . . . . . . . . . . . . . . 51325 7351 48317 1ssuance of preferred stock . . . . . . . . . . . . . . . 29542 44.727 39.759 Issuance of long-term debt . . . . . . . . . . . . . . . 58.693 135.450 63.732 Reduction in long-term debt and preferred stock . . . . . . . . . . . . . . . . . . . . . . . . (6.071) (3.430) (24.639)

Temporary cash investments (net) . . . . . . . . . . . . 16B24 (8.038) (8.786)

Short-term debt (net) .. ................. 55.675 -

(4500)

Funds provided by investors-net . . . . 20SS88 176.060 113 883 Net invested in plant and facilities . . . . . . . . . . . 194398 193.038 154359 Allowance for equity funds used during constnJction. . . . . . . . . . . . . . . . . . . 27 S47 24.908 16.058 Total Invested in Plant and Pacilities . . . . . . . $222345 $217S46 $170.417 The accompanying notes are an integral part of the atae statement.

15

l Balance Sheet Assets oecember ai. 1980 1979 1978 The Dayton Power and Ught Company - thousands -

Property and Plant Electric plani in service . . . . . . . . . . . . . . . . . . $ 1.028.893 $ 970.292 $ 900.360 Gas plant in service . . . . . . . . . . . . . . . . . . . . . 110.446 105.854 104.393

)

Steam plant in service . . . . . . . . . . . . . . . . . . . . 12.305 11.902 10.205 Constructlon work in progress . . . . . . . . . . . . . 659.701 506.916 370.756 Acquisition adjustments, being amortized . . . . 3.744 3.991 4.237 1.815.089 1.598.955 1.389.951 Less accumulated provision for depreciation and amortization . . . . . . . . . 349.794 320.507 298.524 Less accumulated deferred income taxes related to liberalized deprenation and amortization . . . . . . . . . . . 14.567 9.189 S.176 Net property and plant . . . . . . . . . . . . . . . 1.450.728 1.269.259 1.086.251 Current Assets Cash..... .......................... . 7.708 S.462 S.323 Temporary cash investments, at cost . . . . . . . . - 16,824 8.786

.^ ccounts receivable, less provision for uncollectible accounts of

$3.338.000. $2,457.000 and

$1.828.000, respectively. . . . . . . . . . . . . . . 54.429 47.866 45.517 Fuel stock, at average cost . . . . . . . . . . . . . . . . 68.255 49.653 32.330 Materials and supplies, at average cost . . . . . . 16.228 11,596 9.908 Prepayments and other . . . . . . . . . . . . . . . . . . . 28.609 20.206 20.495 Total current assets . . . . . . . . . . . . . . . . . . . 175.229 151.607 122.359 Other Assets . . . . . . . . . . . . . . . . . . . . . . . . 59.087 59.942 61.843 Tbtal Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $1.685.044 $1.480.808 $1.270.453 _

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

I 16

l capitalization December ai. 1980 1979 1978 and Liabilities - thousands -

Capitalization (see Statement of Capitalization)

Common shareholders' equity. . . . . . . . . . . . $ 496.798 $ 443.266 $ 429.434 Preferred stock Without mandatory redemption provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 82.851 82.851 82.851 With mandatory redemption provisions . . . . . . . . . . . . . . . . . . . . . . . . . 136,250 107.500 63.750 long-term debt . . . . . . . . . . . . . . . . . . . . . . 671,741 667.403 538.418 Total capitalization. . . . . . . . . . . . . 1.387.640 1.301.020 1.114.453 Current Liablittles  ;

C::r. at portion of first mortgage i bonds and preferred stock . . . . . . . . . . . . . . . 46.250 1.250 1.250 l Notes payable . . . . . . . . . . . . . . . . ...... 57.882 2.420 1.928 Accounts payable . . . . . . . . . . . . . . . . . . . . . 50.719 46.251 40.105 Accrued taxes . . . . . . . . . . . . . . . . , . . . . . . . . 50.068 47,18'T 46.121 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . 12.414 10.636 7.754 Gas supplier refunds due customers . . . . . . . . . 7.510 11.223 2.268 Other. .............. ..... .. . .. .. 13.694 8.780 8.970 Total current liabilities . . . . . . . . . . . . . . . . . 238.537 127.747 ' 108.396 Deferred Credits and Other Income taxes other than those related to liberalized depreciation and amortization. 20.399 18.827 17.923 Investment tax credit . ................. 36.083 31.610 27.989 Other... .... .. . ........... ....... 2.385 1.604 1.692 Total deferred credits and other . . ..... 58.867 52.041 47.604 Tbtal Capitalization and Liabilities . . . . .$1.685.044 $1.480.808 $1.270.453 The accompanyino notes are an Integral part of the above statement.

