Item 1 - BUSINESS
GENERALLY
Registrant ("Company") is a gas and electric corporation formed on December 31, 1926, as a consolidation of several operating utilities which had been accumulated under one management during the previous 26 years. The Company generates, purchases and distributes electricity and purchases and distributes gas. The Company, in the opinion of its general counsel, has, with minor exceptions, valid franchises, unlimited in duration, to serve a territory extending about 85 miles along the Hudson River and about 25 to 40 miles east and west from such River. The southern end of the territory is about 25 miles north of New York City, and the northern end is about 10 miles south of the City of Albany. The territory, comprising approximately 2,600 square miles, has a population estimated at 623,000. Electric service is available throughout the territory, and natural gas service is provided in and about the cities of Poughkeepsie, Beacon, Newburgh and Kingston and in certain outlying and intervening territory. The number of Company employees at December 31, 1995 was 1,288.
The Company's territory reflects a diversified economy, including manufacturing industries, research firms, farms, governmental agencies, public and private institutions, resorts, and wholesale and retail trade operations.
Total revenues and operating income before income taxes (expressed as percentages) derived from electric and gas operations for each of the last three years were as follows:
Percent of Percent of Operating Total Revenues Income before Income Taxes
ELECTRIC GAS ELECTRIC GAS
1995 80% 20% 90% 10% 1994 80% 20% 89% 11% 1993 82% 18% 89% 11%
Consumption of electricity in New York State has stabilized and, with an increase in supply, there is an excess of electric generating capacity in the State. And, as the utility industry moves toward competition, large customers may have increased opportunities to purchase electricity and natural gas from sources other than the local utility. In some instances, smaller customers may have the same options as larger customers.
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For further information on factors affecting the industry see below subcaptions "Other Matters - Competition" and "Regulation - Energy Policy Act of 1992" and the caption "Competition" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" (hereinafter "MD&A"), which the MD&A, together with the Company's Consolidated Financial Statements for the fiscal year ended December 31, 1995, including the notes thereto, are hereinafter collectively called "Company's 1995 Financial Statements", and are hereinafter incorporated as Exhibit 13 hereto ("Exhibit 13").
Additional information concerning revenues and operating profits, and information concerning identifiable assets for the electric and gas segments, which are the significant industry segments of the Company, are set forth in Note 9 appearing on pages 74 through 75 of the Company's 1995 Financial Statements, which Note 9 is incorporated herein by reference.
Electric Sales to IBM: Reference is made to the caption "Other Developments - Electric Sales to IBM" on page 17 of the MD&A which caption is incorporated herein by reference, for a discussion of the impact on the Company as a result of sales to its largest customer, International Business Machines Corporation ("IBM").
CONSTRUCTION PROGRAM AND FINANCING
The Company is engaged in a construction program which is presently estimated to involve total cash expenditures during the period 1996 through 2000 of approximately $293.0 million. The Company's principal construction projects consist of those designed to improve the reliability, efficiency and environmental compatibility of the Company's generating facilities and those required to expand, reinforce and replace the Company's transmission, substation, distribution and common facilities.
For estimates of construction expenditures, internal funds available, mandatory and optional redemption of long-term securities, and working capital requirements for the five-year period 1996-2000, see the subcaptions "Construction Program" and "Financing Program" under the caption "Capital Resources and Liquidity" of the MD&A appearing on pages 12 through 14 and pages 15 and 16, respectively, of Exhibit 13 hereto, which subcaptions are incorporated herein by reference.
For a discussion of the Company's capital structure, financing program and short-term borrowing arrangements, see Notes 4 through 6 to the Company's 1995 Financial Statements, and the subcaptions "Capital Structure," "Financing Program" and
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"Short-term Debt" under the caption "Capital Resources and Liquidity" of the MD&A appearing, in the case of said Notes, on pages 54 through 60 of Exhibit 13 hereof and, in the case of said subcaptions, on pages 14 through 16 of Exhibit 13 hereof, which Notes and subcaptions are incorporated herein by reference.
The Company's Certificate of Incorporation and its various debt instruments do not contain any limitations upon the issuance of authorized, but unissued, Preferred Stock and Common Stock or of unsecured short-term debt.
The Company's various debt instruments include limitations as to the amount of additional funded indebtedness which the Company can issue. The Company believes such limitations will not impair its ability to issue any or all of the debt described under the above referenced subcaption "Financing Program", incorporated herein by reference.
The Company has authority from the PSC to issue, at any time through December 31, 1997, unsecured short-term debt for capital purposes in an aggregate principal amount not to exceed at any time $52 million.
