UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended SEPTEMBER 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period from to
Commission Registrant, State of Incorporation I.R. S. Employer
File Number Address, and Telephone Number Identification No.
- ----------- ----------------------------- ------------------
1-3525 AMERICAN ELECTRIC POWER COMPANY, INC. 13-4922640
(A New York Corporation)
0-18135 AEP GENERATING COMPANY (An Ohio Corporation) 31-1033833
1-3457 APPALACHIAN POWER COMPANY (A Virginia Corporation) 54-0124790
0-346 CENTRAL POWER AND LIGHT COMPANY (A Texas Corporation) 74-0550600
1-2680 COLUMBUS SOUTHERN POWER COMPANY (An Ohio Corporation) 31-4154203
1-3570 INDIANA MICHIGAN POWER COMPANY (An Indiana Corporation) 35-0410455
1-6858 KENTUCKY POWER COMPANY (A Kentucky Corporation) 61-0247775
1-6543 OHIO POWER COMPANY (An Ohio Corporation) 31-4271000
0-343 PUBLIC SERVICE COMPANY OF OKLAHOMA 73-0410895
(An Oklahoma Corporation)
1-3146 SOUTHWESTERN ELECTRIC POWER COMPANY 72-0323455
(A Delaware Corporation)
0-340 WEST TEXAS UTILITIES COMPANY (A Texas Corporation) 75-0646790
1 Riverside Plaza, Columbus, Ohio 43215-2373
Telephone (614) 223-1000
AEP Generating Company, Columbus Southern Power Company, Kentucky Power Company,
Public Service Company of Oklahoma and West Texas Utilities Company meet the
conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are
therefore filing this Form 10-Q with the reduced disclosure format specified in
General Instruction H(2) to Form 10-Q.
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether American Electric Power Company, Inc. is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes X No
Indicate by check mark whether AEP Generating Company, Appalachian Power
Company, Central Power and Light Company, Columbus Southern Power Company,
Indiana Michigan Power Company, Kentucky Power Company, Ohio Power Company,
Public Service Company of Oklahoma, Southwestern Electric Power Company, and
West Texas Utilities Company are accelerated filers (as defined in Rule 12b-2 of
the Exchange Act).
Yes No X
The number of shares outstanding of American Electric Power Company, Inc. Common
Stock, par value $6.50, at October 31, 2002 was 338,835,220.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q
For The Quarter Ended September 30, 2002
CONTENTS
Page
Glossary of Terms i - iii
Forward-Looking Information iv
Part I. FINANCIAL INFORMATION
Items 1 and 2 Financial Statements and Management's Discussion
and Analysis of Results of Operations:
American Electric Power Company, Inc. and Subsidiary Companies:
Management's Discussion and Analysis of Results of Operations A-1 - A-3
Consolidated Financial Statements A-4 - A-8
AEP Generating Company:
Management's Narrative Analysis of Results of Operations B-1 - B-2
Financial Statements B-3 - B-6
Appalachian Power Company and Subsidiaries:
Management's Discussion and Analysis of Results of Operations C-1 - C-3
Consolidated Financial Statements C-4 - C-8
Central Power and Light Company and Subsidiaries:
Management's Discussion and Analysis of Results of Operations D-1 - D-3
Consolidated Financial Statements D-4 - D-8
Columbus Southern Power Company and Subsidiaries:
Management's Narrative Analysis of Results of Operations E-1 - E-2
Consolidated Financial Statements E-3 - E-7
Indiana Michigan Power Company and Subsidiaries:
Management's Discussion and Analysis of Results of Operations F-1 - F-3
Consolidated Financial Statements F-4 - F-8
Kentucky Power Company:
Management's Narrative Analysis of Results of Operations G-1 - G-2
Financial Statements G-3 - G-7
Ohio Power Company and Subsidiaries:
Management's Discussion and Analysis of Results of Operations H-1 - H-3
Consolidated Financial Statements H-4 - H-8
Public Service Company of Oklahoma and Subsidiary:
Management's Narrative Analysis of Results of Operations I-1 - I-2
Consolidated Financial Statements I-3 - I-7
Southwestern Electric Power Company and Subsidiaries:
Management's Discussion and Analysis of Results of Operations J-1 - J-2
Consolidated Financial Statements J-3 - J-7
West Texas Utilities Company:
Management's Narrative Analysis of Results of Operations K-1 - K-3
Financial Statements K-4 - K-8
Notes to Financial Statements L-1 - L-25
Item 2. Registrants' Combined Management's Discussion and Analysis of
Financial Condition, Accounting Policies and Other Matters M-1 - M-21
Item 3. Quantitative and Qualitative Disclosures About Market Risk N-1 - N-8
Item 4. Controls and Procedures O-1
Part II. OTHER INFORMATION
Item 5. Other Information P-1
Item 6. Exhibits and Reports on Form 8-K P-1
(a) Exhibits
Exhibit 12
Exhibit 99.1
Exhibit 99.2
(b) Reports on Form 8-K
SIGNATURES Q-1
CERTIFICATIONS R-1 - R-4
This combined Form 10-Q is separately filed by American Electric Power
Company, Inc., AEP Generating Company, Appalachian Power Company, Central Power
and Light Company, Columbus Southern Power Company, Indiana Michigan Power
Company, Kentucky Power Company, Ohio Power Company, Public Service Company of
Oklahoma, Southwestern Electric Power Company and West Texas Utilities Company.
Information contained herein relating to any individual registrant is filed by
such registrant on its own behalf. Each registrant makes no representation as to
information relating to the other registrants.
GLOSSARY OF TERMS
When the following terms and abbreviations appear in the text of this
report, they have the meanings indicated below.
Term Meaning
2004 True-up Proceeding............ A filing to be made after January 10, 2004 under the Texas Legislation to finalize the
amount of stranded costs and the recovery of such costs.
AEGCo.............................. AEP Generating Company, an electric utility subsidiary of AEP.
AEP................................ American Electric Power Company, Inc.
AEP Consolidated.................. AEP and its majority owned subsidiaries consolidated.
AEP Credit, Inc.................... AEP Credit, Inc.,a subsidiary of AEP which factors accounts receivable and accrued utility
revenues for affiliated domestic electric utility companies.
AEP East electric operating
companies.......................... APCo, CSPCo, I&M, KPCo and OPCo.
AEPR............................... AEP Resources, Inc.
AEP System or the System........... The American Electric Power System, an integrated electric utility system, owned and
operated by AEP's electric utility subsidiaries.
AEPSC.............................. American Electric Power Service Corporation, a service subsidiary
providing management and professional services to AEP and its subsidiaries.
AEP Power Pool..................... AEP System Power Pool. Members are APCo, CSPCo, I&M, KPCo and OPCo. The Pool shares the
generation, cost of generation and resultant wholesale system sales of the member
companies.
AEP West electric operating
companies.......................... CPL, PSO, SWEPCo and WTU.
Alliance RTO....................... Alliance Regional Transmission Organization, an ISO formed by AEP and four unaffiliated
utilities.
