1 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 JUNE 30, 1996 COMMISSION REGISTRANTS; STATE OF INCORPORATION; I.R.S. EMPLOYER FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO. - ----------- ------------------------------------------ ------------------ 1-11607 DTE Energy Company 38-3217752 (a Michigan corporation) 2000 2nd Avenue Detroit, Michigan 48226-1279 313-235-4000 1-2198 The Detroit Edison Company 38-0478650 (a Michigan corporation) 2000 2nd Avenue Detroit, Michigan 48226-1279 313-235-8000 Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. YES X NO --- --- At July 31, 1996, 145,119,875 shares of DTE Energy's Common Stock, substantially all held by non-affiliates, were outstanding.
2 DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 This document contains the Quarterly Reports on Form 10-Q for the quarter ended June 30, 1996 for each of DTE Energy Company and The Detroit Edison Company. Information contained herein relating to an individual registrant is filed by such registrant on its own behalf. Accordingly, except for its subsidiaries, The Detroit Edison Company makes no representation as to information relating to any other companies affiliated with DTE Energy Company. TABLE OF CONTENTS Page ---- Definitions..............................................................3 Quarterly Report on Form 10-Q for DTE Energy Company: Part I-Financial Information...........................................4 Item 1 -Financial Statements (Unaudited).......................4 Notes to Consolidated Financial Statements (Unaudited)........14 Independent Accountants' Report...............................15 Item 2 -Management's Discussion and Analysis of Financial Condition and Results of Operations...........................16 Part II-Other Information.............................................27 Item 1 -Legal Proceedings.....................................27 Item 4 -Submission of Matters to a Vote of Security Holders...27 Item 5 -Other Information.....................................28 Quarterly Report on Form 10-Q for The Detroit Edison Company: Part I-Financial Information..........................................30 Item 1 -Financial Statements (Unaudited)......................30 Item 2 -Management's Discussion and Analysis of Financial Condition and Results of Operations...........................30 Part II-Other Information.............................................30 Item 1 -Legal Proceedings.....................................30 Item 5 -Other Information.....................................30 Quarterly Reports on Form 10-Q for DTE Energy Company and The Detroit Edison Company: Item 6 -Exhibits and Reports on Form 8-K......................31 Signature Page to DTE Energy Company Quarterly Report on Form 10-Q......37 Signature Page to The Detroit Edison Company Quarterly Report on Form 10-Q..............................................................38 2
3 DEFINITIONS ALJ ..................... Administrative Law Judge Annual Report ........... 1995 Annual Report to the Securities and Exchange Commission on Form 10-K for DTE Energy Company or The Detroit Edison Company, as the case may be Annual Report Notes ..... Notes to Consolidated Financial Statements appearing on pages 46 through 57 of the 1995 Annual Report to the Securities and Exchange Commission on Form 10-K for DTE Energy Company and The Detroit Edison Company Company ................. DTE Energy Company and Subsidiary Companies Detroit Edison .......... The Detroit Edison Company (a wholly owned subsidiary of DTE Energy Company) and Subsidiary Companies EPA ..................... United States Environmental Protection Agency FERC .................... Federal Energy Regulatory Commission kWh ..................... Kilowatthour MDEQ .................... Michigan Department of Environmental Quality MPSC .................... Michigan Public Service Commission MW ...................... Megawatts NOPR .................... Notice of Proposed Rulemaking Note(s) ................. Note(s) to Consolidated Financial Statements (Unaudited) appearing herein NRC ..................... Nuclear Regulatory Commission PFD ..................... Proposal for Decision PSCR .................... Power Supply Cost Recovery Quarterly Report ........ Quarterly Report to the Securities and Exchange Commission on Form 10-Q for quarter ended March 31, 1996 for DTE Energy Company or The Detroit Edison Company, as the case may be Quarterly Report Notes .. Notes to Consolidated Financial Statements (Unaudited) appearing in the Quarterly Report to the Securities and Exchange Commission on Form 10-Q for quarter ended March 31, 1996 for DTE Energy Company or The Detroit Edison Company, as the case may be QUIDS ................... Quarterly Income Debt Securities Registrant .............. Company or Detroit Edison, as the case may be Renaissance ............. Renaissance Energy Company (an unaffiliated company) 3
4 QUARTERLY REPORT ON FORM 10-Q FOR DTE ENERGY COMPANY PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED): DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Three Months Ended Six Months Ended Twelve Months Ended June 30 June 30 June 30 ------------------------ --------------------------- ------------------------------ 1996 1995 1996 1995 1996 1995 -------- --------- ----------- -------------- -------------- -------------- <S> <C> <C> <C> <C> <C> <C> OPERATING REVENUES Electric - System $857,769 $838,913 $1,745,396 $1,701,961 $3,603,905 $3,425,899 Electric - Interconnection 7,988 12,300 19,232 19,639 50,572 32,459 Steam and other 5,564 4,742 16,272 14,629 25,738 24,933 - -------------------------------------------------------------------------------------------------------------------------------- Total Operating Revenues $871,321 $855,955 $1,780,900 $1,736,229 $3,680,215 $3,483,291 - -------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Operation Fuel $166,687 $175,532 $ 342,354 $345,192 $713,129 $ 693,747 Purchased power 37,629 32,747 61,125 67,859 126,823 93,931 Other operation 158,227 148,998 309,249 286,371 658,175 619,590 Maintenance 78,689 59,903 152,300 112,374 280,041 251,979 Steam plant impairment loss - - - - 42,029 - Depreciation and amortization 130,593 124,630 262,604 249,674 513,541 490,042 Deferred Fermi 2 amortization (1,120) (1,493) (2,240) (2,986) (5,226) (6,718) Amortization of deferred Fermi 2 depreciation and return 25,485 23,247 50,968 46,494 97,464 88,908 Taxes other than income 62,994 61,459 129,755 124,104 257,592 239,424 Income taxes 57,671 65,218 133,775 147,269 276,193 284,266 - -------------------------------------------------------------------------------------------------------------------------------- Total Operating Expenses $716,855 $690,241 $1,439,890 $1,376,351 $2,959,761 $2,755,169 - -------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME $154,466 $165,714 $ 341,010 $359,878 $720,454 $728,122 - -------------------------------------------------------------------------------------------------------------------------------- OTHER INCOME AND (DEDUCTIONS) Allowance for other funds used during construction $ 586 $ 268 $ 974 $ 583 $ 1,799 $ 1,274 Other income and (deductions) - net (5,669) (4,941) (6,625) (18,276) (18,595) (37,695) Income taxes 1,888 1,172 2,191 6,170 5,810 12,413 Accretion income 2,150 2,845 4,477 5,859 9,659 12,367 Income taxes - disallowed plant costs and accretion income (624) (868) (1,310) (1,797) (2,868) (3,814) - -------------------------------------------------------------------------------------------------------------------------------- Net Other Income and (Deductions) $ (1,669) $ (1,524) $ (293) $ (7,461) $ (4,195) $ (15,455) - -------------------------------------------------------------------------------------------------------------------------------- INTEREST CHARGES Long-term debt $ 69,261 $ 68,096 $ 137,621 $ 136,520 $ 276,700 $ 270,679 Amortization of debt discount, premium and expense 2,967 2,779 5,922 5,578 11,656 11,174 Other 469 2,313 2,043 6,214 5,495 8,161 Allowance for borrowed funds used during construction (credit) (1,060) (554) (1,762) (941) (3,090) (2,148) - -------------------------------------------------------------------------------------------------------------------------------- Net Interest Charges $ 71,637 $ 72,634 $ 143,824 $ 147,371 $ 290,761 $ 287,866 - -------------------------------------------------------------------------------------------------------------------------------- PREFERRED STOCK DIVIDENDS OF SUBSIDIARY 2,907 7,404 10,200 14,811 23,126 29,627 - -------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 78,253 $84,152 $ 186,693 $ 190,235 $ 402,372 $ 395,174 ================================================================================================================================ COMMON SHARES OUTSTANDING - AVERAGE 145,119,875 144,875,672 145,119,875 144,869,919 144,674,097 145,069,229 EARNINGS PER COMMON SHARE $0.54 $0.58 $1.29 $1.31 $2.78 $2.72 DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $0.515 $0.515 $1.03 $1.03 $2.06 $2.06 </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 4