RATES
Generally: The electric and gas rates of the Company applicable to service supplied to retail customers within the State of New York are regulated by the PSC. Transmission rates and rates for electricity sold for resale in interstate commerce are regulated by the Federal Energy Regulatory Commission ("FERC").
The Company's present retail rate structure consists of various rate and service classifications covering residential, commercial and industrial customers. During 1995, the average price of electricity to such customers was 8.61 cents per kWh, representing an increase of approximately 1.8% over the 8.46 cents average price during 1994. The increase in the 1995 average price was due primarily to the elimination, during 1995, of the 1994 refunds of Unit No. 2 of the Nine Mile Point Nuclear Station ("Nile Mile 2 Plant") litigation credits.
Rate Proceedings - Electric and Gas: For information regarding the Company's most recent electric and gas cases filed with the PSC, see caption "Rate Proceedings" in the MD&A on pages 16 and 17 of Exhibit 13 hereto, which subcaption is incorporated herein by reference.
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Cost Adjustment Clauses: The Company's tariff for retail electric service includes a fuel cost adjustment clause pursuant to which electric rates are adjusted to reflect changes in the costs of fuels used in electric generation and of certain purchased power from the level of such costs included in the Company's base rates for electricity. The Company's tariff for gas service includes a gas cost adjustment clause pursuant to which gas rates are adjusted to reflect changes in the price of natural gas purchased from pipeline and/or third party suppliers and certain costs of manufactured gas from the level of such costs included in base rates for gas. One combination utility in New York State has voluntarily agreed with the PSC to eliminate its electric fuel cost adjustment clause and its gas cost adjustment clause. There is a generic proceeding before the PSC which addresses, among other things, the operation of electric fuel adjustment clauses. The Company can make no prediction as to what effect this proceeding will have on the operation of its electric fuel adjustment clause. While the Company can make no prediction as to whether the PSC would eventually eliminate the electric fuel cost adjustment clause of the Company or any other electric utility, elimination of such clause could adversely affect the Company by increasing the risk that fuel cost expenditures made to provide electric service would not be recovered in rates.
For more information with respect to such clauses, see the discussions under the subcaptions "Rate Proceedings - Electric" and the caption "Sharing Arrangements" in the MD&A, on page 16 and pages 23 through 24, respectively, of Exhibit 13 hereto and the caption "Rates, Revenues and Regulatory Matters" and the subcaptions "Deferred Electric Fuel Costs" and "Deferred Gas Costs" in Note 1 to the Company's 1995 Financial Statements appearing on pages 47 and 48 of Exhibit 13 hereto, which captions and subcaptions are incorporated herein by reference.
Take-or-Pay Gas Liability: For discussion of the Company's settlement under the PSC proceeding commenced in 1988 to determine, among other things, whether recovery of some or all of take-or-pay costs should be denied New York gas distribution companies, see the caption "Take-or-Pay Gas Costs" in Note 8 to the Company's 1995 Financial Statements appearing on pages 68 and 69 of Exhibit 13 hereto, which caption is incorporated herein by reference.
FUEL SUPPLY AND COST
The Company's two primary fossil fuel-fired electric generating stations are the Roseton Plant (described in Item 2
Item 2 - PROPERTIES
ELECTRIC
General: The net capability of the Company's electric generating plants as of December 31, 1995, the net output of each plant for the year ended December 31, 1995, and the year each plant was placed in service or rehabilitated are as set forth below:
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The Company has a contract with PASNY which entitles the Company to 49 MW net capability from the Blenheim-Gilboa Pumped Storage Hydroelectric Plant through 2002.
Since 1975, the Company has purchased capacity in relatively small amounts from the Fitzpatrick Nuclear Plant of PASNY, pursuant to a contract which may be terminated by either party on 12 months' notice. Under such contract, the maximum capacity which can be purchased during specific periods is 8 MW. The Company elected to terminate this contract effective April 30, 1995.
See Item 1 above, under the subcaption "Regulation - Alternative Electric Power Generation," with respect to alternative electric power generation interconnected with the Company's system.
The Company owns 84 substations having an aggregate transformer capacity of 4.4 million KVA. The transmission system consists of 584 pole miles of line and the distribution system of 7,258 pole miles of overhead lines and 808 trench miles of underground lines.