Amos Plant......................... John E. Amos Plant, a 2,900 MW generation station jointly owned and operated by APCo and
OPCo.
APCo............................... Appalachian Power Company, an AEP electric utility subsidiary.
Buckeye............................ Buckeye Power, Inc., an unaffiliated corporation.
COLI............................... Corporate owned life insurance program.
Cook Plant........................ The Donald C. Cook Nuclear Plant, a two-unit, 2,110 MW nuclear plant owned by I&M.
CPL................................ Central Power and Light Company, an AEP electric utility subsidiary.
CSPCo.............................. Columbus Southern Power Company, an AEP electric utility subsidiary.
CSW............................... Central and South West Corporation, a subsidiary of AEP.
CSW Energy......................... CSW Energy, Inc., an AEP subsidiary which invests in energy projects and builds power plants.
CSW International.................. CSW International, Inc., an AEP subsidiary which invests in energy projects and entities
outside the United States.
D.C. Circuit Court................ The United States Court of Appeals for the District of Columbia Circuit.
DOE................................ United States Department of Energy.
EITF............................... The Financial Accounting Standards Board's Emerging Issues Task Force.
ERCOT.............................. The Electric Reliability Council of Texas.
FASB............................... Financial Accounting Standards Board.
Federal EPA........................ United States Environmental Protection Agency.
FERC............................... Federal Energy Regulatory Commission.
GAAP............................... Generally Accepted Accounting Principles.
ICR................................ Internal Cost Reconstruction.
I&M................................ Indiana Michigan Power Company, an AEP electric utility subsidiary.
IRS................................ Internal Revenue Service.
IURC............................... Indiana Utility Regulatory Commission.
ISO................................ Independent system operator.
KPCo............................... Kentucky Power Company, an AEP electric utility subsidiary.
KPSC............................... Kentucky Public Service Commission.
KWH................................ Kilowatthour.
LIG................................ Louisiana Intrastate Gas.
Michigan Legislation............... The Customer Choice and Electricity Reliability Act, a Michigan law which provides for
customer choice of electricity supplier.
MLR................................ Member load ratio, the method used to allocate AEP Power Pool transactions to its
members.
Money Pool......................... AEP System's Money Pool.
MPSC............................... Michigan Public Service Commission.
MTM................................ Mark-to-Market Accounting.
MW................................. Megawatt.
MWH................................ Megawatthour.
NEIL............................... Nuclear Electric Insurance Limited.
NOx................................ Nitrogen oxide.
NOx Rule........................... A final rule issued by Federal EPA which requires NOx reductions in 22 eastern states
including seven of the states in which AEP companies operates.
NRC................................ Nuclear Regulatory Commission.
Ohio Act........................... The Ohio Electric Restructuring Act of 1999.
Ohio EPA........................... Ohio Environmental Protection Agency.
OPCo.............................. Ohio Power Company, an AEP electric utility subsidiary.
PJM................................ Pennsylvania - New Jersey - Maryland regional transmission organization.
PSO................................ Public Service Company of Oklahoma, an AEP electric utility subsidiary.
PUCO............................... The Public Utilities Commission of Ohio.
PUCT............................... The Public Utility Commission of Texas.
PUHCA.............................. Public Utility Holding Company Act of 1935, as amended.
PURPA.............................. The Public Utility Regulatory Policies Act of 1978.
RCRA............................... Resource Conservation and Recovery Act of 1976, as amended.
Registrant Subsidiaries............ AEP subsidiaries who are SEC registrants; AEGCo, APCo, CPL, CSPCo, I&M, KPCo, OPCo, PSO,
SWEPCo and WTU.
Rockport Plant..................... A generating plant, consisting of two 1,300 MW coal-fired generating units near Rockport,
Indiana owned or leased by AEGCo and I&M.
RTO................................ Regional Transmission Organization
SEC................................ Securities and Exchange Commission.
SFAS............................... Statement of Financial Accounting Standards issued by the Financial
Accounting Standards Board.
SFAS 71............................ Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain
Types of Regulation.
SFAS 101........................... Statement of Financial Accounting Standards No. 101, Accounting for the Discontinuance of
Application of Statement 71.
SFAS 121........................... Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of.
SFAS 133........................... Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities.
SFAS 142........................... Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.
SFAS 144........................... Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-lived Assets.
SFAS 146........................... Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with
Exit or Disposal Activities.
SNF................................ Spent Nuclear Fuel.
SPP................................ Southwest Power Pool.
STP................................ South Texas Project Nuclear Generating Plant, owned 25.2% by Central Power and Light
Company, an AEP electric utility subsidiary .
STPNOC............................. STP Nuclear Operating Company, a non-profit Texas Corporation which operates STP on behalf
of its joint owners including CPL.
SWEPCo............................. Southwestern Electric Power Company, an AEP electric utility subsidiary.
Texas Restructuring Legislation.... Legislation enacted in 1999 to restructure the electric utility industry in Texas.
TVA ............................... Tennessee Valley Authority.
U.K................................ The United Kingdom.
VaR................................ Value at Risk, a method to quantify risk exposure.
Virginia SCC..................... Virginia State Corporation Commission.
WPCo............................... Wheeling Power Company, an AEP electric distribution subsidiary.
WTU................................ West Texas Utilities Company, an AEP electric utility subsidiary.
Zimmer Plant....................... William H. Zimmer Generating Station, a 1,300 MW coal-fired unit owned 25.4% by Columbus
Southern Power Company, an AEP subsidiary.
FORWARD-LOOKING INFORMATION
This report made by AEP and certain of its subsidiaries contains
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934. Although AEP and each of its subsidiaries
believe that their expectations are based on reasonable assumptions, any
such statements may be influenced by factors that could cause actual
outcomes and results to be materially different from those projected. Among
the factors that could cause actual results to differ materially from those
in the forward-looking statements are:
o Electric load and customer growth.
o Abnormal weather conditions.
o Available sources and costs of fuels.
o Availability of generating capacity.
o The speed and degree to which competition is introduced to our
power generation business.
o The structure and timing of a competitive market and its impact on
energy prices or fixed rates.
o The ability to recover stranded costs in connection with
possible/proposed deregulation of generation.
o New legislation and government regulation, oversight and/or
investigation of the energy sector or its participants.
o The ability of AEP to successfully control its costs.
o The success of acquiring new business ventures and disposing of
existing investments that no longer match our corporate profile.
o International developments affecting AEP's foreign investments.
o The economic climate and growth in AEP's service territory.
o Inflationary trends.
o Electricity and gas market prices.
o Interest rates.
o Liquidity in the banking, capital and wholesale power markets.
o Other risks and unforeseen events.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
THIRD QUARTER 2002 vs. THIRD QUARTER 2001
AND
YEAR-TO-DATE 2002 vs. YEAR-TO-DATE 2001
AEP's principal operating business segments and their major activities are:
o Wholesale
o Generation of electricity for sale to retail and wholesale customers
o Gas pipeline and storage services
o Marketing and trading of electricity, gas, coal and other commodities
o Coal mining, bulk commodity barging operations and other energy
supply related businesses
o Energy Delivery
o Domestic electricity transmission
o Domestic electricity distribution
o Other Investments
o Investments in foreign power and distribution projects
o Telecommunication services
Results of Operations
Net Income for the third quarter was $425 million, an increase of $4
million compared to third quarter 2001. Earnings per share for the quarter were
$1.25 compared to $1.31 in 2001, reflecting the effects of the sale of
additional shares in 2002. Regulated integrated utilities and wholesale sales
from our power plants showed strong increases in earnings when compared with the
same period last year. However, lower earnings from energy trading and a loss
from power generation in the United Kingdom offset the positives. AEP had Net
Income of $318 million year-to-date compared to $919 million in 2001.