17

Statement of oecemoersi. 1980 1979 1978

- tn = sands -

Capitalization Common Shareholders' Equity The Dayton Power and Light Company Common stock Authorized 50.000.000 shares of $7 par value, outstanding 27.503B47.

23B35.462 and 23356.046 shares, respectively . . . . . . . . . . . . . . . . . . . . . . . . . $192526 $166S48 $163.492 Other paid-in capital. . . ................. 178.700 153.511 149.789 Earnings reinvested in the business . . . . . . . . . 125572 122.907 116.153 Total common shareholders' equity . . . . . . . 496.798 443.266 429.434 Preferred Stock-Cumulative Authorized 4.000.000 shares of $25 par J value and 4.000.000 shares of $100 par value Outstanding $100 par value without mandatory redemption provisions 3.75% Series A. 93.280 shares. . . . . . . . . . . 9328 9328 9328 3.75% Series B. 69398 shares. . . . . . . . . . . 6.940 6.940 6.940 3.90% Series C 65B30 shares. . . . . . . . . . . 6583 6.583 6.583 7.48% Series D, 150.000 shares ......... 15.000 15.000 15.000 7.70% Series E. 200.000 shares ......... 20.000 20.000 20.000 7375% Series F. 250.000 shares . . . . . . . . 25.000 25.000 25.000 Total without mandatory redemption provisions . . . . . . . . . . . . . . . . 82.851 82B51 82B51 Outstanding $100 par value with mandatory j redemption provisions (exclusive of sinking fund payment due within one year) 1250% Series G. 212.500,225.000 and 237.500 shares respectively. . . . . . . . . . 21.250 22.500 23.750 8%% Series H.400.000 shares .......... 40.000 40.000 40.000 9%% Series 1.450.000 sha res . . . . . . . . . . 45.000 45.000 -

11.60% Series J. 300.000 shares . . . . . . . . 30.000 - -

Total with mandatory redemption provisions . . . . . . . . . . . . . . . . 136.250 107.500 63.750

}

The accompanying notes are an integral pa t of the above statement.

18

Statement of December ai. 1980 1979 1978

- tnousands -

Capitalization Long-term Debt The Dayton Power and Light Company First mortgage bonds 10%% Series Due 1981 . . . . . . . . . . . . . . -

45.000 45.000 3%% Series Due 1982. . . ......... . 15.000 15.000 15.000 3% Series Due 1984 . . . . . . . . . . . . . . . 15.000 15.000 15.000 4.45% Series Due 1993 . . . . . . . . .... 50.000 50.000 50.000 5%% Series Due 1997. . . . . . .. .... 40.000 40.000 40,000 6%% Series Due 1998. . . . . . . . . . ..... 25.000 25.000 25.000 8.95% Series Due 1998 . . . . . . . . . . . . . 20.000 20.000 20.000 8%% Series Due 1999. . . . . . . . . . . . . . . . . 30.000 30.000 30.000 10%% Series Due 1999 . . . . . . . . . . . . . . . 45.000 30.000 -

9W% Series Due 2000. . . . . . . . . . . . . . . . . . 35.000 35.000 35.000 8%% Series Due 2001. . . . . . . . . . . . . . . 45.000 45.000 45.000 8% Series Due 2003 . . . . . . . . . . . . . . . . . . 40.000 40.000 40.000 9W% Series Due 2003. . . . . . . . . . . . . . . . . 50.000 50.000 35.000 10.70% Series Due 2005 . . . . . . . . . . . . . . 3.175 3.175 3,17S 8%% Series Due 2006. . . . . . . . . . . . . . . . . 50.000 50.000 50.000 63S% Series Due 2007 (Pollution Con trol) . . . . . . . . . . . . . . . . . . . . . . . . . 14.200 14.200 14.200 8W% Series Due 2007. . . . . . . . . . . . . 60.000 60.000 60.000 12%% Series Due 2009 . . . . . . . . . . . . . . . . 63.620 57.000 -