Load and Capacity: The Company's maximum one-hour demand within its own territory, for the year ended December 31, 1995, occurred on August 2, 1995 and amounted to 902 MW. The Company's maximum one-hour demand within its own territory, for that part of the 1995-1996 winter capability period through February 16, 1996 occurred on January 7, 1996 and amounted to 812 MW.
Based on current projections of peak one-hour demands for the three-year period comprising the 1996 summer capability period through the winter capability period of 1998-1999 the Company estimates that it will have capacity available to satisfy its projected peak demands plus the estimated installed reserve generating capacity requirements which it is required to maintain as a member of the New York Power Pool ("NYPP"), described below. The following table sets forth the amounts of any excess capacity by summer and winter capability periods for such three-year period:
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The Company is a member of the NYPP consisting of the major investor-owned electric utility companies in the State and PASNY. The members of the NYPP, by agreement, provide for coordinated operation of their bulk power electric systems with a view to the use of the most economical source of electricity, for the maintenance of a reserve margin equal to at least 18% of each member's forecasted peak load and for the sale and interchange of electric generating capability and energy among such members. The members of the NYPP also provide for the cooperative development of long-range plans for the expansion on an integrated basis of the bulk power supply system for New York State, compatible with environmental standards, and appropriately related to interstate and international capacity and reliability considerations.
Roseton Plant: The Roseton Plant is located in the Company's franchise area at Roseton, New York, and is owned by the Company, Consolidated Edison Company of New York ("Con Edison") and Niagara Mohawk as tenants-in-common. The Roseton Plant, placed in commercial operation in 1974, has a generating capacity of 1,200 MW consisting of two 600 MW generating units, both of which are capable of being fired either by residual oil or natural gas (see subcaption below entitled "Gas - Sufficiency of Supply and Future Gas Supply"). The Company is acting as agent for the owners with respect to operation of the Roseton Plant. Generally, the owners share the costs and expenses of the operation of such Plant in accordance with their respective ownership interests.
For more information with respect to the Roseton Plant, see the caption "Roseton Plant" in Note 8 to the Company's 1995 Financial Statements appearing on pages 65 and 66 of Exhibit 13 hereto, which caption is incorporated herein by reference.
The 345 kV transmission lines and related facilities to connect the Roseton Plant with other points in the system of the Company and with the systems of Con Edison and Niagara Mohawk to the north and west of such Plant are 100%-owned by the Company. The share of each of the parties in the output of the Roseton Plant is transmitted over these lines pursuant to a certain transmission agreement relating to such Plant, which provides, among other things, for compensation to the Company for such use by the other parties. In addition, the Company has contract rights which entitle the Company to the lesser of 300 MW or one quarter of the capacity in a 345 kV transmission line owned by PASNY, which connects the Roseton Plant with a Con Edison substation to the east of such Plant in East Fishkill, New York. In exchange for these rights, the Company agreed to provide PASNY capacity in the 345 kV transmission lines the Company owns from the Roseton Plant, to the extent it can do so after satisfying its obligations to Con Edison and Niagara Mohawk. - 23 -
Nine Mile 2 Plant: Reference is made to the caption "Nuclear Operations" in the MD&A, on page 23 of Exhibit 13 hereto and Note 2 to the Company's 1995 Financial Statements, on pages 49 through 51 of Exhibit 13 hereto, which caption and Note are incorporated herein by reference, for a discussion of the Company's ownership interest in, costs for, and certain operating matters relating to the Nine Mile 2 Plant. A scheduled refueling outage for the Nine Mile 2 Plant was completed in June 1995. The next refueling outage is scheduled to commence in September 1996, with a targeted 37-day duration.
GAS
General: The Company's gas system consists of 159 miles of transmission pipelines and 949 miles of distribution pipelines.
Current Gas Supply: During 1995, natural gas was available to firm gas customers at a price competitive with that of alternative fuels. As compared to 1994, in 1995, firm retail gas sales, normalized for weather, increased by 3.2% and the average number of firm gas customers increased by 0.7% or 417. Sales to interruptible customers increased 70% in 1995 as compared to 1994.
For information on the Company's gas suppliers and gas storage capability, see the caption "Natural Gas Supply" in Note 8 to the Company's 1995 Financial Statements appearing on pages 67 and 68 of Exhibit 13 hereto, which caption is incorporated herein by reference.
For the year ended December 31, 1995, the total amount of gas purchased from all sources was 32,842,937 Mcf., which includes 1,019,441 Mcf. purchased directly for use as a boiler fuel at the Roseton Plant.