Year-to-date earnings per share as of September 30, 2002 were $.97 compared to
$2.85 in 2001, reflecting the combined effect of equity sales, discontinued
operations and the cumulative effect of a change in accounting principle. The
year-to-date loss for transitional goodwill impairment related to SEEBOARD and
CitiPower resulted from the adoption of SFAS 142 (see Note 3) and has been
reported as a cumulative effect of a change in accounting principle retroactive
to January 1, 2002.
Changes in Revenues
Increase (Decrease)
Third Quarter Year-to-Date
(in millions) % (in millions) %
Electricity Marketing and Trading* $ 314 18 $762 15
Gas Marketing and Trading (214) (22) 32 2
Domestic Energy Delivery* 81 8 138 5
Other Investments (27) (57) (58) (49)
----- ----
Total $ 154 4 $874 9
===== ====
*Reflects the allocation of certain transmission and distribution
revenues included in bundled retail rates to domestic energy delivery.
The increase in Electricity Marketing and Trading revenues was primarily
due to strong wholesale and retail sales as a result of favorable weather
conditions in the third quarter. The increase in revenues year-to-date from Gas
Marketing and Trading can be attributed to an increase in volumes, as we
expanded our operations around Houston Pipe Line (HPL) which we acquired in June
2001. The decrease in Gas Marketing and Trading revenues in the third quarter
resulted from a decrease in net gains from financial trading which offset the
year-to-date increase attributed to the HPL acquisition. Other Investments
decreased in both periods due to the elimination of factoring of accounts
receivable of an unaffiliated utility. Prior to the third quarter of 2002, we
recorded and reported upon settlement, sales under forward trading contracts as
revenues and purchases under forward trading contracts as purchased energy
expenses. Effective July 1, 2002, we reclassified such forward trading revenues
and purchases on a net basis, as permitted by EITF 98-10 (see Note 2 and "New
Accounting Pronouncements" in "Registrants' Combined Management's Discussion and
Analysis of Financial Condition, Accounting Policies and Other Matters").
Changes in Operating Expenses
Increase (Decrease)
Third Quarter Year-to-Date
(in millions) % (in millions) %
Fuel and Purchased Energy:
Electricity Marketing $ 294 41 $ 329 16
Gas Marketing (23) (3) 520 30
Other Investments 1 25 2 20
Maintenance and Other Operation (135) (15) 171 6
Depreciation and Amortization 58 19 127 14
Taxes other Than Income Taxes (1) - 24 4
----- ------
Total $ 194 7 $1,173 15
===== ======
In the quarter and year-to-date, the increase in Fuel and Purchased
Energy expense was primarily attributable to an increase in power generation.
Net generation increased 3% due to increased demand for electricity and a
reduction in planned power plant maintenance outages for various plants from
2001. The year-to-date increase in Gas Marketing expense was primarily due to an
expansion of gas activity around our HPL pipeline assets.
For the quarter, the decrease in Maintenance and Other Operation expense
was due to a $35 million reduction in trading incentives, a $40 million
reduction in administration costs due to severance expense recorded in the prior
year, a $31 million reduction in other transmission and distribution expenses as
well as a $12 million decline in nuclear outage expenses due to the reduction
of planned outages. These favorable results were partially offset by an
impairment charge due to a writedown of utility assets resulting from the
inactivation of inefficient gas fired generating facilities at WTU of
approximately $34 million (see Note 10). Year-to-date Maintenance and Other
Operation expense increased largely as aresult of the expenses of recently
acquired businesses including Quaker Coal; MEMCO, a barging line; planned
material and labor costs incurred in connection with the construction of
gas-fired plants for third parties; HPL; and two power plants in the UK. These
cost increases were partially offset by a reduction in trading incentive
compensation.
Depreciation and Amortization expense for both periods increased due to
plants acquired, and a plant placed into service in late 2001 as well the
amortization of Texas generation related Regulatory Assets that were securitized
in early 2002.
For the year-to-date, period Taxes Other Than Income Taxes increased due
to recently acquired businesses including Quaker Coal, MEMCo and HPL and two
plants in the UK.
Other Changes
Other Income decreased in the year-to-date period due mainly to a gain
on the sale of the Frontera generating plant in 2001 partially offset by an
increase in both periods for other business development income due to the
increased volume of those projects as well as minority interest in 2002.
Other Expense increased in both periods due to an increase in expenses
on other business development projects expenses in 2002.
The increase in Income Taxes for the third quarter and the decrease in
Income Taxes for the year-to-date period were predominately due to a
corresponding increase/decrease in pre-tax income.
The decrease in Interest was primarily due to the refinancing of
long-term debt at favorable interest rates, a reduction in short-term interest
rates and lower outstanding balances of short-term debt.