5 DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Three Months Ended Six Months Ended Twelve Months Ended June 30 June 30 June 30 ---------------------- ---------------------- ---------------------- 1996 1995 1996 1995 1996 1995 ---------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> OPERATING ACTIVITIES Net Income $ 78,253 $ 84,152 $ 186,693 $ 190,235 $ 402,372 $ 395,174 Adjustments to reconcile net income to net cash from operating activities: Accretion income (2,150) (2,845) (4,477) (5,859) (9,659) (12,367) Depreciation and amortization 130,593 124,630 262,604 249,674 513,541 490,042 Deferred Fermi 2 amortization and return - net 24,365 21,754 48,728 43,508 92,238 82,190 Deferred income taxes and investment tax credit - net 11,549 13,807 28,612 40,083 51,052 83,295 Fermi 2 refueling outage - net 3,258 2,955 6,516 6,755 12,836 388 Steam plant impairment loss - - - - 42,029 - Other 12,343 21,111 (9,457) (778) (3,566) (2,481) Changes in current assets and liabilities: Customer accounts receivable and unbilled revenues (19,268) (68,086) (17,726) (192,479) (43,826) (196,790) Other accounts receivable 769 (8,756) (4,739) (3,474) (4,717) (8,716) Inventories (6,358) (22,788) 12,221 (27,664) 21,048 (35,987) Accounts payable (1,987) 2,059 (2,257) (5,143) 20,935 (10,075) Taxes payable (62,759) (32,882) (11,404) 13,254 (27,307) 1,240 Interest payable (10,086) (204) 4,619 (1,114) 7,647 (9,127) Other 29,616 48,191 (55,986) (23,929) (802) 3,245 - ------------------------------------------------------------------------------------------------------------------------------ Net cash from operating activities $ 188,138 $ 183,098 $ 443,947 $ 283,069 $1,073,821 $ 780,031 - ------------------------------------------------------------------------------------------------------------------------------ INVESTING ACTIVITIES Plant and equipment expenditures $ (136,221) $ (94,744) $ (251,980) $(179,978) $ (525,846) $ (375,195) Nuclear decommissioning trust funds (9,107) (11,321) (22,794) (23,292) (42,853) (41,219) Non-utility investments (701) (2,013) (6,285) (552) (5,240) (13,384) Other changes in current assets and liabilities (1,768) (4,441) (847) (3,588) 8,515 3,944 Other (14,318) (3,511) (14,254) (4,592) (41,135) (24,737) - ------------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities $ (162,115) $(116,030) $ (296,160) $(212,002) $ (606,559) $ (450,591) - ------------------------------------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Issuance of long-term debt $ - $ - $ 185,000 $ - $ 185,000 $ 200,000 Funds received from Trustees: Installment sales contracts and loan agreements - - - - 201,525 42,935 Increase (decrease) in short-term borrowings 94,988 3,941 57,998 102,388 (46,889) 49,941 Redemption of long-term debt (69,214) - (69,214) (19,214) (270,739) (250,499) Redemption of preferred stock - - (185,000) - (185,955) - Premiums on reacquired long-term debt - - - - (5,946) (11,350) Purchase of common stock - - - - - (59,855) Dividends on common stock (74,737) (74,609) (149,474) (149,215) (298,761) (299,556) Other (167) (304) (9,975) (463) (16,112) (2,552) - ------------------------------------------------------------------------------------------------------------------------------ Net cash used for financing activities $(49,130) $ (70,972) $ (170,665) $ (66,504) $ (437,877) $ (330,936) - ------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS $ (23,107) $ (3,904) $ (22,878) $ 4,563 $ 29,385 $ (1,496) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF THE PERIOD 65,177 16,589 64,948 8,122 12,685 14,181 - ------------------------------------------------------------------------------------------------------------------------------ CASH AND TEMPORARY CASH INVESTMENTS AT END OF THE PERIOD $ 42,070 $ 12,685 $ 42,070 $ 12,685 $ 42,070 $ 12,685 ============================================================================================================================== SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (excluding interest capitalized) $ 78,617 $ 69,907 $ 133,174 $ 139,699 $ 267,888 $ 284,290 Income taxes paid 113,328 76,240 113,946 76,480 268,003 190,447 New capital lease obligations 11,885 100 12,182 427 41,141 1,316 Exchange of preferred stock of subsidiary for long-term debt - - - - 49,878 - ============================================================================================================================== </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 5
6 DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (UNAUDITED) ASSETS (Dollars in Thousands) <TABLE> <CAPTION> June 30 December 31 1996 1995 ------- ----------- <S> <C> <C> UTILITY PROPERTIES Plant in service $13,529,342 $13,303,992 Less: Accumulated depreciation and amortization (5,185,452) (4,928,316) - --------------------------------------------------------------------------------------------- $ 8,343,890 $ 8,375,676 Construction work in progress 147,222 142,726 - --------------------------------------------------------------------------------------------- Net utility properties $ 8,491,112 $ 8,518,402 - --------------------------------------------------------------------------------------------- Property under capital leases (less accumulated amortization of $104,039 and $99,633, respectively) $ 132,075 $ 137,206 Nuclear fuel under capital lease (less accumulated amortization of $458,486 and $427,831, respectively) 126,989 145,463 - --------------------------------------------------------------------------------------------- Net property under capital leases $ 259,064 $ 282,669 - --------------------------------------------------------------------------------------------- Total owned and leased properties $ 8,750,176 $ 8,801,071 - --------------------------------------------------------------------------------------------- OTHER PROPERTY AND INVESTMENTS Non-utility property $ 47,612 $ 21,576 Investments and special funds 44,350 29,058 Nuclear decommissioning trust funds 142,637 119,843 - --------------------------------------------------------------------------------------------- $ 234,599 $ 170,477 - --------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and temporary cash investments $ 42,070 $ 64,948 Customer accounts receivable and unbilled revenues (less allowance for uncollectible accounts of $20,000 and $22,000, respectively) 432,129 414,403 Other accounts receivable 42,403 37,664 Inventories (at average cost) Fuel 149,257 162,796 Materials and supplies 144,931 142,782 Prepayments 48,393 12,910 - --------------------------------------------------------------------------------------------- $ 859,183 $ 835,503 - --------------------------------------------------------------------------------------------- DEFERRED DEBITS Regulatory assets $ 1,063,798 $ 1,155,482 Prepaid pensions 94,061 81,865 Unamortized debt expense 45,890 40,936 Other 45,605 45,257 - --------------------------------------------------------------------------------------------- $ 1,249,354 $ 1,323,540 - --------------------------------------------------------------------------------------------- TOTAL $11,093,312 $11,130,591 ============================================================================================= </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 6
7 DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (UNAUDITED) LIABILITIES (Dollars in Thousands) <TABLE> <CAPTION> June 30 December 31 1996 1995 ------- ----------- <S> <C> <C> CAPITALIZATION Common stock - without par value, 400,000,000 shares authorized; 145,119,875 shares outstanding $1,951,437 $1,951,437 Retained earnings used in the business 1,519,289 1,484,871 ------------------------------------------------------------------------------ Total common shareholders' equity $3,470,726 $3,436,308 Cumulative preferred stock of subsidiary 144,405 326,604 Long-term debt 3,746,906 3,756,094 ------------------------------------------------------------------------------ Total Capitalization $7,362,037 $7,519,006 ------------------------------------------------------------------------------ OTHER NON-CURRENT LIABILITIES Obligations under capital leases $121,704 $128,362 Other postretirement benefits 4,509 24,381 Other 69,610 58,424 ------------------------------------------------------------------------------ $195,823 $211,167 ------------------------------------------------------------------------------ CURRENT LIABILITIES Short-term borrowings $94,988 $36,990 Amounts due within one year Long-term debt 244,214 119,214 Obligations under capital leases 137,360 154,307 Accounts payable 162,798 165,148 Property and general taxes 20,901 34,416 Income taxes 1,680 - Accumulated deferred income taxes 54,459 51,697 Interest payable 66,747 62,128 Dividends payable 77,644 81,102 Payrolls 74,928 72,164 Fermi 2 refueling outage 20,858 14,342 Other 107,931 130,689 ------------------------------------------------------------------------------ $1,064,508 $922,197 ------------------------------------------------------------------------------ DEFERRED CREDITS Accumulated deferred income taxes $2,060,022 $2,052,875 Accumulated deferred investment tax credits 322,558 330,085 Other 88,364 95,261 - ------------------------------------------------------------------------------- $2,470,944 $2,478,221 - ------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (NOTE 2) - ------------------------------------------------------------------------------- TOTAL $11,093,312 $11,130,591 =============================================================================== </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 7
8 DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Retained Total Common Stock Earnings Common ------------------- Used in the Shareholders' Shares Amount Business Equity - ------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> BALANCE AT DECEMBER 31, 1995 145,119,875 $1,951,437 $1,484,871 $3,436,308 Expense associated with subsidiary preferred stock redeemed (2,801) (2,801) Net income 186,693 186,693 Cash dividends declared on Common stock - $1.03 per share (149,474) (149,474) - ------------------------------------------------------------------------------------------- BALANCE AT JUNE 30, 1996 145,119,875 $1,951,437 $1,519,289 $3,470,726 =========================================================================================== </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 8