600.995 624 375 522375 Unamortized debt discount and premium (net) .............. ..... (228) (176) 295 600.767 624.199 522.670 Guarantee of pollution control obligations-7W% and 7%% Series A Due 1999 h through 2009 . . . . . . . . . . . . . . . . . . . . . 29.995 26390 -

j 10W% 1980 Series Due 2000 ... ...... 6.651 - -

Bank loan agreement . . .......... . ... 20.000 - -

Notes payable-Due through 1984, average rate 6.9%. 7.0% and 6.9%. respectively . 55 95 130 10% mortgage note payable-Due in installments through 2012. . . . . . . . . . . . 8.828 8.871 8.911 Capital lease obligations . . . . . . . . . . . . 5.445 7.848 6.707 Total long-term debt . . . . . . . .. .. 671.741 667.403 S38.418 Total Capitalization . . . . . . . . . . . . . . . $ 1387.640 $1301.020 $1.114.453 Statement of For tne years ended December 31, 1980 1979 1978 Earnings Reinvested - thousands -

. Earnings Reinvested in the Business in the BUSINESS 8alance at beginning or year . . . . . . . . . . . . . $122.907 $116.153 $114595 The Dayton Power and ught Company Net income ...... ... . . .. 64.771 61.536 47.551 187.678 177.689 162.146 Dividends paid-common stock . . .. . . (44501) (40.485) (35.216) preferred stock . .. .. . (17.605) (14297) (10.777)

Balance at End of Year . . . . . . . $125.572 $122.907 $116.153 Tre accompanyrng notes are an integral part or the above statements 19

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1 investment tax credit. wnicn reduces tax currentiy Notes to the Financial payable, is deferred and amortized over the lives of the l

Statements reiated property. Tne Company aiso nas unused investment tax credit of approximately $38 million which j

1 l

1. Summary of Significant will be used to the extent permitted by tax regulations -

Accounting Policies to reduce future tax tiability.

The income taxes-credits, classified under Other income Principles of Consolidation and Deductions, result primarily from the Federal income The Company's financial statements include a wholly tax deductions related to interest expense arising from owned subsidiary which owns the Company's corporate nyestments in Construction Work in Progress.

headquarters building. The other subsidiaries are not sig- The following schedules depict the computation of tax j nificant and are accounted for on the equity basis. -

expense, the current and deferred components of tax Revenues expense and the manner in which tax expense is reflected in the Statement of Results of Operations:

The Company records revenues when customers are billed. The revenues include charges for fuel and gas costs 1980 1979 1978 billed to customers through cost adjustment clauses.

(000) % (000) % (000) %

Purchased Gas and Fuel Costs j Prior to December 1979, each month's gas costs Tax Expense included suppliers' deliveries from the 20th of the prior Federalincome tax at month through the 19th of the current month. As a statutory rate applied result of an order by the Public Utilities Commission of to pre-tax income ... $36345 46 $34.490 46 $28.722 48 Ohio (PUCO) effective December 1979. the Company Decreases in tax from~

AFC which does not records gas cost as an expense as it is recovered through t taxau cost adjustment billings to customers. The portion of [ncoNe .... 18.609 24 15.545 20 10.414 17.'