The Company owns two propane-air mixing facilities for emergency and peak shaving purposes located in Poughkeepsie and in Newburgh, New York. Each facility is capable of supplying 8,000 Mcf. per day with propane storage capability adequate to provide maximum facility sendout for up to three consecutive days.
Sufficiency of Supply and Future Gas Supply: The peak daily demand for natural gas by the Company's customers for the year ended December 31, 1995 occurred on February 6, 1995 and amounted to 105,952 Mcf. The Company's peak-day gas capability in 1995 was 116,865 Mcf. The peak daily demand for natural gas by the Company's customers for that part of the 1995-1996 heating season through February 16, 1996, occurred on December 11, 1995 and amounted to 93,461 Mcf. - 24 -
Other: FERC permits non-discriminatory access to the pipeline facilities of interstate gas pipeline transmission companies subject to the jurisdiction of FERC under the Natural Gas Act. This rule allows access to such pipelines by the pipeline transmission company's customers enabling them to transport gas purchased directly from third parties and spot sources through such pipelines. Such access, moreover, also permits industrial customers of gas distribution utilities to connect directly with the pipeline transmission company and to contract directly with the pipeline transmission companies to transport gas, thereby by-passing the distribution utility. The PSC has authorized New York State distribution gas utilities to transport customer-owned gas through its facilities upon request of a customer. Currently, interstate pipeline transmission companies are located in certain areas where the Company provides retail gas service (the Towns of Carmel, Pleasant Valley, Coxsackie, and LaGrange).
For a discussion of the PSC proceeding relating to issues associated with the restructuring of the natural gas market, see also the subcaption "Competition - New York - Natural Gas" in the MD&A, on pages 9 through 10 of Exhibit 13 hereto, and the caption "Natural Gas Supply" in Note 8 to the Company's 1995 Financial Statements appearing on pages 67 and 68 of Exhibit 13 hereto, which subcaption and caption are incorporated herein by reference.
OTHER MATTERS
The Danskammer Plant and the Roseton Plant and all of the other principal generating plants and important property units of the Company are held by it in fee simple, except (1) certain rights-of-way, and (2) a portion of the property used in connection with the hydroelectric plants of the Company consisting of flowage or other riparian rights. The Company's present interests in the Roseton Plant and the Nine Mile 2 Plant are owned as undivided interests as a tenant-in-common with the other utility owners thereof. Certain of the properties of the Company are subject to rights-of-way and easements which do not interfere with the Company's operations. In the case of certain distribution lines, the Company owns only a part interest in the poles upon which its wires are installed, the remaining interest being owned by telephone companies. Certain electric transmission facilities owned by others are used by the Company pursuant to long-term contractual arrangements.
All of the physical properties of the Company (other than property, such as material and supplies, excluded in the Company's Mortgage) and its franchises are subject to the lien of
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the Company's Mortgage under which all of its Mortgage Bonds are outstanding. Such properties are from time to time subject to liens for current taxes and assessments which it is the Company's practice to pay regularly as and when due.
The Company's properties have been well maintained and are in good operating condition.
During the three-year period ended December 31, 1995, the Company made gross property additions of $168.3 million (which includes $6 million in property additions related to the Roseton Plant restoration due to fire damage, which amount was reimbursed by insurance) and property retirements and adjustments of $34.6 million, resulting in a net increase (including Construction Work in Progress) in utility plant of $133.7 million, or 10.1%.
Item 3
Item 3 - LEGAL PROCEEDINGS
ASBESTOS LITIGATION
For a discussion of suits against the Company involving asbestos, see the caption "Asbestos Litigation" in Note 8 to the Company's 1995 Financial Statements appearing on pages 71 and 72 of Exhibit 13 hereto, which caption is incorporated herein by reference.
Since 1987, the Company has been involved as a defendant in the "mass tort" asbestos litigation in the United States District Court for the Southern District of New York and the New York State Supreme Court, County of New York. This litigation involves thousands of plaintiffs who seek large amounts of compensatory and punitive damages from numerous defendants for deaths and injuries allegedly caused by exposure to asbestos. The Company has been a defendant in approximately 740 such individual lawsuits. Many of these lawsuits have been disposed of without any payment by the Company, or for immaterial amounts. While the amounts demanded in all the remaining lawsuits total several billion dollars, it is the Company's opinion, based on its experience in such litigation and on information and relevant circumstances known to it at this time, that these lawsuits will not have a material adverse effect on the Company's financial position. However, if the Company were ultimately held liable under these lawsuits and insurance coverage were not available, the cost thereof could have a material adverse effect (a reasonable estimate of which cannot be made at this time) on the financial condition of the Company if the Company could not recover all or a substantial portion thereof in rates. The Company's insurance does not extend to punitive damages.