In connection with the sale of CitiPower and SEEBOARD (see Note 4), we
had recorded a net loss totaling $432 million as of September 30, 2002. Within
the total net loss of $432 million is a $350 million transitional goodwill
impairment loss from the adoption of SFAS 142 (see Note 3) reported as a
cumulative effect of a change in accounting principle retroactive to January 1,
2002.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per-share amounts)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
REVENUES:
Electricity Marketing and Trading $2,086 $1,772 $ 5,875 $ 5,113
Gas Marketing and Trading 761 975 2,145 2,113
Domestic Electric Delivery 1,043 962 2,737 2,599
Other Investments 21 48 61 119
------ ------ ------- -------
TOTAL REVENUES 3,911 3,757 10,818 9,944
------ ------ ------- -------
EXPENSES:
Fuel and Purchased Energy:
Electricity Marketing 1,011 717 2,446 2,117
Gas Marketing 778 801 2,225 1,705
Other Investments 5 4 12 10
------ ------ ------- -------
TOTAL FUEL AND PURCHASED ENERGY 1,794 1,522 4,683 3,832
------ ------ ------- -------
Maintenance and Other Operation 770 905 2,857 2,686
Depreciation and Amortization 366 308 1,059 932
Taxes Other Than Income Taxes 198 199 560 536
------ ------ ------- -------
TOTAL EXPENSES 3,128 2,934 9,159 7,986
------ ------ ------- -------
OPERATING INCOME 783 823 1,659 1,958
OTHER INCOME 127 73 210 224
OTHER EXPENSE 89 52 137 99
LESS: INTEREST 180 215 566 650
PREFERRED STOCK DIVIDEND REQUIREMENTS
OF SUBSIDIARIES 3 2 8 7
MINORITY INTEREST IN FINANCE SUBSIDIARY 9 5 27 5
------ ------ ------- -------
INCOME BEFORE INCOME TAXES 629 622 1,131 1,421
INCOME TAXES 242 221 429 537
------ ------ ------- -------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS,
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE 387 401 702 884
Discontinued Operations (net of tax) 38 2 (34) 65
Extraordinary Loss - (net of tax) - - - (48)
Cumulative Effect of a Change in Accounting
Principle - (net of tax) (See Note 3) - 18 (350) 18
------ ------ ------- -------
NET INCOME $ 425 $ 421 $ 318 $ 919
====== ====== ======= =======
AVERAGE NUMBER OF SHARES OUTSTANDING 339 322 329 322
=== === === ===
EARNINGS (LOSS) PER SHARE (BASIC AND DILUTIVE):
Income Before Discontinued Operations,
Extraordinary Item and Cumulative Effect of a
Change in Accounting Principle $1.14 $1.24 $ 2.14 $ 2.74
Discontinued Operations 0.11 0.01 (0.10) 0.20
Extraordinary Loss - - - (0.15)
Cumulative Effect of a Change in Accounting
Principle - 0.06 (1.07) 0.06
----- ----- ------ ------
EARNINGS PER SHARE (BASIC AND DILUTIVE) $1.25 $1.31 $ 0.97 $ 2.85
===== ===== ====== ======
CASH DIVIDENDS PAID PER SHARE $0.60 $0.60 $1.80 $1.80
===== ===== ===== =====
See Notes to Financial Statements beginning on page L-1.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 2002 December 31, 2001
------------------ -----------------
(in millions)
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 566 $ 231
Accounts Receivable (net) 2,546 1,649
Fuel, Materials and Supplies 1,227 1,046
Energy Trading and Derivative Contracts 7,897 8,536
Other 1,361 639
------- -------
TOTAL CURRENT ASSETS 13,597 12,101
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Electric:
Production 17,750 17,477
Transmission 6,237 5,764
Distribution 9,474 9,309
Other (including gas, coal mining and
nuclear fuel) 4,316 4,530
Construction Work in Progress 1,296 1,088
------- -------
Total Property, Plant and Equipment 39,073 38,168
Accumulated Depreciation and Amortization 16,256 15,403
------- -------
NET PROPERTY, PLANT AND EQUIPMENT 22,817 22,765
------- -------
REGULATORY ASSETS 2,394 3,162
------- -------
SECURITIZED TRANSITION ASSET 743 -
------- -------
INVESTMENTS IN POWER, DISTRIBUTION AND
COMMUNICATIONS PROJECTS 521 633
------- -------
ASSETS OF DISCONTINUED OPERATIONS - 3,985
------- -------
GOODWILL 461 392
------- -------
INTANGIBLE ASSETS 35 33
------- -------
LONG-TERM ENERGY TRADING AND DERIVATIVE CONTRACTS 3,027 2,368
------- -------
OTHER ASSETS 1,921 1,842
------- -------
TOTAL $45,516 $47,281
======= =======
See Notes to Financial Statements beginning on page L-1.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 2002 December 31, 2001
(in millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 2,662 $ 1,916
Short-term Debt 3,234 4,011
Long-term Debt Due Within One Year 825 1,114
Energy Trading And Derivative Contracts 8,008 8,288
Other 1,937 1,935
------- -------
TOTAL CURRENT LIABILITIES 16,666 17,264
------- -------
LONG-TERM DEBT 8,719 8,440
------- -------
EQUITY UNIT SENIOR NOTES 371 -
------- -------
LONG-TERM ENERGY TRADING AND DERIVATIVE CONTRACTS 2,693 2,176
------- -------
DEFERRED INCOME TAXES 4,444 4,469
------- -------
DEFERRED INVESTMENT TAX CREDITS 468 491
------- -------
DEFERRED CREDITS AND REGULATORY LIABILITIES 773 844
------- -------
DEFERRED GAIN ON SALE AND LEASEBACK - ROCKPORT PLANT UNIT 2 187 194
------- -------
OTHER NONCURRENT LIABILITIES 1,304 1,334
------- -------
LIABILITIES OF DISCONTINUED OPERATIONS - 2,613
------- -------
COMMITMENTS AND CONTINGENCIES (Note 9)
CERTAIN SUBSIDIARY OBLIGATED, MANDATORILY REDEEMABLE,
PREFERRED SECURITIES OF SUBSIDIARY TRUSTS HOLDING SOLELY
JUNIOR SUBORDINATED DEBENTURES OF SUCH SUBSIDIARIES 321 321
------- -------
MINORITY INTEREST IN FINANCE SUBSIDIARY 759 750
------- -------
CUMULATIVE PREFERRED STOCKS OF SUBSIDIARIES 145 156
------- -------
COMMON SHAREHOLDERS' EQUITY Common Stock-Par Value $6.50:
2002 2001
---- ----
Shares Authorized. . .600,000,000 600,000,000
Shares Issued. . . . .347,835,212 331,234,997
(8,999,992 shares were held in treasury at
September 30, 2002 and December 31, 2001) 2,261 2,153
Paid-in Capital 3,394 2,906
Accumulated Other Comprehensive Income (Loss) (28) (126)
Retained Earnings 3,039 3,296
------- -------
TOTAL COMMON SHAREHOLDERS' EQUITY 8,666 8,229
------- -------
TOTAL $45,516 $47,281
======= =======
See Notes to Financial Statements beginning on page L-1.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
2002 2001
---- ----
OPERATING ACTIVITIES: (in millions)
Net Income $ 318 $ 919
Deduct Income (Add Loss) from Discontinued Operations 384 (65)
------ ------
Net Income from Continuing Operations 702 854
Adjustments for Noncash Items:
Depreciation and Amortization 1,080 960
Deferred Federal Income Taxes (86) 119
Deferred Investment Tax Credits (21) (26)
Deferred Costs Under Fuel Clause Mechanisms (57) 240
Miscellaneous Accrued Expenses 138 (66)
Extraordinary Loss - Effects of Deregulation - 48
Cumulative Effect of Accounting Change - (18)
Mark to Market on Open Energy Trading and Derivative Contracts (145) (434)
Realized Mark to Market on Settled Energy Trading and Derivative Contracts 362 (109)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net) (882) 958
Fuel, Materials and Supplies (176) (119)
Accrued Revenues (255) 7
Prepayments and Other (387) (81)
Accounts Payable 789 (934)
Taxes Accrued 128 153
Interest Accrued 109 60
Change in Other Assets (417) (381)
Change in Other Liabilities (127) (66)
------- -------
Net Cash Flows From Operating Activities 755 1,165
------- -------
INVESTING ACTIVITIES:
Construction Expenditures (1,147) (1,187)
Purchase of Houston Pipe Line - (727)
Net Proceeds from Sale of CitiPower 175 -
Net Proceeds from Sale of Seeboard 941 -
Net Proceeds from Sale of Yorkshire - 383
Net Proceeds from Sale of Frontera - 265
Other 2 (54)
------- -------
Net Cash Flows Used For Investing Activities (29) (1,320)
------- -------
FINANCING ACTIVITIES:
Issuance of Common Stock 656 9
Issuance of Minority Interest - 750
Issuance of Long-term Debt 1,819 1,764
Issuance of Equity Unit Senior Notes 334 -
Change in Short-term Debt (net) (777) (995)
Retirement of Cumulative Preferred Stock (10) (5)
Retirement of Long-term Debt (1,819) (846)
Dividends Paid on Common Stock (590) (580)
------- -------
Net Cash Flows From (Used For) Financing Activities (387) 97
------- -------
Effect of Exchange Rate Change on Cash (4) (7)
------- -------
Net Increase (Decrease) in Cash and Cash Equivalents 335 (65)
------- -------
Net Increase (Decrease) in Cash and Cash Equivalents from Discontinued Operations (102) 7
Cash and Cash Equivalents at Beginning of Period 333 342
------- -------
Cash and Cash Equivalents Continuing Operations - Beginning of Period 231 349
------- -------
Cash and Cash Equivalents at End of Period $ 566 $ 284
------- -------
Supplemental Disclosure: Cash paid for interest net of capitalized amounts was
$328 million and $469 million and for income taxes was $242 million and $208
million in 2002 and 2001, respectively. Noncash acquisitions under capital
leases were $1 million in 2002 and $39 million in 2001.