9 THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Three Months Ended Six Months Ended Twelve Months Ended June 30 June 30 June 30 ------------------------ --------------------------- ------------------------------ 1996 1995 1996 1995 1996 1995 -------- --------- ----------- -------------- -------------- -------------- <S> <C> <C> <C> <C> <C> <C> OPERATING REVENUES Electric - System $857,769 $838,913 $1,745,396 $1,701,961 $3,603,905 $3,425,899 Electric - Interconnection 7,988 12,300 19,232 19,639 50,572 32,459 Steam 5,220 4,742 15,240 14,629 24,706 24,933 - -------------------------------------------------------------------------------------------------------------------------------- Total Operating Revenues $870,977 $855,955 $1,779,868 $1,736,229 $3,679,183 $3,483,291 - -------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Operation Fuel $166,687 $175,532 $ 342,354 $ 345,192 $ 713,129 $ 693,747 Purchased power 37,629 32,747 61,125 67,859 126,823 93,931 Other operation 156,755 148,998 305,966 286,371 654,892 619,590 Maintenance 78,689 59,903 152,300 112,374 280,041 251,979 Steam plant impairment loss - - - - 42,029 - Depreciation and amortization 130,489 124,630 262,393 249,674 513,330 490,042 Deferred Fermi 2 amortization (1,120) (1,493) (2,240) (2,986) (5,226) (6,718) Amortization of deferred Fermi 2 depreciation and return 25,485 23,247 50,968 46,494 97,464 88,908 Taxes other than income 62,889 61,459 129,650 124,104 257,487 239,424 Income taxes 58,198 65,218 134,870 147,269 277,288 284,266 - -------------------------------------------------------------------------------------------------------------------------------- Total Operating Expenses $715,701 $690,241 $1,437,386 $1,376,351 $2,957,257 $2,755,169 - -------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME $155,276 $165,714 $ 342,482 $ 359,878 $ 721,926 $ 728,122 - -------------------------------------------------------------------------------------------------------------------------------- OTHER INCOME AND (DEDUCTIONS) Allowance for other funds used during construction $ 586 $ 268 $ 974 $ 583 $ 1,799 $ 1,274 Other income and (deductions) - net (6,573) (4,941) (8,186) (18,276) (20,156) (37,695) Income taxes 1,888 1,172 2,191 6,170 5,810 12,413 Accretion income 2,150 2,845 4,477 5,859 9,659 12,367 Income taxes - disallowed plant costs and accretion income (624) (868) (1,310) (1,797) (2,868) (3,814) - -------------------------------------------------------------------------------------------------------------------------------- Net Other Income and (Deductions) $ (2,573) $ (1,524) $ (1,854) $ (7,461) $ (5,756) $ (15,455) - -------------------------------------------------------------------------------------------------------------------------------- INTEREST CHARGES Long-term debt $ 69,261 $ 68,096 $ 137,621 $ 136,520 $ 276,700 $ 270,679 Amortization of debt discount, premium and expense 2,956 2,779 5,908 5,578 11,642 11,174 Other 390 2,313 1,941 6,214 5,393 8,161 Allowance for borrowed funds used during construction (credit) (1,060) (554) (1,762) (941) (3,090) (2,148) - -------------------------------------------------------------------------------------------------------------------------------- Net Interest Charges $ 71,547 $ 72,634 $ 143,708 $ 147,371 $ 290,645 $ 287,866 - -------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 81,156 $ 91,556 $ 196,920 $ 205,046 $ 425,525 $ 424,801 PREFERRED STOCK DIVIDENDS 2,907 7,404 10,200 14,811 23,126 29,627 - -------------------------------------------------------------------------------------------------------------------------------- NET INCOME AVAILABLE FOR COMMON STOCK $ 78,249 $ 84,152 $ 186,720 $ 190,235 $ 402,399 $ 395,174 ================================================================================================================================ </TABLE> Note: Detroit Edison's financial statements are presented here for ease of reference and are not considered to be part of Item 1 of the Company's report. See accompanying Notes to Consolidated Financial Statements (Unaudited). 9
10 THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (UNAUDITED) ASSETS (Dollars in Thousands) <TABLE> <CAPTION> June 30 December 31 1996 1995 ------- ----------- <S> <C> <C> UTILITY PROPERTIES Plant in service $13,529,342 $13,303,992 Less: Accumulated depreciation and amortization (5,185,452) (4,928,316) - --------------------------------------------------------------------------------------------- $ 8,343,890 $ 8,375,676 Construction work in progress 147,222 142,726 - --------------------------------------------------------------------------------------------- Net utility properties $ 8,491,112 $ 8,518,402 - --------------------------------------------------------------------------------------------- Property under capital leases (less accumulated amortization of $104,039 and $99,633, respectively) $ 132,075 $ 137,206 Nuclear fuel under capital lease (less accumulated amortization of $458,486 and $427,831, respectively) 126,989 145,463 - --------------------------------------------------------------------------------------------- Net property under capital leases $ 259,064 $ 282,669 - --------------------------------------------------------------------------------------------- Total owned and leased properties $ 8,750,176 $ 8,801,071 - --------------------------------------------------------------------------------------------- OTHER PROPERTY AND INVESTMENTS Non-utility property $ 7,730 $ 21,576 Investments and special funds 26,157 29,058 Nuclear decommissioning trust funds 142,637 119,843 - --------------------------------------------------------------------------------------------- $ 176,524 $ 170,477 - --------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and temporary cash investments $ 6,334 $ 64,948 Customer accounts receivable and unbilled revenues (less allowance for uncollectible accounts of $20,000 and $22,000, respectively) 432,129 414,403 Other accounts receivable 38,606 37,664 Inventories (at average cost) Fuel 149,257 162,796 Materials and supplies 144,931 142,782 Prepayments 46,449 12,910 - --------------------------------------------------------------------------------------------- $ 817,706 $ 835,503 - --------------------------------------------------------------------------------------------- DEFERRED DEBITS Regulatory assets $ 1,063,798 $ 1,155,482 Prepaid pensions 94,061 81,865 Unamortized debt expense 45,890 40,936 Other 42,004 45,257 - --------------------------------------------------------------------------------------------- $ 1,245,753 $ 1,323,540 - --------------------------------------------------------------------------------------------- TOTAL $10,990,159 $11,130,591 ============================================================================================= </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 10
11 THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (UNAUDITED) LIABILITIES (Dollars in Thousands) <TABLE> <CAPTION> June 30 December 31 1996 1995 ------- ----------- <S> <C> <C> CAPITALIZATION Common stock - $10 par value, 400,000,000 shares authorized; 145,119,875 shares outstanding $ 1,451,199 $ 1,451,199 Premium on common stock 547,799 547,799 Common stock expense (47,561) (47,561) Retained earnings used in the business 1,425,932 1,484,871 - ----------------------------------------------------------------------------- Total common shareholders' equity $ 3,377,369 $ 3,436,308 Cumulative preferred stock 144,405 326,604 Long-term debt 3,746,906 3,756,094 - ----------------------------------------------------------------------------- Total Capitalization $ 7,268,680 $ 7,519,006 - ----------------------------------------------------------------------------- OTHER NON-CURRENT LIABILITIES Obligations under capital leases $ 121,704 $ 128,362 Other postretirement benefits 4,509 24,381 Other 69,610 58,424 - ----------------------------------------------------------------------------- $ 195,823 $ 211,167 - ----------------------------------------------------------------------------- CURRENT LIABILITIES Short-term borrowings $ 94,988 $ 36,990 Amounts due within one year Long-term debt 244,214 119,214 Obligations under capital leases 137,360 154,307 Accounts payable 152,616 165,148 Property and general taxes 20,899 34,416 Accumulated deferred income taxes 54,459 51,697 Interest payable 66,671 62,128 Dividends payable 82,723 81,102 Payrolls 74,852 72,164 Fermi 2 refueling outage 20,858 14,342 Other 105,854 130,689 - ----------------------------------------------------------------------------- $ 1,055,494 $ 922,197 - ----------------------------------------------------------------------------- DEFERRED CREDITS Accumulated deferred income taxes $ 2,059,340 $ 2,052,875 Accumulated deferred investment tax credits 322,558 330,085 Other 88,264 95,261 - ----------------------------------------------------------------------------- $ 2,470,162 $ 2,478,221 - ----------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (NOTE 2) - ----------------------------------------------------------------------------- TOTAL $10,990,159 $11,130,591 ============================================================================= </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 11
12 THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Three Months Ended Six Months Ended Twelve Months Ended June 30 June 30 June 30 ---------------------- ---------------------- ---------------------- 1996 1995 1996 1995 1996 1995 ---------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> OPERATING ACTIVITIES Net Income $ 81,156 $ 91,556 $ 196,920 $ 205,046 $ 425,525 $ 424,801 Adjustments to reconcile net income to net cash from operating activities: Accretion income (2,150) (2,845) (4,477) (5,859) (9,659) (12,367) Depreciation and amortization 130,489 124,630 262,393 249,674 513,330 490,042 Deferred Fermi 2 amortization and return-net 24,365 21,754 48,728 43,508 92,238 82,190 Deferred income taxes and investment tax credit - net 11,625 13,807 28,560 40,083 51,000 83,295 Fermi 2 refueling outage - net 3,258 2,955 6,516 6,755 12,836 388 Steam plant impairment loss - - - - 42,029 - Other 12,843 21,111 (6,282) (778) (391) (2,481) Changes in current assets and liabilities: Customer accounts receivable and unbilled revenues (19,268) (68,086) (17,726) (192,479) (43,826) (196,790) Other accounts receivable 2,330 (8,756) (942) (3,474) (920) (8,716) Inventories (6,358) (22,788) 12,221 (27,664) 21,048 (35,987) Accounts payable (5,146) 2,059 (12,439) (5,143) 10,753 (10,075) Taxes payable (65,137) (32,882) (13,085) 13,254 (28,988) 1,240 Interest payable (10,141) (204) 4,543 (1,114) 7,571 (9,127) Other 28,668 48,191 (69,727) (23,929) (14,543) 3,245 - -------------------------------------------------------------------------------------------------------------------------------- Net cash from operating activities $ 186,534 $ 190,502 $ 435,203 $ 297,880 $1,078,003 $ 809,658 - -------------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Plant and equipment expenditures $(124,152) $ (94,744) $ (225,377) $ (179,978) $ (499,243) $(375,195) Nuclear decommissioning