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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 MARCH 31, 2004
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 April 30, 2004, Con Edison had outstanding 226,944,179 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, and together with Con Edison of New York, are collectively referred to in this combined report as the "Utilities"). The Utilities are subsidiaries of Con Edison and, as such, the information in this report about each of the Utilities also applies to Con Edison. Con Edison and the Utilities are collectively referred to in this combined report as the "Companies." However, neither of the Utilities 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 (Unaudited)    
        Con Edison    
            Consolidated Balance Sheet   4
            Consolidated Income Statement   6
            Consolidated Statement of Comprehensive Income   7
            Consolidated Statement of Common Shareholders' Equity   8
            Consolidated Statement of Cash Flows   9
        Con Edison of New York    
            Consolidated Balance Sheet   10
            Consolidated Income Statement   12
            Consolidated Statement of Comprehensive Income   13
            Consolidated Statement of Common Shareholder's Equity   14
            Consolidated Statement of Cash Flows   15
        O&R    
            Consolidated Balance Sheet   16
            Consolidated Income Statement   18
            Consolidated Statement of Comprehensive Income   19
            Consolidated Statement of Common Shareholder's Equity   20
            Consolidated Statement of Cash Flows   21
        Notes to Financial Statements (Unaudited)   22
Item 2   Management's Discussion and Analysis of Financial Condition and Results of Operations   38
Item 3   Quantitative and Qualitative Disclosures About Market Risk   54
Item 4   Controls and Procedures   54
    Forward-Looking Statements   54

PART II—Other Information
 
 
Item 1   Legal Proceedings   55
Item 6   Exhibits and Reports on Form 8-K   55
Signatures   57

2


GLOSSARY OF TERMS

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

Con Edison Companies    
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
The Companies   Con Edison, Con Edison of New York and O&R, collectively
The 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, 2003
FSP   FASB Staff Position
kWh   Kilowatt-hour
MD&A   Management's Discussion and Analysis of Financial Condition and Results of Operations
MW   Megawatts or thousand kilowatts
NUG   Non-Utility Generator
NYISO   New York Independent System Operator
OCI   Other Comprehensive Income
PCBs   Polychlorinated biphenyls
PPA   Purchase Power Agreement
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)

 
       
 
 March 31, 2004
   December 31, 2003
 
 
 (Millions of Dollars)
ASSETS          
UTILITY PLANT, AT ORIGINAL COST          
  Electric $ 12,243   $ 12,097
  Gas   2,716     2,699
  Steam   801     799
  General   1,488     1,482
  TOTAL   17,248     17,077
  Less: Accumulated depreciation   4,131     4,069
  NET   13,117     13,008
  Construction work in progress   1,371     1,276
NET UTILITY PLANT   14,488     14,284
NON-UTILITY PLANT          
  Unregulated generating assets, less accumulated depreciation of $58 and $52 in 2004 and 2003, respectively   881     873
  Non-utility property, less accumulated depreciation of $23 and $15 in 2004 and 2003, respectively   61     56
  Construction work in progress   9     12
NET PLANT   15,439     15,225
CURRENT ASSETS          
  Cash and temporary cash investments   55     49
  Restricted cash   19     18
  Accounts receivable - customers, less allowance for uncollectible accounts of $34 and $36 in 2004 and 2003, respectively   795     790
  Accrued unbilled revenue   42     61
  Other receivables, less allowance for uncollectible accounts of $7 in 2004 and 2003   268     184
  Fuel, at average cost   36     33
  Gas in storage, at average cost   72     150
  Materials and supplies, at average cost   96     100
  Prepayments   282     98
  Other current assets   139     109
TOTAL CURRENT ASSETS   1,804     1,592
INVESTMENTS   250     248
DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS          
  Goodwill   406     406
  Intangible assets, less accumulated amortization of $18 and $16 in 2004 and 2003, respectively   108     111
  Prepaid pension costs   1,303     1,257
  Regulatory assets   1,899     1,861
  Other deferred charges and noncurrent assets   304     266
TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS   4,020     3,901
TOTAL ASSETS $ 21,513   $ 20,966

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

4


Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

 
         