See Notes to Financial Statements beginning on page L-1.
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(UNAUDITED)
Accumulated
Other
Common Paid-in Retained Comprehensive
Stock Capital Earnings Income (Loss) Total
(in millions)
JANUARY 1, 2001 $2,152 $2,915 $3,090 $(103) $8,054
Issuance of Common Stock 1 8 9
Common Stock Dividends (580) (580)
Other (7) 9 2
------
7,485
Comprehensive Income:
Other Comprehensive Income,
Net of Taxes:
Currency Translation Adjustment (21) (21)
Unrealized Gain on
Hedged Derivatives 2 2
Minimum Pension Liability (6) (6)
Net Income 919 919
------
Total Comprehensive Income 894
------ ------ ------ ----- ------
SEPTEMBER 30, 2001 $2,153 $2,916 $3,438 $(128) $8,379
====== ====== ====== ===== ======
JANUARY 1, 2002 $2,153 $2,906 $3,296 $(126) $8,229
Issuance of Common Stock 108 568 676
Common Stock Dividends (590) (590)
Other (80) 15 (65)
------
8,250
Comprehensive Income:
Other Comprehensive Income,
Net of Taxes:
Currency Translation Adjustment 97 97
Unrealized Loss on
Securities Available for sale (3) (3)
Unrealized Gain on Cash Flow
Hedges 4 4
Net Income 318 318
------
Total Comprehensive Income 416
------ ------ ------ ---- ------
SEPTEMBER 30, 2002 $2,261 $3,394 $3,039 $(28) $8,666
====== ====== ====== ====- ======
See Notes to Financial Statements beginning on page L-1.
AEP GENERATING COMPANY
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
THIRD QUARTER 2002 vs. THIRD QUARTER 2001
AND
YEAR-TO-DATE 2002 vs. YEAR-TO-DATE 2001
AEGCo is engaged in the generation and wholesale sale of electric power
to two affiliates under long-term agreements.
Operating Revenues are derived from the sale of Rockport Plant energy
and capacity to two affiliated companies pursuant to FERC approved long-term
unit power agreements. The unit power agreements provide for recovery of costs
including a FERC approved rate of return on common equity and a return on other
capital net of temporary cash investments.
Results of Operations
Net Income decreased $104,000 or 5% for the third quarter and $536,000
or 9% for the year-to-date period due to limits on recovery of return on capital
related to operating and in-service ratios of the Rockport Plant.
Changes in Revenues
The decreases in Operating Revenues of $1,429,000 or 2% for the third
quarter and $10,922,000 or 6% for the year-to-date period resulted from
decreases in recoverable expenses, primarily Fuel.
Changes in Operating Expenses
Operating expenses declined 2% in the third quarter and 6% for the
year-to-date period as follows:
Increase (Decrease)
-------------------
Third Quarter Year-to-Date
------------- ------------
(in thousands) % (in thousands) %
-------------- - -------------- -
Fuel $(1,441) (5) $(10,312) (14)
Other Operation (506) (20) 1,404 18
Maintenance 69 5 (474) (6)
Depreciation 30 1 117 1
Taxes Other Than Income Taxes 149 15 41 1
Income Taxes 449 N.M. (1,101) (43)
------- --------
Total $(1,250) (2) $(10,325) (6)
======= ========
N.M. = Not Meaningful
Fuel expense, which includes coal transportation cost and coal trading
gains, decreased in the year-to-date period due to lower average fuel costs and
a decrease in generation. Lower fuel cost contributed $6,600,000 of the decrease
while decreased generation contributed $3,700,000. The decrease in generation
reflects longer outages for planned maintenance and system enhancements in 2002.
Other Operation expense decreased in the third quarter due to a decrease
in the FERC assessment and lower costs allocated from affiliates. The increase
in Other Operation expense for the year-to-date period is primarily due to
higher costs for employee benefits and property insurance.
Maintenance expense for the year-to-date period decreased even though
the duration of outages lengthened. In 2002, due to the capital nature of the
projects, more labor and related costs are being capitalized as part of system
enhancements instead of expensed as maintenance projects.
Taxes Other Than Income Taxes increased due to increased employer
expense for employment taxes in the third quarter due to a change in estimate
from the second quarter's level of expense.
The decrease in Income Taxes attributable to operations for the
year-to-date period is primarily due to a change in estimate of state income
taxes during first quarter of 2001 based on an estimate of higher taxable income
for the year 2001 than actually occurred. The over-accrual was adjusted during
the second and third quarters of 2001 resulting in higher comparable Income
Taxes for the third quarter of 2002.
Other Changes
Interest Charges declined 14% in the third quarter and 12% for the
year-to-date period due to lower interest rates on short-term borrowing through
AEP's money pool reflecting market conditions and lower outstanding balances.