trust funds (9,107) (11,321) (22,794) (23,292) (42,853) (41,219) Non-utility investments - (2,013) - (552) - (13,384) Other changes in current assets and liabilities (1,768) (4,441) (847) (3,588) 8,515 3,944 Other (13,714) (3,511) (2,345) (4,592) (28,181) (24,737) - -------------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities $(148,741) $ (116,030) $ (251,363) $ (212,002) $ (561,762) $(450,591) - -------------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of long-term debt $ - $ - $ 185,000 $ - $ 185,000 $ 200,000 Funds received from Trustees: Installment sales contracts and loan agreements - - - - 201,525 42,935 Increase (decrease) in short-term borrowings 94,988 3,941 57,998 102,388 (46,889) 49,941 Redemption of long-term debt (69,214) - (69,214) (19,214) (270,739) (250,499) Redemption of preferred stock - - (185,000) - (185,955) - Premiums on reacquired long-term debt and preferred stock - - (1,850) - (7,796) (11,350) Purchase of common stock - - - - - (59,855) Dividends on common and preferred stock (80,852) (82,013) (166,361) (164,026) (328,574) (329,183) Cash portion of restructuring dividend to parent - - (56,510) - (56,510) - Other (2,039) (304) (6,517) (463) (12,654) (2,552) - -------------------------------------------------------------------------------------------------------------------------------- Net cash used for financing activities $ (57,117) $ (78,376) $ (242,454) $ (81,315) $ (522,592) $(360,563) - -------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS $ (19,324) $ (3,904) $ (58,614) $ 4,563 $ (6,351) $ (1,496) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF THE PERIOD 25,658 16,589 64,948 8,122 12,685 14,181 - -------------------------------------------------------------------------------------------------------------------------------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF THE PERIOD $ 6,334 $ 12,685 $ 6,334 $ 12,685 $ 6,334 $ 12,685 ================================================================================================================================ SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (excluding interest capitalized) $ 78,595 $ 69,907 $ 133,152 $ 139,699 $ 267,866 $ 284,290 Income taxes paid 114,548 76,240 115,166 76,480 269,223 190,447 New capital lease obligations 11,885 100 12,182 427 41,141 1,316 Exchange of preferred stock for long-term debt - - - - 49,878 - Non-cash portion of restructuring dividend to parent - - 26,716 - 26,716 - ================================================================================================================================ </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 12
13 THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Common Stock Premium Retained Total -------------------- on Common Earnings Common $10 Par Common Stock Used in the Shareholders' Shares Value Stock Expense Business Equity - ----------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> BALANCE AT DECEMBER 31, 1995 145,119,875 $ 1,451,199 $ 547,799 $ (47,561) $ 1,484,871 $ 3,436,308 Expense associated with preferred stock redeemed (2,801) (2,801) Net income 196,920 196,920 Cash dividends declared Common stock - $1.10 per share (159,632) (159,632) Cumulative preferred stock* (10,200) (10,200) Restructuring dividend to parent (83,226) (83,226) - --------------------------------------------------------------------------------------------------------------- BALANCE AT JUNE 30, 1996 145,119,875 $ 1,451,199 $ 547,799 $ (47,561) $ 1,425,932 $ 3,377,369 =============================================================================================================== </TABLE> *At established rate for each series See accompanying Notes to Consolidated Financial Statements (Unaudited). 13
14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES NOTE 1 - GENERAL These consolidated financial statements should be read in conjunction with the Quarterly Report Notes and the Annual Report Notes. The Notes contained herein update and supplement matters discussed in the Quarterly Report Notes and the Annual Report Notes. The preceding consolidated financial statements are unaudited, but, in the opinion of the Company and Detroit Edison, include all adjustments necessary for a fair statement of the results for the interim periods. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year. NOTE 2 - COMMITMENTS AND CONTINGENCIES As discussed in Note 14 of the Annual Report Notes, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121 in the fourth quarter of 1995. As the result of continuing losses in the operation of its steam heating business, upon adoption of SFAS No. 121, Detroit Edison wrote off the remaining net book value of its steam heating plant assets of $42 million ($32 million after-tax) or $0.22 per common share. Based on current market conditions, the steam heating operations continue to generate losses. Therefore, Detroit Edison will continue to review its steam heating operations to determine what actions, if any, may be necessary. --------------------------------------- This Quarterly Report on Form 10-Q, including the report of Deloitte & Touche LLP (on page 15) will automatically be incorporated by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Registration Nos. 33-53207 and 33-64296) of The Detroit Edison Company and Form S-8 (Registration No. 333-00023) and Form S-3 (Registration No. 33-57545) of DTE Energy Company, filed under the Securities Act of 1933. Such report of Deloitte & Touche LLP, however, is not a "report" or "part of the Registration Statement" within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the liability provisions of Section 11(a) of such Act do not apply. 14
15 INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Shareholders of DTE Energy Company and The Detroit Edison Company We have reviewed the accompanying condensed consolidated balance sheets of DTE Energy Company and subsidiary companies and of The Detroit Edison Company and subsidiary companies as of June 30, 1996, and the related condensed consolidated statements of income and of cash flows for the three-month, six-month, and twelve-month periods ended June 30, 1996 and 1995, and the condensed consolidated statements of common shareholders' equity for the six-month period ended June 30, 1996. These financial statements are the responsibility of DTE Energy Company's management and of The Detroit Edison Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheets of DTE Energy Company and subsidiary companies and of The Detroit Edison Company and subsidiary companies as of December 31, 1995, and the related consolidated statements of income, common shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 22, 1996 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheets as of December 31, 1995 is fairly stated, in all material respects, in relation to the consolidated balance sheets from which it has been derived. DELOITTE & TOUCHE LLP Detroit, Michigan August 8, 1996 15
16 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES This analysis for the three, six and twelve months ended June 30, 1996, as compared to the same periods in 1995, should be read in conjunction with the consolidated financial statements (unaudited), the accompanying Notes, the Quarterly Report Notes and the Annual Report Notes. Detroit Edison is the principal subsidiary of the Company and, as such, this discussion explains material changes in results of operations of both the Company and Detroit Edison and identifies recent trends and events affecting both the Company and Detroit Edison. For the periods presented, the Company's operations and those of Detroit Edison are not materially different. RESULTS OF OPERATIONS For the three months ended June 30, 1996, the Company's net income was $78.3 million, or $0.54 per common share, down 7 percent from the $84.2 million, or $0.58 per common share earned in the three months ended June 30, 1995. For the six months ended June 30, 1996, the Company's net income was $186.7 million, or $1.29 per common share, down 1.9 percent from the $190.2 million, or $1.31 per common share earned in the six months ended June 30, 1995. The decreases in net income were due to higher operating expenses caused by an increase in storms and related restoration costs, higher nuclear plant expenses, and increased depreciation and amortization expenses, partially offset by increases in electricity sales. For the twelve months ended June 30, 1996, the Company's net income was $402.4 million, or $2.78 per common share, up 1.8 percent from the $395.2 million, or $2.72 per common share earned in the twelve months ended June 30, 1995. At June 30, 1996, the book value of the Company's common stock was $23.88 per share, an increase of $0.26 per share or 1.1 percent since December 31, 1995. Return on average total common shareholders' equity was 11.6% and 11.7% for the twelve months ended June 30, 1996 and 1995, respectively. Detroit Edison's ratio of earnings to fixed charges was 3.14 and 3.20 for the twelve months ended June 30, 1996 and 1995, respectively. Detroit Edison's ratio of earnings to fixed charges and preferred stock dividends for the 1996 and 1995 twelve-month periods was 2.82 and 2.79, respectively. 16
17 OPERATING REVENUES - -------------------------------------------------------------------------------- Total operating revenues of the Company increased (decreased) due to the following factors: <TABLE> <CAPTION> Three Six Twelve Months Months Months ------ ---------- ------ (Millions) <S> <C> <C> <C> Rate Changes Special Manufacturing Contracts $ (2) $(11) $(31) PSCR Clause (8) (23) (4) ---- ----- ----- (10) (34) (35) System sales volume and mix 16 57 178 Interconnection sales (4) (1) 18 Fermi 2 capacity factor performance standard reserve 11 16 32 Other - net 2 7 4 ---- ----- ----- Total $ 15 $45 $197 ==== ===== ===== </TABLE> SPECIAL MANUFACTURING CONTRACTS In March 1995, the MPSC issued an order approving Detroit Edison's 10-year special manufacturing contracts with Chrysler Corporation, Ford Motor Company and General Motors Corporation. In return for their long-term commitments, these companies receive a reduction in the price paid for electricity. For additional information, see Management's Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report. PSCR CLAUSE The decreases in PSCR Clause revenues resulted from lower average unit costs of fuel and purchased power. kWh SALES kWh sales increased (decreased) as follows: <TABLE> <CAPTION> Three Six Twelve Months Months Months ----------- ----------- --------- <S> <C> <C> <C> Residential 4.8 % 5.4 % 9.7 % Commercial 0.4 2.7 3.0 Industrial 1.9 2.0 2.2 Other (includes primarily sales for resale) 0.9 4.6 6.2 Total System 2.0 3.3 4.7 Interconnection (54.5) (12.6) 55.3 Total (1.7) 2.5 6.7 </TABLE> 17