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ENVIRONMENTAL LITIGATION
The Company is operating the Roseton Plant pursuant to a Consent Order approved by the Supreme Court of the State of New York, Albany County, on March 23, 1992, based on an action brought in 1991 by the Natural Resources Defense Council, Inc., the Hudson River Fisherman's Association and Scenic Hudson, Inc.
Such Consent Order provides for certain operating restrictions at the Roseton Plant relating to the use of river water for plant cooling purposes, which have not imposed, and are not expected to impose, material additional costs on the Company. The Consent Order was extended by agreement of the parties until February 1, 1997 and will be submitted for Court approval. For a description of the pending NYSDEC proceeding involving renewal of the SPDES permit for the Roseton Plant (which expired on October 1, 1992), see Item 1 above under the subcaption "Environmental Quality - Water."
ENVIRONMENTAL CLAIMS - NEWBURGH MANUFACTURED GAS SITE
Reference is made to the subcaption "Environmental Matters - Former Manufactured Gas Plant Facilities" on pages 70 and 71 of Note 8 to the Company's 1995 Financial Statements, which subcaption is herein incorporated by reference, for a discussion of litigation filed against the Company by the City of Newburgh, New York, May 26, 1995 in the United States District Court, Southern District of New York, and the Company's response thereto.
CATSKILL INCIDENT
Reference is made to the caption "Other Matters" in Note 8 of the Company's 1995 Financial Statements, on pages 72 and 73 of Exhibit 13 hereto, which caption is herein incorporated by reference, for a description of an explosion in a dwelling in the Company's gas service territory in Catskill, New York in November 1992 which resulted in personal injuries, the death of an occupant and property damage.
Lawsuits have been commenced against the Company arising out of such incident including the following:
By complaint, dated February 2, 1994, Carl Fatzinger, as executor of the estate of Mildred Fatzinger, and Virginia Fatzinger commenced an action in the Supreme Court of the State of New York, Greene County, against the Company and two other defendants. The complaint alleges that Mildred and Virginia Fatzinger were residents of the dwelling in which said explosion
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occurred and that, as a result of said explosion, Mildred Fatzinger was killed, Virginia Fatzinger received serious personal injuries, and the Fatzingers suffered extensive damage to their property. The complaint seeks an unspecified amount of compensatory and punitive damages against the Company based on theories of negligence, absolute liability and gross negligence.
By complaint, dated October 18, 1993 and filed in the Supreme Court of the State of New York, Greene County, Frank Reyes commenced an action against the Company for unspecified personal injuries and property damage alleged to have been caused by said explosion. The complaint alleges that Mr. Reyes was a nearby resident at the time of said explosion. The complaint seeks $2,000,000 in compensatory damages and $2,000,000 in punitive damages from the Company, based on theories of negligence and gross negligence.
The Company is investigating these claims and presently has insufficient information on which to predict their outcome. The Company believes that it has adequate insurance to cover any compensatory damages that might be awarded. The Company's insurance, however, does not extend to punitive damages. If punitive damages were ultimately awarded in either or both of these lawsuits, such award(s) could have a material adverse effect on the financial condition of the Company. At this time, the Company can make no prediction as to any other litigation which may arise out of this incident.
WAPPINGERS FALLS INCIDENT
Reference is made to the caption "Other Matters" in Note 8 to the Company's 1995 Financial Statements, on pages 72 and 73 of Exhibit 13 hereto, which caption is herein incorporated by reference, for a description of two consecutive fires and explosions which occurred on February 12, 1994, destroying a residence and commercial establishment in the Village of Wappingers Falls, New York, in the Company's service territory.
Lawsuits have been commenced against the Company arising out of such incident, including the following:
On August 31, 1994, the Company was served with a summons and complaint in an action brought by John DeLorenzo against the Company and the Village of Wappingers Falls in the Supreme Court of the State of New York, County of Dutchess. The plaintiff alleges that because of the negligence of defendants in causing and/or permitting natural gas to leak into plaintiff's home, an explosion resulted, which destroyed plaintiff's
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residence and its contents at 14 Franklin Street in the Village of Wappingers Falls, and which caused bodily injuries to the plaintiff. Plaintiff seeks damages for these losses and injuries, which damages are unspecified in the complaint.