 
   March 31, 2004
   December 31, 2003
 
  
 
   (Millions of Dollars)
CAPITALIZATION AND LIABILITIES            
CAPITALIZATION            
  Common shareholders' equity (See Statement of Common Shareholders' Equity)   $ 6,492   $ 6,423
  Preferred stock of subsidiary     213     213
  Long-term debt     6,987     6,733
TOTAL CAPITALIZATION     13,692     13,369
MINORITY INTERESTS     41     42
NONCURRENT LIABILITIES            
  Obligations under capital leases     35     36
  Provision for injuries and damages     202     194
  Pensions and retiree benefits     222     205
  Superfund and other environmental costs     199     193
  Other noncurrent liabilities     72     79
TOTAL NONCURRENT LIABILITIES     730     707
CURRENT LIABILITIES            
  Long-term debt due within one year     16     166
  Notes payable     394     159
  Accounts payable     964     905
  Customer deposits     227     228
  Accrued taxes     21     69
  Accrued interest     102     102
  Accrued wages     81     79
  Other current liabilities     138     203
TOTAL CURRENT LIABILITIES     1,943     1,911
DEFERRED CREDITS AND REGULATORY LIABILITIES            
  Deferred income taxes and investment tax credits     3,317     3,172
  Regulatory liabilities     1,760     1,733
  Other deferred credits     30     32
TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES     5,107     4,937
TOTAL CAPITALIZATION AND LIABILITIES   $ 21,513   $ 20,966

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

5


Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT
(UNAUDITED)

 
   For the Three Months Ended March 31,
  
 
   2004
   2003
  
 
  
 
 
   (Millions of Dollars/Except Share Data)

  
OPERATING REVENUES              
  Electric   $ 1,539   $ 1,493  
  Gas     645     620  
  Steam     235     238  
  Non-utility     266     219  
 
TOTAL OPERATING REVENUES     2,685     2,570  
 
OPERATING EXPENSES              
  Purchased power     931     865  
  Fuel     185     185  
  Gas purchased for resale     400     363  
  Other operations and maintenance     390     389  
  Depreciation and amortization     137     129  
  Taxes, other than income taxes     282     284  
  Income taxes     105     98  
 
TOTAL OPERATING EXPENSES     2,430     2,313  
 
OPERATING INCOME     255     257  
 
OTHER INCOME (DEDUCTIONS)              
  Investment and other income     12     5  
  Allowance for equity funds used during construction     6     2  
  Other deductions     (3 )   (3 )
  Income taxes     2     2  
 
TOTAL OTHER INCOME (DEDUCTIONS)     17     6  
 
INCOME BEFORE INTEREST EXPENSE     272     263  
 
  Interest on long-term debt     108     100  
  Other interest     10     8  
  Allowance for borrowed funds used during construction     (4 )   (2 )
 
NET INTEREST EXPENSE     114     106  
 
INCOME BEFORE PREFERRED STOCK DIVIDENDS OF SUBSIDIARY     158     157  
PREFERRED STOCK DIVIDEND REQUIREMENTS OF SUBSIDIARY     3     3  
 
NET INCOME FOR COMMON STOCK     155     154  
 
EARNINGS PER COMMON SHARE - BASIC   $ 0.69   $ 0.72  
 
EARNINGS PER COMMON SHARE - DILUTED   $ 0.68   $ 0.72  
 
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK   $ 0.565   $ 0.560  
 
AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC (IN MILLIONS)     226.2     214.2  
 
AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED (IN MILLIONS)     227.5     215.1  
 

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 March 31,
 
   2004
   2003
 
  
 
   (Millions of Dollars)
NET INCOME FOR COMMON STOCK   $ 155   $ 154
OTHER COMPREHENSIVE INCOME, NET OF TAXES            
  Minimum pension liability adjustments, net of $1 taxes in 2004     1     —
  Unrealized gains on derivatives qualified as hedges, net of $5 and $9 taxes in in 2004 and 2003, respectively     8     13
  Less: Reclassification adjustment for gains included in net income, net of $3 and $8 taxes in 2004 and 2003, respectively     4     10
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAXES     5     3
COMPREHENSIVE INCOME   $ 160   $ 157

