UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | 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
| ¨ | 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 000-50039
OLD DOMINION ELECTRIC COOPERATIVE
(Exact Name of Registrant as Specified in Its Charter)
| VIRGINIA | 23-7048405 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
| 4201 Dominion Boulevard, Glen Allen, Virginia | 23060 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
(804) 747-0592
(Registrant’s Telephone Number, Including Area Code)
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 x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ¨ No x
The Registrant is a membership corporation and has no authorized or outstanding equity securities.
OLD DOMINION ELECTRIC COOPERATIVE
INDEX
| Page Number | ||||
| PART I. Financial Information | ||||
| Item 1. | Financial Statements | |||
| Condensed Consolidated Balance Sheets – March 31, 2004 (Unaudited) and December 31, 2003 |
3 | |||
| 4 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 8 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 16 | ||
| Item 4. | Controls and Procedures | 16 | ||
| PART II. Other Information | ||||
| Item 1. | Legal Proceedings | 17 | ||
| Item 5. | Other Information | 17 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 17 | ||
| Signatures | 18 | |||
OLD DOMINION ELECTRIC COOPERATIVE
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2004 |
December 31, 2003* |
|||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| ASSETS: |
||||||||
| Electric Plant: |
||||||||
| In service |
$ | 1,316,749 | $ | 1,313,649 | ||||
| Less accumulated depreciation |
(405,312 | ) | (397,327 | ) | ||||
| 911,437 | 916,322 | |||||||
| Nuclear fuel, at amortized cost |
6,075 | 7,439 | ||||||
| Construction work in progress |
177,924 | 161,645 | ||||||
| Net Electric Plant |
1,095,436 | 1,085,406 | ||||||
| Investments: |
||||||||
| Nuclear decommissioning trust |
70,123 | 68,780 | ||||||
| Lease deposits |
149,889 | 150,559 | ||||||
| Other |
68,742 | 57,659 | ||||||
| Total Investments |
288,754 | 276,998 | ||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
25,260 | 31,758 | ||||||
| Receivables |
53,652 | 59,708 | ||||||
| Fuel, materials and supplies, at average cost |
26,304 | 23,523 | ||||||
| Prepayments |
2,454 | 2,571 | ||||||
| Total Current Assets |
107,670 | 117,560 | ||||||
| Deferred Charges: |
||||||||
| Regulatory assets |
65,603 | 68,234 | ||||||
| Other |
14,089 | 14,138 | ||||||
| Total Deferred Charges |
79,692 | 82,372 | ||||||
| Total Assets |
$ | 1,571,552 | $ | 1,562,336 | ||||
| CAPITALIZATION AND LIABILITIES: |
||||||||
| Capitalization: |
||||||||
| Patronage capital |
$ | 250,542 | $ | 247,590 | ||||
| Long-term debt |
873,736 | 873,041 | ||||||
| Total Capitalization |
1,124,278 | 1,120,631 | ||||||
| Current Liabilities: |
||||||||
| Accounts payable |
42,188 | 66,812 | ||||||
| Accounts payable – members |
72,461 | 47,788 | ||||||
| Accrued expenses |
50,043 | 36,439 | ||||||
| Deferred energy |
5,713 | 13,582 | ||||||
| Total Current Liabilities |
170,405 | 164,621 | ||||||
| Deferred Credits and Other Liabilities |
||||||||
| Asset retirement obligation |
43,551 | 42,997 | ||||||
| Obligations under long-term leases |
152,659 | 153,659 | ||||||
| Regulatory liabilities |
37,912 | 37,024 | ||||||
| Other |
42,747 | 43,404 | ||||||
| Total Deferred Credits and Other Liabilities |
276,869 | 277,084 | ||||||
| Commitments and Contingencies |
— | — | ||||||
| Total Capitalization and Liabilities |
$ | 1,571,552 | $ | 1,562,336 | ||||
| * | The Condensed Consolidated Balance Sheet at December 31, 2003, has been taken from the audited financial statements at that date, but does not include all disclosures required by generally accepted accounting principles. |
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
OLD DOMINION ELECTRIC COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF REVENUES,
EXPENSES AND PATRONAGE CAPITAL (UNAUDITED)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (in thousands) | ||||||||
| Operating Revenues |
$ | 134,961 | $ | 143,917 | ||||
| Operating Expenses: |
||||||||
| Fuel |
20,125 | 13,269 | ||||||
| Purchased power |
80,933 | 109,672 | ||||||
| Deferred energy |
(7,869 | ) | (16,261 | ) | ||||
| Operations and maintenance |
8,826 | 15,385 | ||||||
| Administrative and general |
7,612 | 5,181 | ||||||
| Depreciation, amortization and decommissioning |
7,332 | 5,438 | ||||||
| Amortization of regulatory asset/(liability), net |
1,756 | (4,354 | ) | |||||
| Taxes other than income taxes |
1,220 | 837 | ||||||
| Accretion |
553 | 517 | ||||||
| Total Operating Expenses |
120,488 | 129,684 | ||||||
| Operating Margin |
14,473 | 14,233 | ||||||
| Other Expense, net |
(12 | ) | (20 | ) | ||||
| Investment Income |
561 | 145 | ||||||
| Interest Charges, net |
(12,070 | ) | (8,371 | ) | ||||
| Net Margin Before Cumulative Effect of Change in Accounting Principle |
2,952 | 5,987 | ||||||
| Cumulative Effect of Change in Accounting Principle |
— | (3,271 | ) | |||||
| Net Margin After Cumulative Effect of Change in Accounting Principle |
2,952 | 2,716 | ||||||
| Patronage Capital – Beginning of Period |
247,590 | 235,534 | ||||||
| Patronage Capital – End of Period |
$ | 250,542 | $ | 238,250 | ||||
OLD DOMINION ELECTRIC COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (UNAUDITED)