18 The increases in residential and commercial sales reflect colder winter weather and customer growth, and for the twelve-month period, substantially warmer summer weather. Commercial sales also reflect an improvement in economic conditions. Increased industrial sales in the three-month and six-month periods reflect strong demand in the automotive and construction sectors. The increases in industrial sales for the twelve-month period reflect higher sales to automotive, steel and other customers due to improved economic conditions. The increased sales to other customers reflect increased load requirements of wholesale for resale customers. Interconnection sales decreases for the three-month and six-month periods reflect decreased demand for energy. The increase in interconnection sales for the twelve-month period reflects the improved availability of energy available for sale in meeting demand during the substantially warmer summer weather in 1995. FERMI 2 CAPACITY FACTOR PERFORMANCE STANDARD RESERVE Because of a turbine-generator failure in December 1993, Fermi 2, a nuclear generating unit, was out of service in 1994 and early 1995. As a result, under the MPSC capacity factor performance standard, a disallowance of net incremental replacement power cost will be imposed in each of the years 1994-1998 for the amount by which the Fermi 2 three-year rolling average capacity factor is less than the greater of either the average of the top 50% of U. S. boiling water reactors or 50%. Detroit Edison recorded a reserve for such disallowances of $31 million in 1994 and $32 million in 1995, which amounts were charged to operating revenues. For additional information, see Notes 2 and 3 in the Annual Report. Operating revenues have increased due to the absence of Fermi 2 reserve charges in the 1996 three-month and six-month periods, and due to a decrease in Fermi 2 reserve charges in the 1996 twelve-month period. OPERATING EXPENSES - -------------------------------------------------------------------------------- FUEL AND PURCHASED POWER Fuel and purchased power expenses increased (decreased) due to the following factors: 18
19 <TABLE> <CAPTION> Three Six Twelve Months Months Months ------ ------ ------ (Millions) <S> <C> <C> <C> Net system output $ (3) $ 9 $ 55 Average unit cost (4) (27) (64) Fermi 2 business interruption insurance - 6 59 Other 3 2 2 ---- ---- ---- Total $ (4) $(10) $ 52 ==== ==== ==== </TABLE> Net system output and average fuel and purchased power unit costs were as follows: <TABLE> <CAPTION> Three Months Six Months Twelve Months ----------------- -------------- --------------- 1996 1995 1996 1995 1996 1995 ------------- ------------- ------------ ------------ ------------ ------------ (Thousands of Megawatthours, "MWh") <S> <C> <C> <C> <C> <C> <C> Power plant generation Fossil 9,653 10,355 20,156 20,687 41,106 41,836 Nuclear 1,365 1,078 3,150 1,323 6,918 1,323 Purchased power 1,366 1,143 1,987 2,706 4,699 6,143 ------- ------- ------- ------- ------- ------- Net system output 12,384 12,576 25,293 24,716 52,723 49,302 ======= ======= ======= ======= ======= ======= Average unit cost ($/MWh) $ 14.98 $ 15.31 $ 14.49 $ 15.54 $ 14.80 $ 16.02 ======= ======= ======= ======= ======= ======= </TABLE> Fuel and purchased power expense decreased in the three-month and six-month periods due to lower average unit costs resulting from increased usage of lower cost nuclear generation and lower-cost Western low-sulfur coal, and, in the three-month period, lower net system output. The decrease in the six-month period was partially offset by higher net system output. For the twelve-month period, fuel and purchased power expense increased due to higher net system output and the prior-period receipt of Fermi 2 business interruption insurance, partially offset by lower average unit costs resulting from increased usage of lower cost nuclear generation and lower-cost Western low-sulfur coal. Fermi 2 was out of service in 1994 and early 1995 as a result of a turbine-generator failure in December 1993. OTHER OPERATION Three Months Other operation expense increased due primarily to higher sales expenses ($4.5 million), nuclear plant expenses ($4.1 million), lump sum payments to union employees ($3.6 million) and higher employee retirement and savings plan expenses ($2.6 million). These increases were partially offset by lower incentive award expenses related to a 19
20 shareholder value improvement plan ($5.4 million) and lower fossil plant expenses ($3.2 million). Six Months Other operation expense increased due primarily to higher nuclear plant ($7.8 million) and major storm ($4.8 million) expenses, lump sum payments to union employees ($3.6 million) and higher employee retirement plan ($3.0 million) and demand side management ($3.9 million) expenses. These increases were partially offset by lower incentive award expenses related to a shareholder value improvement plan ($5.4 million). Twelve Months Other operation expense increased due primarily to higher major storm expenses ($14.8 million), an increase in a reserve for the write-off of obsolete and excess stock material ($9.0 million), expenses related to the settlement of the Ludington Pumped Storage Plant fish mortality case ($8.4 million), higher demand side management expenses ($8.8 million), Electric Power Research Institute dues ($4.8 million), higher incentive award expenses related to a shareholder value improvement plan ($3.9 million), lump sum payments to union employees ($3.6 million) and higher sales expenses ($2.8 million). These increases were partially offset by expenses recorded in the year-earlier period for service quality claims ($8.7 million), and lower uncollectible ($7.7 million), postretirement benefits ($6.4 million) and nuclear plant ($5.5 million) expenses. MAINTENANCE Three Months Maintenance expense increased due to higher overhead and underground lines support ($9.6 million), general property ($3.3 million), nuclear plant ($3.2 million) and station equipment ($2.2 million) expenses. Six Months Maintenance expense increased due to higher overhead and underground lines support ($16.3 million), general property ($6.2 million), major storm ($5.4 million), nuclear plant ($5.1 million) and station equipment ($4.8 million) expenses. Twelve Months Maintenance expense increased due primarily to higher overhead and underground lines support ($19.6 million), major storm ($15.7 million), general property ($6.2 million) and station equipment ($4.8 million) expenses. These increases were 20
21 partially offset by lower nuclear plant ($12.9 million) and fossil plant ($2.9 million) expenses. STEAM PLANT IMPAIRMENT LOSS As the result of continuing losses in the operation of its steam heating business, upon adoption of Statement of Financial Accounting Standards No. 121 in the fourth quarter of 1995, Detroit Edison wrote off the remaining net book value of its steam heating plant assets of $42 million. Based on current market conditions, the steam heating operations continue to generate losses. Therefore, Detroit Edison will continue to review its steam heating operations to determine what actions, if any, may be necessary. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense increased due primarily to increases in plant in service, including internally developed software costs. DEFERRED FERMI 2 AMORTIZATION Deferred Fermi 2 amortization, a non-cash item of income, was recorded beginning with Detroit Edison's purchase of the Wolverine Power Supply Cooperative, Inc.'s ownership interest in Fermi 2 in February 1990. The annual amount deferred decreases each year through 1999. AMORTIZATION OF DEFERRED FERMI 2 DEPRECIATION AND RETURN Deferred Fermi 2 depreciation and return, non-cash items of income, were recorded beginning with the implementation of the Fermi 2 rate phase-in plan in January 1988. The annual amounts of deferred depreciation and return decreased each year through 1992. Beginning in 1993 and continuing through 1998, these deferred amounts will be amortized to operating expense as the cash recovery is realized through revenues. TAXES OTHER THAN INCOME TAXES Taxes other than income taxes increased due to higher payroll and property taxes. INCOME TAXES Income taxes decreased due to lower pretax operating income. 21
22 OTHER INCOME AND DEDUCTIONS - -------------------------------------------------------------------------------- OTHER INCOME AND (DEDUCTIONS) - NET Three Months Other deductions increased due to expenses related to merchandise, jobbing and contract work. Six Months Other deductions decreased due to lower promotional practices expense ($7.2 million) and lower expenses related to the sale of accounts receivables and unbilled revenues ($3.1 million). Twelve Months Other deductions decreased due to lower expenses related to the sale of accounts receivable and unbilled revenues ($8.4 million), promotional practices expense ($5.0 million) and contributions expense ($3.7 million). ACCRETION INCOME Accretion income, a non-cash item of income, was recorded beginning in January 1988 to restore to income, over the period 1988-1998, losses recorded due to discounting indirect disallowances of plant costs. The annual amount of accretion income recorded decreases each year through 1998. INTEREST CHARGES - -------------------------------------------------------------------------------- LONG-TERM DEBT Long-term debt interest charges were higher due to the issuance of QUIDS. OTHER Other interest charges were lower due primarily to lower levels of short-term borrowings. PREFERRED STOCK DIVIDENDS OF DETROIT EDISON - -------------------------------------------------------------------------------- Preferred stock dividends of Detroit Edison decreased due to the redemption of all of the outstanding Cumulative Preferred Stock, 7.68% Series, 7.45% Series and 7.36% 22