gas costs recoverable in future periods is deferred. The cost of fuel used to produce electricity and steam is $fpfec(t on and expensed as the fuelis consumed. amortization over book depreciation Allowance for Funds Used During Construction and amortization n t deferred . . .. 3.528 4 4.341 6 5.689 9 Allowance for funds used during construction (AFC) "

reflects the estimated cost of capital funds applicable to I"N8c [t . . . 562 1 418 1 .351 1 utility plant under construction. This cost represents Other (net) . . . . . . . (593) (1) 743 1 (19) i interest charges on borrowed funds and the cost of Total tax expense. .$14.239 18 $13.443 18 $12.287 21 equity funds. The portion of AFC related to borrowed funds is recorded as a reduction of interest charges, and the portion related to equity funds is recorded as other g q mcome. Th,s i accounting practice results m these capital Tax Expense l costs being included as part of the utility plant in the Total tax currently same manner as labor and material costs. The AFC rate payable in 1980 was 8%, in 1979 was 7%% through June and (refundable) . . . . . . $ 2.165 $ 2.646 $ (719) 8% thereafter, and in 1978 was 7W%. These rates are Deferred taxes -

net of income tax effect and are compounded 1.lberalized depreciation and semi-annually. SV9 4.023 2.922 amortization . . .

Income Taxes Other . . .. .. .. 1.598 1.842 304 ,

income taxes are computed based on pre-tax income Deferred investment tax credit (ne'.) ... 4.473 3.621 8.547 adjusted for.AFC and other differences between pre-tax income and taxable income, income tax expense differs Other deferred items. . 644 1311 1.233 from income tax currently payable due to transactions Total tax expense. . . $14.239 $13.443 $12287 which affect book net income and taxable income in different accounting periods. The tax effects of certain of these timing differences, consistent with PUC0 classification of Tax regulatory policies, are deferred to future periods and are Expense as Shown in reflected in the balance sheet as deferred credits, other the5 teme of assets and if associated with property, as a reduction to Operating Expenses -

property and plant. # '"'

In determining income tax currently payable, the D $

Company has used liberalized depreciation which red net . . 4.471 3.646 8.506 currently is greater than depreciation for financial Other income and l' statement purposes, and, as a result of PUC0 rate orders. Deductions the Company has deferred taxes on a portion of the income taxes-additional depreciation (the difference between liberalized credits. . . . . . . (10.904) (7.442) (5.065) and straight-line tax depreciation using guideline lives for Total tax expense. . $14.239 $ 13.443 $12.287 i 1976 and subsequent property additions).

20

Pensions 2. Revenues Subject to Refund The Company's trusteed Retirement income Plans, in October 1980, the Company filed an application with which cover substantially all employees, do not require the PUC0 to increase annual retail electric revenues by contributions by the employees. The Company's contri- $103 million. The application also requested the PUC0 bution provides for the annual pension expense, including to allow the collection of $48 million of this increase on the amortization of unfunded past service costs over an interim basis pending the decision on the permanent twenty years. Contnbutions amounted to $5.7 million in increase.The PUCO approved the $48 million effective 1980. $5.5 million in 1979 and $5.1 million in 1978. December 1.1980, and accordingly. Revenues. Eamings Accumulated plan benefits represent the value at a cer. on Common Stock and Eamings per Share include for tain date of the benefits expected to be paid to former 1980 $2.2 million. $1.2 million and $0.05. respectively, eligible employees and present employees. based on the resulting from the increase. These revenues are subject employee's salary and service. to refund if the final order in this proceeding (expected in u 1 approves an increase in revenues of less than At January 1.1980 (the most recent actuarial valuation g '

date) the actuarial present value of accumulated plan benefits, assuming a 6% rate of retum, was as follows: 3. Notes Payable and

-thousands- Compensating Balances Contingent on employees' At December 31.1980, the Company had informal lines future service . . . . . . . . . . . . . ... $10.443 of credit of $96 milhon including unused lines of $49 Not contingent on employees' million.The Company maintains $5.7 million of compen-future service . . . . . . . . . . . . . . . . . . 70.456 sating balances for $86 million and pays commitment Total ..... ........ ..... .. $80.899 fees for $10 million of these lines of credit.

Notes payable include $9 million of the Company's The net assets available for such benefits were $94 mil- c mmercial paper.

lion at January 1.1981 and $71 million at January 1.

1980. In addition, the Company has a $75 million bank loan

' agreemcnt with $55 million unused at year end.

Proparty and Plant. Maintenance and Depreciation Property and plant in service is stated at the cost when 4. CapitallZation first put into utility service (original cost). Construction Common Shareholders' Equity costs include material, labor, overheads for payroll-related Shares of common stock were issued as follows:

costs administrative and general expenses and AFC.