AEP GENERATING COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
OPERATING REVENUES - Sales to
AEP Affiliates $55,988 $57,417 $159,219 $170,141
------- ------- -------- --------
OPERATING EXPENSES:
Fuel 26,702 28,143 65,737 76,049
Rent - Rockport Plant Unit 2 17,071 17,071 51,212 51,212
Other Operation 2,023 2,529 9,259 7,855
Maintenance 1,484 1,415 6,838 7,312
Depreciation 5,643 5,613 16,918 16,801
Taxes Other Than Income Taxes 1,150 1,001 3,110 3,069
Income Taxes 479 30 1,438 2,539
------- ------- -------- --------
TOTAL OPERATING EXPENSES 54,552 55,802 154,512 164,837
------- ------- -------- --------
OPERATING INCOME 1,436 1,615 4,707 5,304
NONOPERATING INCOME 74 5 108 5
NONOPERATING EXPENSES (8) (3) 98 7
NONOPERATING INCOME TAX CREDITS 886 957 2,541 2,716
INTEREST CHARGES 457 529 1,700 1,924
------- ------- -------- -------
NET INCOME $ 1,947 $ 2,051 $ 5,558 $ 6,094
======= ======= ======== =======
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
BALANCE AT BEGINNING OF PERIOD $15,272 $11,847 $13,761 $ 9,722
NET INCOME 1,947 2,051 5,558 6,094
CASH DIVIDENDS DECLARED 1,050 959 3,150 2,877
------- ------- ------- -------
BALANCE AT END OF PERIOD $16,169 $12,939 $16,169 $12,939
======= ======= ======= =======
The common stock of AEGCo is wholly owned by AEP.
See Notes to Financial Statements beginning on page L-1.
AEP GENERATING COMPANY
BALANCE SHEETS
(UNAUDITED)
September 30, 2002 December 31, 2001
------------------ -----------------
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production $639,487 $638,297
General 2,883 3,012
Construction Work in Progress 12,295 6,945
-------- --------
Total Electric Utility Plant 654,665 648,254
Accumulated Depreciation 353,080 337,151
-------- --------
NET ELECTRIC UTILITY PLANT 301,585 311,103
-------- --------
OTHER PROPERTY AND INVESTMENTS 119 119
-------- --------
CURRENT ASSETS:
Cash and Cash Equivalents - 983
Advances to Affiliates 14,148 -
Accounts Receivable:
Affiliated Companies 33,714 22,344
Miscellaneous 147 147
Fuel - at average cost 13,048 15,243
Materials and Supplies - at average cost 4,934 4,480
Prepayments 83 244
-------- --------
TOTAL CURRENT ASSETS 66,074 43,441
-------- --------
REGULATORY ASSETS 5,030 5,207
-------- --------
DEFERRED CHARGES 2,010 1,471
-------- --------
TOTAL ASSETS $374,818 $361,341
======== ========
See Notes to Financial Statements beginning on page L-1.
AEP GENERATING COMPANY
BALANCE SHEETS
(UNAUDITED)
September 30, 2002 December 31, 2001
------------------ -----------------
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock - Par Value $1,000:
Authorized and Outstanding - 1,000 Shares $ 1,000 $ 1,000
Paid-in Capital 23,434 23,434
Retained Earnings 16,169 13,761
-------- --------
Total Common Shareholder's Equity 40,603 38,195
Long-term Debt 44,800 44,793
-------- --------
TOTAL CAPITALIZATION 85,403 82,988
-------- --------
OTHER NONCURRENT LIABILITIES 340 76
-------- --------
CURRENT LIABILITIES:
Advances from Affiliates - 32,049
Accounts Payable:
General 11,684 7,582
Affiliated Companies 28,628 1,654
Taxes Accrued 9,002 4,777
Rent Accrued - Rockport Plant Unit 2 23,427 4,963
Other 2,723 3,481
-------- --------
TOTAL CURRENT LIABILITIES 75,464 54,506
-------- --------
DEFERRED GAIN ON SALE AND LEASEBACK - ROCKPORT
PLANT UNIT 2 112,439 116,617
-------- --------
REGULATORY LIABILITIES:
Deferred Investment Tax Credit 53,800 56,304
Amounts Due to Customers for Income Taxes 20,840 22,725
-------- --------
TOTAL REGULATORY LIABILITIES 74,640 79,029
-------- --------
DEFERRED INCOME TAXES 26,532 27,975
-------- --------
DEFERRED CREDITS - 150
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 9)
TOTAL CAPITALIZATION AND LIABILITIES $374,818 $361,341
======== ========
See Notes to Financial Statements beginning on page L-1.
AEP GENERATING COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
2002 2001
---- ----
(in thousands)
OPERATING ACTIVITIES:
Net Income $ 5,558 $ 6,094
Adjustment for Noncash Items:
Depreciation 16,918 16,801
Deferred Income Taxes (3,328) (4,409)
Deferred Investment Tax Credits (2,504) (2,509)
Amortization of Deferred Gain on Sale and Leaseback -
Rockport Plant Unit 2 (4,178) (4,178)
Deferred Property Taxes (881) (922)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (11,370) 4,742
Fuel, Materials and Supplies 1,741 (4,595)
Accounts Payable 31,076 1,985
Taxes Accrued 4,225 7,201
Rent Accrued - Rockport Plant Unit 2 18,464 18,464
Change in Other Assets 243 (1,840)
Change in Other Liabilities (644) (1,860)
-------- --------
Net Cash Flow From Operating Activities 55,320 34,974
-------- --------
INVESTING ACTIVITIES - Construction Expenditures (6,956) (3,120)
-------- --------
FINANCING ACTIVITIES:
Change in Advances from Affiliates (net) (46,197) (31,546)
Dividends Paid (3,150) (2,877)
-------- --------
Net Cash Flows Used For Financing Activities (49,347) (34,423)
-------- --------
Net Decrease in Cash and Cash Equivalents (983) (2,569)
Cash and Cash Equivalents at Beginning of Period 983 2,757
-------- --------
Cash and Cash Equivalents at End of Period $ - $ 188
======== ========
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $1,983,000 and $1,489,000
and for income taxes was $2,442,000 and $1,352,000 in 2002 and 2001,
respectively.
See Notes to Financial Statements beginning on page L-1.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
THIRD QUARTER 2002 vs. THIRD QUARTER 2001
AND
YEAR-TO-DATE 2002 vs. YEAR-TO-DATE 2001
APCo is a public utility engaged in the generation, purchase, sale,
transmission and distribution of electric power to 917,000 retail customers in
southwestern Virginia and southern West Virginia. APCo, as a member of the AEP
Power Pool, shares in the revenues and costs of the AEP Power Pool's wholesale
sales to neighboring utility systems and power marketers including power trading
transactions. APCo also sells wholesale power to municipalities.
The cost of the AEP Power Pool's generating capacity is allocated among
its members based on their relative peak demands and generating reserves through
the payment of capacity charges and the receipt of capacity credits. AEP Power
Pool members are also compensated for the out-of-pocket costs of energy
delivered to the AEP Power Pool and charged for energy received from the AEP
Power Pool. The AEP Power Pool calculates each company's prior twelve month peak
demand relative to the total peak demand of all member companies as a basis for
sharing revenues and costs. The result of this calculation is each company's
member load ratio (MLR) which determines each company's percentage share of
revenues and costs.
Results of Operations
Net Income increased $24 million or 78% for the quarter and $27 million
or 21% year-to-date period due to higher retail sales and cost reductions.