23 Series and the exchange of a portion of the 7.75% Series for QUIDS and the redemption and/or conversion of all shares of the convertible 5.50% Series. LIQUIDITY AND CAPITAL RESOURCES COMPETITION - -------------------------------------------------------------------------------- THE DETROIT EDISON COMPANY FERC. On April 24, 1996, the FERC issued Orders 888 and 889. Order 888 requires public utilities to file open access transmission tariffs for wholesale transmission services in accordance with non-discriminatory terms and conditions established by the FERC. On July 9, 1996, the Detroit Edison Company filed its Pro-Forma Open Access Transmission Tariff in compliance with FERC Order 888. The tariff sets forth the terms and conditions under which Detroit Edison will supply wholesale Firm and Non-Firm Point-to-Point Transmission Service as well as Network Integration Transmission Service (a service which allows the network customer to integrate, economically dispatch and regulate its network resources to serve its network load in a manner comparable to that in which the transmission provider utilizes its transmission system to serve its native load customers). Detroit Edison's filing also included the development and cost support for the rates to be charged for transmission service and the various ancillary services that are required to be offered. Order 888 permits the recovery of stranded costs on a case by case basis. Effective with the filing, Detroit Edison must take transmission service (including ancillary services) under the open access tariff for any new wholesale sales or purchases. Existing economy energy coordination agreements must be unbundled to take service under the transmission tariff after December 31, 1996. Effective October 1996, all bills submitted to wholesale requirements customers must include unbundled informational rates as a line item in order to allow customers to compare rates and evaluate alternative contracts. By December 31, 1996, Detroit Edison, as a member of a pool, must file a joint pool-wide pro forma tariff and must begin to take service under that tariff for all pool transactions. Power pool agreements must be reformed to establish open, non-discriminatory provisions and to modify any provisions that are unduly discriminatory or preferential. By November 1, 1996, public utilities are required by Order 889 to obtain transmission information for wholesale transactions through a system on the Internet. Public utilities must separate transmission operations and reliability functions from wholesale marketing functions. FERC has also issued a NOPR on Capacity Reservation Transmission Tariffs ("CRT"). The NOPR requests comment by October 21, 1996 on whether there are certain disadvantages inherent in offering transmission service on both a network and 23
24 point-to-point basis and whether comparability can be better accomplished using a single different methodology. The proposed CRT approach suggests that no later than December 31, 1997, all pro forma point-to-point and network service be replaced with a single point-to-point tariff that provides for reservation-based transmission service for all jurisdictional (wholesale sales and wholesale and retail transmission) service. Detroit Edison is currently unable to estimate the revenue impact, if any, of these newly required tariffs and procedures. MPSC. On April 12, 1996, the MPSC issued a "Scheduling Order" which required Detroit Edison and Consumers Power Company to file "applications" by May 15, 1996 containing proposals addressing the recommendation of Michigan Governor Engler and the Michigan Jobs Commission ("MJC") to "allow new industrial/commercial electrical load to be negotiated directly from the generator and wheeled over 'common' transmission" by January 1, 1997. The MPSC emphasized in its order "that this is the first step toward consideration of the recommendations made by the MJC. Further proceedings for both electric and gas utilities may be ordered as necessary for consideration of all relevant issues." Detroit Edison filed its application on May 15, 1996, stating that the MJC's report set out a framework for a transition to a competitive environment that included six specific recommendations associated with a near term deadline of January 1, 1997. However, the MPSC's scheduling order only sought proposals regarding the first recommendation. Detroit Edison indicated it does not support piecemeal implementation of the MJC's framework. Detroit Edison also stated that, although the MPSC has no legal authority to compel Michigan utilities to offer retail wheeling services, it would voluntarily develop a retail wheeling program as part of a comprehensive implementation of the MJC's recommendations, including the development of a mechanism to recover stranded costs. Detroit Edison also indicated that it will take some time to develop a tariff that, among other things, identifies and separates the transmission and distribution facilities as required by FERC Order 888. In the interim, Detroit Edison requested ex parte authority to immediately offer an Economic Growth Service Rider to be used as a tool to attract new business. The proposed rider, which is still before the MPSC, contains significant price discounts for new commercial and industrial customers. Detroit Edison is continuing to address its competitive status and the needs of its customers by entering into long-term (10 years) service contracts with large commercial and industrial customers. A number of such contracts, which must be approved by the MPSC prior to implementation, are pending before the MPSC. The MPSC is also considering a Detroit Edison request for approval of an industrial process heat rider. 24
25 CASH GENERATION AND CASH REQUIREMENTS - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Net cash from operating activities increased due primarily to changes in current assets and liabilities, primarily as a result of the 1995 repurchase of customer accounts receivable and unbilled revenues and for the twelve-month period, higher non-cash charges to income and higher net income. Net cash from operating activities for Detroit Edison decreased for the three-month period due to lower net income. Net cash used for investing activities was higher due to increased plant and equipment expenditures. Net cash used for financing activities was lower in the three-month period due to an increase in short-term borrowings, partially offset by the redemption of long-term debt. Net cash used for financing activities for the six-month period was higher due to decreases in short-term borrowings and higher redemptions of long-term debt. Net cash used for financing activities for the twelve-month period was higher due to the redemption of preferred stock and a decrease in short-term borrowings, partially offset by increased funds received from Trustees and the purchase of common stock in the prior period. ADDITIONAL INFORMATION In May and June 1996, Detroit Edison purchased a total of $50 million of General and Refunding Mortgage Bonds on the open market, consisting of $29.5 million of 7.74% 1993 Series J, $19.5 million of 8.24% 1993 Series C and $1 million of 8.25% 1993 Series C. These bonds have been canceled. Detroit Edison's 1996 cash requirements for its capital expenditure program are estimated at $482 million, of which $222 million had been expended as of June 30, 1996. Detroit Edison's internal cash generation is expected to be sufficient to meet cash requirements for capital expenditures as well as scheduled long-term debt redemptions. Expenditures for 1996 non-regulated investments are estimated to range from $100 million to $200 million of which $27 million had been expended as of June 30, 1996. The Company had short-term credit arrangements of approximately $658 million at June 30, 1996, under which $95 million of borrowings were outstanding. Of the total amount, $200 million represents a DTE Capital Corporation Revolving Credit Agreement, backed by a Support Agreement from the Company. The remaining $458 million results from Detroit Edison arrangements. 25
26 CAPITALIZATION - -------------------------------------------------------------------------------- The Company's capital structure as of June 30, 1996 was 47.1% common shareholders' equity, 2.0% cumulative preferred stock of subsidiary and 50.9% long-term debt as compared to 45.7%, 4.3% and 50.0%, respectively, at December 31, 1995. 26
27 DTE ENERGY COMPANY PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS. On May 28, 1996 an order was issued by the Circuit Court for Wayne County, Michigan certifying a plaintiff class (Gilford, et al v Detroit Edison) in a lawsuit claiming that Detroit Edison had engaged in age and racial discrimination. Detroit Edison has appealed the class certification to the Michigan Court of Appeals and has, also, filed a motion for summary disposition of the lawsuit with the Circuit Court for Wayne County. Detroit Edison is of the opinion that the allegations of discrimination are without merit. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The annual meeting of the holders of Common Stock of the Company was held on April 22, 1996. Proxies for the meeting were solicited pursuant to Regulation 14(a). (b) There was no solicitation in opposition to the Board of Directors' nominees, as listed in the proxy statement, for directors to be elected at the meeting and all such nominees were elected. The terms of the previously elected eight directors listed below continue until the annual meeting dates shown after each name: John E. Lobbia April 28, 1997 Patricia S. Longe April 28, 1997 Eugene A. Miller April 28, 1997 Dean E. Richardson April 28, 1997 Terence E. Adderley April 27, 1998 Anthony F. Earley, Jr. April 27, 1998 Allan D. Gilmour April 27, 1998 Theodore S. Leipprandt April 27, 1998 (c) At the annual meeting of the holders of Common Stock of the Company held on April 22, 1996, the following five directors were elected to serve until the 1999 annual meeting with the votes shown: <TABLE> <CAPTION> Total Vote Total Vote Withheld for Each from Each Director Director ----------- --------- <S> <C> <C> Lillian Bauder 109,326,967 1,824,032 David Bing 109,137,150 2,013,849 Larry G. Garberding 109,154,855 1,998,644 Alan E. Schwartz 107,586,022 3,564,977 William Wegner 109,201,430 1,949,569 </TABLE> 27
