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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

ý Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 2003
OR  

o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission
File Number

   Exact name of registrant as specified in its charter
and principal office address and telephone number

   State of
Incorporation

   I.R.S. Employer
ID. Number
1-14514   Consolidated Edison, Inc.
4 Irving Place, New York, New York 10003
(212) 460-4600		   New York   13-3965100

1-1217
 
Consolidated Edison Company of New York, Inc.

4 Irving Place, New York, New York 10003
(212) 460-4600
 
New York
 
13-5009340

1-4315
 
Orange and Rockland Utilities, Inc.
One Blue Hill Plaza, Pearl River, New York 10965
(845) 352-6000
 
New York
 
13-1727729

Indicate by check mark whether each 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, 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).

Consolidated Edison, Inc. (Con Edison)   Yes ý    No o

Consolidated Edison Company of New York, Inc. (Con Edison of New York)
 
Yes o    No ý

Orange and Rockland Utilities, Inc. (O&R)
 
Yes o    No ý

As of the close of business on October 31, 2003, Con Edison had outstanding 225,456,625 Common Shares ($.10 par value). Con Edison owns all of the outstanding common equity of Con Edison of New York and O&R.

1


Filing Format

This Quarterly Report on Form 10-Q is a combined report being filed separately by three different registrants: Consolidated Edison, Inc. (Con Edison), Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R). Con Edison of New York and O&R are subsidiaries of Con Edison and together with Con Edison are referred to in this report as "the Companies." Neither Con Edison of New York nor O&R makes any representation as to the information contained in this report relating to Con Edison or the subsidiaries of Con Edison other than itself.


TABLE OF CONTENTS

 
    
    
  
  
   PAGE
Glossary of Terms   3

PART I—Financial Information
 
 
Item 1   Financial Statements    
        Con Edison    
            Consolidated Balance Sheet   4
            Consolidated Income Statement   6
            Consolidated Statement of Comprehensive Income   7
            Consolidated Statement of Retained Earnings   7
            Consolidated Statement of Cash Flows   8
        Con Edison of New York    
            Consolidated Balance Sheet   9
            Consolidated Income Statement   11
            Consolidated Statement of Comprehensive Income   12
            Consolidated Statement of Retained Earnings   12
            Consolidated Statement of Cash Flows   13
        O&R    
            Consolidated Balance Sheet   14
            Consolidated Income Statement   16
            Consolidated Statement of Comprehensive Income   17
            Consolidated Statement of Retained Earnings   17
            Consolidated Statement of Cash Flows   18
        Notes to Financial Statements   19
Item 2   Management's Discussion and Analysis of Financial Condition and Results of Operations   39
Item 3   Quantitative and Qualitative Disclosure About Market Risk   65
Item 4   Controls and Procedures   65
    Forward-Looking Statements   65

PART II—Other Information
 
 
Item 1   Legal Proceedings   66
Item 6   Exhibits and Reports on Form 8-K   67
Signatures   69

2


GLOSSARY OF TERMS

The following is a glossary of frequently used abbreviations or acronyms that are found throughout this report:

Con Edison Companies    
Companies   Con Edison, Con Edison of New York and O&R, collectively
Con Edison   Consolidated Edison, Inc
Con Edison Communications   Con Edison Communications, LLC
Con Edison Development   Consolidated Edison Development, Inc.
Con Edison Energy   Consolidated Edison Energy, Inc.
Con Edison of New York   Consolidated Edison Company of New York, Inc.
Con Edison Solutions   Consolidated Edison Solutions, Inc.
O&R   Orange and Rockland Utilities, Inc.
RECO   Rockland Electric Company
Utilities   Con Edison of New York and O&R

Regulatory and State Agencies
 
 
NJBPU   New Jersey Board of Public Utilities
NYPA   New York Power Authority
PSC   New York State Public Service Commission
SEC   Securities and Exchange Commission

Other
 
 
AFDC   Allowance for Funds used During Construction
DTH   Dekatherm
EITF   Emerging Issues Task Force
FASB   Financial Accounting Standards Board
Form 10-K   Companies' combined Annual Report on Form 10-K for the year ended December 31, 2002
kWh   Kilowatt-hour
MD&A   Management's Discussion and Analysis of Financial Condition and Results of Operations
MW   Megawatts or thousand kilowatts
NYISO   New York Independent System Operator
OCI   Other Comprehensive Income
PCBs   Polychlorinated biphenyls
SFAS   Statement of Financial Accounting Standards
Superfund   Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980
VaR   Value-at-Risk

3


Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

 
       