On October 13, 1994, the Company was served with a summons and complaint in an action brought by Edward Baecher d/b/a NTC Auto Body against the Company, the Town of Wappingers Falls, the Village of Wappingers Falls, and the Wappingers Falls Fire Department in the Supreme Court of the State of New York, County of Dutchess. Four causes of action are recited in the complaint, one of which relates to the Company. This cause of action alleges that because of the Company's negligence in the construction, maintenance and improvements of its facilities near the plaintiff's commercial establishment at 33 Market Street in Wappingers Falls, an explosion resulted that destroyed the building and its contents. Plaintiff, who owns the business only, but not the building, at 33 Market Street, seeks recovery from the Company of compensatory and punitive damages in the sum of $1,000,000, plus interest, costs and disbursements.
On March 9, 1995, the Company was served with a summons and complaint in an action brought by Cengiz Ceng, individually and as executor under the last will and testament of Nizamettin Ceng, and Tarkan Thomas Ceng against the Company and the Village of Wappingers Falls in the Supreme Court of the State of New York, County of Dutchess. The complaint alleges that the plaintiffs were the owners of premises at 33 Market Street in the Village of Wappingers Falls, and that as a result of the Company's alleged negligence, the plaintiffs' premises at 33 Market Street was destroyed. Plaintiffs seek recovery of $250,000 from the Company, plus costs and disbursements.
The Company is investigating these claims and presently has insufficient information on which to predict their outcome. The Company believes that it has adequate insurance to cover any compensatory damages that might be awarded. The Company's insurance, however, does not extend to punitive damages. If punitive damages were ultimately awarded, in any of these lawsuits, such award(s) could have a material adverse effect on the financial condition of the Company. At this time, the Company can make no prediction as to any other litigation which may arise out of this incident.
INCOME TAX ASSESSMENTS
Reference is made to the subcaption "Tax Matters - Assessments" in Note 8 to the Company's 1995 Financial Statements, on page 72 of Exhibit 13 hereto, which subcaption is
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incorporated herein by reference, for a discussion of the examination by the Internal Revenue Service ("IRS") of the Company's federal income tax returns for 1987 and 1988. On or about March 7, 1994, the Company received letters from the IRS, arising out of this examination, proposing net increases in the Company's federal tax liability of approximately $16 million, plus interest. Such letters do not represent a notice of deficiency from the IRS, and the Company has received no notice of deficiency from the IRS regarding these taxable years. According to such letters, the Company had the option of (i) responding within 60 days from the date of the letters to agree or disagree with the proposed adjustments and request a conference with the Regional Office of Appeals of the IRS, or (ii) seeking relief in the United States Tax Court. On May 3, 1994, the Company filed a protest with the IRS to said proposed adjustments. The Company can make no prediction at this time as to the ultimate resolution of these proposed adjustments. However, the Company believes that a significant portion of any final assessments would be recoverable in rates.
Item 4
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter of the Company's fiscal year covered by this Report. PART II
Item 5
Item 5 - MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth under the caption "Common Stock Dividends and Price Ranges" in the MD&A, on page 29 of Exhibit 13 hereto, is incorporated herein by reference.
Pursuant to applicable statutes and its Certificate of Incorporation, the Company may pay dividends on shares of Preferred and Common Stock only out of surplus.
The Company has an Automatic Dividend Reinvestment and Stock Purchase Plan which permits holders of the Company's Common Stock who elect to participate in such Plan to reinvest dividends and also permits participants to make additional cash investments in the Company's Common Stock. Shares can be acquired directly from the Company or on the open market at the election of the Company. For a complete description of said Plan, reference is made to the Prospectus, dated January 5, 1993, which is part of
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the Company's Registration Statement on Form S-3 (Registration No. 33-56760), relating to 3,550,000 shares of Common Stock registered under the Securities Act of 1933 ("1933 Act") for issuance under said Plan.
The Company's Customer Stock Purchase Plan provides the Company's residential customers and members of their families residing with them who are residents of New York State with a method of purchasing shares of the Company's Common Stock directly from the Company. Shares can be acquired directly from the Company or on the open market at the election of the Company. For a complete description of said Plan, reference is made to the Prospectus, dated January 5, 1993, which is part of the Company's Registration Statement on Form S-3 (Registration No. 33-55764), relating to 780,000 shares of Common Stock registered under the 1933 Act for issuance under said Plan.
The Company also maintains for its employees an Employee Stock Purchase Plan, which provides for the purchase of the Company's Common Stock on the open market.
Item 6
Item 6 - SELECTED FINANCIAL DATA
The information required hereunder is incorporated herein by reference to the material on pages 4 and 5 of Exhibit 13 hereto.