1980 1979 1978 1 When a unit of property is retired the accumulated provision for depreciation is charged with the book value Public offerings .. . 3.000.000 - 2,500.000 of the property plus the cost of removal. less salvage Dividend reinvestment value. Routine repairs and maintenance of property and plan . . . . . .. . .. 458.949 360,732 261.651 replacements of minor items of property are charged to Employee plans . . . . 209.436 118.684 178.404 the appropriate maintenance expense accounts. Total... ........ 3.668.385 479.416 2.940.055 Utility plant depreciation is calculated using the straight-line method which depreciates the cost of property, less At December 31,1980. the Company had 407.344 and .

salvage value, in equal amounts over its estimated useful 508.100 shares of authorized but unissued stock life. Studies are conducted periodically to determine reserved for the dividend reinvestment plan and whether these useful lives and salvage values are employee plans. respectively.

appropriate. The annual composite depreciation rates by utility are as follows: The changes in other paid-in capital are as follows:

1980 1979 1978 1980 1979 1978

-thousands-Electric plant . ..% 3.1 3.2 3.1 Balance at beginning of Gas plant . . . . .% 2.5 2.2 2.2 year.... .... . .. $153.511 $149.789 $122.293 Steam plant . . . . . . . % 23 2.2 2.1 Premium. net of expense. received Rscijtssifications from sales of c mm n stock . . . . . 25.647 3.995 27.737 3 Certain reclassifications have been made in the prior Expenses of sales of years' amounts to make them comparable to the classifications of such items in 1980, preferred stock. . . . . (458) (273) (241)

Balance at end of year... ... .. .. $178.700 $153.511 $149.789 21 J

Preferred Stock Long-term Debt Substantially all property and plant of the Company is Without Mandatory Redemption Provisions H s first mortgage bonds, ' 3# 9#9 "9

• The following series of preferred stock may be redeemed Company at the option of the Company at the following per share Improvement and sinking fund requirements for each redemption prices, plus accrued dividends:

of the next five years average $4.5 million and may be Current Redemption satisfied by (a) cash or(b) delivery of bonds of the Price respective series or (c) unfunded property additions at 60% of the lesser of cost or fair value thereof.

Amount o i u The mortgage also provides for annual payments as a 3.75% Series A . . . . $10250 -

$10250 maintenance and replacement fund of a sum equival- j 3.75% Series B . . . . . . $103.00 -

$103.00 ent to the minimum provision for depreciation (as  !

3.90% Series C . . . . . . $101.00 -

$101.00 defined), which approximated $24 million in 1980.

7.48% Series D . . . . . . $105.095 5-1-84 $103225 This fund may be satisfied by (a) cash or (b) delivery 7.70% Senes E . . . . . $106.00 4-1-81 $101.00 of bonds issued under the liens or (c) the cost of 7.375% Series F . . . . . $105.00 6243 $101.00 unfunded property additions.

The Company has been using the cost of unfunded With Mandatory Redemption Provisions property additions to meet these requirements of the The following series of preferred stock, which are

s. y may foHow a Mem akemaWe b W e rep 2 cenain sedes ohs.

redeemable pursuant to mandatory sinking fund requirements, may also be redeemed at the option of The amounts of maturities and mandatory redemp-the Company at the following per share redemption tions for first mortgage bonds over the next five years prices. plus accrued dividends: are as follows:

Annual Year -thousands-Current Redemption Sinking Fund 1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45.000 Price Requirements 1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,000 Prior Eventual 1983............................. -

Amount to Minimum (1) (2) 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16.330 12.50% Series G. , $112.00 11-1-84 $101.00 5% 11-1-79 The Company expects to issue an additional $60 mil-8%% Series H . . $110.00 4-143 $101.00 5% 4-143 Hon of DM mMgage WS b hay N 9%% Series 1. . . . $ 110.00 5-144 $101.00 5% 5-1-85 11.60% Series J . , $111.60 7-1-85 $101.00 3% 7-146 (1) Percentage of the original amount of each issue.