28 Shareholders ratified the appointment of Deloitte & Touche LLP as the Company's independent auditors for the year 1996 with the votes shown: For Against Abstain --- ------- ------- 109,431,465 676,579 1,044,255 Shareholders also voted on the two items below: (1) A shareholder proposal regarding criterion for closing the nuclear power plant. For Against Abstain --------- ---------- --------- 6,960,710 85,513,799 6,613,725 (2) A shareholder proposal regarding the cost of closing the nuclear power plant before its license expires. For Against Abstain --------- ---------- --------- 7,840,120 82,673,496 6,574,620 (d) Not applicable. ITEM 5 - OTHER INFORMATION. As discussed in Part I, Items 1 and 2 - Business and Properties, "Regulation and Rates - Michigan Public Service Commission - Retail Wheeling" of the Annual Report and in Item 5 - Other Information of the Quarterly Report, on March 1, 1996, MascoTech Forming Technologies, Inc., a Detroit Edison industrial customer currently purchasing approximately 25 MW of electricity annually (with the potential for an additional 6 MW annually), petitioned the MPSC to establish a "cost based fair and pro-competitive transportation rate" for its new and existing electric load. A March 19, 1996 Detroit Edison motion to dismiss asserting that the MPSC lacks jurisdiction to establish the requested rate is pending at the MPSC. The Michigan Attorney General has been permitted to intervene and another public utility that had been denied intervention by the ALJ has been granted intervenor status on appeal to the MPSC. Hearings commenced on June 24, 1996. The current procedural schedule provides that the ALJ will issue a PFD by September 30, 1996 and a final MPSC order will be issued in early December 1996. On May 8, 1996, the NRC issued the fifteenth Systematic Assessment of Licensee Performance report on Fermi 2 operations during the period from April 1994 through March 1996. The NRC assessment of nuclear activities was good overall. 28
29 On May 21, 1996, the NRC issued Detroit Edison a Notice of Violation and Proposed Imposition of Civil Penalty in the amount of $50,000 for failure to take prompt action to identify and correct a potential common mode failure of water pumps at the Fermi 2 plant on February 5, 1996. Detroit Edison did not contest the violation or civil penalty. The civil penalty was paid on June 20, 1996. The state of Michigan's Mercury Pollution Prevention Task Force's final report, released in April 1996, reviewed sources of mercury and recommended action programs for reduction of mercury discharges to the environment from six main segments of society. The recommendations for the utility industry focused on encouraging the EPA to finalize its mercury study reports to Congress and the MPSC and utilities to support additional research to determine the full environmental costs of mercury emissions. The report also urged continued Michigan utility support of renewable energy projects and asked the utilities to develop a plan with timetables and goals to further reduce mercury usage or emissions. At this time, until studies are complete and resulting regulations, if any, are promulgated, the impact upon Detroit Edison cannot be determined. As discussed in Part I - Items 1 and 2 - Business and Properties, "Environmental Matters - Water" of the Annual Report, National Pollution Discharge Elimination System permits for Detroit Edison's power plants are issued by the MDEQ pursuant to delegation by the EPA under the federal Clean Water Act. One permit renewal was issued in June 1996 and one permit renewal application was filed, leaving six permit renewal applications (submitted in 1996, 1994 and earlier) pending. The expired permits remain effective until new permits are issued or denied. As discussed in Part 1 - Items 1 and 2 - Business and Properties, "Employees and Executive Officers - Employees" of the Annual Report, the Company and its directors and officers in their capacities as such are insured against liability for wrongful acts (to the extent defined) under three insurance policies. The aggregate coverage under the policies has been increased from $85 million to $95 million. 29
30 QUARTERLY REPORT ON FORM 10-Q FOR THE DETROIT EDISON COMPANY PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED). See pages 9 through 14. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. See the Company's and Detroit Edison's "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated herein by this reference. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS. See the Company's "Item 1 - Legal Proceedings," which is incorporated herein by this reference. ITEM 5 - OTHER INFORMATION. See the Company's "Item 5 - Other Information," which is incorporated herein by this reference. 30
31 QUARTERLY REPORTS ON FORM 10-Q FOR DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits (i) Exhibits filed herewith. Exhibit Number ------- 11-4 - DTE Energy Company and Subsidiary Companies Primary and Fully Diluted Earnings Per Share of Common Stock. 15-2 - Awareness Letter of Deloitte & Touche LLP regarding their report dated August 8, 1996. 27-5 - Financial Data Schedule for the period ended June 30, 1996 for the Company. 27-6 - Financial Data Schedule for the period ended June 30, 1996 for Detroit Edison. (ii) Exhibits incorporated herein by reference. 3(a) -Restated Articles of Incorporation of Detroit Edison, as filed December 10, 1991 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-117 to Form 10-Q for quarter ended March 31, 1993). 3(b) -Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.75% Series as filed February 22, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-134 to Form 10-Q for quarter ended March 31, 1993). 3(c) -Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.74% Series, as filed April 21, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-140 to Form 10-Q for quarter ended March 31, 1993). 3(d) -Amended and Restated Articles of Incorporation of the Company, dated December 13, 1995 (Exhibit 3A (3.1) to the Company's Form 8-B filed January 2, 1996, File No. 1-11607). 31
32 Exhibit Number ------ 3(e) - Agreement and Plan of Exchange (Exhibit 1(2) to the Company's Form 8-B filed January 2, 1996, File No. 1-11607). 3(f) - Amended and Restated By-Laws, dated as of February 26, 1996, of the Company (Exhibit 3-3 to Form 10-K for year ended December 31, 1995). 3(g) - Amended and Restated By-Laws, dated as of February 26, 1996, of Detroit Edison (Exhibit 3-4 to Form 10-K for year ended December 31, 1995). 4(a) - Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison (File No. 1-2198) and Bankers Trust Company as Trustee (Exhibit B-1 to Registration No. 2-1630) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings as set forth below: September 1, 1947 Exhibit B-20 to Registration No. 2-7136 October 1, 1968 Exhibit 2-B-33 to Registration No. 2-30096 November 15, 1971 Exhibit 2-B-38 to Registration No. 2-42160 January 15, 1973 Exhibit 2-B-39 to Registration No. 2-46595 June 1, 1978 Exhibit 2-B-51 to Registration No. 2-61643 June 30, 1982 Exhibit 4-30 to Registration No. 2-78941 August 15, 1982 Exhibit 4-32 to Registration No. 2-79674 October 15, 1985 Exhibit 4-170 to Form 10-K for year ended December 31, 1994 November 30, 1987 Exhibit 4-139 to Form 10-K for year ended December 31, 1992 July 15, 1989 Exhibit 4-171 to Form 10-K for year ended December 31, 1994 December 1, 1989 Exhibit 4-172 to Form 10-K for year ended December 31, 1994 February 15, 1990 Exhibit 4-173 to Form 10-K for year ended December 31, 1994 November 1, 1990 Exhibit 4-110 to Form 10-K for year ended December 31, 1990 April 1, 1991 Exhibit 4-15 to Form 10-K for year ended December 31, 1995 May 1, 1991 Exhibit 4-112 to Form 10-Q for quarter ended June 30, 1991 May 15, 1991 Exhibit 4-113 to Form 10-Q for quarter ended June 30, 1991 32
33 Exhibit Number - ------- September 1, 1991 Exhibit 4-116 to Form 10-Q for quarter ended September 30, 1991 November 1, 1991 Exhibit 4-119 to Form 10-K for year ended December 31, 1991 January 15, 1992 Exhibit 4-120 to Form 10-K for year ended December 31, 1991 February 29, 1992 Exhibit 4-121 to Form 10-Q for quarter ended March 31, 1992 April 15, 1992 Exhibit 4-122 to Form 10-Q for quarter ended June 30, 1992 July 15, 1992 Exhibit 4-123 to Form 10-Q for quarter ended September 30, 1992 July 31, 1992 Exhibit 4-124 to Form 10-Q for quarter ended September 30, 1992 November 30, 1992 Exhibit 4-130 to Registration No. 33-56496 January 1, 1993 Exhibit 4-131 to Registration No. 33-56496 March 1, 1993 Exhibit 4-141 to Form 10-Q for quarter ended March 31, 1993 March 15, 1993 Exhibit 4-142 to Form 10-Q for quarter ended March 31, 1993 April 1, 1993 Exhibit 4-143 to Form 10-Q for quarter ended March 31, 1993 April 26, 1993 Exhibit 4-144 to Form 10-Q for quarter ended March 31, 1993 May 31, 1993 Exhibit 4-148 to Registration No. 33-64296 June 30, 1993 Exhibit 4-149 to Form 10-Q for quarter ended June 30, 1993 (1993 Series AP) June 30, 1993 Exhibit 4-150 to Form 10-Q for quarter ended June 30, 1993 (1993 Series H) September 15, 1993 Exhibit 4-158 to Form 10-Q for quarter ended September 30, 1993 March 1, 1994 Exhibit 4-163 to Registration No. 33-53207 June 15, 1994 Exhibit 4-166 to Form 10-Q for quarter ended June 30, 1994 August 15, 1994 Exhibit 4-168 to Form 10-Q for quarter ended September 30, 1994 December 1, 1994 Exhibit 4-169 to Form 10-K for year ended December 31, 1994 August 1, 1995 Exhibit 4-174 to Form 10-Q for quarter ended September 30, 1995. 4(b) - Collateral Trust Indenture (notes), dated as of June 30, 1993 (Exhibit 4-152 to Registration No. 33-50325). 33