Item 7
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required hereunder is incorporated herein by reference to the material appearing on pages 6 through 27 of Exhibit 13 hereto.
Item 8
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements and Report of Independent Accountants
The Company's 1995 Financial Statements, together with the report thereon of Price Waterhouse LLP, dated January 26, 1996, appearing on pages 30 through 77 of Exhibit 13 hereto, are incorporated by reference in this Annual Report on Form 10-K. The Financial Statement Schedule incorporated by reference as part of this Annual Report on Form 10-K should be read in conjunction with the Company's 1995 Financial Statements. Financial Statement Schedules not included with this Form 10-K
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Annual Report have been omitted because they are not applicable or the required information is shown in the Company's 1995 Financial Statements.
The Company's 1995 Financial Statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. The Company's subsidiaries are each wholly-owned and consist of landholding, cogeneration or energy management companies. The net income of the Company's subsidiaries is reflected in the Company's Consolidated Statement of Income as Other Income and Deductions - Other-net; such Consolidated Statement of Income is contained on pages 37 and 38 of Exhibit 13 hereto.
The following information is being furnished in accordance with Regulation S-X, Section 210.5-02:
Weighted average December 31, interest rate on 1995 1994 1993 the Company's short-term debt - 6.69% - outstanding
(b) Supplementary Financial Information
The supplementary financial information specified by Item 302 of Regulation S-K is found under the caption "Selected Quarterly Financial Data (Unaudited)," of the Company's 1995 Financial Statements on page 78 of Exhibit 13 hereto, which caption is incorporated herein by reference pursuant to Item 8 (a) above.
(c) Other Financial Statements and Schedule
Other financial statements and schedule required under Regulation S-X are filed pursuant to Item 14 of this Annual Report on Form 10-K.
Item 9
Item 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
Item 10
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information with respect to the Directors of the Company required hereunder is incorporated by reference to the caption "Election of Directors" in the Company's definitive proxy statement, dated February 23, 1996, to be used in connection with its Annual Meeting of Shareholders to be held on April 2, 1996, which proxy statement has previously been submitted to the Securities and Exchange Commission pursuant to that Commission's Regulation S-T.
The information with respect to the executive officers of the Company required hereunder is incorporated by reference to Item 1 of this Annual Report on Form 10-K, under the caption "Executive Officers of the Company."
Item 11
Item 11 - EXECUTIVE COMPENSATION
The information required hereunder is incorporated by reference to the caption "Executive Compensation" in the Company's definitive proxy statement, dated February 23, 1996, to be used in connection with its Annual Meeting of Shareholders to be held on April 2, 1996.
Item 12
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required hereunder is incorporated by reference to the caption "Security Ownership" in the Company's definitive proxy statement, dated February 23, 1996, to be used in connection with its Annual Meeting of Shareholders to be held on April 2, 1996.
Item 13
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no relationships or transactions of the type required to be described by this Item.
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PART IV
Item 14
Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. Financial Statements
See subpart 1 of Index to Financial Statements on page of this Report.
2. Financial Statement Schedule
See subpart 2 of Index to Financial Statements on page of this Report.
3. Exhibits
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Incorporated herein by reference to the Exhibit Index beginning on page E-1 of this Report. Such Exhibits include the following management contracts or compensatory plans or arrangements required to be filed as an Exhibit pursuant to Item 14(c) hereof:
DESCRIPTION IN THE EXHIBIT LIST AND EXHIBIT NOS. FOR THIS REPORT
Directors' Deferred Compensation Plan, effective October 1, 1980. (Exhibit (10)(iii)1)
Trust Agreement between Registrant and Dutchess Bank & Trust Company, as trustee, dated as of January 1, 1984, pursuant to Registrant's Savings Incentive Plan. (Exhibit (10)(iii)2)
First Amendment, dated December 31, 1990, to Trust Agreement between Registrant and The Bank of New York, as successor trustee, dated as of January 1, 1984, pursuant to Registrant's Savings Incentive Plan. (Exhibit (10)(iii)3)
Agreement, made March 14, 1994 by and between Registrant and Mellon Bank, N.A., amending and restating, effective April 1, 1994, Registrant's Savings Incentive Plan and related Trust Agreement with The Bank of New York, together with amendments dated July 22, 1994 and December 16, 1994. (Exhibits (10)(iii)18, 19 and 20)
Executive Deferred Compensation Plan of the Company, effective March 1, 1992 together with Amendment thereto dated December 17, 1993. (Exhibits (10)(iii)8 and 15)
Retirement Benefit Restoration Plan of the Company, effective May 1, 1993, together with Amendment thereto dated July 23, 1993. (Exhibits (10)(iii)10 and 11)
Executive Incentive Compensation Plan of the Company, effective January 1, 1993, together with Amendment thereto dated April 4, 1995. (Exhibits (10)(iii)17 and 21)
Stock Plan for Outside Directors of the Company, dated November 17, 1995 (Exhibit (10)(iii)22)
Management Incentive Program of the Company, effective April 1, 1994 (Exhibit (10)(iii)23)
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(b) Reports on Form 8-K
During the period to the date hereof, the following Reports on Form 8-K were filed by the Company:
None
(c) Exhibits Required by Item 601 of Regulation S-K
Incorporated herein by reference to subpart (a)-3 of Item 14, above.