5. Construction Program (2) Sinking fund commencement date. The Company estimates that its construction program will amount to $273 million in 1981 and $248 million No redemptions may be made for Series G. H. I and J at in 1982. These amounts include the Company's share of effective interest rates or dividend yields less than the construction costs associated with its commonly-owned par value yields of the respective series prior to the cur. facilities (See Note 8). The Company's ability to com- i rent redemption dates in the above table. plete its proposed construction program depends upon its financial condition. the availability of extemal funds f Mandatory redemptions for preferred stock over the next at reasonable costs and adequate and timely rate  !

five years are as follows:

increases.

Year -thousands- The Company has announced plans for the cancellation of 1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.250 the second unit at Killen Station.The Company believes l 1982........ . .. ... . .. . $1.250 that recovery of accumulated costs and further cancella- -

1983.......... . . . . . . . . . . . . . . . . $ 3 250 tion costs will be allowed by regulatory agencies in 1984...... ... . . ....... .... $3250 future rates.

1985.. .. .. . . . . . . . . . . . . . . $ 5.500

6. Supplementary income Information If four full quarterly preferred stock dividends are in The amounts of maintenance. depreciation and taxes l

i arrears, the preferred shareholders would have the other than income taxes (other than those set forth in I right to elect one-third of the members of the Board the Statement of Results of Operations) charged to of Directors, other accounts are not material.

The amounts of rents royalties advertising and research I and development are not considered material.

22

l l

7. FinanClal Information by 8. Commonly Owned Pacilities Business Segments The Company. The Cincinnati Gas & Electric Company The Company's pnmary business is the generation, dis- and. on certain projects. Columbus and Southem Ohio tnbution and sale of electric energy and the purchase, Electric Company own as tenants in common certain distnbution and sale of natural gas. The following is cer. electric generating and transmission facilities and have tain information relating to the Company's business made commitments for additional construction. The segments: agreements among the companies obligate each individ-ual company to pay its ownership share of construction 1980 1979 1978 and operation costs of each facility. Included in the Statement of Results of Operations is the Company's

-thousands - share of direct expenses. These expenses are included as For the years ended either fuel used in production or other operation and December 31 maintenance.

Operating revenues (a)

Electnc . . $ 454.062 $ 398.552 $ 362.145 facilities at December 31,1980 is as follows:

Gas. 188.466 171 B19 166.922 6B61 6.746 Company Portion Steam . 7.472 Total. . . $ 650.000 $ 577232 $ 535B13 Accumulated Plant Company Plant in Provision for Under Unit Ownership Service Depreciation Construction Operating income (a)

Electnc . .$ 67.449 $ 59.821 $ 49.439 percent - millions -

Gas. . 5.685 5597 8589 Steam . (114) (159) (214)

Production Total . . .$ 73.020 $ 65259 $ 57.814 Beckjord Unit 6 . 50 $ 38 $11 $-

income taxes (b)

Co Electnc . .$ 24363 $ 20.754 $ 14335 Unt .... 16 5 22 6 -

Gas . . . 1.112 493 3.638 Stuart Steam . (332) (362) (621) Units 1-4 . . 35 167 31 6 Total. .$ 25.143 $ 20B85 $ 17352 Miami Fort Units 7&B . 36 94 13 1 Provision for East Bend depreciation and Units 182 . 31 7 -

112 amortization Killen Unit 2. 67 - -

218 Electnc . .$ 29.489 $ 27.738 $ 26205 Zimmer Gas . 2.599 2226 2.181 Unit 1 (nuclear). ... 31.5 - -

274 Steam . 257 219 194 Transmson Total . .$ 32345 $ 30.183 $ 28.580 (at varying Capital expenditures on en ges). 62 9 1 Electnc . . . $ 214.997 $ 214.657 $ 167.101 7.087 2.043 2247 Total. .. $390 $70 $612 Cas .

Other, primanly steam . . 261 1246 1.069 Total. . $ 222345 $ 217.946 $ 170.417 December 31.

Identifiable assets Ek.ctnc . . . $1.478.680 S1279385 $ 1.081236 Gas . . 120.442 105332 105.085 Other. pnmanly steam . 8B28 10346 9.608 Corporate assets (c).. 77.094 85.745 74324 Total. . $1.685.044 $1.480B08 $ 1270.453

a) Excludes intersegment transactions which are not matenal.

b) Includes mcome taxes and deferred investment tax credit (net) applicable to operating income only

c) includes pnmanly cash. accounts receivable and certain deferred items.