Changes in Revenues
Increase (Decrease)
Third Quarter Year-to-Date
(in millions) % (in millions) %
Electricity Marketing and Trading $39 16 $ 7 1
Energy Delivery* (5) (3) (11) (2)
Sales to AEP Affiliates 6 15 6 5
--- ---
Total $40 9 $ 2 -
=== ===
*Reflects the allocation of certain transmission and distribution
revenues included in bundled retail rates to energy delivery.
The increase in revenues for the quarter was due primarily to warmer
summer weather as the third quarter of 2002 saw a 31% increase in cooling degree
days over third quarter of 2001. Year-to-date revenues were comparable to those
of last year as current quarter increases offset lower revenues for the first
six months which were lower primarily as a result of lower demand caused by mild
winter weather. Sales to AEP Affiliates increased quarter to quarter and year to
year due to available generation to be delivered to the AEP Power Pool.
Changes in Operating Expenses
Increase (Decrease)
Third Quarter Year-to-Date
(in millions) % (in millions) %
- -
Fuel $ 16 17 $ 50 18
Electricity Marketing Purchases 12 115 24 83
Purchases from AEP Affiliates (15) (21) (88) (33)
Other Operation (8) (11) (10) (5)
Maintenance - - (13) (13)
Depreciation and Amortization 2 3 7 6
Taxes Other Than Income Taxes (1) (3) (1) (2)
Income Taxes 13 66 14 18
---- ----
Total $ 19 5 $(17) (2)
==== ====
Fuel expense increased for the quarter and year-to-date as a result of
an increase in APCo generation. Mountaineer, Amos, and Glen Lyn plants had
undergone boiler plant maintenance in 2001 which resulted in increased
availability and a decrease in maintenance in 2002.
Electricity Marketing Purchases increased for the quarter and
year-to-date as a result of increased purchases from third parties for resale to
wholesale customers and to meet internal demand.
The overall decrease for both periods in Purchases from AEP Affiliates
is a result of increased internal generation due to plant availability as
disclosed above in the discussion of Fuel expense.
The decrease in Other Operation expense for both periods is due
primarily to a decrease in transmission equalization charges caused by a
reduction in APCo's MLR ratio, a decrease in power trading incentive
compensation expense, and energy delivery severance accruals recorded in 2001
for which there was no comparable activity in 2002. These favorable variances
were partially offset by an increase in insurance premiums and other employee
benefit costs.
The decrease in Maintenance expense year-to-date is primarily due to
boiler plant maintenance at Amos, Mountaineer, and Glen Lyn plants in the year
2001 for which there was less activity in 2002. In addition, there were fewer
maintenance needs for electric plant, station equipment, and company owned
structures and improvements.
Depreciation and Amortization expense increased during both periods due
to increased amortization for the net generation-related regulatory assets
related to the Company's Virginia and West Virginia jurisdictions that are being
recovered through regulated rates. Additionally, investment in production plant
in service, primarily emission control related, also contributed to the increase
in depreciation and amortization expense.
The increase in Income Taxes for the quarter and year-to-date was due to
an increase in pre-tax income.
Other Changes
Nonoperating Income for the quarter increased due to a net gain in power
trading activity. The Nonoperating Income decrease year-to-date was due to a
decrease in net power trading gains driven by a decline in market prices.
Year-to-date Interest Charges decreased primarily as a result of lower
AEP money pool balances and interest rates and the retirement of first mortgage
bonds in 2001.
Nonoperating Income Tax Expense increased in both periods due to the
increase in nonoperating pre-tax income and year-to-date due to a change in the
allocation of tax savings from AEP.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
OPERATING REVENUES:
Electricity Marketing and Trading $277,796 $ 238,819 $ 785,206 $ 777,803
Energy Delivery 150,236 155,566 444,706 455,587
Sales to AEP Affiliates 46,250 40,065 138,990 132,676
-------- ---------- ---------- ----------
TOTAL OPERATING REVENUES 474,282 434,450 1,368,902 1,366,066
-------- ---------- ---------- ----------
OPERATING EXPENSES:
Fuel 107,514 91,594 322,164 272,119
Purchased Power:
Electricity Marketing 23,047 10,741 51,508 28,106
AEP Affiliates 58,395 73,951 177,892 265,614
Other Operation 67,255 75,239 197,631 207,266
Maintenance 32,053 31,812 85,542 98,663
Depreciation and Amortization 47,692 46,177 141,373 133,950
Taxes Other Than Income Taxes 23,881 24,578 73,926 75,263
Income Taxes 33,080 19,977 90,723 77,190
-------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 392,917 374,069 1,140,759 1,158,171
-------- ---------- ---------- ----------
OPERATING INCOME 81,365 60,381 228,143 207,895
NONOPERATING INCOME 6,627 5,655 26,644 47,746
NONOPERATING EXPENSES 4,865 8,108 9,170 31,800
NONOPERATING INCOME TAX EXPENSE (CREDIT) 538 (1,535) 5,622 4,041
INTEREST CHARGES 28,642 29,146 84,099 91,277
-------- ---------- ---------- ----------
NET INCOME 53,947 30,317 155,896 128,523
PREFERRED STOCK DIVIDEND REQUIREMENTS 502 502 1,508 1,508
-------- ---------- ---------- ----------
EARNINGS APPLICABLE TO COMMON STOCK $ 53,445 $ 29,815 $ 154,388 $ 127,015
======== ========== ========== ==========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
NET INCOME $53,947 $30,317 $155,896 $128,523
OTHER COMPREHENSIVE INCOME (LOSS):
Cash Flow Power Hedges (1,731) - 486 -
Cash Flow Interest Rate Hedge 108 - (2,020) -
Foreign Currency Exchange Rate
Hedge 4 673 147 44
------- ------- -------- --------
COMPREHENSIVE INCOME $52,328 $30,990 $154,509 $128,567
======= ======= ======== ========
The common stock of the Company is wholly owned by AEP. See Notes to Financial
Statements beginning on page L-1.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
BALANCE AT BEGINNING OF PERIOD $189,773 $152,987 $150,797 $120,584
NET INCOME 53,947 30,317 155,896 128,523
-------- -------- -------- --------
DEDUCTIONS:
Cash Dividends Declared:
Common Stock 30,984 32,399 92,952 97,196
Preferred Stock 361 361 1,082 1,082
Capital Stock Expense 142 141 426 426
-------- -------- -------- --------
BALANCE AT END OF PERIOD $212,233 $150,403 $212,233 $150,403
======== ======== ======== ========
See Notes to Financial Statements beginning on page L-1.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 2002 December 31, 2001
------------------ -----------------
(in thousands)
ASSETS
ELECTRIC UTILITY PLANT:
Production $2,198,392 $2,093,532
Transmission 1,219,411 1,222,226
Distribution 1,927,797 1,887,020
General 252,295 257,957
Construction Work in Progress 214,973 203,922
---------- ----------
Total Electric Utility Plant 5,812,868 5,664,657
Accumulated Depreciation and Amortization 2,400,618 2,296,481