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

7


Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(MILLION OF DOLLARS/EXCEPT SHARE DATA)
(UNAUDITED)

 
   Common Stock
    
    
   Treasury Stock
    
   Accumulated
Other
Comprehensive
Income/(Loss)
    
  
 
   Additional Paid-
In Capital
   Retained
Earnings
   Capital Stock
Expense
    
  
 
   Shares
   Amount
   Shares
   Amount
   Total
  
 
  
 
BALANCE AS OF DECEMBER 31, 2002   213,932,934   $ 24   $ 1,527   $ 5,420   23,210,700   $ (1,001 ) $ (36 ) $ (13 ) $ 5,921  

Net income for common stock
 
 
 
 
 
 
 
 
 
 
154
 
 
 
 
 
 
 
 
 
 
 
 
 
154
 
Common stock dividends                     (120 )                         (120 )
Issuance of common shares - dividend reinvestment and employee stock plans   510,447           20     (1 )                         19  
Other comprehensive income                                           3     3  
 
BALANCE AS OF MARCH 31, 2003   214,443,381   $ 24   $ 1,547   $ 5,453   23,210,700   $ (1,001 ) $ (36 ) $ (10 ) $ 5,977  
 

BALANCE AS OF DECEMBER 31, 2003
 
225,840,220
 
$
25
 
$
2,003
 
$
5,451
 
23,210,700
 
$
(1,001
)
$
(39
)
$
(16
)
$
6,423
 

Net income for common stock
 
 
 
 
 
 
 
 
 
 
155
 
 
 
 
 
 
 
 
 
 
 
 
 
155
 
Common stock dividends                     (127 )                         (127 )
Issuance of common shares - dividend reinvestment and employee stock plans   955,259           42     (6 )                         36  
Other comprehensive income                                           5     5  
 
BALANCE AS OF MARCH 31, 2004   226,795,479   $ 25   $ 2,045   $ 5,473   23,210,700   $ (1,001 ) $ (39 ) $ (11 ) $ 6,492  
 

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

8


Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

 
   For the Three Months
Ended March 31,
  
 
   2004
   2003
  
 
  
 
 
   (Millions of Dollars)

  
OPERATING ACTIVITIES              
  Income before preferred stock dividends   $ 158   $ 157  
  PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME              
      Depreciation and amortization     137     129  
      Deferred income taxes     150     114  
      Common equity component of allowance for funds used during construction     (6 )   (2 )
      Prepaid pension costs (net of capitalized amounts)     (37 )   (32 )
      Other non-cash charges     35     8  
  CHANGES IN ASSETS AND LIABILITIES              
      Accounts receivable - customers, less allowance for uncollectibles     (5 )   (190 )
      Materials and supplies, including fuel and gas in storage     78     17  
      Prepayments, other receivables and other current assets     (278 )   (203 )
      Recoverable energy costs     20     (85 )
      Accounts payable     59     101  
      Pensions and retiree benefits     16     10  
      Accrued taxes     (47 )   (96 )
      Accrued interest     —     13  
      Deferred charges and regulatory assets     (64 )   (13 )
      Deferred credits and other regulatory liabilities     28     (4 )
      Transmission congestion contracts     (3 )   —  
      Other assets     (24 )   (10 )
      Other liabilities     (65 )   28  
 
NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES     152     (58 )
 
INVESTING ACTIVITIES              
      Utility construction expenditures (excluding capitalized support costs of $8 and $9 in 2004 and 2003, respectively)     (317 )   (260 )
      Cost of removal less salvage     (35 )   (28 )
      Non-utility construction expenditures     (21 )   (28 )
      Regulated companies' non-utility construction expenditures     —     (1 )
      Common equity component of allowance for funds used during construction     6     2  
      Investments by unregulated subsidiaries     (2 )   (14 )
      Demolition and remediation costs for First Avenue properties     —     (3 )
 
NET CASH FLOWS USED IN INVESTING ACTIVITIES     (369 )   (332 )
 
FINANCING ACTIVITIES              
      Net proceeds from short-term debt     235     470  
      Repayment/retirement of long-term debt     (549 )   (310 )
      Additions to long-term debt     645