| Three Months Ended March 31, | ||||||
| 2004 |
2003 | |||||
| (in thousands) | ||||||
| Net Margin |
$ | 2,952 | $ | 2,716 | ||
| Other Comprehensive Income: |
||||||
| Unrealized gain on derivative contracts |
— | 10,480 | ||||
| Other comprehensive income |
— | 10,480 | ||||
| Comprehensive Income |
$ | 2,952 | $ | 13,196 | ||
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
OLD DOMINION ELECTRIC COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (in thousands) | ||||||||
| Operating Activities: |
||||||||
| Net Margin |
$ | 2,952 | $ | 2,716 | ||||
| Adjustments to reconcile net margins to net cash provided by (used for) operating activities: |
||||||||
| Cumulative effect of change in accounting principle |
— | 3,271 | ||||||
| Depreciation, amortization and decommissioning |
7,332 | 5,438 | ||||||
| Other non-cash charges |
2,577 | 1,801 | ||||||
| Amortization of lease obligations |
2,481 | 2,372 | ||||||
| Interest on lease deposits |
(2,375 | ) | (2,263 | ) | ||||
| Change in current assets |
3,392 | 1,456 | ||||||
| Change in deferred energy |
(7,869 | ) | (16,261 | ) | ||||
| Change in current liabilities |
13,655 | (32 | ) | |||||
| Change in regulatory assets and liabilities |
2,772 | (4,540 | ) | |||||
| Deferred charges and credits |
79 | 3,421 | ||||||
| Net Cash Provided by (Used for) Operating Activities |
24,996 | (2,621 | ) | |||||
| Financing Activities: |
||||||||
| Obligations under long-term leases |
(436 | ) | (109 | ) | ||||
| Net Cash Used for Financing Activities |
(436 | ) | (109 | ) | ||||
| Investing Activities: |
||||||||
| Investments, net |
(11,679 | ) | 6,803 | |||||
| Electric plant additions |
(19,379 | ) | (39,035 | ) | ||||
| Decommissioning fund deposits |
— | (170 | ) | |||||
| Net Cash Used for Investing Activities |
(31,058 | ) | (32,402 | ) | ||||
| Net Change in Cash and Cash Equivalents |
(6,498 | ) | (35,132 | ) | ||||
| Cash and Cash Equivalents – Beginning of Period |
31,758 | 67,829 | ||||||
| Cash and Cash Equivalents – End of Period |
$ | 25,260 | $ | 32,697 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
OLD DOMINION ELECTRIC COOPERATIVE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | In the opinion of our management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include only normal recurring adjustments, necessary for a fair statement of our consolidated financial position as of March 31, 2004, and our consolidated results of operations, comprehensive income, and cash flows for the three months ended March 31, 2004 and 2003. The consolidated results of operations for the three months ended March 31, 2004, are not necessarily indicative of the results to be expected for the entire year. These financial statements should be read in conjunction with the financial statements and notes thereto included in our 2003 Annual Report on Form 10-K filed with the Securities and Exchange Commission. |
| 2. | We adopted Statement of Financial Accounting Standards (“SFAS”) No. 143 “Accounting for Asset Retirement Obligations” effective January 1, 2003. SFAS No. 143 requires legal obligations associated with the retirement of long-lived assets to be recognized at fair value when incurred and capitalized as part of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized asset is depreciated over the useful life of the long-lived asset. SFAS No. 143 requires that any transition adjustment determined at adoption be recognized as a cumulative effect of change in accounting principle. |
In the absence of quoted market prices, we determined fair value by using present value techniques, in which estimates of future cash flows associated with retirement activities are discounted using a credit adjusted risk free rate. Our estimated liability could change significantly if actual costs vary from assumptions or if governmental regulations change significantly.
SFAS No. 143 applies to the decommissioning of the North Anna Nuclear Power Plant (“North Anna”), certain asset retirement obligations at the Clover Power Station (“Clover”), as well as certain asset retirement obligations at our Rock Springs, Louisa, and Marsh Run combustion turbine facilities and our distributed generation facilities. At December 31, 2002, we had recorded a liability for the decommissioning of North Anna of $56.7 million, which equaled the balance in our nuclear decommissioning trust fund. At January 1, 2003, our liability for the decommissioning of North Anna as well as our liabilities associated with Clover and the distributed generation facilities as calculated under SFAS No. 143 were $39.0 million. This liability was calculated using the present value of estimated future cash flows. We also recorded plant assets totaling $12.3 million and offsetting accumulated depreciation of $4.4 million. The majority, $28.8 million, of the difference between what was recorded prior to January 1, 2003, and the net amount of what we recorded under SFAS No. 143 has been deferred as a regulatory liability. The remainder, $3.3 million, represents the cumulative effect of change in accounting principle. See Notes to Consolidated Financial Statements – “Note 3 —Accounting for Asset Retirement Obligations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2003, for further discussion of SFAS No. 143.
| 3. | In December 1992, we entered into an agreement with Public Service Electr |