---------- ----------
NET ELECTRIC UTILITY PLANT 3,412,250 3,368,176
---------- ----------
OTHER PROPERTY AND INVESTMENTS 57,235 53,736
---------- ----------
LONG-TERM ENERGY TRADING AND DERIVATIVE
CONTRACTS 347,588 316,249
---------- ----------
CURRENT ASSETS:
Cash and Cash Equivalents 9,428 13,663
Accounts Receivable:
Customers 113,359 113,371
Affiliated Companies 135,972 63,368
Miscellaneous 23,011 11,847
Allowance for Uncollectible Accounts (2,345) (1,877)
Fuel - at average cost 50,064 56,699
Materials and Supplies - at average cost 61,308 59,849
Accrued Utility Revenues 23,360 30,907
Energy Trading and Derivative Contracts 475,513 566,284
Prepayments and Other 25,643 16,018
---------- ----------
TOTAL CURRENT ASSETS 915,313 930,129
---------- ----------
REGULATORY ASSETS 384,920 397,383
---------- ----------
DEFERRED CHARGES 41,377 42,265
---------- ----------
TOTAL ASSETS $5,158,683 $5,107,938
========== ==========
See Notes to Financial Statements beginning on page L-1.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 2002 December 31, 2001
------------------ -----------------
(in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 30,000,000 Shares
Outstanding - 13,499,500 Shares $ 260,458 $ 260,458
Paid-in Capital 716,212 715,786
Accumulated Other Comprehensive Income (Loss) (1,727) (340)
Retained Earnings 212,233 150,797
---------- ----------
Total Common Shareowner's Equity 1,187,176 1,126,701
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption 17,790 17,790
Subject to Mandatory Redemption 10,860 10,860
Long-term Debt 1,568,904 1,476,552
---------- ----------
TOTAL CAPITALIZATION 2,784,730 2,631,903
---------- ----------
OTHER NONCURRENT LIABILITIES 84,725 84,104
---------- ----------
CURRENT LIABILITIES:
Long-term Debt Due Within One Year 155,007 80,007
Advances from Affiliates 165,177 291,817
Accounts Payable - General 129,869 127,597
Accounts Payable - Affiliated Companies 55,298 84,518
Taxes Accrued 95,243 55,583
Customer Deposits 26,296 13,177
Interest Accrued 35,257 21,770
Energy Trading and Derivative Contracts 445,532 549,703
Other 70,811 79,089
---------- ----------
TOTAL CURRENT LIABILITIES 1,178,490 1,303,261
---------- ----------
DEFERRED INCOME TAXES 713,795 703,575
---------- ----------
DEFERRED INVESTMENT TAX CREDITS 35,033 38,328
---------- ----------
LONG-TERM ENERGY TRADING AND DERIVATIVE CONTRACTS 272,862 257,129
---------- ----------
REGULATORY LIABILITIES AND DEFERRED CREDITS 89,048 89,638
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 9)
TOTAL CAPITALIZATION AND LIABILITIES $5,158,683 $5,107,938
========== ==========
See Notes to Financial Statements beginning on page L-1.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
2002 2001
---- ----
(in thousands)
OPERATING ACTIVITIES:
Net Income $ 155,896 $ 128,523
Adjustments for Noncash Items:
Depreciation and Amortization 141,457 134,034
Deferred Income Taxes 10,257 30,506
Deferred Investment Tax Credits (3,295) (3,318)
Amortization of Deferred Property Taxes 13,573 13,480
Mark-to-Market Energy Trading and Derivative Contracts (27,710) (99,410)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net) (83,288) 105,134
Fuel, Materials and Supplies 5,176 (12,162)
Accrued Utility Revenues 7,547 46,655
Accounts Payable (26,948) (34,550)
Taxes Accrued 39,660 14,630
Interest Accrued 13,487 19,104
Change in Other Assets (21,270) (22,917)
Change in Other Liabilities 4,618 (17,936)
---------- ---------
Net Cash Flows From Operating Activities 229,160 301,773
--------- ---------
INVESTING ACTIVITIES:
Construction Expenditures (175,314) (185,185)
Proceeds from Sale of Property and Other 3,483 1,182
--------- ---------
Net Cash Flows Used For Investing Activities (171,831) (184,003)
--------- ---------
FINANCING ACTIVITIES:
Change in Short-term Debt (net) - (191,495)
Change in Advances to Affiliates (net) (126,640) 217,925
Issuance of Long-term Debt 444,110 124,588
Retirement of Long-term Debt (285,000) (175,000)
Dividends Paid on Common Stock (92,952) (97,196)
Dividends Paid on Cumulative Preferred Stock (1,082) (1,082)
--------- ---------
Net Cash Flows Used For Financing Activities (61,564) (122,260)
--------- ---------
Net Decrease in Cash and Cash Equivalents (4,235) (4,490)
Cash and Cash Equivalents at Beginning of Period 13,663 5,847
--------- ---------
Cash and Cash Equivalents at End of Period $ 9,428 $ 1,357
========= =========
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $68,305,000 and
$70,286,000 and for income taxes was $38,425,000 and $21,521,000 in 2002 and
2001, respectively. There were no noncash payments for the capital leases in
2002. Noncash acquisitions under capital leases were $2,576,000 in 2001.
See Notes to Financial Statements beginning on page L-1.
CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
THIRD QUARTER 2002 vs. THIRD QUARTER 2001
AND
YEAR-TO-DATE 2002 vs. YEAR-TO-DATE 2001
CPL is a public utility engaged in the generation, purchase, sale,
transmission and distribution of electric power in southern Texas. CPL also
sells electric power at wholesale to other utilities, municipalities, rural
electric cooperatives and beginning in 2002 to its affiliated REP in Texas.
Wholesale power marketing and trading activities are conducted on CPL's
behalf by AEPSC. CPL, along with the other AEP electric operating subsidiaries,
shares in AEP's forward trades with other utility systems and power marketers.
On January 1, 2002, customer choice of electricity supplier began in the
Electric Reliability Council of Texas (ERCOT) area of Texas. CPL currently
operates in the ERCOT region of Texas.
Under the Texas Restructuring Legislation, each electric utility was
required to submit a plan to structurally unbundle its business into a REP, a
power generator, and a transmission and distribution utility. During the year
2000, CPL submitted a plan for separation that was subsequently approved by the
PUCT. As a result of this legislation, CPL has functionally separated its
generation from its transmission and distribution operations and formed a
separate affiliated REP. Pending regulatory approval, CPL will separate its
generation from its transmission and distribution operations. The affiliated REP
is a separate legal entity that is an AEP subsidiary that is not owned by or
consolidated with CPL.
Since the affiliated REP is the electricity supplier to retail customers
in the ERCOT area, CPL sells its generation to the affiliated REP and other
market participants and provides transmission and distribution services to
retail customers in the CPL service territory. As a result of the formation of
the affiliated REP, effective January 1, 2002, CPL no longer supplies
electricity directly to retail customers. The implementation of affiliated REPs
as suppliers to retail customers has caused a significant shift in CPL's sales
as described below under "Results of Operations."
Results of Operations
T