34 Exhibit Number - ------ 4(c) - First Supplemental Note Indenture, dated as of June 30, 1993 (Exhibit 4-153 to Registration No. 33-50325). 4(d) - Second Supplemental Note Indenture, dated as of September 15, 1993 (Exhibit 4-159 to Form 10-Q for quarter ended September 30, 1993). 4(e) - Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-169 to Form 10-Q for quarter ended September 30, 1994). 4(f) - First Amendment, dated as of December 12, 1995, to Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-12 to Registration No. 333-00023). 4(g) - Fourth Supplemental Note Indenture, dated as of August 15, 1995 (Exhibit 4-175 to Form 10-Q for quarter ended September 30, 1995). 4(h) - Fifth Supplemental Note Indenture, dated as of February 1, 1996 (Exhibit 4-14 to Form 10-K for year ended December 31, 1995). 4(i) - Standby Note Purchase Credit Facility, dated as of August 17, 1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank and Administrative Agent, Bank of America, The Bank of New York, The Fuji Bank Limited, The Long-Term Credit Bank of Japan, LTD, Union Bank and Citicorp Securities, Inc. and First Chicago Capital Markets, Inc. as Remarketing Agents (Exhibit 99-18 to Form 10-Q for quarter ended September 30, 1994). 4(j) - Support Agreement, dated as of March 8, 1996, between the Company and Detroit Edison (Exhibit 4-176 to Form 10-Q for quarter ended March 31, 1996). 99(a) - Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-5 to Registration No. 2-81501). 99(b) - Belle River Transmission Ownership and Operating Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-6 to Registration No. 2-81501). 99(c) - 1988 Amended and Restated Loan Agreement, dated as of October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-6 to Registration No. 33-50325). 34
35 Exhibit Number - ------- 99(d) - First Amendment to 1988 Amended and Restated Loan Agreement, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-7 to Registration No. 33-50325). 99(e) - Second Amendment to 1988 Amended and Restated Loan Agreement, dated as of September 1, 1993, between Detroit Edison and Renaissance (Exhibit 99-8 to Registration No. 33-50325). 99(f) - $200,000,000 364-Day Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-12 to Registration No. 33-50325). 99(g) - First Amendment, dated as of August 31, 1994, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-19 to Form 10-Q for quarter ended September 30, 1994). 99(h) - Third Amendment, dated as of March 8, 1996, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-11 to Form 10-Q for quarter ended March 31, 1996). 99(i) - $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-13 to Registration No. 33-50325). 99(j) - First Amendment, dated as of September 1, 1994, to $200,000,000 Three-Year Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-20 to Form 10-Q for quarter ended September 30, 1994). 99(k) - Third Amendment, dated as of March 8, 1996, to $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, as amended among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-12 to Form 10-Q for quarter ended March 31, 1996). 35
36 Exhibit Number - ------- 99(l) - 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-9 to Registration No. 33-50325). 99(m) - First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-10 to Registration No. 33-50325). 99(n) - Second Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract dated as of September 1, 1993, between Detroit Edison and Renaissance (Exhibit 99-11 to Registration No. 33-50325). 99(o) - Third Amendment, dated as of August 31, 1994, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-21 to Form 10-Q for quarter ended September 30, 1994). 99(p) - Fourth Amendment, dated as of March 8, 1996, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract Agreement, dated as of October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-10 to Form 10-Q for quarter ended March 31, 1996). 99(q) - Credit Agreement, dated as of March 1, 1996 among DTE Capital Corporation, the Initial Lenders named therein, and Citibank, N.A., as Agent (Exhibit 99-9 to Form 10-Q for quarter ended March 31, 1996). (b) Reports on Form 8-K Registrants did not file any Current Reports on Form 8-K during the second quarter of 1996. 36
37 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DTE ENERGY COMPANY -------------------------------- (Registrant) Date August 8, 1996 /s/ SUSAN M. BEALE --------------------- -------------------------------- Susan M. Beale Vice President and Corporate Secretary Date August 8, 1996 /s/ RONALD W. GRESENS --------------------- -------------------------------- Ronald W. Gresens Vice President and Controller 37
38 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE DETROIT EDISON COMPANY -------------------------------- (Registrant) Date August 8, 1996 /s/ SUSAN M. BEALE --------------------- -------------------------------- Susan M. Beale Vice President and Corporate Secretary Date August 8, 1996 /s/ RONALD W. GRESENS --------------------- -------------------------------- Ronald W. Gresens Vice President and Controller 38
39 DTE ENERGY COMPANY (FILE NO. 1-11607) AND THE DETROIT EDISON COMPANY (FILE NO. 1-2198) QUARTERLY REPORTS ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 EXHIBIT INDEX (a) Exhibits filed herewith. Exhibit Number Page No. - ------- -------- 11-4 - DTE Energy Company and Subsidiary Companies Primary and Fully Diluted Earnings Per Share of Common Stock. 15-2 - Awareness Letter of Deloitte & Touche LLP regarding their report dated August 8, 1996. 27-5 - Financial Data Schedule for the period ended June 30, 1996 for the Company. 27-6 - Financial Data Schedule for the period ended June 30, 1996 for Detroit Edison. See Page Nos. __ through ___ for location of exhibits incorporated by reference (b) Exhibits incorporated by reference. 3(a) - Restated Articles of Incorporation of Detroit Edison, as filed December 10, 1991 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau. 3(b) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.75% Series as filed February 22, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau. 3(c) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.74% Series, as filed April 21, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau.
40 3(d) - Amended and Restated Articles of Incorporation of the Company, dated December 13, 1995. 3(e) - Agreement and Plan of Exchange. 3(f) - Amended and Restated By-Laws, dated as of February 26, 1996, of the Company. 3(g) - Amended and Restated By-Laws, dated as of February 26, 1996, of Detroit Edison. 4(a) - Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison and Bankers Trust Company as Trustee and indentures supplemental thereto, dated as of dates indicated below: September 1, 1947 October 1, 1968 November 15, 1971 January 15, 1973 June 1, 1978 June 30, 1982 August 15, 1982 October 15, 1985 November 30, 1987 July 15, 1989 December 1, 1989 February 15, 1990 November 1, 1990 April 1, 1991 May 1, 1991 May 15, 1991
41 September 1, 1991 November 1, 1991 January 15, 1992 February 29, 1992 April 15, 1992 July 15, 1992 July 31, 1992 November 30, 1992 January 1, 1993 March 1, 1993 March 15, 1993 April 1, 1993 April 26, 1993 May 31, 1993 June 30, 1993 June 30, 1993 September 15, 1993 March 1, 1994 June 15, 1994 August 15, 1994 December 1, 1994 August 1, 1995 4(b) - Collateral Trust Indenture (notes), dated as of June 30, 1993. 4(c) - First Supplemental Note Indenture, dated as of June 30, 1993. 4(d) - Second Supplemental Note Indenture, dated as of September 15, 1993. 4(e) - Third Supplemental Note Indenture, dated as of August 15, 1994. 4(f) - First Amendment, dated as of December 12, 1995, to Third Supplemental Note Indenture, dated as of August 15, 1994. 4(g) - Fourth Supplemental Note Indenture, dated as of August 15, 1995. 4(h) - Fifth Supplemental Note Indenture, dated as of February 1, 1996. 4(i) - Standby Note Purchase Credit Facility, dated as of August 17, 1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank and Administrative Agent, Bank of America, The Bank of New York, The Fuji Bank Limited, The Long-Term Credit Bank of Japan, LTD, Union Bank and Citicorp Securities, Inc. and First Chicago Capital Markets, Inc. as Remarketing Agents. 4(j) - Support Agreement, dated as of March 8, 1996, between the Company and Detroit Edison.
42 99(a) - Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982. 99(b) - Belle River Transmission Ownership and Operating Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982. 99(c) - 1988 Amended and Restated Loan Agreement, dated as of October 4, 1988, between Detroit Edison and Renaissance. 99(d) - First Amendment to 1988 Amended and Restated Loan Agreement, dated as of February 1, 1990, between Detroit Edison and Renaissance. 99(e) - Second Amendment to 1988 Amended and Restated Loan Agreement, dated as of September 1, 1993, between Detroit Edison and Renaissance. 99(f) - $200,000,000 364-Day Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent. 99(g) - First Amendment, dated as of August 31, 1994, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. 99(h) - Third Amendment, dated as of March 8, 1996, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. 99(i) - $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent. 99(j) - First Amendment, dated as of September 1, 1994, to $200,000,000 Three-Year Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. 99(k) - Third Amendment, dated as of March 8, 1996, to $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, as amended among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent.
43 99(l) - 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance. 99(m) - First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-10 to Registration No. 33-50325). 99(n) - Second Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract dated as of September 1, 1993, between Detroit Edison and Renaissance. 99(o) - Third Amendment, dated as of August 31, 1994, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance. 99(p) - Fourth Amendment, dated as of March 8, 1996, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract Agreement, dated as of October 4, 1988, between Detroit Edison and Renaissance. 99(q) - Credit Agreement, dated as of March 1, 1996 among DTE Capital Corporation, the Initial Lenders named therein, and Citibank, N.A., as Agent.