Item 1 - BUSINESS
Generally
Registrant ("Company") is a gas and electric corporation formed, on December 31, 1926, as a consolidation of several operating utilities which had been accumulated under one management during the previous 26 years. The Company generates, purchases and distributes electricity and purchases and distributes gas. The Company, in the opinion of its general counsel, has, with minor exceptions, valid franchises, unlimited in duration, to serve a territory extending about 85 miles along the Hudson River and about 25 to 40 miles east and west from such River. The southern end of the territory is about 25 miles north of New York City, and the northern end is about 10 miles south of the City of Albany. The territory, comprising approximately 2,600 square miles, has a population estimated at 639,000. Electric service is available throughout the territory, and natural gas service is provided in and about the cities of Poughkeepsie, Beacon, Newburgh and Kingston and in certain outlying and intervening territory. The number of Company employees at December 31, 1993 was 1,370.
The Company's territory reflects a diversified economy, including manufacturing industries, research firms, farms, governmental agencies, public and private institutions, resorts, and wholesale and retail trade operations.
Total revenues and operating income before income taxes (expressed as percentages), derived from electric and gas operations for each of the last three years, were as follows:
Percent of Percent of Operating Total Revenues Income before Income Taxes
Electric Gas Electric Gas
1993 82% 18% 89% 11% 1992 82% 18% 87% 13% 1991 86% 14% 93% 7%
Electric Sales to IBM: The Company's largest customer is International Business Machines Corporation ("IBM"), which accounted for approximately 14% of the Company's total electric revenues for the year ended December 31, 1993. Published reports indicate that IBM reduced its employment by 45,000 worldwide to 256,000 in 1993 from 301,000 in 1992. Such reports also indicate that IBM has reduced its employment in the Company's service territory by up to 8,400 employees in 1993. IBM, in February 1994, announced a further reduction of approximately 1,500 employees in 1994 in the Company's service territory. Such reductions would bring the total number employed in the Company's service territory to approximately 11,600, as compared to the peak level of IBM employment in excess of 30,000 in 1985. During 1993, IBM phased out its semiconductor manufacturing operations at its East Fishkill, New York facility, which is in the Company's service territory. This downsizing of IBM has resulted in a decline of electric sales to IBM by 20% in 1993. The Company cannot assess at this time the effect, if any, of such IBM employment reductions on the Company's future results of operations.
Additional information concerning revenues and operating profits, and information concerning identifiable assets for the electric and gas segments, which are the significant industry segments of the Company, are set forth in Note 10 to the Company's Consolidated Financial Statements for the fiscal year ended December 31, 1993 (which Statements, including the Notes thereto, are hereinafter called "Company's 1993 Financial Statements"), appearing on pages 69 through 71 of the Company's 1993 Financial Statements (which Statements, together with Registrant's "Management's Discussion and Analysis of Financial Condition and Results of Operations" are included as Exhibit 13 hereto and hereinafter called "Exhibit 13"), which Note 10 is incorporated herein by reference.
Construction Program and Financing
The Company is engaged in a construction program which is presently estimated to involve total cash expenditures during the period 1994 through 1998 of approximately $364 million. The Company's principal construction projects consist of those designed to improve the reliability, efficiency and environmental compatibility of the Company's generating facilities and those required to expand, reinforce and replace the Company's transmission, substation, distribution and common facilities.
For estimates of construction expenditures, internal funds, mandatory redemption of long-term securities, and working capital requirements for the five-year period 1994-1998, see the subcaption "Construction Program" of "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing on pages 6 through 8 of Exhibit 13 hereto, which subcaption is incorporated herein by reference.
For a discussion of the Company's capital structure, financing program, short-term borrowing arrangements and sale of accounts receivable, see Notes 4 through 6 and Note 8 to the Company's 1993 Financial Statements, and the subcaptions "Capital Structure," "Financing Program" and "Short-term Debt and Sale of Receivables," appearing in "Management's Discussion and Analysis of Financial Condition and Results of Operations," appearing, in the case of said Notes, on pages 52 through 56, and 61 of Exhibit 13 hereof and, in the case of said subcaptions, on pages 8 and 9 of Exhibit 13 hereof, which Notes and subcaptions are incorporated herein by reference.
The Company's Certificate of Incorporation and its various debt instruments do not contain any limitations upon the issuance of authorized, but unissued, Preferred Stock and Common Stock or of unsecured short-term debt.
The Company's various debt instruments include limitations as to the amount of additional funded indebtedness which the Company can issue. The Company believes such limitations will not impair its ability to issue any or all of the debt described under said caption "Financing Program" incorporated herein by reference.
The Company has authority from the State of New York Public Service Commission ("PSC") to issue, at any time through December 31, 1997, unsecured short-term debt for capital purposes in an aggregate principal amount not to exceed at any time $52 million.
Rates
Generally: The electric and gas rates of the Company applicable to service supplied to retail customers within the State of New York generally are regulated by the PSC. Transmission rates and rates for electricity sold for resale in interstate commerce are regulated by the Federal Energy Regulatory Commission ("FERC").
During 1993, the average price per kWh paid by the Company's residential electric customers was 11.2 cents, representing an increase of approximately 1.8% over the 11 cents average price during 1992. The rise in average price during 1993 was due primarily to the annualized effect of the increase in the Company's base electric rates effective April 15, 1992.
Rate Proceedings - Electric and Gas: For information with respect to the PSC's Opinion and Order Determining Revenue Requirement and Rate Design, issued and effective February 11, 1994, incorporating the PSC's Order Adopting Revenue Requirement and Rate Design, issued and effective December 16, 1993, which authorizes the Company to increase its base rates for electric service and denies the Company's request to increase rates for base gas service, see subcaptions "Rate Proceeding - Electric" and "Rate Proceeding - Gas," in "Management's Discussion and Analysis of Financial Condition and Results of Operations," on pages 9 and 10 of Exhibit 13 hereto, which subcaptions are incorporated herein by reference.
Cost Adjustment Clauses: The Company's tariff for retail electric service includes a fuel cost adjustment clause pursuant to which electric rates are adjusted to reflect changes in the costs of fuels used in electric generation and of certain purchased power from the level of such costs included in the Company's base rates for electricity. The Company's tariff for gas service includes a gas cost adjustment clause pursuant to which gas rates are adjusted to reflect changes in the price of natural gas purchased from pipeline and/or third party suppliers and certain costs of manufactured gas from the level of such costs included in base rates for gas.
For more information with respect to such clauses, see the discussions under the subcaptions "Deferred Electric Fuel Costs" and "Deferred Gas Costs" in Note 1 to the Company's 1993 Financial Statements appearing on pages 44 and 45 of Exhibit 13 hereto, which subcaptions are incorporated herein by reference.
Take-or-Pay Gas Liability: For a discussion of the PSC proceeding commenced in 1988 to determine, among other things, whether recovery of some or all of take-or-pay costs should be denied New York gas distribution companies, see the subcaption "Take-or-Pay Gas Costs" in Note 9 to the Company's 1993 Financial Statements appearing on page 65 of Exhibit 13 hereto, which subcaption is incorporated herein by reference.
Other Rate Matters: From time to time legislation is introduced in the New York State Legislature which, if enacted, would affect the rate structures and ability to recover costs of service of all electric and/or gas utilities operating in New York State.
The PSC from time to time has initiated various proceedings and taken action relating to the rate structures and operations of electric and/or gas utilities which could or will require Company action and the expenditure of funds.
Fuel Supply and Cost
The Company's two primary fossil fuel-fired electric generating stations are the Roseton Plant (described in Item 2
Item 2 - PROPERTIES
Electric
General: The net capability of the Company's electric generating plants as of December 31, 1993, the net output of each plant for the year ended December 31, 1993, and the year each plant was placed in service or rehabilitated are as set forth below: Electric Net Capability 1993 Unit Generating Year Placed (MW)* Net Output Plant Type of Fuel In Service Summer Winter (MWh)
Danskammer Residual Oil, Natural 1951-1967 496.5 507.0 1,990,979 Plant Gas and Coal
Roseton Plant Residual Oil 1974 422.1 426.0 1,072,734 (35% share) and Natural Gas
Neversink Water 1953 23.5 23.0 64,028 Hydro Station
Dashville Water 1920 3.0 3.9 11,880 Hydro Station
Sturgeon Pool Water 1924 14.6 15.3 53,863 Hydro Station
High Falls Water 1986 1.2 2.7 5,342 Hydro Station
Coxsackie Kerosene or 1969 20.0 24.0 5,609 Gas Turbine Natural Gas
So. Cairo Kerosene 1970 18.0 24.0 820 Gas Turbine
Nine Mile 2 Nuclear 1988 94.0 95.0 645,036 Plant (9% share) ------- ------ --------- Total 1,092.9 1,120.9 3,850,291
* Reflects Company ownership of generation resources and, therefore, does not include firm purchases or sales.
The Company entered into a contract with New York State Electric and Gas Corporation, with a term of May 24, 1993 through April 29, 1995, for the purchase of energy and capacity of up to 300 MW. During 1993, the Company purchased 920,000 MWh of energy under this contract.
The Company has a contract with PASNY which entitles the Company to 49 MW net capability from the Blenheim-Gilboa Pumped Storage Hydroelectric Plant through 2002.
Since 1975, the Company has purchased capacity in relatively small amounts from the Fitzpatrick Nuclear Plant of PASNY, pursuant to a contract which may be terminated by either party on 12 months' notice. Under such contract, the maximum capacity which can be purchased during specific periods is 6 MW.
See Item 1, subcaption "Regulation - Alternative Electric Power Generation," with respect to alternative electric power generation interconnected with the Company's system.
The Company owns 89 substations having an aggregate transformer capacity of 4.3 million KVA. The transmission system consists of 584 pole miles of line and the distribution system of 7,224 pole miles of overhead lines and 783 trench miles of underground lines.
Load and Capacity: The Company's maximum one-hour demand within its own territory, for the year ended December 31, 1993, occurred on July 15, 1993 and amounted to 860 MW. The Company's maximum one-hour demand within its own territory, for that part of the 1993-1994 winter capability period through March 15, 1994, occurred on January 26, 1994 and amounted to 845 MW.
Based on current projections of peak one-hour demands for the three-year period comprising the 1994 summer capability period through the winter capability period of 1996-1997, the Company estimates that it will have capacity available to satisfy its projected peak demands plus the estimated reserve generating capacity requirements which it is required to maintain as a member of the New York Power Pool ("NYPP"), described below. The following table sets forth the amounts of any excess capacity by summer and winter capability periods for such three-year period:
Excess of Capacity over Forecasted Peak + Available Peak Plus NYPP Capability Peak Reserve Capacity Reserve Requirements Period (MW) (MW)* (MW) (MW) Percent
1994 Summer 840 991 1,092.9 101.9 9.3 1994-95 Winter 760 991 1,152.9 161.9 14.0 1995 Summer 820 968 1,122.9 154.9 13.8 1995-96 Winter 765 968 1,182.9 214.9 18.2 1996 Summer 820 968 1,152.9 184.9 16.0 1996-97 Winter 770 968 1,212.9 251.9 20.8
* Summer period peak plus reserve requirements carry over to the following winter period.
The foregoing table reflects the following:
(1) reduction in capacity requirements as a result of the Company's Energy Efficiency Programs described above in Item 1 under the subcaption "Regulation - Energy Efficiency Programs," (2) the decreases in IBM related electric sales and revenues (as described above in Item 1 under the subcaption "Rates - Rate Proceedings - Electric and Gas") and (3) effective with the 1994-1995 Winter - Capability Period, the capacity represented by the interests in the Roseton Plant proposed to be purchased by the Company from Niagara Mohawk Power Corporation ("Niagara Mohawk") under the "Amendment" (as described below under the subcaption "Roseton Plant").
The Company is a member of the NYPP consisting of the major investor-owned electric utility companies in the State and PASNY. The members of the NYPP, by agreement, provide for coordinated operation of their bulk power electric systems with a view to the use of the most economical source of electricity, for the maintenance of a reserve margin equal to at least 18% of each member's forecasted peak load and for the sale and interchange of electric generating capability and energy among such members. The members of the NYPP also provide for the cooperative development of long-range plans for the expansion on an integrated basis of the bulk power supply system for New York State, compatible with environmental standards, and appropriately related to interstate and international capacity and reliability considerations.
Roseton Plant: The Roseton Plant is located in the Company's franchise area at Roseton, New York, and is owned by the Company, Con Edison and Niagara Mohawk as tenants-in-common. The Roseton Plant, placed in commercial operation in 1974, has a generating capacity of 1,200 MW consisting of two 600 MW generating units, both of which are capable of being fired either by residual oil or natural gas (see subcaption below entitled "Gas - Sufficiency of Supply and Future Gas Supply"). The Company is acting as agent for the owners with respect to operation of the Roseton Plant. Generally, the owners share the costs and expenses of the operation of such Plant in accordance with their respective ownership interests.
In March 1993, Unit No. 2 of the Roseton Plant went out of service because of extensive damage to that Unit and related facilities caused by fire. No injury to personnel was involved. Some non-hazardous mineral oil spillage also occurred into a tributary of the Hudson River. No customer service interruptions occurred. Appropriate governmental agencies, including the PSC, the U.S. Coast Guard and the NYSDEC were contacted. Unit No. 1 of the Roseton Plant was taken out of service due to less extensive damage to that Unit. Unit No. 1 was returned to service in May 1993 and Unit No. 2 was returned to service in December 1993. Total restoration costs are approximately $32 million, most of which will be recovered through insurance.
Pursuant to an agreement among the cotenant owners of the Roseton Plant, dated October 1, 1968, and thereafter amended ("Roseton Plant Agreement"), Con Edison owns 40% of such Plant, Niagara Mohawk owns 25% of such Plant and the Company owns 35% of such Plant, all as tenants-in-common. The Company, under the Roseton Plant Agreement, has an option to purchase the interests of Con Edison and Niagara Mohawk in the Roseton Plant in December 2004 at a purchase price based upon fair value within specified limits of amortized costs. The exercise of such option by the Company is subject to approval by the PSC and may be subject to the statutory standards and/or competitive bidding requirements described in Item 1 above under the caption "Regulation - Least- Cost Generation Supply."
In order to satisfy then anticipated requirements for additional generating capacity starting in the mid-1990s, in 1987 the Company and Niagara Mohawk entered into an agreement ("Amendment") which revises the option of the Company to purchase the interest of Niagara Mohawk in the Roseton Plant under the Roseton Plant Agreement. The Company's option to buy Con Edison's interest in the Roseton Plant is not affected by the Amendment. The Amendment is subject to PSC approval, and in the event such approval is not obtained, the Amendment is cancelled and the parties return to their same positions under the Roseton Plant Agreement.
Pursuant to the Amendment, Niagara Mohawk will sell to the Company a 2.5% interest in the Roseton Plant on December 31, 1994 and on each succeeding December 31, through and including December 31, 2003, which will constitute all of Niagara Mohawk's interest in the Roseton Plant. In exchange, Niagara Mohawk will have the option to repurchase from the Company up to a 25% interest in the Roseton Plant in December 2004. The prices for the purchases will be based on the depreciated book cost of the Roseton Plant assuming straight-line amortization to provide for a fully amortized facility as of December 31, 2009. Pursuant to the Amendment, the Company has the option to repurchase Niagara Mohawk's remaining interest in the Roseton Plant when such Plant reaches the end of its assumed physical life as agreed upon by the parties to the Amendment.
In July 1988, the PSC established a proceeding to consider a joint petition filed by the Company and Niagara Mohawk requesting the PSC to approve the transfers of interests in the Roseton Plant contemplated by the Amendment. In May 1989, the Company and the PSC Staff reached a Stipulation Agreement indicating that, giving consideration to expected demand-side management activities, the proposed transfers of interest of the Roseton Plant under the Amendment were one alternative which would meet the Company's future needs for power. The PSC has not yet acted on such petition. The Company continues to consider other alternatives to the Amendment.
The 345 Kv transmission lines and related facilities to connect the Roseton Plant with other points in the system of the Company and with the systems of Con Edison and Niagara Mohawk to the north and west of such Plant are 100%-owned by the Company. The share of each of the parties in the output of the Roseton Plant is transmitted over these lines pursuant to a certain transmission agreement relating to such Plant, which provides, among other things, for compensation to the Company for such use by the other parties. In addition, the Company has contract rights which entitle the Company to the lesser of 300 MW or one quarter of the capacity in a 345 Kv transmission line owned by PASNY which connects the Roseton Plant with a Con Edison substation to the east of such Plant in East Fishkill, New York. In exchange for these rights, the Company agreed to provide PASNY capacity in the 345 Kv transmission lines the Company owns from the Roseton Plant, to the extent it can do so after satisfying its obligations to Con Edison and Niagara Mohawk.
Nine Mile 2 Plant:
General: Unit No. 2 of the Nine Mile Point Nuclear Station ("Nine Mile 2 Plant" or "Plant") is located in Oswego County, New York, and is operated by Niagara Mohawk. The Nine Mile 2 Plant is owned as tenants-in-common by the Company (9% interest), Niagara Mohawk (41% interest), New York State Electric & Gas Corporation (18% interest), Long Island Lighting Company (18% interest) and Rochester Gas and Electric Corporation (14% interest). The output of the Nine Mile 2 Plant, which has a nominally rated net capability of 1,080 MW, is shared, and the operating expenses of and capital additions to the Plant are allocated to the cotenants, in the same proportions as the cotenants' respective ownership interests.
An Operating Agreement for the operation of the Plant was entered into by the Nine Mile 2 Plant cotenants effective January 1, 1993, and the PSC approved said Operating Agreement on February 24, 1994. Under that Agreement, Niagara Mohawk operates the Nine Mile 2 Plant, but all five owners shared certain policy, budget and managerial oversight functions. The fixed term of such Operating Agreement is 24 months from its effective date and, unless terminated on the expiration of such 24 month period, continues, subject to termination on six months' notice.
In August 1989, the non-operating cotenants of the Nine Mile 2 Plant entered into an agreement for consulting services with Management, Analytical & Technical Services, Inc. ("MATS") concerning the monitoring and assessment of the operation of the Plant, including the provision of technical advice, with the objective of improving the operation of the Plant. Pursuant to such agreement, MATS is acting as the on-site representative of the non-operating cotenants.
Operational Matters:
NRC and INPO Monitoring: On September 28, 1993, the Nuclear Regulatory Commission ("NRC") issued its latest systematic assessment of licensee performance ("SALP") review of the Nine Mile Point Nuclear Station for the period May 24, 1992 to August 14, 1993 ("1992/93 SALP Report"). The Nine Mile Point Nuclear Station is comprised of Units No. 1 and No. 2, Unit No. 1 being located adjacent to the Nine Mile 2 Plant and owned and operated solely by Niagara Mohawk and Unit No. 2 being the Nine Mile 2 Plant. The 1992/93 SALP Report, conducted under the revised SALP process that was implemented by the NRC on July 19, 1993, rates licensee performance in four functional areas: Operations, Maintenance, Engineering and Plant Support.
Overall, the NRC indicated that it continues to see improved performance at the Nine Mile Point Nuclear Station. According to the NRC, Niagara Mohawk's management demonstrated a proactive and proper safety perspective and excellent oversight, control and involvement in and support of activities at such Station. Due to the change in the NRC's revised SALP process, direct comparisons to previous SALP reports are not available in all areas.
Operations was rated Category 2 ("good"), which was the same rating as on the prior SALP Report (covering the period April 1991 through May 23, 1992).
Maintenance was rated Category 2 ("good"), up from Category 2 "with a declining trend" in said prior SALP Report.
Engineering was rated Category 1 ("excellent"), up from Category 2 in said prior SALP Report.
Plant Support was rated Category 2 ("good"). Plant Support is a new functional area covering all activities related to plant support functions, including Radiological Controls, Emergency Preparedness, Security, Chemistry, Fire Protection and House Keeping Controls.
The Institute of Nuclear Power Operations ("INPO"), an industry sponsored oversight group, conducted evaluations of the Nine Mile Point Nuclear Station during the weeks of May 17 and 24, 1993. Niagara Mohawk informed the Company that the INPO Report was generally favorable, however, there were some areas in need of improvement. Niagara Mohawk reports that it has responded to INPO with its intent to correct any problem areas. INPO evaluations are conducted at twelve (12) to eighteen (18) month intervals.
Radioactive Waste: For a discussion of the low-level and high-level radioactive waste management programs at the Nine Mile 2 Plant, see the caption "Radioactive Waste" in Note 2 to the Company's 1993 Financial Statements appearing on pages 46 and 47 of Exhibit 13 hereto, which caption is incorporated herein by reference.
Refueling Outage: A scheduled refueling outage for the Nine Mile 2 Plant commenced on October 2, 1993. Such refueling outage was completed on November 29, 1993 and full plant output was achieved on December 3, 1993.
Gas
General: The Company's gas system consists of 156 miles of transmission pipelines and 923 miles of distribution pipelines.
Current Gas Supply: During 1993, natural gas was available to firm gas customers at a price competitive with that of alternative fuels. As compared to 1992, in 1993, firm retail gas sales, normalized for weather, increased by 1% and the average number of firm gas customers increased by 1.9%. Sales to interruptible customers decreased 37.4% in 1993 as compared to 1992.
For information on the Company's gas suppliers and gas storage capability, see the caption "Natural Gas Supply" in Note 9 to the Company's 1993 Financial Statements appearing on pages 63 and 64 of Exhibit 13, which caption is incorporated herein by reference.
For the year ended December 31, 1993, the total amount of gas purchased from all sources was 18,293,178 Mcf., which includes 1,940,214 Mcf. purchased directly for use as a boiler fuel at the Roseton Plant.
The Company owns two propane-air mixing facilities for emergency and peak shaving purposes located in Poughkeepsie and in Newburgh, New York. Each facility is capable of supplying 8,000 Mcf. per day with propane storage capability adequate to provide maximum facility sendout for up to three consecutive days.
Sufficiency of Supply and Future Gas Supply: The peak daily demand for natural gas by the Company's customers for the year ended December 31, 1993 occurred on February 6, 1993, and amounted to 100,774 Mcf. The Company's peak-day gas capability in 1993 was 116,865 Mcf. The peak daily demand for natural gas by the Company's customers for that part of the 1993-1994 heating season through March 15, 1994, occurred on January 27, 1994 and amounted to 113,033 Mcf.
Other: In late 1985, FERC instituted a rule which permits non-discriminatory access to the pipeline facilities of interstate gas pipeline transmission companies subject to the jurisdiction of FERC under the Natural Gas Act. This rule allows access to such pipelines by the pipeline transmission company's customers enabling them to transport gas purchased directly from third parties and spot sources through such pipelines. Such access, moreover, also permits industrial customers of gas distribution utilities to connect directly with the pipeline transmission company and to contract directly with the pipeline transmission companies to transport gas, thereby by-passing the distribution utility. In 1985, the PSC issued its Opinion and Order requiring New York State distribution gas utilities to transport customer-owned gas through its facilities upon request of a customer. Except in the Towns of Carmel, Pleasant Valley, New Baltimore, Coxsackie, Athens, Milan, Clinton, LaGrange and Unionvale, currently, no interstate pipeline transmission companies are located in areas where the Company provides retail gas service.
For a discussion of FERC Order 636, issued in 1992, and thereafter amended, which requires pipeline gas suppliers to unbundle natural gas sales service from transportation and storage service, see the caption "Natural Gas Supply" in Note 9 to the Company's 1993 Financial Statements appearing on pages 63 and 64 of Exhibit 13 hereto, which caption is incorporated herein by reference.
The Company is a member of the New York Gas Group ("NYGAS"), a voluntary association of utilities providing gas service in New York State. The purpose of NYGAS is to achieve, by cooperative action among gas distributors, greater efficiency in meeting present demands for gas service in New York State and to develop state-wide gas sufficiency to support future economic growth throughout the State.
Other Matters
The Danskammer Plant and the Roseton Plant and all of the other principal generating plants and important property units of the Company are held by it in fee simple, except (1) certain rights-of-way, and (2) a portion of the property used in connection with the hydroelectric plants of the Company consisting of flowage or other riparian rights. The Company's present interests in the Roseton Plant and the Nine Mile 2 Plant are owned as undivided interests as a tenant-in-common with the other utility owners thereof. Certain of the properties of the Company are subject to rights-of-way and easements which do not interfere with the Company's operations. In the case of certain distribution lines, the Company owns only a part interest in the poles upon which its wires are installed, the remaining interest being owned by telephone companies. Certain electric transmission facilities owned by others are used by the Company pursuant to long-term contractual arrangements.
All of the physical properties of the Company (other than property, such as material and supplies, excluded in the Company's Mortgage) and its franchises are subject to the lien of the Company's Mortgage under which all of its Mortgage Bonds are outstanding. Such properties are from time to time subject to liens for current taxes and assessments which it is the Company's practice to pay regularly as and when due.
The Company's properties have been well maintained and are in good operating condition.
During the three-year period ended December 31, 1993, the Company made gross property additions of $186.7 million and property retirements and adjustments of $35.8 million, resulting in a net increase (including Construction Work in Progress) in utility plant of $150.9 million, or 12.5%
Item 3
Item 3 - LEGAL PROCEEDINGS
Asbestos Litigation
The Company, as of March 1, 1994, is a defendant or third-party defendant in 189 asbestos lawsuits commenced in New York state and federal courts. Since 1987, and as of March 1, 1994, the Company, along with many other parties, has been a defendant or third-party defendant in a total of 439 such asbestos lawsuits (including the 189 cases which are currently pending).
The plaintiffs in these lawsuits typically allege that they were injured by exposure to airborne asbestos fibers while working at a Company job site, either as an employee of an independent contractor or as an employee of the Company, when asbestos-containing products were being installed, maintained, renovated or removed. Typically, each plaintiff seeks $10,000,000 in compensatory damages, plus punitive damages, from all defendants.
Of the 439 cases that have been brought against the Company, only 189 remain pending against the Company, as of March 1, 1994, as a result of the following developments: (1) the Company negotiated voluntary dismissals in 22 cases and won summary judgment dismissals in 9 cases; (2) 114 third-party claims were extinguished with respect to the Company when the third-party plaintiff, Owens-Corning Fiberglass ("OCF") settled the cases with the plaintiffs; and (3) the Company settled 105 cases for an amount that in the aggregate is not material to the Company's financial condition.
Four of the pending cases were commenced against the Company and numerous other defendants in the United States District Court for the Southern District of New York by complaints dated March 26, 1991, June 13, 1991 and February 19, 1992. All four federal court plaintiffs allege to have been injured by exposure to asbestos fibers while working as an employee of an independent contractor at a Company facility. In two of the cases, the Company was joined as a third-party defendant by OCF. The third-party complaint alleges that the Company is responsible to OCF for the amount of any recovery obtained by the plaintiffs against OCF in each lawsuit. The two remaining federal court plaintiffs each seek $10,500,000 in compensatory damages, plus punitive damages.
One hundred eighty-five (185) cases are pending against the Company in New York State Supreme Court, County of New York. These cases were commenced against the Company and numerous other defendants by complaints dated March 6, 1990, August 12, 1991, October 21, 1991, December 12, 1991, January 3, 1992, May 11, 1992, May 21, 1992, July 10, 1992, August 24, 1992, October 5, 1992, October 6, 1992, October 27, 1992, December 21, 1992, December 22, 1992, January 3, 1993, February 23, 1993, March 5, 1993, May 28, 1993, July 1, 1993, August 2, 1993, November 1, 1993, November 26, 1993, December 1, 1993, January 6, 1994, January 12, 1994, January 24, 1994 and January 25, 1994. All of these cases involve persons who were allegedly exposed to asbestos fibers while working as employees of independent contractors at Company facilities. One hundred seventy-seven (177) of these plaintiffs seek $10,000,000 in compensatory damages, plus punitive damages. Seven (7) plaintiffs seek $10,500,000 in compensatory damages, plus punitive damages. One (1) plaintiff seeks $27,000,000 in compensatory damages, plus punitive damages.
In summary, as of March 1, 1994, the Company is a defendant or third-party defendant in 189 asbestos lawsuits. Although the Company is presently unable to assess the validity of these 189 lawsuits, based on information known to the Company at this time, including its experience in settling asbestos cases and in obtaining dismissals of asbestos cases, the Company believes that the costs to be incurred in connection with these lawsuits will not have a material adverse effect on the Company's financial position. However, if the Company were ultimately held liable under these lawsuits and insurance coverage were not available, the cost thereof could have a material adverse effect (a reasonable estimate of which cannot be made at this time) on the financial condition of the Company if the Company could not recover all or a substantial portion thereof through rates.
Environmental Litigation
In December 1980, several utilities, including the Company, three environmental groups and the NYSDEC, among others, entered into an agreement ("Settlement Agreement") which relates to compliance with environmental matters concerning the operations of certain electric generating stations located along the Hudson River, including the Roseton Plant. The Settlement Agreement expired on May 9, 1991. Effective May 9, 1991, such utilities and the NYSDEC entered into an interim agreement which relates to certain environmental aspects of the operation of such plants, pending future developments.
In September, 1991, Natural Resources Defense Council, Inc., the Hudson River Fisherman's Association and Scenic Hudson, Inc. commenced an action in the Supreme Court of the State of New York, County of Albany, against the NYSDEC, Con Edison, PASNY, Orange and Rockland Utilities, Inc. and the Company. This lawsuit challenged, as arbitrary and capricious, an abuse of discretion and a violation of lawful procedure, the determination of the NYSDEC to enter into said interim agreement, alleging, among other things, that it would result in less stringent regulatory standards than set forth in the SPDES permits applicable to, among others, the Roseton Plant, without regard to the applicable SPDES permit modification procedures. The lawsuit also sought a declaratory judgment that the existing SPDES permits (which expired October 1, 1992) include all covenants contained in the expired Settlement Agreement which restrict operations at said plants, including the Roseton Plant.
On March 23, 1992, the Court approved an agreed-upon Consent Order which resolved this action. Such Consent Order provides for certain operating restrictions at the Roseton Plant relating to the use of river water for plant cooling purposes, which have not imposed, and are not expected to impose, material additional costs on the Company. Such Consent Order remains in effect until September 1, 1994 (originally due to expire on September 1, 1993, but extended for one year by agreement by the parties thereto, as approved by the Court on August 5, 1993), or until renewal SPDES permits for said plants, including the Roseton Plant, are finally effective, whichever first occurs. For a description of the pending NYSDEC proceeding involving renewal of the SPDES permit for the Roseton Plant (which expired on October 1, 1992), see Item 1 above under the subcaption "Environmental Quality - Water."
IBM Litigation
By complaint, dated July 28, 1988, the International Business Machines Corporation ("IBM") commenced a lawsuit in the Supreme Court of the State of New York, County of Dutchess, against the Company and other unnamed defendants. IBM is the largest electric customer of the Company (see in Item 1 above, subcaption entitled "Generally"). In such complaint IBM alleges that negligence, gross negligence and breach of contract on the part of the defendants resulted in a power outage and electrical loss on August 2, 1985, whereby IBM sustained damages in the amount of $470,740. The Company filed its answer, denying liability and cross complaint on September 26, 1988. Currently, discovery is underway. The Company denies liability in this matter; if, however, it were held to be so liable, the amount of such damages would not have a material adverse effect on the financial condition of the Company.
Catskill Incident
In November 1992, an explosion in a dwelling in the Company's gas service territory in Catskill, New York resulted in personal injuries, including the death of an occupant, and property damage. The National Transportation Safety Board ("NTSB"), the Office of Pipeline Safety ("OPS," a part of the Research and Special Program Administration of the U.S. Department of Transportation) and the PSC investigated this incident.
On January 27, 1993, the Staff of the PSC issued a report which attributed the cause of this incident to the Company's alleged violations of the PSC's gas safety regulations and the Company's operating procedures. Based upon such report, the PSC approved the commencement of a penalty proceeding against the Company. The PSC Staff, based on its interpretation of the New York Public Service Law, sought a penalty of up to approximately $8.25 million.
The Company and the staff of the PSC reached an Agreement in connection with the PSC's threatened penalty proceeding arising out of such explosion, which Agreement expires on December 31, 1998. The Agreement provides that the Company will not pay any penalties or fines in connection with the Catskill incident.
Under the terms of such Agreement, which was approved by the PSC, by Order issued and effective January 7, 1994, the Company has established a Quality Control Program to assure the safe and efficient operation of the Company's Gas System.
The Company also will establish, under the Agreement, an expanded training program, create four training centers and implement an expanded program to evaluate and replace cast iron and steel pipeline facilities. Shareholders will contribute the following amounts under the Agreement: an aggregate of $500,000 in 1994 toward the cost of the pipeline replacement program and the cost of the creation of the training centers; in each of 1995 and 1996, $500,000 toward the cost of such pipeline replacement program; and in 1997 from $0 to $500,000 toward the cost of such pipeline replacement program, depending on the Company's completion of certain tasks by specified dates.
As a result of an investigation of the Catskill incident conducted by the OPS pursuant to the Natural Gas Pipeline Safety Act, the OPS issued a Notice of Proposed Violation and Proposed Civil Penalty in December 1992. By Final Order, issued December 2, 1993, the OPS found that the Company failed to submit a telephonic report of the Catskill incident to the DOT at the earliest practicable moment following discovery of such incident as required by applicable regulations. The Company did notify the DOT of the Catskill incident by telephone approximately nine hours and forty-five minutes after such incident. The OPS assessed the Company a civil penalty of $5,000, which the Company elected not to appeal.
The NTSB in its investigation of the Catskill incident, by letter dated August 23, 1993, determined that the probable cause of such incident was the Company's failure to follow its procedures and the PSC's code for the immediate replacement of exposed cast iron pipe. The NTSB also recommended that the Company undertake a certain program to ensure continuity of supervisory responsibility for the timely and effective verification of the safety integrity of exposed cast iron pipe and to identify and replace in a timely manner cast iron piping systems that may threaten public safety. By letter, dated October 22, 1993, the Company responded that it would undertake such a program.
Two lawsuits have been commenced against the Company alleging personal injuries and wrongful death arising out of such incident as follows:
By complaint, dated February 2, 1994, Carl Fatzinger, as executor of the estate of Mildred Fatzinger, and Virginia Fatzinger commenced an action in the Supreme Court of the State of New York, Greene County, against the Company and two other defendants. The complaint alleges that Mildred and Virginia Fatzinger were residents of the dwelling in which said explosion occurred and that, as a result of said explosion, Mildred Fatzinger was killed, Virginia Fatzinger received serious personal injuries, and the Fatzingers suffered extensive damage to their property. The complaint seeks an unspecified amount of compensatory and punitive damages against the Company based on theories of negligence, absolute liability and gross negligence.
By complaint, dated October 18, 1993 and filed in the Supreme Court of the State of New York, Greene County, Frank Reyes commenced an action against the Company for unspecified personal injuries and property damage alleged to have been caused by said explosion. Mr. Reyes was a nearby resident at the time of said explosion. The complaint seeks $2,000,000 in compensatory damages and $2,000,000 in punitive damages from the Company, based on theories of negligence and gross negligence, respectively.
The Company is investigating these claims and presently has insufficient information on which to predict their outcome. The Company believes that it has adequate insurance to cover any compensatory damages that might be awarded. The Company's insurance, however, does not extend to punitive damages. If punitive damages were ultimately awarded in either or both of these lawsuits, such award(s) could have a material adverse effect on the financial condition of the Company if the Company could not recover all or a substantial portion thereof through rates. At this time the Company can make no prediction as to any other litigation which may arise out of the Catskill incident.
Income Tax Assessments: Reference is made to the subcaption "Tax Matters - Assessments" in Note 9 to the Company's 1993 Financial Statements, on page 67 of Exhibit 13, for a discussion of the examination by the Internal Revenue Service ("IRS") of the Company's federal income tax returns for 1987 and 1988, which subcaption is incorporated herein by reference. On or about March 7, 1994, the Company received letters from the IRS, arising out of this examination, proposing net increases in the Company's federal tax liability of approximately $16 million. Such letters do not represent a notice of deficiency from the IRS, and the Company has received no notice of deficiency regard- ing these taxable years from the IRS. According to such letters, the Company has the option of: (i) responding within 30 days from the date of the letters to agree or disagree with the proposed adjustments and request a conference with the Regional Office of Appeals of the IRS, or (ii) seeking relief in the United States Tax Court. The Company intends to respond (in either a 30-day period or, pending the granting by the IRS of an extension, a 60- day period) to these letters, challenge the proposed adjustments, and request a conference with said Office of Appeals. The Company can make no prediction at this time as to the ultimate resolution of these proposed adjustments. However, the Company believes that a significant portion of any final assessments would be recovered in rates. And, the Company believes that the amount of any final assessments, not recovered in rates, would not have a material adverse effect on the financial condition of the Company.
Item 4
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter of the Company's fiscal year covered by this Report.
PART II
Item 5
Item 5 - MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth under the subcaption "Common Stock Dividends and Price Ranges" in Management's Discussion and Analysis of Financial Condition and Results of Operations, on page 29 of Exhibit 13 hereto, is incorporated herein by reference.
Pursuant to applicable statutes and its Certificate of Incorporation, the Company may pay dividends on shares of Preferred and Common Stock only out of surplus.
The Company has an Automatic Dividend Reinvestment and Stock Purchase Plan which permits holders of the Company's Common Stock who elect to participate in such Plan to reinvest dividends and also permits participants to make additional cash investments in the Company's Common Stock. Shares can be acquired directly from the Company or on the open market at the election of the Company. For a complete description of said Plan, reference is made to the Prospectus, dated January 5, 1993, which is part of the Company's Registration Statement on Form S-3 (Registration No. 33-56760), relating to 3,550,000 shares of Common Stock registered under the Securities Act of 1933 ("1933 Act") for issuance under said Plan.
The Company's Customer Stock Purchase Plan provides the Company's residential customers and members of their families residing with them who are residents of New York State with a method of purchasing shares of the Company's Common Stock directly from the Company. Shares can be acquired directly from the Company or on the open market at the election of the Company. For a complete description of said Plan, reference is made to the Prospectus, dated January 5, 1993, which is part of the Company's Registration Statement on Form S-3 (Registration No. 33-55764), relating to 780,000 shares of Common Stock registered under the 1933 Act for issuance under said Plan.
The Company also maintains for its employees an Employee Stock Purchase Plan, which provides for the purchase of the Company's Common Stock on the open market.
Item 6
Item 6 - SELECTED FINANCIAL DATA
The information required hereunder is incorporated herein by reference to the material on pages 4 and 5 of Exhibit 13 hereto.
Item 7
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required hereunder is incorporated herein by reference to the material appearing on pages 6 through 29 of Exhibit 13 hereto.
Item 8
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements
The Company's 1993 Financial Statements, together with the report thereon of Price Waterhouse, dated January 28, 1994, appearing on pages 30 through 72 of Exhibit 13 hereto, are incorporated by reference in this Annual Report on Form 10-K. The Financial Statement Schedules incorporated by reference as part of this Annual Report on Form 10-K should be read in conjunction with the Company's 1993 Financial Statements. Financial Statement Schedules not included with this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the Company's 1993 Financial Statements.
The Company's 1993 Financial Statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. The Company's subsidiaries are wholly-owned landholding, cogeneration and energy management companies. Due to immateriality, the net income of the Company's subsidiaries is reflected in the Company's Consolidated Statement of Income as Other Non-operating Income - net; such Consolidated Statement of Income is contained on pages 36 and 37 of Exhibit 13 hereto.
(b) Supplementary Financial Information
The supplementary financial information specified by Item 302 of Regulation S-K is found under the caption "Selected Quarterly Financial Data (Unaudited)," of the Company's 1993 Financial Statements on page 73 of Exhibit 13 hereto, which caption is incorporated herein by reference pursuant to Item 8 (a) above.
(c) Other Financial Statements and Schedules
Other financial statements and schedules required under Regulation S-X are filed pursuant to Item 14 of this Report.
Item 9
Item 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information with respect to the Directors of the Company required hereunder is incorporated by reference to the caption "Election of Directors" in the Company's definitive proxy statement, dated February 25, 1994, to be used in connection with its Annual Meeting of Shareholders to be held on April 5, 1994, which proxy statement has previously been submitted to the Securities and Exchange Commission pursuant to that Commission's Regulation S-T.
The information with respect to the executive officers of the Company required hereunder is incorporated by reference to Item 1 of this Report, under the caption "Executive Officers of the Company."
Item 11
Item 11 - EXECUTIVE COMPENSATION
The information required hereunder is incorporated by reference to the caption "Executive Compensation" in the Company's definitive proxy statement, dated February 25, 1994, to be used in connection with its Annual Meeting of Shareholders to be held on April 5, 1994.
Item 12
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required hereunder is incorporated by reference to the caption "Security Ownership" in the Company's definitive proxy statement, dated February 25, 1994, to be used in connection with its Annual Meeting of Shareholders to be held on April 5, 1994.
Item 13
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no relationships or transactions of the type required to be described by this Item.
PART IV
Item 14
Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. Financial Statements
See subpart 1 of Index to Financial Statements on page of this Report.
2. Financial Statement Schedules
See subpart 2 of Index to Financial Statements on page of this Report.
3. Exhibits
Incorporated herein by reference to the Exhibit Index beginning on page E-1 of this Report. Such Exhibits include the following management contracts or compensatory plans or arrangements required to be filed as an Exhibit pursuant to Item 14(c) hereof:
Description in the Exhibit List and Exhibit Nos. for this Report
Directors' Deferred Compensation Plan, effective October 1, 1980. (Exhibit (10)(iii)(1))
Trust Agreement between Registrant and Dutchess Bank & Trust Company, as trustee, dated as of January 1, 1984, pursuant to Registrant's Savings Incentive Plan. (Exhibit (10)(iii)(2))
First Amendment, dated December 31, 1990, to Trust Agreement between Registrant and The Bank of New York, as successor trustee, dated as of January 1, 1984, pursuant to Registrant's Savings Incentive Plan. (Exhibit (10)(iii)(3))
Savings Incentive Plan of Registrant, as restated as of January 1, 1987, together with Amendments thereto dated September 23, 1988 and March 17, 1989, December 31, 1990, January 14, 1991, October 25, 1991, December 11, 1992, July 23, 1993, September 24, 1993, December 17, 1993 and March 3, 1994. (Exhibits (10)(iii)(4, 5, 6, 7, 9, 12, 13, 14 and 16))
Executive Deferred Compensation Plan of the Company, effective March 1, 1992 together with Amendment thereto dated December 17, 1993. (Exhibits (10)(iii)(8 and 15))
Retirement Benefit Restoration Plan of the Company, effective May 1, 1993, together with Amendment thereto dated July 23, 1993. (Exhibits (10)(iii) (10 and 11))
Executive Incentive Compensation Plan of the Company, effective January 1, 1993. (Exhibit (10)(iii)(17))
(b) Reports on Form 8-K
During the period October 1, 1993, to the date hereof, the following Reports on Form 8-K were filed by the Company:
Report, dated October 8, 1993, reporting the issuance on September 22, 1993, of the Recommended Decision of the PSC Administrative Law Judge in the PSC proceeding relating to the Company's request for increased gas and electric rates filed with the PSC on November 12, 1992.
Report, dated January 5, 1994, reporting (i) the issuance by the PSC, on December 16, 1993, of an Order authorizing an increase in the Company's electric base rates and denying the Company's request for increased base gas rates, all with respect to the Company's request for increased gas and electric rates filed with the PSC on November 12, 1992, and (ii) the return to full service on December 20, 1993 of Unit No. 2 of the Company's Roseton Electric Generating Station after repair of damage to such Unit suffered on March 18, 1993.
Report, dated January 24, 1994, reporting (i) the issuance of an Order of the PSC approving an agreement between the Company and the Staff of the PSC relating to the PSC's threatened penalty proceeding arising out of a November 1992 explosion in a dwelling in the Company's gas service territory in Catskill, New York, (ii) the $5,000 fine assessed by the Office of Pipeline Safety due to this explosion incident and (iii) the Company's response to the recommendation of the National Transportation Safety Board with respect to this explosion incident.
(c) Exhibits Required by Item 601 of Regulation S-K
Incorporated herein by reference to subpart (a)-3 of Item 14, above.
(d) Financial Statement Schedules required by Regulation S-X which are excluded from the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1993
Incorporated herein by reference to subpart 2 of Index to Financial Statements on page of this Report. SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
By (John E. Mack, III, Chairman of the Board and Chief Executive Officer)
Dated: March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the date indicated.
Signature Title Date
(a) Principal Executive Officer or Officers:
(John E. Mack, III) Chairman of the Board and Chief Executive Officer March 25, 1994
(b) Principal Financial Officer and Principal Accounting Officer:
(John F. Drain) Vice President - Finance and March 28, 1994 Controller
(c) Directors:
(L. Wallace Cross) Director March 25, 1994
SIGNATURES - (Continued)
Signature Title Date
(Jack Effron) Director March 25, 1994
(Richard H. Eyman) Director March 25, 1994
(Frances D. Fergusson) Director March 25, 1994
(Heinz K. Fridrich) Director March 25, 1994
(Edward F. X. Gallagher) Director March 25, 1994
(Paul J. Ganci) Director March 25, 1994
(Charles LaForge) Director March 25, 1994
(John E. Mack, III) Director March 25, 1994
(Howard C. St. John) Director March 25, 1994
(Edward P. Swyer) Director March 25, 1994
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
Page(s) in Exhibit 13 of this Report* 1. Financial Statements
Report of Independent Accountants 30
Consolidated Statement of Retained 31 Earnings for the three years ended December 31, 1993
Consolidated Balance Sheet at 32-35 December 31, 1993 and 1992
Consolidated Statement of Income for 36-37 the three years ended December 31, 1993
Consolidated Statement of Cash Flows for 38-39 the three years ended December 31, 1993
Notes to Consolidated Financial Statements 40-72
Selected Quarterly Financial Data (unaudited) 73
Page(s) in Form 10-K
Report of Independent Accountants on Financial Statement Schedules
Consent of Independent Accountants
2. The Financial Statement Schedules for the Years 1991, 1992 and 1993
Schedule V - Utility Plant -
Schedule VI - Accumulated Depreciation - and Amortization of Utility Plant
Schedule VIII - Reserves -
Schedule IX - Short-Term Borrowings -
Schedule X - Supplementary Income - Statement Information
*Incorporated by reference to the indicated pages of Exhibit 13 to this Report.
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Central Hudson Gas & Electric Corporation
Our audits of the consolidated financial statements referred to in our report dated January 28, 1994 appearing on page 30 of Exhibit 13 of this Annual Report on Form 10-K, (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed on page of this Annual Report on Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE
New York, New York January 28, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in (i) the Prospectus constituting part of the Registration Statement, on Form S-3 (Registration No. 33-56760), relating to Central Hudson Gas & Electric Corporation's Automatic Dividend Reinvestment and Stock Purchase Plan, (ii) the Prospectus constituting part of the Registration Statement, on Form S-3 (Registration No. 33-55764), relating to Central Hudson Gas & Electric Corporation's Customer Stock Purchase Plan and (iii) the Prospectus constituting part of the Registration Statement on Form S-3 (Registration No. 33- 46624), relating to certain debt securities of Central Hudson Gas & Electric Corporation, of our report dated January 28, 1994 appearing on page 30 of Exhibit 13 to this Annual Report on Form 10-K. We also consent to the incorporation by reference therein of our report on the Financial Statement Schedules, which appears above.
PRICE WATERHOUSE
New York, New York March 25, 1994