 
 September 30, 2003
   December 31, 2002
 
 
 (Millions of Dollars)
ASSETS          
UTILITY PLANT, AT ORIGINAL COST          
  Electric $ 11,953   $ 11,568
  Gas   2,637     2,530
  Steam   791     768
  General   1,469     1,435
  TOTAL   16,850     16,301
  Less: Accumulated depreciation   4,813     4,660
  NET   12,037     11,641
  Construction work in progress   1,198     989
NET UTILITY PLANT   13,235     12,630
NON-UTILITY PLANT          
  Unregulated generating assets, less accumulated depreciation of $38 and $30 in 2003 and 2002, respectively   555     222
  Non-utility property, less accumulated depreciation of $30 and $19 in 2003 and 2002, respectively   171     140
  Construction work in progress   32     347
NET PLANT   13,993     13,339
CURRENT ASSETS          
  Cash and temporary cash investments   49     118
  Restricted cash   18     14
  Funds held for the redemption of long-term debt   —     275
  Accounts receivable - customers, less allowance for uncollectible accounts of $33 and $35 in 2003 and 2002, respectively   861     683
  Accrued unbilled revenue   53     54
  Other receivables, less allowance for uncollectible accounts of $5 and $1 in 2003 and 2002, respectively   365     169
  Fuel, at average cost   30     23
  Gas in storage, at average cost   167     81
  Materials and supplies, at average cost   98     92
  Prepayments   254     73
  Other current assets   98     125
TOTAL CURRENT ASSETS   1,993     1,707
INVESTMENTS   244     235
DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS          
  Goodwill   406     406
  Intangible assets, less accumulated amortization of $13 and $10 in 2003 and 2002, respectively   81     82
  Prepaid pension costs   1,181     1,024
  Regulatory assets   1,928     1,866
  Other deferred charges and noncurrent assets   251     196
TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS   3,847     3,574
TOTAL ASSETS $ 20,077   $ 18,855

The accompanying notes are an integral part of these financial statements.

4


Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

 
         

  
 
   September 30, 2003
   December 31, 2002
  
 
  
 
 
   (Millions of Dollars)

  
CAPITALIZATION AND LIABILITIES              
CAPITALIZATION              
  Common stock, authorized 500,000,000 shares; outstanding 225,326,323 shares and 213,932,934 shares in 2003 and 2002, respectively   $ 2,006   $ 1,551  
  Retained earnings     5,527     5,420  
  Treasury stock, at cost: 23,210,700 shares in 2003 and 2002     (1,001 )   (1,001 )
  Capital stock expense     (39 )   (36 )
  Accumulated other comprehensive income (loss)     (21 )   (13 )
 
      TOTAL COMMON SHAREHOLDERS' EQUITY     6,472     5,921  
 
  Preferred stock     213     213  
  Long-term debt     6,406     6,168  
 
TOTAL CAPITALIZATION     13,091     12,302  
 
MINORITY INTERESTS     8     9  
NONCURRENT LIABILITIES              
  Obligations under capital leases     37     38  
  Provision for injuries and damages     203     197  
  Pension and benefits     211     206  
  Superfund and other environmental costs     152     143  
  Independent power producer buyout     31     32  
  Other noncurrent liabilities     42     41  
 
TOTAL NONCURRENT LIABILITIES     676     657  
 
CURRENT LIABILITIES              
  Long-term debt due within one year     163     473  
  Notes payable     362     162  
  Accounts payable     870     919  
  Customer deposits     222     221  
  Accrued taxes     134     100  
  Accrued interest     103     94  
  System benefits charge     18     18  
  Accrued wages     82     82  
  Other current liabilities     194     197  
 
TOTAL CURRENT LIABILITIES     2,148     2,266  
 
DEFERRED CREDITS AND REGULATORY LIABILITIES              
  Deferred income taxes     3,053     2,598  
  Deferred investment tax credits     107     112  
  Regulatory liabilities     990     907  
  Other deferred credits     4     4  
 
TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES     4,154     3,621  
 
TOTAL CAPITALIZATION AND LIABILITIES   $ 20,077   $ 18,855  
 

The accompanying notes are an integral part of these financial statements.

5


Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT
(UNAUDITED)

 
   For the Three Months
Ended September 30,
   For the Nine Months
Ended September 30,
  
 
   2003
   2002
   2003
   2002
  
 
  
 
 
   (Millions of Dollars/Except Share Data)

  
OPERATING REVENUES                          
  Electric   $ 2,249   $ 2,126   $ 5,304   $ 4,827  
  Gas     184     156     1,130     872  
  Steam     95     76     430     289  
  Non-utility     273     181     684     457  
 
TOTAL OPERATING REVENUES     2,801     2,539     7,548     6,445  
 
OPERATING EXPENSES                          
  Purchased power     1,220     1,064     2,990     2,434  
  Fuel     131     83     417     195  
  Gas purchased for resale     101     75     657     425  
  Other operations     292     224     867     692  
  Maintenance     94     99     279     297  
  Depreciation and amortization     134     126     393     369  
  Taxes, other than income taxes     295     301     849     837  
  Income taxes     173     181     314     352  
 
