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DPL INC. INDEX

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number 1-9052

DPL INC.
(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ý        NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES ý        NO o

Indicate the number of shares of the issuer's classes of common stock, as of the latest practicable date.

DPL INC.
INDEX

Available Information:

DPL makes available free of charge on or through its Internet website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, beneficial ownership reports on Forms 3, 4 and 5, and amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. DPL's Internet website address is www.dplinc.com.

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Part I. Financial Information

Item 1. Financial Statements

DPL INC.
CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
($ in millions)

See Notes to Consolidated Financial Statements.
These interim statements are unaudited.

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DPL INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($ in millions)

See Notes to Consolidated Financial Statements.
These interim statements are unaudited.

4

DPL INC.
CONSOLIDATED BALANCE SHEET
($ in millions)

See Notes to Consolidated Financial Statements.
These interim statements are unaudited.

5

DPL INC.
CONSOLIDATED BALANCE SHEET
($ in millions)
(continued)

See Notes to Consolidated Financial Statements.
These interim statements are unaudited.

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Notes to Consolidated Financial Statements

1. DPL Inc. ("DPL" or the "Company") has prepared the unaudited consolidated financial statements in this report, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in DPL's 2002 Annual Report on Form 10-K.

2. Reclassifications have been made in the presentation of certain prior year amounts to conform to the current reporting presentation of DPL.

In the opinion of management, the information included in this Form 10-Q reflects all adjustments that are necessary for a fair statement of the results of operations for the periods presented. Any adjustments are of a normal recurring nature.

3. Basic earnings per share ("EPS") are based on the weighted-average number of common shares outstanding during the year. Diluted earnings per share are based on the weighted-average number of common and common equivalent shares outstanding during the year, except in periods where the inclusion of such common equivalent shares is anti-dilutive.

For the three months and six months ended June 30, 2003, approximately 37.7 million of DPL's stock options and warrants were excluded from the computation of diluted earnings per share because they were anti-dilutive. These stock options and warrants could be dilutive in the future. Approximately 0.6 million stock options were anti-dilutive in the three months and six months ended June 30, 2002.

The following illustrates the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for income before cumulative effect of accounting change:

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4. Comprehensive income (loss) for the three and six months ended June 30, 2003 and 2002 consisted of the following:

5. The Financial Accounting Standards Board ("FASB") issued the Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149") and Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS No. 150") during the second quarter of 2003. SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including those embedded in other contracts, and for hedging activities and is effective for contracts entered into or modified after June 30, 2003. This standard is not expected to have a material impact on the Company. SFAS No. 150 establishes standards for the classification and measurement of certain financial instruments with both liability and equity characteristics. This standard, which is effective at the beginning of the third quarter of 2003, will require DPL to classify its mandatorily redeemable trust preferred securities and preferred stock subject to mandatory redemption as liabilities.

6. DPL adopted the provisions of the FASB Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143") as of January 1, 2003. SFAS No. 143 requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time those obligations are incurred. Upon initial recognition of a legal liability, costs are capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. SFAS No. 143 also requires that components of previously recorded depreciation related to the cost of removal of assets upon retirement, whether legal asset retirement obligations or not, must be removed from a company's accumulated depreciation reserve. DPL's legal obligations associated with the retirements of its long-lived assets consist primarily of river intake and discharge structures, coal unloading facilities, loading docks, ice breakers, and ash disposal facilities. Application of SFAS No. 143 in 2003 resulted in an increase in net property, plant and equipment of $0.8 million, the recognition of an asset retirement obligation of $4.6 million and reduced DPL's accumulated depreciation reserve by $32.1 million. If the new accounting rule had been adopted on January 1, 2002, the asset retirement obligation would have approximated $4.3 million. Beginning in January 2003, depreciation rates were reduced to reflect the discontinuation of the cost of removal accrual for applicable non-regulated generation assets. This change will reduce annual depreciation and amortization expense by $1.9 million. On a pro forma basis, the impact for the quarter and six-month period ended June 30, 2002 would have been $0.3 million and $0.6 million, respectively, after tax, or less than $0.01 per basic share. In addition, costs for the removal of retired assets are charged to operation and maintenance when incurred. Since the generation assets are not subject to Ohio regulation, DPL recorded the net effect of adopting this standard in its Consolidated Statement of Results of Operations. The total cumulative effect of the adoption of SFAS No. 143 increased net income and shareholder's equity by $28.3 million before tax.

7. On January 1, 2003, DPL began accounting for stock options under the fair value method set forth in FASB Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). This standard requires the recognition of compensation expense for

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stock-based awards to reflect the fair value of the award on the date of grant. DPL previously followed Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB