Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2010

Commission File Number 1-267

 

 

ALLEGHENY ENERGY, INC.

(Name of Registrant)

 

 

 

Maryland   13-5531602
(State of Incorporation)   (IRS Employer Identification Number)
800 Cabin Hill Drive, Greensburg, Pennsylvania   15601
(Address of Principal Executive Offices)   (Zip Code)

(724) 837-3000

(Telephone Number)

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  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  þ

   Accelerated filer    ¨
Non-accelerated filer  ¨    Smaller reporting company    ¨

(Do not check if a smaller reporting company)

     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  þ

As of October 29, 2010, 169,939,233 shares of the common stock, par value of $1.25 per share, of the registrant were outstanding.

 

 

 


Table of Contents

 

TABLE OF CONTENTS

 

         Page
No.
 

PART I. FINANCIAL INFORMATION

  

Item 1.

  Financial Statements (unaudited)      4   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)      51   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      89   

Item 4.

  Controls and Procedures      90   

PART II. OTHER INFORMATION

  

Item 1.

  Legal Proceedings      92   

Item 1A.

  Risk Factors      92   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      93   

Item 3.

  Defaults Upon Senior Securities      93   

Item 4.

  Reserved      93   

Item 5.

  Other Information      93   

Item 6.

  Exhibits      94   
  Signature      95   

 

2


Table of Contents

 

GLOSSARY

 

I. The following abbreviations and names are used in this report to identify Allegheny Energy, Inc. and its subsidiaries:

 

AE

   Allegheny Energy, Inc., a diversified utility holding company

AESC

   Allegheny Energy Service Corporation, a subsidiary of AE

AE Supply

   Allegheny Energy Supply Company, LLC, an unregulated generation subsidiary of AE

AGC

   Allegheny Generating Company, a generation subsidiary of AE Supply and Monongahela

Allegheny

   Allegheny Energy, Inc., together with its consolidated subsidiaries

Distribution Companies

   Monongahela, Potomac Edison and West Penn, which collectively do business as Allegheny Power

Monongahela

   Monongahela Power Company, a regulated subsidiary of AE

PATH, LLC

   Potomac-Appalachian Transmission Highline, LLC, a series limited liability company

PATH Allegheny

   PATH Allegheny Transmission Company, LLC

PATH Allegheny MD

   PATH Allegheny Maryland Transmission Company, LLC

PATH Allegheny VA

   PATH Allegheny Virginia Transmission Corporation

PATH WV

   PATH West Virginia Transmission Company, LLC

Potomac Edison

   The Potomac Edison Company, a regulated subsidiary of AE

TrAIL Company

   Trans-Allegheny Interstate Line Company

West Penn

   West Penn Power Company, a regulated subsidiary of AE

 

II. The following abbreviations and acronyms are used in this report to identify entities and terms relevant to Allegheny’s business and operations:

 

CDD

   Cooling Degree-Days

Clean Air Act

   Clean Air Act of 1970

CO2

   Carbon dioxide

EPA

   United States Environmental Protection Agency

Exchange Act

   Securities Exchange Act of 1934, as amended

ENEC

   Expanded Net Energy Clause in West Virginia

FERC

   Federal Energy Regulatory Commission

FirstEnergy

   FirstEnergy Corp.

FPA

   Federal Power Act

FTRs

   Financial Transmission Rights

GAAP

   Generally accepted accounting principles used in the United States of America

HDD

   Heating Degree-Days

kW

   Kilowatt, which is equal to 1,000 watts

kWh

   Kilowatt-hour, a unit of electric energy equivalent to one kW operating for one hour

Maryland PSC

   Maryland Public Service Commission

MW

   Megawatt, which is equal to 1,000,000 watts

MWh

   Megawatt-hour, a unit of electric energy equivalent to one MW operating for one hour

NERC

   North American Electric Reliability Corporation

NOX

   Nitrogen Oxide

NSR

   The New Source Performance Review Standards, or “New Source Review,” applicable to facilities deemed “new” sources of emissions by the EPA

PATH

   Potomac-Appalachian Transmission Highline

Pennsylvania PUC

   Pennsylvania Public Utility Commission

PJM

   PJM Interconnection, L.L.C., a regional transmission organization

PLR

   Provider-of-last-resort

PURPA

   Public Utility Regulatory Policies Act of 1978

RPM

   Reliability Pricing Model, which is PJM’s capacity market

RTEP

   Regional Transmission Expansion Plan

RTO

   Regional Transmission Organization

Scrubbers

   Flue-gas desulfurization equipment

SEC

   Securities and Exchange Commission

SO2

   Sulfur dioxide

SOS

   Standard Offer Service

T&D

   Transmission and distribution

TrAIL

   Trans-Allegheny Interstate Line

Virginia SCC

   Virginia State Corporation Commission

West Virginia PSC

   Public Service Commission of West Virginia

 

3


Table of Contents

 

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

 

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 

(In millions, except per share amounts)

       2010              2009           2010             2009      

Operating revenues

   $ 1,043.7       $ 793.7      $ 3,038.3      $ 2,565.7   
                                 

Operating expenses:

         

Fuel

     323.3         188.0        937.0        663.8   

Purchased power and transmission

     114.4         134.2        389.7        380.4   

Deferred energy costs, net

     17.7         (14.3     28.0        (38.9

Gain on sale of Virginia distribution business

     0         0        (45.1     0   

Operations and maintenance

     196.2         151.2        573.4        518.9   

Depreciation and amortization

     81.2         71.3        241.7        207.0   

Taxes other than income taxes

     58.3         57.4        171.9        159.7   
                                 

Total operating expenses

     791.1         587.8        2,296.6        1,890.9   
                                 

Operating income

     252.6         205.9        741.7        674.8   

Other income (expense), net

     4.4         1.9        9.7        6.1   

Interest expense

     83.6         85.1        240.1        201.5   
                                 

Income before income taxes

     173.4         122.7        511.3        479.4   

Income tax expense

     58.3         45.3        187.8        195.1   
                                 

Net income

     115.1         77.4        323.5        284.3   

Net income attributable to noncontrolling interest

     0         (0.4     0        (0.8
                                 

Net income attributable to Allegheny Energy, Inc.

   $ 115.1       $ 77.0      $ 323.5      $ 283.5   
                                 

Earnings per common share attributable to Allegheny Energy, Inc.:

         

Basic

   $ 0.68       $ 0.45      $ 1.91      $ 1.67   

Diluted

   $ 0.68       $ 0.45      $ 1.90      $ 1.67   

Average common shares outstanding:

         

Basic

     169.8         169.6        169.7        169.5   

Diluted

     170.3         170.0        170.1        169.9   

Dividends per common share

   $ 0.15       $ 0.15      $ 0.45      $ 0.45   

See accompanying Notes to Consolidated Financial Statements.

 

4


Table of Contents

 

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

     Nine Months  Ended
September 30,
 

(In millions)

       2010             2009      

Cash Flows From Operating Activities:

    

Net income

   $ 323.5      $ 284.3   

Adjustments for non-cash items included in income:

    

Depreciation and amortization

     241.7        207.0   

Amortization of debt related costs

     19.3        9.5   

Amortization of liability for adverse power purchase commitment

     (13.4     (13.1

Gain on sale of Virginia distribution business

     (45.1     0   

Provision for uncollectible accounts

     12.9        12.3   

Deferred income taxes and investment tax credit, net

     189.6        188.5   

Deferred energy costs, net

     28.0        (38.9

Stock-based compensation expense

     17.5        11.9   

Unrealized losses (gains) on derivative contracts, net

     (2.4     (16.1

Pension and other postretirement employee benefit plan expense

     44.6        30.0   

Contributions to pension and other postretirement plans

     (69.6     (45.1

Deferred revenue—Fort Martin scrubber project

     (2.9     8.1   

Deferred revenue recognized—Virginia

     0        (28.3

Deferred revenue—energy efficiency programs

     12.9        0   

Uncollected transmission revenue

     (33.7     (14.6

Other, net

     (11.5     12.9   

Changes in certain assets and liabilities:

    

Accounts receivable, net

     (12.2     1.0   

Materials, supplies and fuel

     70.5        (85.2

Prepaid taxes

     (7.6     (12.2

Collateral deposits

     (27.0     32.7   

Accounts payable

     (38.4     (45.3

Accrued taxes

     (23.6     (55.7

Accrued interest

     22.0        9.1   

Regulatory assets and liabilities

     (30.9     23.5   

Deferred income taxes

     (2.0     (2.6

Distributions from equity method investee

     0        1.3   

Assets and liabilities held for sale

     (8.6     3.1   

Other operating assets and liabilities

     (6.3     5.6   
                

Net cash provided by operating activities

     647.3        483.7   
                

 

See accompanying Notes to Consolidated Financial Statements.

 

5


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(unaudited)

 

 

     Nine Months Ended
September 30,
 

(In millions)

       2010             2009      

Cash Flows From Investing Activities:

    

Capital expenditures

     (726.6     (870.1

Proceeds from sale of Virginia distribution business

     317.2        0   

Decrease in restricted funds

     40.2        131.0   

Deconsolidation of PATH WV

     (3.4     0   

Other

     (4.0     (3.6
                

Net cash used in investing activities

     (376.6     (742.7
                

Cash Flows From Financing Activities:

    

Issuance of long-term debt

     1,011.8        709.2   

Repayment of long-term debt

     (1,021.4     (438.3

Costs associated with AE Supply revolving credit facility refinancing

     (0.1     (21.6

Equity contribution to PATH, LLC by the joint venture partner

     0        6.9   

Payments on capital lease obligations

     (8.3     (6.4

Proceeds from exercise of employee stock options

     0.8        1.6   

Cash dividends paid on common stock

     (76.3     (76.2

Other

     (0.2     0   
                

Net cash provided by (used in) financing activities

     (93.7     175.2   
                

Net increase (decrease) in cash and cash equivalents

     177.0        (83.8

Cash and cash equivalents at beginning of period

     286.6        362.1   
                

Cash and cash equivalents at end of period

   $ 463.6      $ 278.3   
                

Supplemental Cash Flow Information:

    

Cash paid during the period for interest (net of amounts capitalized)

   $ 198.9      $ 182.5   

Cash paid during the period for income taxes, net

   $ 14.1      $ 48.6   

Accounts payable at September 30 relating to capital expenditures

   $ 135.4      $ 136.3   

See accompanying Notes to Consolidated Financial Statements.

 

6


Table of Contents

 

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

 

(In millions)

   September 30,
2010
    December 31,
2009
 

ASSETS

    

Current Assets:

    

Cash and cash equivalents

   $ 463.6      $ 286.6   

Accounts receivable:

    

Customer

     235.3        188.2   

Unbilled utility revenue

     97.8        116.4   

Wholesale and other

     41.3        64.4   

Allowance for uncollectible accounts

     (15.5     (14.0

Materials and supplies

     109.2        110.6   

Fuel

     140.9        206.4   

Deferred income taxes

     0        81.5   

Prepaid taxes

     56.0        48.4   

Collateral deposits

     21.5        20.8   

Derivative assets

     45.0        4.6   

Restricted funds

     14.3        25.9   

Regulatory assets

     114.8        132.7   

Assets held for sale

     0        32.4   

Other

     76.2        40.4   
                

Total current assets

     1,400.4        1,345.3   
                

Property, Plant and Equipment:

    

Generation

     7,548.6        7,469.4   

Transmission

     1,408.2        1,313.2   

Distribution

     3,888.5        3,784.4   

Other

     498.7        440.7   

Accumulated depreciation

     (5,308.0     (5,104.9
                

Subtotal

     8,036.0        7,902.8   

Construction work in progress

     1,104.7        800.6   

Property, plant and equipment held for sale, net

     0        253.7   
                

Total property, plant and equipment, net

     9,140.7        8,957.1   
                

Other Noncurrent Assets:

    

Regulatory assets

     730.9        717.3   

Goodwill

     367.3        367.3   

Restricted funds

     31.6        60.2   

Investments in unconsolidated affiliates

     48.9        26.7   

Derivative assets

     22.6        0   

Other

     99.7        115.2   
                

Total other noncurrent assets

     1,301.0        1,286.7   
                

Total Assets

   $ 11,842.1      $ 11,589.1   
                

 

See accompanying Notes to Consolidated Financial Statements.

 

7


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

(unaudited)

 

 

(In millions, except share amounts)

   September 30,
2010
    December 31,
2009
 

LIABILITIES AND EQUITY

    

Current Liabilities:

    

Long-term debt due within one year

   $ 15.5      $ 140.8   

Accounts payable

     360.0        411.4   

Accrued taxes

     78.6        87.3   

Payable to PJM for FTRs

     10.0        31.7   

Derivative liabilities

     4.0        24.4   

Regulatory liabilities

     12.6        37.4   

Accrued interest

     90.0        68.3   

Security deposits

     53.8        51.0   

Liabilities associated with assets held for sale

     0        10.1   

Deferred income taxes

     6.2        0   

Other

     119.2        123.2   
                

Total current liabilities

     749.9        985.6   
                

Long-term Debt:

    

Securitized debt—Environmental Control Bonds

     481.0        496.5   

Other long-term debt

     4,069.6        3,920.5   
                

Total long-term debt

     4,550.6        4,417.0   
                

Deferred Credits and Other Liabilities:

    

Derivative liabilities

     4.8        6.7   

Income taxes payable

     70.9        85.7   

Investment tax credit

     59.2        61.6   

Deferred income taxes

     1,636.8        1,501.3   

Regulatory liabilities

     474.0        461.2   

Pension and other postretirement employee benefit plan liabilities

     571.1        597.4   

Adverse power purchase commitment

     100.9        114.4   

Liabilities associated with assets held for sale

     0        53.1   

Other

     192.4        177.0   
                

Total deferred credits and other liabilities

     3,110.1        3,058.4   
                

Commitments and Contingencies (Note 18)

    

Equity:

    

Common stock—$1.25 par value per share, 260,000,000 shares authorized and 169,990,965 and 169,620,917 shares issued at September 30, 2010 and December 31, 2009, respectively

     212.5        212.0   

Other paid-in capital

     1,984.1        1,970.2   

Retained earnings

     1,269.9        1,022.7   

Treasury stock at cost—54,955 and 51,313 shares at September 30, 2010 and December 31, 2009, respectively

     (1.9     (1.8

Accumulated other comprehensive loss

     (33.1     (89.9
                

Total Allegheny Energy, Inc. common stockholders’ equity

     3,431.5        3,113.2   

Noncontrolling interest

     0        14.9   
                

Total equity

     3,431.5        3,128.1   
                

Total Liabilities and Equity

   $ 11,842.1      $ 11,589.1   
                

See accompanying Notes to Consolidated Financial Statements.

 

8


Table of Contents

 

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(unaudited)

 

(In millions, except shares)

  Shares
outstanding
    Common
stock
    Other
paid-in
capital
    Retained
earnings
    Treasury
stock
    Accumulated
other
comprehensive
loss
    Total
Allegheny
Energy, Inc.
common
stockholders’
equity
    Noncontrolling
interest
    Total
equity
 

Balance at June 30, 2010

    169,614,706      $ 212.1      $ 1,979.6      $ 1,180.2      $ (1.8   $ (64.2   $ 3,305.9      $ 0      $ 3,305.9   

Net income

    0        0        0        115.1        0        0        115.1        0        115.1   

Amortization - pension and other post employment benefit (“OPEB”) plans, net of tax of $0.5 million

    0        0        0        0        0        1.0        1.0        0        1.0   

Adjustment to unamortized OPEB plan actuarial loss, net of tax of $5.2 million

    0        0        0        0        0        7.8        7.8        0        7.8   

Cash flow hedges, net of tax of $14.1

    0        0        0        0        0        22.4        22.4        0        22.4   

Dividends on common stock

    0        0        0        (25.5     0        0        (25.5     0        (25.5

Stock-based compensation expense:

                 

Non-employee director stock awards

    3,000        0        0.2        0        0        0        0.2        0        0.2   

Stock options

    0        0        3.8        0        0        0        3.8        0        3.8   

Performance shares

    0        0        4.5        0        0        0        4.5        0        4.5   

Restricted shares

    0        0        0.2        0        (0.1     0        0.1        0        0.1   

Exercise of stock options

    12,148        0        0.2        0        0        0        0.2        0        0.2   

Issuance of performance shares

    309,798        0.4        (4.4     0        0        0        (4.0     0        (4.0

Purchase of treasury shares

    (3,642     0        0        0        0        0        0        0        0   

Other

    0        0        0        0.1        0        (0.1     0        0        0   
                                                                       

Balance at September 30, 2010

    169,936,010      $ 212.5      $ 1,984.1      $ 1,269.9      $ (1.9   $ (33.1   $ 3,431.5      $ 0      $ 3,431.5   
                                                                       

(In millions, except shares)

  Shares
outstanding
    Common
stock
    Other
paid-in
capital
    Retained
earnings
    Treasury
stock
    Accumulated
other
comprehensive
loss
    Total
Allegheny
Energy, Inc.
common
stockholders’
equity
    Noncontrolling
interest
    Total
equity
 

Balance at June 30, 2009

    169,482,591      $ 211.9      $ 1,981.9      $ 887.3      $ (1.8   $ (33.6   $ 3,045.7      $ 5.6      $ 3,051.3   

Net income

    0        0        0        77.0        0        0        77.0        0.4        77.4   

Amortization - pension and other OPEB plans, net of tax of $0.6

    0        0        0        0        0        0.8        0.8        0        0.8   

Cash flow hedges, net of tax of $(21.4)

    0        0        0        0        0        (33.7     (33.7     0        (33.7

Equity contribution to PATH, LLC by AEP

    0        0        0        0        0        0        0        6.6        6.6   

Dividends on common stock

    0        0        0        (25.4     0        0        (25.4     0        (25.4

Stock-based compensation expense:

                 

Non-employee director stock awards

    3,000        0        0.2        0        0        0        0.2        0        0.2   

Stock options

    0        0        1.7        0        0        0        1.7        0        1.7   

Performance shares

    0        0        1.4        0        0        0        1.4        0        1.4   

Exercise of stock options

    33,060        0        0.4        0        0        0        0.4        0        0.4   

Settlement of stock units

    3,573        0        0        0        0        0        0        0        0   

Share-based excess tax benefits

    0        0        (19.7     0        0        0        (19.7     0        (19.7
                                                                       

Balance at September 30, 2009

    169,522,224      $ 211.9      $ 1,965.9      $ 938.9      $ (1.8   $ (66.5   $ 3,048.4      $ 12.6      $ 3,061.0   
                                                                       

See accompanying Notes to Consolidated Financial Statements.

 

9


Table of Contents

 

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(unaudited)

 

(In millions, except shares)

  Shares
outstanding
    Common
stock
    Other
paid-in
capital
    Retained
earnings
    Treasury
stock
    Accumulated
other
comprehensive
loss
    Total
Allegheny
Energy, Inc.
common
stockholders’
equity
    Noncontrolling
interest
    Total
equity
 

Balance at December 31, 2009

    169,569,604      $ 212.0      $ 1,970.2      $ 1,022.7      $ (1.8   $ (89.9   $ 3,113.2      $ 14.9      $ 3,128.1   

Net income

    0        0        0        323.5        0        0        323.5        0        323.5   

Amortization - pension and OPEB plans, net of tax of $1.7 million

    0        0        0        0        0        2.5        2.5        0        2.5   

Adjustment to unamortized OPEB plan actuarial loss, net of tax of $4.9 million

    0        0        0        0        0        7.4        7.4        0        7.4   

Cash flow hedges, net of tax of $29.8

    0        0        0        0        0        46.9        46.9        0        46.9   

Deconsolidation of PATH WV

    0        0        0        0        0        0        0        (14.9     (14.9

Dividends on common stock

    0        0        0        (76.3     0        0        (76.3     0        (76.3

Stock-based compensation expense:

                 

Non-employee director stock awards

    9,000        0        0.6        0        0        0        0.6        0        0.6   

Stock options

    0        0        6.5        0        0        0        6.5        0        6.5   

Performance shares

    0        0        10.2        0        0        0        10.2        0        10.2   

Restricted shares

    0        0        0.3        0        (0.1     0        0.2        0        0.2   

Exercise of stock options

    51,250        0.1        0.7        0        0        0        0.8        0        0.8   

Issuance of performance shares

    309,798        0.4        (4.4     0        0        0        (4.0     0        (4.0

Purchase of treasury shares

    (3,642     0        0        0        0        0        0        0        0   
                                                                       

Balance at September 30, 2010

    169,936,010      $ 212.5      $ 1,984.1      $ 1,269.9      $ (1.9   $ (33.1   $ 3,431.5      $ 0      $ 3,431.5   
                                                                       

(In millions, except shares)

  Shares
outstanding
    Common
stock
    Other
paid-in
capital
    Retained
earnings
    Treasury
stock
    Accumulated
other
comprehensive
loss
    Total
Allegheny
Energy, Inc.
common
stockholders’
equity
    Noncontrolling
interest
    Total
equity
 

Balance at December 31, 2008

    169,364,394      $ 211.8      $ 1,952.5      $ 731.6      $ (1.8   $ (43.3   $ 2,850.8      $ 4.9      $ 2,855.7   

Net income

    0        0        0        283.5        0        0        283.5        0.8        284.3   

Amortization - pension and OPEB plans, net of tax of $1.7

    0        0        0        0        0        2.5        2.5        0        2.5   

Cash flow hedges, net of tax of $(16.5)

    0        0        0        0        0        (25.7     (25.7     0        (25.7

Equity contribution to PATH, LLC by AEP

    0        0        0        0        0        0        0        6.9        6.9   

Dividends on common stock

    0        0        0        (76.2     0        0        (76.2     0        (76.2

Stock-based compensation expense:

                 

Non-employee director stock awards

    18,907        0        0.7        0        0        0        0.7        0        0.7   

Stock options

    0        0        5.6        0        0        0        5.6        0        5.6   

Performance shares

    0        0        5.5        0        0        0        5.5        0        5.5   

Restricted shares

    17,850        0        0.1        0        0        0        0.1        0        0.1   

Exercise of stock options

    117,500        0.1        1.5        0        0        0        1.6        0        1.6   

Settlement of stock units

    3,573        0        0        0        0        0        0        0        0   
                                                                       

Balance at September 30, 2009

    169,522,224      $ 211.9      $ 1,965.9      $ 938.9      $ (1.8   $ (66.5   $ 3,048.4      $ 12.6      $ 3,061.0   
                                                                       

See accompanying Notes to Consolidated Financial Statements.

 

10


Table of Contents

 

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Note

        Page
Number
 

1

  

Business and Basis of Presentation

     12   

2

  

Merger Agreement

     13   

3

  

Recently Adopted and Recently Issued Accounting Standards

     14   

4

  

Sale of Virginia Distribution Business

     15   

5

  

Rates and Regulation

     16   

6

  

Transmission Expansion

     16   

7

  

Regulatory Assets and Liabilities

     17   

8

  

Income Taxes

     18   

9

  

Common Stock and Debt

     19   

10

  

Segment Information

     22   

11

  

Fair Value Measurements, Derivative Instruments and Hedging Activities

     23   

12

  

Stock-Based Compensation

     31   

13

  

Pension Benefits and Postretirement Benefits Other Than Pensions

     33   

14

  

Financial Instruments

     35   

15

  

Comprehensive Income and Accumulated Other Comprehensive Loss

     36   

16

  

Earnings Per Share

     37   

17

  

Variable Interest Entities

     37   

18

  

Commitments and Contingencies

     39   

 

11


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

NOTE 1: BUSINESS AND BASIS OF PRESENTATION

Business Description

Allegheny Energy, Inc. (“AE” and, together with its subsidiaries, “Allegheny”) is an integrated energy business. Allegheny owns and operates electric generation facilities primarily in Pennsylvania, West Virginia and Maryland. Additionally, Allegheny owns transmission assets in Pennsylvania, West Virginia, Maryland and Virginia and provides distribution services to customers in Pennsylvania, West Virginia and Maryland. Allegheny manages its operations through two business segments: Merchant Generation and Regulated Operations. These business segments are also referred to as reportable segments.

The Merchant Generation segment includes Allegheny’s unregulated electric generation operations including Allegheny Energy Supply Company, LLC (“AE Supply”) and AE Supply’s interest in Allegheny Generating Company (“AGC”). AE Supply owns, operates and controls electric generation capacity and supplies and trades energy and energy-related commodities. AGC owns and sells generation capacity to AE Supply and Monongahela Power Company (“Monongahela”), which own approximately 59% and 41% of AGC, respectively. The Merchant Generation segment is subject to various federal and state regulations but, unlike the Regulated Operations segment, is not generally subject to state regulation of rates.

The Regulated Operations segment includes the operations of Monongahela, The Potomac Edison Company (“Potomac Edison”) and West Penn Power Company (“West Penn” and, together with Monongahela and Potomac Edison, the “Distribution Companies”), which primarily operate electric transmission and distribution (“T&D”) systems in Pennsylvania, West Virginia and Maryland, as well as transmission in Virginia. Monongahela also owns and operates electric generation facilities in West Virginia and has a 41% interest in AGC. The Distribution Companies are subject to various federal and state regulations, including state regulation of rates.

The Regulated Operations segment also includes the operations of Trans-Allegheny Interstate Line Company (“TrAIL Company”) and Allegheny’s interests in Potomac-Appalachian Transmission Highline, LLC (“PATH, LLC”). These entities were created to construct or facilitate the construction of high voltage transmission lines and other transmission facilities, including the Trans-Allegheny Interstate Line (“TrAIL”) and the Potomac-Appalachian Transmission Highline (“PATH”). TrAIL Company and PATH, LLC are subject to the regulation of rates by the Federal Energy Regulatory Commission (“FERC”). PATH, LLC is a series limited liability company that is comprised of multiple series, each of which has separate rights, powers and duties regarding specified property and the series profits and losses associated with such property. A subsidiary of AE owns 100% of the Allegheny Series and 50% of the West Virginia Series (“PATH WV”), which is a joint venture with a subsidiary of American Electric Power Company, Inc. (“AEP”). Allegheny accounts for its interest in PATH WV using the equity method of accounting, effective January 1, 2010. See Note 3, “Recently Adopted and Recently Issued Accounting Standards” for additional information.

On June 1, 2010, Potomac Edison sold its electric distribution business in Virginia. See Note 4, “Sale of Virginia Distribution Business” for additional information.

Allegheny Energy Service Corporation (“AESC”) is a wholly-owned subsidiary of AE that employs substantially all of Allegheny’s personnel.

Financial Statement Presentation

As permitted by the rules and regulations of the Securities and Exchange Commission (the “SEC”), Allegheny’s accompanying unaudited Consolidated Financial Statements contain certain condensed financial

 

12


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

information and exclude certain footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). These unaudited Consolidated Financial Statements should be read in conjunction with Allegheny’s Consolidated Financial Statements and Notes in its Annual Report on Form 10-K for the year ended December 31, 2009.

The accompanying unaudited Consolidated Financial Statements contain all adjustments, including normal recurring accruals, necessary to present fairly Allegheny’s financial position, results of operations, cash flows and changes in equity for the periods presented therein. The results of operations for the interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in revenues, fuel and energy purchases and other factors. The year-end 2009 balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Certain amounts in previously issued financial statements have been reclassified to conform to the current presentation, including a change in the composition of reportable segments made during the fourth quarter of 2009.

Goodwill

Allegheny’s consolidated balance sheets at September 30, 2010 and December 31, 2009 included goodwill of $367.3 million, which was attributable to the unregulated generation operations of AE Supply, a reporting unit that substantially comprises Allegheny’s Merchant Generation segment.

Allegheny tests goodwill for possible impairment on an annual basis as of August 31 of each year and at any other time if events or changes in circumstances make it likely that the fair value of the reporting unit has decreased below its carrying amount.

Goodwill is tested for impairment using a fair value based approach. The first step of the test consists of comparing the reporting unit’s fair value to its carrying value, including the goodwill allocated to the reporting unit. If the reporting unit’s fair value exceeds its carrying amount, the reporting unit’s goodwill is considered not impaired. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to measure the amount of the impairment loss, if any. The second step requires a calculation of the implied fair value of the reporting unit’s goodwill determined in the same manner as the amount of goodwill recorded in a business combination. This implied fair value is then compared to the carrying amount of the goodwill. If the carrying amount of the goodwill exceeds its implied fair value, an impairment loss is recognized.

Allegheny performed its annual goodwill impairment test as of August 31, 2010. The estimated fair value of the reporting unit exceeded its carrying amount by a significant amount and, therefore, no goodwill impairment was indicated at that date. The fair value was estimated using a combination of a discounted cash flow analysis approach and a market based approach that estimates fair value based on market multiples of earnings before interest, taxes, depreciation and amortization for other merchant generators. Significant assumptions used in estimating the fair value of the reporting unit include, among others, discount and growth rates, future energy and capacity prices, plant performance, operating and capital expenditures, environmental regulations, and the selection of comparable companies used in the market based approach.

NOTE 2: MERGER AGREEMENT

On February 10, 2010, AE entered into an Agreement and Plan of Merger (as amended on June 4, 2010, the “Merger Agreement”) with FirstEnergy Corp. (“FirstEnergy”) and Element Merger Sub, Inc. (“Merger Sub”), a

 

13


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

wholly owned subsidiary of FirstEnergy. Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into AE (the “Merger”), with AE becoming a wholly owned subsidiary of FirstEnergy. The Merger is intended to qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as amended, and be tax-free to AE stockholders. Pursuant to the Merger Agreement, upon completion of the Merger, each issued and outstanding share of AE’s common stock, including grants of restricted stock, will automatically be converted into the right to receive 0.667 of a share of the common stock of FirstEnergy. This ratio is fixed, and the Merger Agreement does not provide for any adjustment to reflect stock price changes prior to completion of the Merger.

Completion of the Merger is subject to various customary conditions, including, among others, (i) approvals by shareholders of both companies, which were obtained on September 14, 2010; (ii) the SEC’s clearance of a registration statement registering the FirstEnergy common stock to be issued in connection with the merger, which registration statement was declared effective by the SEC on July 16, 2010; (iii) expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Anti-Trust improvements Act of 1976; (iv) receipt of all required regulatory approvals, including approvals by FERC and state public service and utility commissions in Virginia, Maryland, Pennsylvania and West Virginia; (v) the absence of any governmental action challenging or seeking to prohibit the Merger and (vi) the absence of any material adverse effect with respect to either Allegheny or FirstEnergy. The proposed Merger was approved by the Virginia SCC on September 9, 2010. AE and FirstEnergy currently anticipate completing the Merger in the first half of 2011.

NOTE 3: RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS

Consolidations and Variable Interest Entities

Allegheny adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2009-17 (Consolidations Topic 810), “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities,” on January 1, 2010. Under this new guidance, consolidation of a variable interest entity (“VIE”) is required by an enterprise (the “primary beneficiary”), if any, that is determined qualitatively to have both the power to direct the activities that most significantly impact the VIE’s economic success and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the prior guidance, the primary beneficiary (consolidator) of a VIE was the party that absorbed a majority of the expected losses or the majority of the expected residual returns of the VIE using a quantitative analysis.

Through December 31, 2009, Allegheny consolidated PATH WV for financial statement purposes, because Allegheny determined that PATH WV was a VIE and that Allegheny was its primary beneficiary under the prior accounting standard. Under the new accounting standard, Allegheny determined that it is not the primary beneficiary of PATH WV, and therefore deconsolidated PATH WV for financial statement purposes, effective January 1, 2010. Allegheny did not retrospectively apply this new guidance by deconsolidating PATH WV in its financial statements for periods prior to January 1, 2010. The deconsolidation of PATH WV did not impact retained earnings or net income attributable to AE. See Note 17, “Variable Interest Entities,” for additional information.

Fair Value Measurements and Disclosures

Allegheny adopted the FASB’s ASU on “Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements” in January 2010. The ASU added new requirements for disclosures about transfers into and out of fair value Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements. The ASU also clarified existing fair value disclosures about the

 

14


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

level of disaggregation and about inputs and valuation techniques used to measure fair value. Allegheny’s adoption of this ASU did not affect its results of operations or financial position.

NOTE 4: SALE OF VIRGINIA DISTRIBUTION BUSINESS

On June 1, 2010, Potomac Edison sold its electric distribution business in Virginia (the “Virginia distribution business”) to Rappahannock Electric Cooperative and Shenandoah Valley Electric Cooperative. Cash proceeds from the sale were approximately $317 million, resulting in a pre-tax gain of approximately $45 million.

The Virginia distribution business was included in the Regulated Operations segment. Assets and liabilities relating to the Virginia distribution business were classified as “held for sale” in Allegheny’s consolidated balance sheet, and depreciation expense on those assets ceased as of May 1, 2009. The operating results of the Virginia distribution business have not been reported as discontinued operations, because AE Supply will continue to provide the majority of the power to serve the customers of this business through June 30, 2011 under a power sales agreement. Assets held for sale and liabilities associated with assets held for sale at December 31, 2009 were as follows:

 

(In millions)

   December 31,
2009
 

Current Assets:

  

Accounts receivable

   $ 31.2   

Materials and supplies

     0.7   

Regulatory assets

     0.5   
        

Total current assets

     32.4   

Property, Plant and Equipment:

  

Distribution property, plant and equipment

     344.9   

Accumulated depreciation

     (91.2
        

Property, plant and equipment, net

     253.7   
        

Total assets held for sale

   $ 286.1   
        

Current Liabilities:

  

Customer deposits

   $ 5.5   

Regulatory liabilities

     3.7   

Other

     0.9   
        

Total current liabilities

     10.1   

Deferred Credits and Other Liabilities:

  

Regulatory liabilities

     51.8   

Other

     1.3   
        

Total deferred credits and other liabilities

     53.1   
        

Total liabilities associated with assets held for sale

   $ 63.2   
        

In connection with the sale, Potomac Edison agreed to contribute $27.5 million between July 1, 2011 and July 1, 2014 to reduce the impact of any future rate increases, the present value of which was included in the calculation of the $45.1 million pre-tax gain. In addition, on June 1, 2010, Potomac Edison entered into an

 

15


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

agreement to purchase Shenandoah Valley Electric Cooperative’s West Virginia distribution business for approximately $13 million, subject to certain adjustments.

NOTE 5: RATES AND REGULATION

Rate Case

On April 2, 2010, Monongahela and Potomac Edison filed with the Public Service Commission of West Virginia (“West Virginia PSC”) a Joint Stipulation and Agreement of Settlement (the “West Virginia Stipulation”) reached with the other parties in a rate case filed by Monongahela and Potomac Edison in August 2009. The West Virginia Stipulation provides for:

 

   

a $40 million annualized base rate increase effective June 29, 2010;

 

   

the deferral of February 2010 storm restoration expenses in West Virginia over a maximum five-year period;

 

   

an additional $20 million annualized base rate increase effective January 2011;

 

   

a decrease of $20 million in the Expanded Net Energy Clause (“ENEC”) rates effective January 2011, which amount is deferred for later recovery in 2012; and

 

   

a moratorium on filing for further increases in base rates before December 1, 2011, except under specified circumstances.

The West Virginia PSC conducted a hearing on the West Virginia Stipulation on April 6, 2010 and approved the stipulation on June 25, 2010.

NOTE 6: TRANSMISSION EXPANSION

TrAIL Project. TrAIL is a 500 kV high voltage line that, when completed, will extend from southwestern Pennsylvania through West Virginia to a point of interconnection with Virginia Electric and Power Company (“Dominion”) in northern Virginia. The majority of the line will be constructed, owned and maintained by TrAIL Company. Dominion will construct and maintain a 30 mile segment of the line in Virginia that will be jointly owned by Dominion and TrAIL Company. TrAIL Company funds its ownership share of construction costs and operating expenses and receives its ownership share of operating revenues.

In addition to the TrAIL line, TrAIL Company owns a static volt-ampere reactive power compensator at the Black Oak substation, implemented upgrades and/or replacements of transformers and/or buses at six other substations and owns a transmission operations center in West Virginia.

PATH Project. The PATH project is comprised of a 765 kV transmission line that is proposed to extend from West Virginia through Virginia and into Maryland, modifications to an existing substation in Putnam County, West Virginia and the construction of new substations in Hardy County, West Virginia and Frederick County, Maryland. PJM initially authorized the construction of PATH in June 2007 and, on June 17, 2010, requested that PATH, LLC proceed with all efforts related to the PATH project, including state regulatory proceedings, assuming a required in-service date of June 1, 2015. Applications requesting authorization to construct the PATH project are currently pending before state commissions in West Virginia, Maryland and Virginia. Allegheny anticipates that decisions by the state commissions on these applications will be issued during the third quarter of 2011.

 

16


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

Allegheny and a subsidiary of AEP formed PATH, LLC to facilitate the construction of the PATH project. In December 2007, PATH, LLC submitted a filing to FERC under Section 205 of the FPA to implement a cost of service formula rate effective March 1, 2008. In February 2008, FERC issued an order setting the formula rate and its protocols for hearing and authorizing a return on equity of 14.3%, a return on CWIP, recovery of prudently incurred start-up business and administrative costs incurred prior to the time the rates go into effect, and recovery of prudently incurred development and construction costs if the PATH project is abandoned as a result of factors beyond the control of PATH, LLC. In December 2008, PATH, LLC submitted to FERC a settlement with the active parties that resolves all issues set for hearing. FERC action on the settlement and requests for rehearing of the February 29, 2008 order with respect to return on equity are pending.

NOTE 7: REGULATORY ASSETS AND LIABILITIES

Allegheny’s regulated utility operations are subject to industry-specific accounting provisions. Regulatory assets represent probable future revenues associated with incurred costs that are expected to be recovered in the future from customers through the rate-making process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited or refunded to customers through the rate-making process or amounts collected for costs not yet incurred. Regulatory assets and regulatory liabilities reflected in the Consolidated Balance Sheets were as follows:

 

(In millions)

   September 30,
2010
     December 31,
2009
 

Regulatory assets, including current portion:

     

Income taxes (a)(b)

   $ 230.4       $ 234.9   

Pension benefits and postretirement benefits other than pensions (a)(c)

     380.2         396.5   

Deferred ENEC charges (d)

     71.0         109.5   

Transmission revenue requirement (e)

     63.9         29.8   

Unamortized loss on reacquired debt (a)(f)

     34.1         26.8   

Unrealized loss on financial transmission rights (a)

     0         1.7   

Other (g)

     66.1         50.8   
                 

Subtotal

     845.7         850.0   

Regulatory liabilities, including current portion:

     

Net asset removal costs (h)

     381.4         374.2   

Income taxes

     27.9         29.3   

SO2 allowances

     12.4         12.8   

Fort Martin Scrubber project—environmental control surcharge

     37.2         40.1   

Maryland rate stabilization and transition plan surcharge

     2.8         30.1   

Unrealized gain on financial transmission rights

     9.2         0   

Other

     15.7         12.1   
                 

Subtotal

     486.6         498.6   
                 

Net regulatory assets

   $ 359.1       $ 351.4   
                 

 

(a) Does not earn a return.
(b) Amount is being recovered over various periods associated with the remaining useful life of related regulated utility property, plant and equipment.
(c) Amount is being recovered over various periods up to 13 years.
(d) Includes approximately $48 million at September 30, 2010 that does not earn a return with recovery periods through 2012.
(e) Amount earns interest at the approved FERC interest rate and will be recovered through 2012.

 

17


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

(f) Amount is being recovered over various periods through 2025, based upon the maturities of reacquired debt.
(g) Includes amounts that do not earn a return with various recovery periods through 2027.
(h) Net asset removal costs of $51.0 million are included in liabilities associated with assets held for sale at December 31, 2009 in the consolidated balance sheet.

NOTE 8: INCOME TAXES

Allegheny records income taxes under the liability method of accounting. Deferred income tax balances are generally determined based on the difference between the financial statement and tax basis of assets and liabilities using the statutory income tax rates in effect for years in which the differences are expected to reverse. Investment tax credits are amortized over the estimated useful life of the related property. Tax benefits are recognized in the financial statements when it is more likely than not that a tax position will be sustained upon examination by the tax authorities based on the technical merits of the position. Such tax positions are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and all relevant facts.

Allegheny allocates federal income tax expense (benefit) among its subsidiaries pursuant to its consolidated tax sharing agreement.

The following is a reconciliation of reported income tax expense to income tax expense calculated by applying the federal statutory rate of 35% to income before income taxes:

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2010     2009     2010     2009  

(In millions, except percentages)

   Amount     %     Amount     %     Amount     %     Amount     %  

Income before income taxes

   $ 173.4        $ 122.7        $ 511.3        $ 479.4     
                                        

Income tax expense calculated at the federal statutory rate of 35%

     60.7        35.0     42.9        35.0     179.0        35.0     167.8        35.0

Increases (reductions) resulting from:

                

Rate-making effects of depreciation differences and removal costs

     0.8        0.5        0.7        0.6        2.5        0.5        2.1        0.4   

Other state income tax, net of federal income tax benefit

     6.6        3.8        4.1        3.3        17.1        3.3        16.8        3.5   

Amortization of deferred investment tax credits

     (0.9     (0.5     (0.9     (0.7     (2.6     (0.5     (2.7     (0.6

Change in estimated Pennsylvania net operating loss benefits

     0        0        0        0        0        0        9.5        2.0   

Changes in tax reserves related to uncertain tax positions and audit settlements

     (9.9     (5.7     (0.9     (0.7     (7.6     (1.5     2.4        0.5   

Other, net

     1.0        0.5        (0.6     (0.5     (0.6     (0.1     (0.8     (0.1
                                                                

Income tax expense

   $ 58.3        33.6   $ 45.3        37.0   $ 187.8        36.7   $ 195.1        40.7
                                                                

The Commonwealth of Pennsylvania limits the amount of net operating loss carryforwards that may be used to reduce current year taxable income to the greater of $3 million or 15% of taxable income per year for 2010 and the greater of $3 million or 20% of taxable income for years after 2010. During the nine months ended

 

18


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

September 30, 2009, Allegheny recorded a charge of $9.5 million, net of applicable federal income tax, to adjust the recorded Pennsylvania net operating loss carryforward asset to reflect estimates of future Pennsylvania taxable income during the carryforward period.

During the three months ended September 30, 2010, Allegheny reduced unrecognized tax benefits by approximately $9.1 million as a result of a lapse of the applicable statute of limitations.

NOTE 9: COMMON STOCK AND DEBT

Common Stock

On September 27, 2010, June 21, 2010 and March 22, 2010, AE paid cash dividends on its common stock of $0.15 per share to shareholders of record at the close of business on September 13, 2010, June 7, 2010 and March 8, 2010, respectively. On October 7, 2010, AE’s Board of Directors authorized a cash dividend on its common stock of $0.15 per share payable on December 27, 2010 to shareholders of record on December 13, 2010.

Debt

Outstanding debt and scheduled debt repayments at September 30, 2010 were as follows:

 

(In millions)

   October 1, 2010
through
December 31,
2010
    2011     2012     2013     2014     Thereafter     Total  

AE Supply:

              

Medium-Term Notes

   $ 0      $ 0      $ 503.2      $ 0      $ 0      $ 600.0      $ 1,103.2   

Pollution Control Bonds

     0        0        1.3        0        15.4        251.7        268.4   

Exempt Facilities Revenue Bonds

     0        0        0        0        0        235.0        235.0   

Debentures-AGC

     0        0        0        0        0        100.0        100.0   
                                                        

Total AE Supply

     0        0        504.5        0        15.4        1,186.7        1,706.6   

Monongahela:

              

Securitized Debt—Environmental Control Bonds (a)

     0        11.6        12.2        12.8        13.5        322.1        372.2   

First Mortgage Bonds

     0        0        0        300.0        120.0        220.0        640.0   

Pollution Control Bonds

     0        0        6.0        7.1        0        57.1        70.2   
                                                        

Total Monongahela

     0        11.6        18.2        319.9        133.5        599.2        1,082.4   

West Penn:

              

First Mortgage Bonds

     0        0        0        0        0        420.0        420.0   

Medium-Term Notes

     0        0        80.0        0        0        0        80.0   

Revolving Credit Facility

     0        0        0        15.0        0        0        15.0   
                                                        

Total West Penn

     0        0        80.0        15.0        0        420.0        515.0   

Potomac Edison:

              

First Mortgage Bonds

     0        0        0        0        175.0        245.0        420.0   

Securitized Debt—Environmental Control Bonds (a)

     0        3.9        4.1        4.3        4.5        107.5        124.3   
                                                        

Total Potomac Edison

     0        3.9        4.1        4.3        179.5        352.5        544.3   

TrAIL Company:

              

Medium-Term Notes

     0        0        0        0        0        450.0        450.0   

Revolving Loan

     0        0        0        290.0        0        0        290.0   
                                                        

Total TrAIL

     0        0        0        290.0        0        450.0        740.0   

Unamortized debt discounts

     (0.4     (1.5     (1.2     (1.1     (0.9     (2.7     (7.8

Eliminations (b)

     0        0        (1.3     0        0        (13.1     (14.4
                                                        

Total consolidated debt

   $ (0.4   $ 14.0      $ 604.3      $ 628.1      $ 327.5      $ 2,992.6      $ 4,566.1   
                                                        

 

19


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

(a) Amounts represent repayments based upon estimated surcharge collections from customers.
(b) Amounts represent the elimination of certain pollution control bonds, for which Monongahela and AE Supply are co-obligors.

The environmental control bonds shown in the table above were issued by two bankruptcy remote, special purpose limited liability companies (the “Funding Companies”) that are indirect subsidiaries of Monongahela and Potomac Edison, respectively. Proceeds from the bonds were used to construct environmental control facilities. The Funding Companies own the irrevocable right to collect non-bypassable environmental control charges (the “Environmental Control Charge”) from all customers who receive electric delivery service in Monongahela’s and Potomac Edison’s West Virginia service territories. Principal and interest owing on the environmental control bonds is secured by and payable solely from the proceeds of the Environmental Control Charge. The right to collect Environmental Control Charges is not included on Allegheny’s consolidated balance sheets. Creditors of AE and its subsidiaries other than the Funding Companies have no recourse to any assets or revenues of the Funding Companies.

Certain of Allegheny’s properties are subject to liens of various relative priorities securing debt.

2010 Debt Activity

Borrowings and principal repayments on debt during the nine months ended September 30, 2010 were as follows:

 

(In millions)

   Borrowings      Repayments  

AE:

     

AE Revolving Credit Facility

   $ 130.1       $ 130.1   

AE Supply:

     

Medium-Term Notes

     0         150.5   

TrAIL Company:

     

Medium-Term Notes

     450.0         0   

New TrAIL Company Credit Facility-Revolver

     290.0         0   

TrAIL Company Credit Facility-Term Loan (a)

     30.0         465.0   

TrAIL Company Credit Facility-Revolver (a)

     0         20.0   

West Penn:

     

Transition Bonds

     0         16.0   

Revolving Credit Facility

     20.0         5.0   

Monongahela:

     

Medium-Term Notes

     0         110.0   

Environmental Control Bonds

     0         11.1   

Potomac Edison:

     

Environmental Control Bonds

     0         3.7   

Revolving Credit Facility

     110.0         110.0   
                 

Consolidated Total

   $ 1,030.1       $ 1,021.4   
                 

 

(a) Represents debt under TrAIL Company’s previous credit facility, which was repaid and replaced in January 2010 by a new revolving credit facility, which is described below.

 

20


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

On January 15, 2010, Monongahela repaid its $110 million 7.36% medium-term notes.

On January 25, 2010, TrAIL Company issued $450 million aggregate principal amount of 4.0% senior unsecured notes due in 2015 and also entered into a $350 million senior unsecured revolving credit facility with a three-year maturity. The revolving credit facility capacity was increased to $450 million in August 2010. Borrowings under the new credit facility bear interest at a rate that is calculated based on the London Interbank Offered Rate (“LIBOR”) plus a margin based on TrAIL Company’s senior unsecured credit rating. Currently, the margin is 3.0%. TrAIL Company used the net proceeds from the sale of the notes, together with funds from the credit facility, to repay all amounts outstanding under the $550 million senior unsecured credit facility that it entered into in 2008.

On May 3, 2010, Potomac Edison and West Penn entered into new $150 million and $200 million senior unsecured revolving credit facilities, respectively. On May 4, 2010, AE entered into a new $250 million senior unsecured revolving credit facility. The new AE revolving credit facility replaced AE’s previous $376 million revolving credit facility, which was scheduled to mature in May 2011. The AE, Potomac Edison and West Penn credit facilities mature April 30, 2013. Loans under all three credit facilities bear interest at a rate that is calculated based on LIBOR plus a margin based on the borrower’s senior unsecured credit rating. Currently, the margins are 3.0% for AE and 2.75% for Potomac Edison and West Penn. Allegheny capitalized approximately $5.6 million in debt issuance costs related to the three credit facilities.

On July 16, 2010, AE Supply redeemed all $150.5 million of its outstanding 7.80% Medium Term Notes due 2011 and expensed approximately $7.3 million in redemption premiums and unamortized costs associated with the notes.

On October 22, 2010, AGC entered into a $50 million senior unsecured revolving credit facility and borrowed $50 million under the credit facility to pay dividends and a return of capital of $30 million to AE Supply and $20 million to Monongahela. The credit facility matures on December 31, 2013. Loans under the credit facility bear interest at a rate that is calculated based on LIBOR plus a margin based on AGC’s senior unsecured credit rating. Currently, the margin is 2.50%.

 

21


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

NOTE 10: SEGMENT INFORMATION

The following tables summarize the results of operations for Allegheny’s two reportable segments. The information for the Regulated Operations segment includes the operations of the Virginia distribution business through the date of its sale on June 1, 2010. See Note 4, “Sale of Virginia Distribution Business,” for additional information.

Allegheny changed the composition of its reportable segments during the fourth quarter of 2009, consistent with changes made to its management structure and the internal financial reporting used by its chief operating decision maker to regularly assess the performance of the business and allocate resources. Segment information for the three and nine months ended September 30, 2009 has been reclassified to conform to the 2010 presentation included below.

 

    Three Months Ended
September 30, 2010
    Three Months Ended
September 30, 2009
 

(In millions)

  Merchant
Generation
    Regulated
Operations
    Eliminations
(a)
    Total     Merchant
Generation
    Regulated
Operations
    Eliminations
(a)
    Total  

Operating revenues:

               

External operating revenues

  $ 167.0      $ 876.7      $ 0      $ 1,043.7      $ 66.0      $ 727.7      $ 0      $ 793.7   

Internal operating revenues

    317.5        1.3        (318.8     0        292.3        1.5        (293.8     0   
                                                               

Total operating revenues

    484.5        878.0        (318.8     1,043.7        358.3        729.2        (293.8     793.7   
                                                               

Operating expenses:

               

Fuel

    233.1        90.2        0        323.3        151.2        36.8        0        188.0   

Purchased power and transmission

    9.0        422.9        (317.5     114.4        9.0        417.5        (292.3     134.2   

Deferred energy costs, net

    0        17.7        0        17.7        0        (14.3     0        (14.3

Operations and maintenance

    70.2        127.3        (1.3     196.2        50.2        102.5        (1.5     151.2   

Depreciation and amortization

    32.4        49.2        (0.4     81.2        28.5        43.3        (0.5     71.3   

Taxes other than income taxes

    12.3        46.0        0        58.3        12.4        45.0        0        57.4   
                                                               

Total operating expenses

    357.0        753.3        (319.2     791.1        251.3        630.8        (294.3     587.8   
                                                               

Operating income

    127.5        124.7        0.4        252.6        107.0        98.4        0.5        205.9   

Other income (expense), net

    1.6        6.4        (3.6     4.4        0.1        4.5        (2.7     1.9   

Interest expense

    40.5        44.1        (1.0     83.6        46.5        38.8        (0.2     85.1   
                                                               

Income before income taxes

    88.6        87.0        (2.2     173.4        60.6        64.1        (2.0     122.7   

Income tax expense

    26.3        32.0        0        58.3        20.4        24.9        0        45.3   
                                                               

Net income

    62.3        55.0        (2.2     115.1        40.2        39.2        (2.0     77.4   

Net income attributable to noncontrolling interest

    (2.4     0        2.4        0        (2.2     (0.4     2.2        (0.4
                                                               

Net income attributable to Allegheny Energy, Inc.

  $ 59.9      $ 55.0      $ 0.2      $ 115.1      $ 38.0      $ 38.8      $ 0.2      $ 77.0   
                                                               

 

(a) Represents elimination of transactions between reportable segments.

 

22


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

    Nine Months Ended
September 30, 2010
    Nine Months Ended
September 30, 2009
 

(In millions)

  Merchant
Generation
    Regulated
Operations
    Eliminations
(a)
    Total     Merchant
Generation
    Regulated
Operations
    Eliminations
(a)
    Total  

Operating revenues:

               

External operating revenues

  $ 408.0      $ 2,630.3      $ 0      $ 3,038.3      $ 262.1      $ 2,303.6      $ 0      $ 2,565.7   

Internal operating revenues

    997.0        4.0        (1,001.0     0        926.0        6.0        (932.0     0   
                                                               

Total operating revenues

    1,405.0        2,634.3        (1,001.0     3,038.3        1,188.1        2,309.6        (932.0     2,565.7   
                                                               

Operating expenses:

               

Fuel

    697.7        239.3        0        937.0        490.2        173.6        0        663.8   

Purchased power and transmission

    27.8        1,358.9        (997.0     389.7        27.2        1,280.9        (927.7     380.4   

Deferred energy costs, net

    0        28.0        0        28.0        0        (38.9     0        (38.9

Gain on sale of Virginia distribution business

    0        (45.1     0        (45.1     0        0        0        0   

Operations and maintenance

    188.8        388.7        (4.1     573.4        201.0        322.2        (4.3     518.9   

Depreciation and amortization

    97.0        145.9        (1.2     241.7        76.2        132.2        (1.4     207.0   

Taxes other than income taxes

    38.4        133.5        0        171.9        33.7        126.0        0        159.7   
                                                               

Total operating expenses

    1,049.7        2,249.2        (1,002.3     2,296.6        828.3        1,996.0        (933.4     1,890.9   
                                                               

Operating income

    355.3        385.1        1.3        741.7        359.8        313.6        1.4        674.8   

Other income (expense), net

    3.0        16.9        (10.2     9.7        1.2        13.2        (8.3     6.1   

Interest expense

    112.9        129.9        (2.7     240.1        84.4        117.8        (0.7     201.5   
                                                               

Income before income taxes

    245.4        272.1        (6.2     511.3        276.6        209.0        (6.2     479.4   

Income tax expense

    83.3        104.5        0        187.8        110.0        85.1        0        195.1   
                                                               

Net income

    162.1        167.6        (6.2     323.5        166.6        123.9        (6.2     284.3   

Net income attributable to noncontrolling interest

    (6.9     0        6.9        0        (6.8     (0.8     6.8        (0.8
                                                               

Net income attributable to Allegheny Energy, Inc.

  $ 155.2      $ 167.6      $ 0.7      $ 323.5      $ 159.8      $ 123.1      $ 0.6      $ 283.5   
                                                               

 

(a) Represents elimination of transactions between reportable segments.

NOTE 11: FAIR VALUE MEASUREMENTS, DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Allegheny’s assets and liabilities measured at fair value on a recurring basis at September 30, 2010 consisted of the following:

 

(In millions)

   Assets      Liabilities  

Cash equivalents (a)

   $ 340.8       $ 0   

Derivative instruments (b):

     

Current

     214.2         (4.0

Non-current

     22.6         (9.9
                 

Total derivative instruments

     236.8         (13.9
                 

Total recurring fair value measurements

   $ 577.6       $ (13.9
                 

 

(a) Cash equivalents represent amounts invested in money market mutual funds and are valued using Level 1 inputs.
(b) Before netting of cash collateral and financial transmission right (“FTR”) obligation.

 

23


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

The following table disaggregates the net fair values of derivative assets and liabilities by class, before netting of cash collateral and FTR obligation, based on their level within the fair value hierarchy at September 30, 2010. This table excludes derivatives that have been designated as normal purchases or normal sales.

 

     Fair Value at September 30, 2010 Using  

(In millions)

   Level 1     Level 2     Level 3      Total  

Derivative assets:

         

Power contracts

   $ 0      $ 64.3      $ 0       $ 64.3   

Gas contracts

     5.7        0        0         5.7   

FTRs

     0        0        166.8         166.8   
                                 

Total derivative assets

     5.7        64.3        166.8         236.8   
                                 

Derivative liabilities:

         

Power contracts

     (7.9     (3.9     0         (11.8

Interest rate swaps

     0        (2.1     0         (2.1
                                 

Total derivative liabilities

     (7.9     (6.0     0         (13.9
                                 

Net derivative assets (liabilities)

   $ (2.2   $ 58.3      $ 166.8       $ 222.9   
                                 

The following table shows the expected settlement year for derivative assets and liabilities outstanding before netting of cash collateral and FTR obligation at September 30, 2010. This table excludes derivatives that have been designated as normal purchases or normal sales:

 

(In millions)

   2010      2011      2012     2013      Total  

Level 1

   $ 5.7       $ 0.8       $ (8.7   $ 0       $ (2.2

Level 2

     3.2         53.0         2.1        0         58.3   

Level 3

     63.2         103.6         0        0         166.8   
                                           

Net derivative assets (liabilities)

   $ 72.1       $ 157.4       $ (6.6   $ 0       $ 222.9   
                                           

The following table disaggregates the net fair values of derivative assets and liabilities, before netting of cash collateral and FTR obligation, based on their level within the fair value hierarchy at December 31, 2009. This table excludes derivatives that have been designated as normal purchases or normal sales.

 

     December 31, 2009  

(In millions)

   Derivative
Assets
     Derivative
Liabilities
    Net Derivative
Assets
 

Level 1

   $ 31.9       $ (4.7   $ 27.2   

Level 2

     0.2         (29.5     (29.3

Level 3

     96.2         0        96.2   
                         

Total

   $ 128.3       $ (34.2   $ 94.1   
                         

 

24


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

Derivative assets and liabilities included in Level 1 primarily consist of exchange-traded futures and other exchange-traded transactions that are valued using closing prices for identical instruments in active markets. Derivative assets and liabilities included in Level 2 primarily consist of non-exchange traded power contracts and interest rate swaps. Derivatives included in Level 2 are valued using a pricing model with inputs that are observable in the market, such as quoted forward prices of commodities, or that can be derived from or corroborated by observable market data. Derivative assets included in Level 3 consist of FTRs and are valued using an internal model based on data from PJM annual and monthly FTR auctions.

The following tables provide a reconciliation of the beginning and ending balance of FTR derivative assets measured at fair value (Level 3):

 

     Three Months Ended
September 30,
 

(In millions)

   2010     2009  

Balance at July 1

   $ 241.7      $ 250.5   

Total realized and unrealized gains (losses):

    

Included in earnings, in operating revenues

     25.1        (69.5

Included in regulatory assets or liabilities

     13.1        (36.0

Purchases, issuances and settlements

     (113.1     (20.1

Transfers in / out of Level 3

     0        0   
                

Balance at September 30

   $ 166.8      $ 124.9   
                

Amount of total gains (losses) included in earnings attributable to the change in unrealized gains (losses) related to Level 3 assets held at September 30

   $ 4.1      $ (33.7
                

 

     Nine Months
Ended
September 30,
 

(In millions)

   2010     2009  

Balance at January 1

   $ 96.2      $ 189.8   

Total realized and unrealized gains (losses):

    

Included in earnings, in operating revenues

     48.9        (171.7

Included in regulatory assets or liabilities

     25.6        (86.7

Purchases, issuances and settlements

     (3.9     193.5   

Transfers in / out of Level 3

     0        0   
                

Balance at September 30

   $ 166.8      $ 124.9   
                

Amount of total gains (losses) included in earnings attributable to the change in unrealized gains (losses) related to Level 3 assets held at September 30

   $ 17.2      $ (15.5
                

There were no transfers between Level 1 and Level 2, and no transfers into or out of Level 3, of the fair value hierarchy for the nine months ended September 30, 2010. To the extent that it has transfers between these levels, Allegheny accounts for the transfers at the end of the reporting period.

 

25


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

The volume and expiration of Allegheny’s derivative contracts at September 30, 2010 that did not qualify for the normal purchase or normal sale exemption were as follows:

 

(In millions)

   2010      2011      2012      2013      Total  

Electricity contracts (MWhs):

              

Sales of power

     0.8         10.4         2.4         0         13.6   

Purchases of power

     0.1         1.6         0.6         0         2.3   

FTRs (MWhs)

     16.3         26.7         0         0         43.0   

Gas contracts—Kern River (decatherms):

              

Sales of gas

     5.5         0         0         0         5.5   

Purchases of gas

     5.8         0         0         0         5.8   

Interest rate swaps (notional dollars):

              

Interest rate swap agreements (fixed rate to floating rate)

   $ 0       $ 200       $ 0       $ 0       $ 200   

Interest rate swap agreements (floating rate to fixed rate)

   $ 0       $ 200       $ 0       $ 0       $ 200   

Allegheny enters into derivative contracts for the sale or purchase of power to hedge the variable price risks related to forecasted sales or purchases of power. To the extent that such contracts qualify and are designated as cash flow hedging instruments, the effective portion of unrealized gain or loss on the derivative contract is reported as a component of other comprehensive income (“OCI”) and is subsequently reclassified into earnings in the period during which the hedged forecasted transaction affects earnings. Allegheny had 6.3 million MWhs of derivative electricity contracts that qualify and were designated as cash flow hedging instruments at September 30, 2010. Changes in the fair value of derivative electricity contracts that are not qualifying cash flow hedge instruments are reported in revenues on a mark-to-market basis. Allegheny had 9.6 million MWhs of derivative electricity contracts that were not designated as cash flow hedge instruments at September 30, 2010, including approximately 4.2 million MWhs that were de-designated on July 16, 2010.

Allegheny entered into derivative contracts for the forward purchase and sale of gas to hedge a portion of the value of a capacity contract related to the Kern River pipeline that did not qualify for cash flow hedge accounting. Interest rate swaps at September 30, 2010 include two interest rate swap agreements with an aggregate notional value of $200 million that were entered into during 2003 to substantially offset two existing interest rate swaps with the same counterparty. The 2003 agreements effectively locked in a net liability and substantially eliminated future income volatility from the interest rate swap positions but do not qualify for cash flow hedge accounting.

Allegheny also holds FTRs that generally represent an economic hedge of future congestion charges that will be incurred in connection with Allegheny’s load obligations. These future obligations are not reflected on Allegheny’s Consolidated Balance Sheets, and the FTRs have not been designated as cash flow hedge instruments. As a result, the timing of recognition of gains or losses on FTRs will differ from the timing of power purchases, including incurred congestion charges. Allegheny acquires its FTRs in an annual auction through a self-scheduling process involving the use of auction revenue rights (“ARRs”) allocated to members of PJM that have load serving obligations. Allegheny initially records FTRs and a FTR obligation payable to PJM at the annual FTR auction price, and subsequently adjusts the carrying value of remaining FTRs to their estimated fair value at the end of each accounting period prior to settlement. Changes in the fair value of FTRs held by Allegheny’s unregulated subsidiaries are included in operating revenues as unrealized gains or losses. Unrealized gains or losses on FTRs held by Allegheny’s regulated subsidiaries are recorded as regulatory assets or liabilities.

 

26


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

Derivative contracts that have been designated as normal purchases or normal sales are not subject to mark-to-market accounting treatment, and their effects are included in earnings at the time of contract performance.

The recorded fair values of derivatives at September 30, 2010 were as follows:

 

    Power
Contracts
    Gas
Contracts
-Kern
River
    Interest
Rate
Swaps
    FTRs     Gross
Derivatives
    Netting     Net
Derivatives
    FTR
Obligation
(a)
    Collateral     Balance
Sheet
Derivatives
 

(In millions)

  Sales     Purchases                    

Derivatives designated as hedging instruments:

  

             

Derivative assets:

                     

Current

  $ 26.9      $ 0      $ 0      $ 0      $ 0      $ 26.9      $ (26.9   $ 0      $ 0      $ 0      $ 0   

Long-term

    11.2        0        0        0        0        11.2        (11.2     0        0        0        0   
                                                                                       

Total derivative assets

    38.1        0        0        0        0        38.1        (38.1     0        0        0        0   

Derivative liabilities:

                     

Current

    (0.1     0        0        0        0        (0.1     0.1        0        0        0        0   

Long-term

    (0.1     0        0        0        0        (0.1     0.1        0        0        0        0   
                                                                                       

Total derivative liabilities

    (0.2     0        0        0        0        (0.2     0.2        0        0        0        0   
                                                                                       

Total designated

    37.9        0        0        0        0        37.9        (37.9     0        0        0        0   
                                                                                       

Derivatives not designated as hedging instruments:

  

             

Derivative assets:

                     

Current

    18.3        0        8.8        0        166.8        193.9        20.3        214.2        (166.8     (2.4     45.0   

Long-term

    12.9        0        0        0        0        12.9        9.7        22.6        0        0        22.6   
                                                                                       

Total derivative assets

    31.2        0        8.8        0        166.8        206.8        30.0        236.8        (166.8     (2.4     67.6   

Derivative liabilities:

                     

Current

    (0.2     (5.1     (3.0     (2.1     0        (10.4     6.4        (4.0     0        0        (4.0

Long-term

    (0.9     (10.5     0        0        0        (11.4     1.5        (9.9     0        5.1        (4.8
                                                                                       

Total derivative liabilities

    (1.1     (15.6     (3.0     (2.1     0        (21.8     7.9        (13.9     0        5.1        (8.8
                                                                                       

Total not designated

    30.1        (15.6     5.8        (2.1     166.8        185.0        37.9        222.9        (166.8     2.7        58.8   
                                                                                       

Total derivatives

  $ 68.0      $ (15.6   $ 5.8      $ (2.1   $ 166.8      $ 222.9      $ 0      $ 222.9      $ (166.8   $ 2.7      $ 58.8   
                                                                                       

 

(a) The FTR obligation at September 30, 2010 was $176.8 million and is payable to PJM in approximately equal weekly amounts through the PJM planning year ending May 31, 2011. Of this obligation, $166.8 million has been netted against the FTR derivative asset balance and the remaining $10.0 million is included in non-derivative current liabilities on the consolidated balance sheet.

 

27


Table of Contents

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

 

 

The recorded fair values of derivatives at December 31, 2009 were as follows:

 

    Power Contracts     Gas
Contracts
-Kern
River
    Interest
Rate
Swaps
    FTRs     Gross
Derivatives
    Netting     Net
Derivatives
    FTR
Obligation
(a)
    Collateral     Balance
Sheet
Derivatives
 

(In millions)

  Sales     Purchases                    

Derivatives designated as hedging instruments:

  

       

Derivative assets:

                     

Current

  $ 0.3      $ 0      $ 0      $ 0      $ 0      $ 0.3      $ (0.3