(d) Financial Statement Schedule required by Regulation S-X which is excluded from the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1995
Incorporated herein by reference to subpart 2 of Index to Financial Statements on page of this Report.
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SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
By____________________________ (John E. Mack, III, Chairman of the Board and Chief Executive Officer)
Dated: February 23, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the date indicated.
Signature Title Date --------- ----- ---- (a) Principal Executive Officer or Officers:
________________________ (John E. Mack, III) Chairman of the Board and Chief Executive Officer February 23, 1996
(b) Principal Accounting Officer:
_______________________ (Donna S. Doyle) Controller February 23, 1996
(c) Principal Financial Officer:
_______________________ (Steven V. Lant) Treasurer and Assistant Secretary February 23, 1996
- 37 -
SIGNATURES - (Continued) ------------------------ Signature Title Date --------- ----- ---- (d) Directors:
_____________________________ (L. Wallace Cross) Director February 23, 1996
_____________________________ (Jack Effron) Director February 23, 1996
_____________________________ (Richard H. Eyman) Director February 23, 1996
_____________________________ (Frances D. Fergusson) Director February 23, 1996
_____________________________ (Heinz K. Fridrich) Director February 23, 1996
_____________________________ (Edward F. X. Gallagher) Director February 23, 1996
_____________________________ (Paul J. Ganci) Director February 23, 1996
_____________________________ (Charles LaForge) Director February 23, 1996
_____________________________ (John E. Mack, III) Director February 23, 1996
_____________________________ (Howard C. St. John) Director February 23, 1996
_____________________________ (Edward P. Swyer) Director February 23, 1996
- 38 -
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
Page(s) in Exhibit 13 of this Report* 1. Financial Statements
Report of Independent Accountants 30
Consolidated Balance Sheet at December 31, 1995 and 1994 33-36
Consolidated Statement of Income for the three years ended December 31, 1995 37-38
Consolidated Statement of Retained Earnings for the three years ended December 31, 1995 39
Consolidated Statement of Cash Flows for the three years ended December 31, 1995 40-41
Notes to Consolidated Financial Statements 42-77
Selected Quarterly Financial Data (Unaudited) 78
Page(s) in Form 10-K
Report of Independent Accountants on Financial Statement Schedule
Consent of Independent Accountants
2. The Financial Statement Schedule for the Years 1995, 1994 and 1993 -
Schedule II - Reserves
*Incorporated by reference to the indicated pages of Exhibit 13 to this Report.
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Central Hudson Gas & Electric Corporation
Our audits of the consolidated financial statements referred to in our report dated January 26, 1996 appearing on page 30 of Exhibit 13 of this Annual Report on Form 10-K, (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule presented on pages through of this Annual Report on Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
New York, New York January 26, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in (i) the Prospectus constituting part of the Registration Statement, on Form S-3 (Registration No. 33-56760), relating to Central Hudson Gas & Electric Corporation's Automatic Dividend Reinvestment and Stock Purchase Plan, (ii) the Prospectus constituting part of the Registration Statement, on Form S-3 (Registration No. 33-55764), relating to Central Hudson Gas & Electric Corporation's Customer Stock Purchase Plan, and (iii) the Prospectus constituting part of the Amendment No. 1 to the Registration Statement, on Form S-3 (Registration No. 33-56349), relating to certain debt and equity securities of the Company's of our report dated January 26, 1996 appearing on page 30 of Exhibit 13 to this Annual Report on Form 10-K. We also consent to the incorporation by reference therein of our report on the Financial Statement Schedule, which appears above.
PRICE WATERHOUSE LLP
New York, New York February 23, 1996