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(2) Constant donar. computed by using the Consumer Price index Sunniementarv rr a Information on for all Urban Consumers. is a measure of general inflation.

Reporting the Effects ofInflation (3) Tne provisions for depreciation and amortization uneer con.

stant dollar and current cost are calculated by applying current The information provided below is an estimate of the eco- depreciation rates to the constant dollar and current cost nomic impact inflation had on the Company and the com- plant amounts. Income taxes are not adjusted.

mon shareholders' investment during 1980. It supplements (4) The 1979 economic gain from holding fixed money obligations the basic financial statements, which are based on historical is $106 million.

cost. (5) The adjustment to earnings on common stock on a current The Company is subject to rate regulation and tax laws that cost basis equals the adjustment on a constant dollar basis.

are based on the recovery of original (historical) cost only. This reflects the effects of rate regulation which limits the Therefore, inflationary increases in the value of the Com- recovery of property and plant to original (historical) cost.

pany's property create an economic loss because the Com-The following schedule, a comparison of reported historical l pany is recovering its cost of investments in dollars that data with data adjusted for general inflation. Shows that a have less purchasing power. Conventional accounting which , ,

is based on historical cost does not recognize this economic significant part of the reported Company five-year growth has resulted from inflation. For example, the increase in loss. It also does act recognize the partially offsetting gain revenues between the years 1976 and 1980 was only $74 that arises through financing facilities with fixed money million after adjustment for the effects of inflation. rather obligations, such as long-term debt and preferred stock, than the reported $252 million increase. Inflation has actu .

ally caused a decrease in the purchasing power of the Com-Conventional oY($ o0a ( ) pany s dividends.

Historical Cost Average 1980 Dollars

-mMons- Increase (Decrease [

NET PROPERTY AND Year Ended Between -

December 31.

PLANT ADJUSTED 1976 and 1980 FOR INFLATION 1911 1980 1 Annual December 31,1980. . $1.451 $ 2.702 $ 2.503 - - -milhons- - - Percentage i Rate 1 EARNINGS ON COMMON STOCK FOR Operating revenues 1980 DJUSTED FOR -as reported . . . . . $ 398 $ 650 252 13

]

A: reported in the -In average 1980 j conventional financial docars . . . . . . . . $ 576 $ 650 74 3 statements (p.14) . $ 47 $ 47 $ 47 Net assets at year end Additional provision for at net recoverable dcpreciation and cost amortization (3). . -

50 _

41 -as reported . . . . . . . $ 324 $ 497 173 11 Eamings on common -in average 1980 stock as adjusted . . $ 47 $ (3) $ 6 dollars . , . . S 460 $ 471 11 1 Cash dividends-Eamings per common declared per common share . .. $ 1.85 $ (.12) $ .25 share EARNINGS ON -as reported . . . $ 1.66 $ 1.74 .08 1 COMMON STOCK FOR -in average 1980 1979 ADJUSTED FOR dollars . . . . . . $ 2.40 $ 1.74 (.66) (8)

INFLATION Market pnce per Eamings on common common share at stock as adjusted . $ 47 $ 1 $ 17 year end Eamings per common -as reported . . $ 19.88 $11.88 (8.00) (12) share , . . . $ 2.01 $ .03 $ .70 -in average 1980 dollars . . . . . $28.16 $11.26 (16.90) (20) l TOTAL ADJUSTMENT Average consumer l TO EARNINGS ON price index. . . . . 170.5 246.8 763 10 1

COMMON STOCK FOR 1980 Additional provision for depreciation and amortization . . . .$ (41)

Economic loss from holding property and plant . . ... (125)

Economic gain from holding fixed money obhgations (4) . . . 109 Total adjustment to eamings on common stock (5) . $ (57)

(1) Current cost measures changes In specific prices of utihty property and plant primanly through the use of the Handy-Whitman Index of Public Utihty Construction Costs. During .

1980, the current cost of property and plant increased $234 )

milhon. which is $91 milhon less than the effects of general inflation.

24