TOTAL OPERATING EXPENSES     2,440     2,153     6,766     5,601  
 
OPERATING INCOME     361     386     782     844  
 
OTHER INCOME (DEDUCTIONS)                          
  Investment income     1     1     3     1  
  Allowance for equity funds used during construction     4     2     10     8  
  Other income     2     2     13     17  
  Other deductions     (5 )   (5 )   (13 )   (19 )
  Income taxes     5     10     8     26  
 
TOTAL OTHER INCOME (DEDUCTIONS)     7     10     21     33  
 
INCOME BEFORE INTEREST CHARGES     368     396     803     877  
 
  Interest on long-term debt     102     103     300     296  
  Other interest     9     8     25     27  
  Allowance for borrowed funds used during construction     (3 )   (2 )   (8 )   (3 )
 
NET INTEREST CHARGES     108     109     317     320  
 
INCOME BEFORE PREFERRED STOCK DIVIDENDS     260     287     486     557  
 
PREFERRED STOCK DIVIDEND REQUIREMENTS     3     3     8     9  
 
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE     257     284     478     548  
 
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (NET OF INCOME TAX OF $14 MILLION)     —     —     —     (20 )
 
NET INCOME FOR COMMON STOCK   $ 257   $ 284   $ 478   $ 528  
 
EARNINGS PER COMMON SHARE - BASIC                          
  Before cumulative effect of change in accounting principle   $ 1.17   $ 1.34   $ 2.18   $ 2.58  
 
  Cumulative effect of change in accounting principle   $ —   $ —   $ —   $ (0.10 )
 
  After cumulative effect of change in accounting principle   $ 1.17   $ 1.34   $ 2.18   $ 2.48  
 
EARNINGS PER COMMON SHARE - DILUTED                          
  Before cumulative effect of change in accounting principle   $ 1.16   $ 1.33   $ 2.17   $ 2.57  
 
  Cumulative effect of change in accounting principle   $ —   $ —   $ —   $ (0.10 )
 
  After cumulative effect of change in accounting principle   $ 1.16   $ 1.33   $ 2.17   $ 2.47  
 
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK   $ 0.560   $ 0.555   $ 1.680   $ 1.665  
 
AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC (IN MILLIONS)     225.0     213.2     219.5     212.8  
 
AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED (IN MILLIONS)     226.0     214.2     220.4     213.9  
 

The accompanying notes are an integral part of these financial statements.

6


Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

 
   For the Three Months
Ended September 30,
   For the Nine Months
Ended September 30,
  
 
   2003
   2002
   2003
   2002
  
 
  
 
 
   (Millions of Dollars)

  
NET INCOME FOR COMMON STOCK   $ 257   $ 284   $ 478   $ 528  
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES                          
  Investment in marketable equity securities, net of $2, ($1), $2, and ($1) taxes, respectively     3     (1 )   3     (1 )
  Minimum pension liability adjustments, net of ($2) taxes in 2002     —     —     —     (3 )
  Unrealized gains (losses) on derivatives qualified as hedges, net of ($3), $0, $5 and $7 taxes, respectively     (4 )   —     7     10  
  Less: Reclassification adjustment for gains (losses) included in net income, net of $2, $2, $12 and ($3) taxes, respectively     3     3     18     (5 )
 
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES     (4 )   (4 )   (8 )   11  
 
COMPREHENSIVE INCOME   $ 253   $ 280   $ 470   $ 539  
 


Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(UNAUDITED)

 
   For the Three Months
Ended September 30,
   For the Nine Months
Ended September 30,
 
   2003
   2002
   2003
   2002
 
  
 
   (Millions of Dollars)
BEGINNING BALANCE   $ 5,396   $ 5,256   $ 5,420   $ 5,251
  Less: Stock options exercised     —     —     5     3
  Income before preferred stock dividends     260     287     486     557
  Less: Cumulative effect of change in accounting principle     —     —     —     20
NET INCOME AFTER CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE     260     287     486     537
TOTAL     5,656     5,543     5,901     5,785
DIVIDENDS DECLARED ON CAPITAL STOCK                        
  Cumulative preferred, at required annual rates     3     3     8     9
  Common, $.56, $.555, $1.68 and $1.665 per share, respectively     126     118     366     354
TOTAL DIVIDENDS DECLARED     129     121     374     363
ENDING BALANCE   $ 5,527   $ 5,422   $ 5,527   $ 5,422

The accompanying notes are an integral part of these financial statements.

7


Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

 
   For the Nine Months
Ended September 30,
  
 
   2003
   2002
  
 
  
 
 
   (Millions of Dollars)

  
OPERATING ACTIVITIES              
  Income before preferred stock dividends   $ 486   $ 557  
  PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME